The essential :
- Life insurance fees consist of management fees and operating expenses, to which must be added the costs of investment vehicles.
- Pay attention to retrocessions that may skew the recommendations of your bank or financial advisor.
- With Nalo, the fees are up to 2 times lower than those charged by banks and online banks.
What are the costs when investing with life insurance?
When you invest with life insurance, the fees are broken down into three parts: contract management fees, transaction fees, and indirectly, investment support fees.
Contract Management Fees
The life insurance policy's management fees remunerate the insurer, the broker or the bank for their day-to-day management of the contract. They are proportional to the total amount of savings achieved on the contract. Their amounts usually differ according to whether they concern the part of the investments made in the fund in euros (guaranteed capital funds), or on the units of account.
Many life insurance contracts still have entry fees. These are charges levied for each new payment, in proportion to the amount paid. Some contracts also have arbitrage fees. You pay these fees when you change the allocation of your investments. All players in life insurance do not charge a transaction fee. However, this is often the case in network banks and private banks.
Investment management fees
In life insurance, you can invest in the fund in euros but also in many other investment vehicles that are called "units of account". These are generally investment funds, ie "baskets" of stocks or bonds. The fees of the investment media pay the investment funds for the management of these baskets of securities. These costs do not relate directly to the life insurance policy, so they are rarely explained by the bank or the insurer. They nevertheless decrease the performance of your investments and are not negligible. The best way to know the fees applied to each fund in your allocation is to refer to the KIID (Key Investor Information Document).
It is possible with many life insurance players to have a contract under mandate management. That is to say to delegate the management of his life insurance. Additional fees must be added.
For more information on discretionary management, please read our article: Decrypted Money Order Management
Retrocessions and conflicts of interest
These "hidden" fees, collected by the investment funds, are also used to remunerate your bank, your broker or your adviser in the form of retrocession. In other words, in addition to the fees posted on the life insurance policy, your bank receives a portion of the fees charged on each fund.
In addition to the lack of transparency, it is difficult for your advisor not to encourage you to choose a fund based on the retrocession it will receive. This is all the more true as some funds have much higher retrocessions than others. They can account for more than half of management fees on investment vehicles.
Finally, be aware that many banking groups have their own investment funds. Some even offer only investment funds managed by their subsidiary.
In order to limit these conflicts of interest, a European directive, MIF 2, calls for the abolition of retrocession. However, this directive is still not applied in the context of life insurance.
Comparison of fees applied by life insurance players in France
Traditional actors: network banks and private banks
Traditional players are generally the ones with the highest fees, averaging fees for a unit-linked contract of 3 , 9% per year (by smoothing transaction costs). On average, the fees of these banks break down as follows:
- management fees for your life insurance policy: between 0.9% per year for the euro fund share and 0.9% for the unit-linked portion;
- agency fees: 0.87% per annum;
- upfront charge: up to 4.5% per installment;
- arbitration fees: 1.58% by arbitration;
- media management fee: 1.72% per annum.
These high fees translate into poor performance returned to investors.
Online banks have reduced the cost of a life insurance policy by eliminating transaction costs. On the other hand, they still practice high management fees composed of:
- management fee for your life insurance policy: 0.75% on average per year for the euro fund and 0.7% for the unit account;
- media management fees: 1.7% on average per year;
- agency fees: 0.1%;
Thus, in total, the average cost of a life insurance contract taken out in an online bank is 2.65% per year on the units of account.
Discover the FinTechs of the investment: the robo-advisors
Nalo and fees
With Nalo, your unit-linked investments generate average fees of 1.65% per year versus 2.65% in an online bank. Despite lower fees, we offer better support. We regularly optimize your investments according to the economic situation, we adapt your investments according to your patrimonial situation and we secure them gradually according to your investment horizon.
It is thanks to the advanced use of technology and the use of index-based investment vehicles (also known as ETFs ) that we offer you a better service at a better price.
In detail, the costs break down as follows:
- 0.85% per annum for the management of life insurance (unit of account and funds in euros);
- 0.55% per annum of additional management fees associated with the management of the units of account;
- only 0.25%, on average for investment media.
The choice of transparency
Nalo is a company independent of any bank and any other financial institution. This allows us to advise you without conflict of interest. We are against retrocessions, so we select your investment vehicles independently, only for their potential performance.