Beware of Some Capital Guaranteed Products which might NOT be Capital Guaranteed actually...
With the news that those that invested into Lehman Brothers mini-bonds and DBS High 5 Notes might lose most of their money, some of my clients get very worried.

One client called me this morning:"I invested in a plan through DBS, it is Capital Guaranteed, should be ok, right?"

I told her, if it is stated as Capital Guaranteed, your capital should be guaranteed. However, if you want, you can email the product information to me, and I help you take a look.

When my client emailed me the information, I discovered that what she invested in, migt NOT be Capital Guaranteed afterall, becos the Capital Guarantee is SUBJECT to condition.

Sharing with you information I discovered about "MyPlan" a 3.5 years single premium Investment-linked insurance plan by AVIVA distributed through DBS bank branches:

The Capital Guarantee is SUBJECT to the Credit Risk of Banque AIG (credit rating of AA by Standard and Poor's and Aa2 by Moody's.

My interpretation: if the credit rating of Banque AIG falls below AA by Standard and Poor's then, this investment is NO longer Capital Guarantee.


I'm not sure how to disclose this TRUTH that I discovered to my client... 
 

On the other hand, for UK Traded Endowment policies, it is very simple and straightforward.

The Cash Value of the Policy, which makes up of sum assured and bonus already declared are 100% Capital Guaranteed by the UK Insurer. And even in the worst case scenario of the collapse of the UK Insurer, 90% of the Cash Value is Guaranteed by a UK government backed Financial Services Compensation Scheme.

I think by now my client wished that she had invested more of her money into UK Traded Endowment instead of all these complicated products distributed out there.