These three conditions are not always met. With “profiled” management funds, the uncertain participant agrees with the insurer on what he wants to do with his money and how to invest it. In return, he no longer has initiative. The system is even simpler than the management options, because the saver does not have to choose his own investment instruments. However, this type of control, which is very rigid, can be costly in terms of cost without achieving the targeted performance.
Through “profiled” funds, which are available from many reputable institutions, especially brokers (Altaprofits, Assurancevie.com, etc.) and online banks (BforBank, Fortuneo, etc.), the participant agrees with his adviser on what he wants to save . . Once his level of risk is defined, he no longer has to take any initiative. An even simpler system than automatic arbitrage options, as the saver does not have to choose his own funds.
However, this type of management is only profitable if you have a relatively distant investment horizon, from three to ten years, depending on the share of shares integrated into the fund. When this is fixed once and for all, the manager will no more avoid small market shocks than the devastating shocks we experienced in 2022. That is why we start with a profiled fund in the medium to long term, enough to give the manager time to recover from the inevitable downturns.
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The insurer selects a fund corresponding to the risk profile defined for its client. In a profiled procedure, it is up to the subscriber to determine with the help of their advisor the level of risk he wants to take. An important choice because for each type of saver, categorized as “prudent”, “balanced”, “dynamic” or “aggressive” as the case may be, there is a very different distribution between investment instruments (bonds, shares, real estate…).
This distribution is carried out by the adviser, who then selects a suitable fund (often a fund itself composed of several other funds) to strike a balance between risk and safety which comes as close as possible to the goals of the insured. Therefore, they no longer have to intervene either in strategic decisions (stocks or bonds?) or in the details of management (American, Asian or European market?). The composition of the portfolio and its development are completely outside his control.
The manager must faithfully follow the general instructions given to him, which do not prevent him from proceeding within each risk pocket (stocks, bonds, etc.) with arbitrages recommended by his services.
Life insurance: comparison, taxation, inheritance, rates in 2022
Lack of flexibility in management method and significant costs. As attractive as it may be on paper, effective management should not be decorated with all the virtues. Mainly because she is relatively expensive for the insured. The fees for managing selected funds are generally 20 to 30% higher than the market average (up to 2.50% per year).
Then, because from one business to another there is often quite a clear difference in meaning between the terms used. Thus, a fund labeled as “balanced” by one insurer, composed of, for example, 30 to 40% stocks, may be considered only “prudent” by another. Under these conditions, it is difficult to compare the performance of different products…
Another problem with profiled management: it is not designed to implement anything other than a pre-defined strategy in which the fund’s asset allocation is decided from the start without changing afterwards. As a result, with rare exceptions, a profiled fund that initially holds 60% stocks will always remain invested with that percentage of risky securities in the portfolio. Which explains why almost all managers faced a stock market crash in 2022 without being able to react.
This is the so-called “delegated” management formula that the insured must choose if he wants to benefit from a less rigid system that leaves the manager more freedom of maneuver, whether to take advantage of opportunities that appear in the markets or to reduce the level of risk.
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In a strike fund, the pocket dedicated to stocks can reach 100%. Three or four management profiles are offered. As its name suggests, “cautious” profile refers to savers who want to protect their savings from the vagaries of the stock market. Preference is then given to bond products (between 70 and 90%), low risk and the offer of regular income. As a result, the proportion of shares is very small (10 to 30% maximum). Hopes for profits are limited in this case, but the risk of capital loss is almost nil over an investment horizon of eight years.
THE “balanced” profile, for its part, aims to secure capital while promoting savings. The usual asset allocation in this type of fund: 40 to 60% stocks, the balance in bonds and risk-free cash securities. The “Dynamic” profile is for investors who seek significant capital gains, even if it means taking significant risks. These are preferred shares, up to 70 to 90% of the fund.
THE “attack” profile, which is not offered in all contracts, is actually just a dynamic profile in which the share of shares can be increased up to 100%. Reserved for daredevils or subscribers who have an investment horizon of more than eight or ten years.
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Suitable for insured persons who want to save for old age. Intended for policyholders who want manage from a long-term point of view their level of riskThese profiled funds, now offered by a large number of insurers, are characterized by the fact that they are scalable: the risk, which is initially quite high (the proportion allocated to shares is generally between 40 and 70%), decreases over the years. towards zero at the maturity of the product, the date when 100% of the capital is placed in the fund in euros. Target performance: between 3 and 5% per year.
In practice, the investor chooses a fund with a horizon of 2030, 2040 or 2050 (there are many dates), depending on when he wants to get his capital back. However, these products are not captive to a fixed investment process. THE managers can adapt their strategy (by country or industry) according to market trends and their expectations, while the goal always remains to preserve the invested capital in the considered horizon. So it is a good solution for those who want to prepare for retirement at a fixed date. Note down however, as with traditional profile funds, management fees are high.
Recommended management: the insured remains in control of his contract
To get recommendations and at the same time choose freely. Halfway between free management and “delegated” management is aimed at “advised” managementsaver who intends to retain control of his contract and at the same time use the regular advice of a financial expert. It’s a kind of streamlined management plus flexibility.
A certain number of brokers (Elvidea, Linxea, Meilleurtaux Placement, etc.) offer this support service at no additional cost, which consists of sending the client an information email every two weeks or every month, which includes insight into market trends, analysis new products as well as three to four times a year proposals for arbitrage of funds in relation to the profile of the insured. It is up to him to follow the investment advice provided or not.
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Help know your saver profile
Evaluating the right balance of risk and security to apply to your contract is not always easy. Reading this table, which takes into account all the useful parameters, should help those who feel a little lost. His instructions are simple: for each line, the saver must check the box that corresponds to his situation. Then simply look at the column where the most answers appear: it’s your manager profile column. A 42-year-old insured living in a couple with two children, who is looking for extra income, will therefore have a “balanced” profile, even if his financial knowledge is zero and he has one hour a week or more to manage your savings.
Composition of profiled funds and achieved performance by category
The absence of common definitions of managerial profiles limits the interest in comparing their performances. We can still get an idea of what these products bring by examining the category averages: the longer the reference period, the more profiles with high exposure to stocks win the match.
Another notable observation: when the market declines during the year, as in 2022 (-18% for the world stock market index), prudent and balanced profiled funds also turn bright red.
(1) Average market performance of profiled funds as of 31/12/2022.
(2) Funds mixing stocks and bonds or even commodities and speculative instruments.
Which life insurance contract to choose?
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