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Asset Management within an Insurance contract in Germany! Sense or nonsense?

Updated: Feb 20


Regulation is forcing many small asset managers (VW) to merge or cooperate with so-called liability roofs/umbrella. The planned BaFin (Financial markets regulator) subordination for financial service providers (FDL), mainly § 34f investment fund brokers, will force many small and medium-sized players to give up their businesses because costs will exceed income. MİFID and other regulations make sure that the market is increasingly concentrated on a few independent market participants.


How can I as a financial service provider /independent asset manager avoid this dilemma?


If you as a fund broker/independent asset manager work with funds, ETFS or fund/ETF-based portfolios or strategies, the use of a insurance bond can be a solution. In order for this to pay off for the customers, these professionals must guarantee access to the largest possible fund / ETF range and have a transparent cost structure with low fees. This is the only way to ensure that the additional tax advantages of the insurance bond (no withholding tax, no advance lump sum, 50% tax-bonus on payment, reduction of inheritance tax, use of tax exemptions) are not "eaten up" by the additional costs of a classical unit-linked insurance contract. If costs and income match, then funds available at maturity can exceed a non-insurance (straight forward fund investment bank account) type of investment by more than 20%.


Advantages:

  1. No BaFin (regulator) subordination/approval required.

  2. Fund/ETF-transactions at NAV (no bid-offer spread).

  3. Clients benefit from considerable tax advantages over the long term, these advantages not bring available in straight investments.

  4. and much more...

Disadvantage:

The use of individual stocks and bonds is only possible for asset managers who have a large client base for this type of product. Otherwise customers will be offerd high-efficient solutions with a choice of different strategies available to everybody but also benefitting of all the tax advantages given to an individual portofolio, the use of stocks or bonds being only, by a legal point of view, possible with an appointed asset manager.


The insurance wrapper offers another goodie. In the event of a benefit payment (in case of death), the income generated is paid out tax-free. Classical insurance contracts are usually very rigid products. In order to be able to make use of this tax-free benefit payment, the relevant insurance bond allows the choice of different insured persons f. ex. the parents or grand parents. This smart structuring of the contarct, does not cause unnecessarily high costs and has the advantage, if the contract runs until the death of the parents or grand-parents, that the value of the contract is paid out tax-free. When investing € 100,000 - with a term of 20 years - the tax-efficiency of the life insurance wrapper will generated up to € 20,000 more.


With ProtectInvest insurance brokers who hold a § 34d licence and independent asset managers, can legally offer to their customers the largest range of Investment Funds/ETFs as well many different portfolio strategies without needing to be subordinated to the regulator BaFin.

If you have any questions, please get in touch with us. We would be pleased to get to know you. Markus Graf

VR Nucleus Life AG | CEO nl360 vertriebs gmbh Tel. 0041 61 520 00 70 | graf@nl360.eu | Mobile 0049 151 533 833 44 | www.nl360.eu


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