Friends Provident Reserve (FPI) Bond Review

(Quick note; for a more in-depth review of Friends Provident and similar savings plans, alongside customer reviews and questions at the bottom of the page, please visit here – https://adamfayed.com/zurich-vista-review-rl360-quantum-friends-provident-hansard/). 

Who are Friends Provident?

Friends Provident are a life insurance company, with product offerings in areas such as life cover, savings plans and lump sum. The Reserve is a lump sum account. Friends Provident have been bought by Aviva recently, so have rebranded.

Where is Friends Provident sold?

They are sold worldwide in Dubai, Qatar, Hong Kong, Singapore, Malaysia, China and other expat destinations.  Friends Provident was more widely sold 5-10 years ago, compared to today.  So most people in the plan, have already contributed for a number of years.

What are the fees and general terms and conditions?

The charges are taken out for as long as 10 years and aren’t very transparent. The reason is that the charging structure that is chosen (commission-free or with commission) can mean that client X is paying more than client Y for the same product.

In general, the charges are:

  • Establishment charge of 8%-8.5% upfront charge, taken out over many years, on a gradual basis. This charge lasts for 5-10 years, often working out at 1%+ per year. This charge goes down to 0% after this time.
  • Fund charges, which can be anything from 0.1% to 3%, but typically 1.5% on most actively managed funds
  • $137.50 every 3 months for admin charges.
  • Broker management fee charge – typically 1%.

What’re the positives about the plan?

  1. You can earn more than in the bank even with high costs
  2. Low-cost options, such as index funds, are available, but seldom used, within this product.

What are the negatives about the plan?

1. It is expensive

2. Used alongside expensive funds, and trustee fees in QROPS/SIPPS for British expats, the fees compound.

3.  Many high-risk products like structured notes are used in tandem with this product. This often leads to losses.

Are there charges for getting out of this product?

Yes, there are, but it depends on how much you want to withdraw.  On day 1, most clients can withdraw 70%+ or more of their money, without penalty, assuming the funds are liquid funds, which can be sold relatively quickly and without penalty.

Just because the provider allows penalty-free withdrawals, doesn’t mean there aren’t charges for getting out of the investments chosen within the platform.

If there are charges for getting out of the product, what can I do?

It depends on each case. In some cases, reducing the management fee and fund charges can make a difference.

For instance, if somebody has already been invested for 10 years, the establishment charge doesn’t apply any longer.

In such cases, simply reducing the other fees, could increase performance.  For many other clients, however, it is possible to get the same funds, for a cheaper price, with cheaper platforms and providers.

This will make a big difference over time. If you have $100,000 in your account and markets go up 8% per year, for the next 5 years, you are only likely to get 4% per year returns in this product, due to the numerous charges.

Mistakes to avoid 

In investing one of the biggest mistakes investors makes is called loss aversion in cognitive psychology. This means that if investors are down, or not doing well, they wait until the accounts are breaking even before selling.

A simple example would be if you have $100,000 in your account. The value is $95,000. After more reading, you know that deep down the fees are eating into returns. However, as the account briefly hit $101,000 before, you wait until the account recovers to $100,000+ before selling as you don’t want a loss.

I have even seen investors wait 2-10 years to avoid this loss. The rational thing to do is accept the $5000 loss in this situation, as that money can be made up quickly in a cheaper structure.

In addition to that, many investors think size is always good. Having 24/7 account access and log in, flash IT systems and an office in Mayfair doesn’t help client returns; lower fees and better funds would help that.

What can you do if you have a Friends Provident policy offshore?

If you have a policy and would like a conversation please contact me via adamfayed@hotmail.co.uk, I can’t promise anything – only to try my best.

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