Who are RL360?
RL360 is a life insurance company, with product offerings in areas such as life cover, savings plans and lump sum. The Oracle Bond is a lump sum account, with minimum investments of $32,000.
Even though RL360 Oracle is a lump sum product, it isn’t open architecture, which means that only about 160-170 fund choices are available.
Where is RL360 sold?
They are sold worldwide in Dubai, Qatar, Hong Kong, Singapore, Malaysia, China and other expat destinations. RL360 has become more widely sold in recent years, after many bigger life insurance companies which were more widely sold 5-10 years ago have restricted sales.
What are the fees and general terms and conditions?
There are numerous charges associated with this product:
- Establishment charge of up to 7.5%. This is charged gradually. For example, 1%-2% per year for 5-10 years. This charge goes down to 0% after this time.
- 1.2% for investing in mirror funds, even though non-mirror funds exist in the plan.
- Admin charges of 1.2% per year, or 0.3% per quarter
- Fund charges, which can be anything from 0.1% to 3%, but typically 1.5% on most actively managed funds
- Broker management fee charge – typically 1%.
What’re the positives about the plan?
- You can earn more than in the bank even with high costs
- If a cheaper charging structure is chosen within this plan, the plan isn’t as super expensive as it might seem. For example, the establishment, broker management fee and mirror fund charges can be reduced, unlike the admin charge.
- In general, as the number of funds within this plan are limited, some of the truly toxic funds that have gone down to 0 in some cases, are not allowed within the platform.
What are the negatives about the plan?
1. It is an expensive product, especially if all the fees are applied as above.
2. There are few index trackers available and investment options are limited. Whilst this may limit the possibility of clients being in dangerous funds, it also limits the cheaper fund options, which tend to perform better over time.
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.
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 RL360 Oracle policy offshore?