RetireJapan

So we’ve looked at all the fees and considered about surrender charges etc. we are leaning towards keeping our money in there until for another 5 years until we no longer have to pay the surrender charges.

My FP’s argument was that when we initially signed up for the fund, it was set to be conservative fund without taking much rush with equalities around 30% of the fund. We are up around 6% so far but he mentioned some of his clients are up 65%. We should keep the fund but take a bit more risk by increasing the equities ratio.

If we cancel the plan, we have about 6% of the fund as a surrender charge and since we are up 6% we would be able to take it out without any loss. But part of me is also thinking if it’s better to just keep and it hopefully our fund will preform better going forward. FYI after 5 more years, our platform charge for ITA will disappear and it’ll be just FA management fee of 0.5%...

What are your thoughts on this?

Nandeyanen wrote: ↑Sat Feb 06, 2021 7:30 am So we’ve looked at all the fees and considered about surrender charges etc. we are leaning towards keeping our money in there until for another 5 years until we no longer have to pay the surrender charges.

My FP’s argument was that when we initially signed up for the fund, it was set to be conservative fund without taking much rush with equalities around 30% of the fund. We are up around 6% so far but he mentioned some of his clients are up 65%. We should keep the fund but take a bit more risk by increasing the equities ratio.

If we cancel the plan, we have about 6% of the fund as a surrender charge and since we are up 6% we would be able to take it out without any loss. But part of me is also thinking if it’s better to just keep and it hopefully our fund will preform better going forward. FYI after 5 more years, our platform charge for ITA will disappear and it’ll be just FA management fee of 0.5%...

What are your thoughts on this?

Sorry that you are in this situation. When I find I am in a bad financial product I try to get out quickly to stop feeding those who are taking advantage of me. Part of the problem is that low equity allocation (which also reflects their poor advice) but right now 3 years of a total of 6% return compared to the nearly 40% returns for MSCI World is a wide gap and in the situation you describe I wouldn’t want to continue the underperformance another 5 years in order to avoid a 6% backend charge.

https://en.m.wikipedia.org/wiki/MSCI_World

To add to what TokyoWart said, even if you change to a 'higher risk' plan, remember that the advisor will get his percentage whether you benefit or not. The risk is all on you with none on him. He can't lose, but you can. We can all lose with our own investments, of course, but it's a bit annoying if that happens and yet someone else has benefitted from your portfolio despite his poor calls on your behalf. If you really can get out with what you have put in, it might be best just to take the hit on the gains and start by yourself.

Just to clarify...The platform fees are 2% and the FA management fee is 0.5%. So you'll be paying 2.5% per year for the next 5 years. Is that right? Fees like those will seriously stunt your returns.

If you can get out with few or no losses, do it now and start fresh. In 5 years things can go south and if that's the case your investments in an under-performing plan will do even worse.

Also don't forget the opportunity cost. Let's imagine that for the next 5 years, things keep going nicely and you make another 6% return on your plan, making its total gain a "nice" 12%. That's basically the return you can expect in 2 years under a more adequate plan.

Let me also mention the peace of mind of not having to deal with crooks anymore and being in control of your finances. I left from a poorly designed plan with some (thankfully limited) losses a few years ago, it did hurt somehow but what a relief when I finally told my FA to f... off (after confirming the money reached my bank account of course ). Since then I have made up for my losses a few times already. Biting the bullet and leaving was 100% the right decision.

Don't forget that whatever your advisor tells you is for his benefit, not yours. Some of his clients up 65%... yeah right. Again you probably don't have the whole story.

Just bite the bullet and stop feeding the sharks.

Thanks all.

My wife thinks we should just keep the fund and continue to pay the fees for 5 more years so we can at least keep our fund tax free. That’s our FA’s argument that the whole point of using ITA was to keep it tax free so when we take the money out in years time we will not have to be paying tax (we know we have to be outside of Japan)

She has funds with a normal retail bank and she says we’d have to pay 1-1.5% on normal mutual funds else where and that 2%(1.5 ITA 0.5% FA) fees aren’t too bad for just 5 more years if we can keep the tax benefits now we are almost half way through. I could even take over the fund to just keep the 1.5% only for the next 5 years to minimize the fees as well. (After 5 more years I no longer will have to pay the platform fee) even in this situation, would you still get out of it?

5 years is almost enough time to double your money if you simply invested it in something simple like the eMaxis Slim S&P500 with a fee of 0.33%.

https://emaxis.jp/fund/253955.html

Take all of it out immediately and put it into a NISA account, and whatever left over into a tokutei account. Now.

goodandbadjapan wrote: ↑Fri Jan 29, 2021 2:06 am

If you are only 3 years in then to pull out now will probably mean hefty forfeit charges. Only you can decide if they are worth it. Think about if you would be better off taking that hit now and starting your own investing from scratch. I, too, had one of these plans and was in it for 10 years. It was a 15-year plan and after ten years I could cancel without the heavy forfeit charges. I ended up making about 10% on what I had put in but over 10 years of supposedly good market returns that wasn't much. Better than it would have been in the bank, though. Maybe you can reduce your payments to the minimum required and stay in it till the initial period with the hefty penalty charges is up and then cash in. Meanwhile take small steps into learning how to do your own investing? These plans are a con, but you may well end up better off than if you had not invested at all so don't be too hard on yourself.
[/quote]

Thanks for that. This is similar to my situation. I started 2 of these before iDeCo and NISA were created. Charges are high (as we all know) so growth isn't as high as it should be, but the alternative was doing nothing/putting money in the post office. So in hindsight it wasn't the best investment, but I am not going to kick myself about it. I have time to 're-balance' into lower-cost funds for the next few years.

i am in the same position with one thru banner japan. it hasnt worked out due to the high fees,and just trying to avoid a loss...
this has been a long term thing so i will be pleased to get out..

Nandeyanen wrote: ↑Mon Feb 15, 2021 11:18 pm we’d have to pay 1-1.5% on normal mutual funds else where and that 2%(1.5 ITA 0.5% FA) fees aren’t too bad for just 5 more years if we can keep the tax benefits now we are almost half way through.

This is nonsense. Fees are around 0.1% for index funds.

It would actually be really cool to make a "get me out of this mess" calculator that simulates whether you'd be better off sticking with a bad plan and when the best timing to bail out would be to minimse losses. One for the todo list...