Value for money
How to explain what the policy delivers
"What matters is what comes out at the end." The former German Chancellor's famous line was about his style of politics, but it sums up the point of investing just as well.
The technical term for it is value for money. BaFin, Germany's financial supervisory authority, requires financial products to deliver a reasonable benefit relative to their costs, and that benefit has to be communicated to clients in a way they can follow.
For your advice, value for money means acting demonstrably in the client's interest. Above all, by checking whether an insurance solution, including the investment options it contains, offers the greatest added value for this particular client. The key terms below can guide you through the client conversation.
Product transparency
Every fund-linked policy carries a promise of benefits:
-
The basic pension (Basisrente, e.g. Liechtenstein Life Pension) brings considerable tax advantages in the accumulation phase.
-
Layer 3 products such as Liechtenstein Life Invest stay flexible over the entire term and offer high return potential.
-
The strength of generational policies such as Liechtenstein Life Wealth lies in tax-optimised wealth transfer.
Spell out these differences clearly and pay particular attention to how adaptable insurance solutions are. Younger clients especially want their fund-linked policy to keep pace with a changing life, including contribution adjustments and partial withdrawals as needed.
At the end of the contract, the capital option is an attractive choice: with Liechtenstein Life Invest, clients can decide whether the contract balance is paid out in one lump sum or as a lifelong annuity.
Whatever you recommend, the cost-benefit ratio comes first. Explain to the client, in terms they can follow, why the solution you offer contributes most to their individual retirement goals.
Portfolio transparency
Even the best policy only works with an investment structure the client can understand. Investing with Liechtenstein Life is based on a curated fund selection with a regular quality review (every 12 months), and the funds have to keep meeting criteria such as a reasonable risk-return ratio.
For rule-based portfolio construction, you can draw on proven concepts from financial research, for example the core-satellite strategy and modern portfolio theory. The easiest way to build these concepts in is to use the AI-supported Funds Copilot when you create a quote in Partner Life, and so develop a portfolio with an optimised allocation that fits the individual client.
If the selected funds do not perform as hoped, a product like Liechtenstein Life Invest gives you plenty of room to give the portfolio new impetus where needed.
Risk transparency
The choice of funds also depends on the client profile: willingness and capacity to take risk, target market suitability and personal sustainability preferences.
The higher the risk, the greater the growth opportunities. Depending on their risk profile, investors have to be prepared for fluctuations in the value of their assets of varying size. Safety-minded clients (with a matching portfolio) should also be aware that performance on the capital market never runs in a straight line.
In client communication, stress that the long investment horizon is designed to smooth out fluctuations and allow positive performance overall.
Cost transparency
Anyone who talks about returns has to talk about costs, too. With classic gross policies, clients should understand that in the first years their contributions also pay an acquisition commission.
Clients generally find it easy to follow that the Liechtenstein Life product family pays remuneration on a NAV basis, and it strengthens their trust. In practice, the full contribution flows into the funds, and the remuneration is based on the contract value. Over the medium term, steady growth in value gives the intermediary a predictable income. The result is a stable business relationship with ongoing client care.
Transparency also prevents nasty surprises when it comes to ongoing fund costs. The active management of classic investment funds quickly leads to high total expense ratios. Passive funds, ETFs in particular, often cost only a fraction of that, which has a positive effect on returns.
Outcome transparency
Whether a financial product really lives up to the value-for-money standard is decided by the bottom line. The key term is RIY, reduction in yield. How high is the potential net return after all costs?
Realistic expectations help intermediaries and clients keep an eye on the portfolio and work steadily towards the best possible result. Above all, that means using the available levers effectively, such as regular rebalancing and, where appropriate, reallocations and an adjusted investment strategy.
Digital tools such as Partner Life and the customer app help both sides track performance and spot room for improvement.
Conclusion: Value for money becomes tangible when product, portfolio, risk, cost and outcome transparency work together. The result is a clear overall picture that makes sense to clients and can contribute to higher contract loyalty.
The value of your investment can fluctuate.
Article published by Prosperity Solutions AG
More topics to deepen your knowledge:
