I have been getting emails from concerned pre-need plan holders about whether or not a certain company is in trouble, and whether or not to continue paying.

By this time, I suppose most of you know that there are inherent flaws in the products themselves and structural as well as regulatory weaknesses.

Having said that, if you have money sunk in these pre-need products, the practical first step would be to find out if the company you bought is one of those in danger of collapsing, or whether it has been managing your money soundly despite the crisis.
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Celso de los Angeles, owner of the Legacy group of companies, appears to be a financial genius. He created a scheme that fell through the regulatory cracks, and stumped both the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.

From the Senate hearings, here is the anatomy of de los Angeles’ perfect scam:

1. His companies sell a pre-need plan to an investor.
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To hear Senator Mar Roxas say it, the Securities and Exchange Commission is either sleeping on the job, sleeping with the enemy or both.

The problems of Legacy Consolidated Plans have resurrected old ghosts and painful lessons for hapless parents trying to prepare for the future. Issues hounding College Assurance Plans, PET Plans, Pryce Plans, Pacific Plans, TPG and many others raise serious question for students of financial planning.

Do we still trust the pre-need industry? Do we still trust regulators? How in the world can we steer clear of potholes that can endanger our precious savings?
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By Aya Laraya, RFP*

With the global financial crisis hitting everyone and so many people losing their shirts, a lot of people are beginning to lose heart and quitting the whole financial planning mindset.  And as lousy as it can be to talk investing when you have just lost your life’s savings, you will only be able to recover from things like this if you develop a sound and coherent plan. How?  By being the one who actually decides where your money goes.  What do I mean by this? Consider the following:

First, ask yourself, how did you arrive at the decision to purchase your last investment?  (Let’s say a pre-need educational plan.)  Did you decide on your own or was it recommended to you? Did you consider other options before deciding on the pre-need plan? (Like stocks, mutual funds, etc.)  What factors made you decide to take that option over the others?  (Risk? Accessibility? Rate of Return? Cost?)

Second, who decided on which provider to buy from?  Did you research who the industry leaders were?  Or was it based on word-of-mouth?  Or on the fact that your friend or relative worked for said provider?
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When you’ve been socking away money religiously to pay for an education or pension plan, sacrificing personal comfort and doing away with little treats in the process, and you find that dream of security snatched away by a corporate failure, you don’t just hurt. You are likely to lose belief in the system. You are likely to blame everyone you can think of—the government, the agent, the company. You may even lose belief in yourself and in the very basic principle of preparing well for the future.

I have learned to live with my investment mistakes, but it hasn’t been a walk in the park. I have decided that there’s nothing else to do but learn from it and start over.

If I had known some of the things I know now, I would have handled the situation in a more mature way. I would have been more empowered and less freaked out! So, here’s a quick guide for those who find themselves victimized by failures of pre-need plans:

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There’s no place good enough for scam artists but the darkest, foulest, living hell where cretins that go bump in the night are more sinister than the exorcist and the predator combined.

Leticia Catalan, a reader, emailed me she now will put money under the mattress rather than trust anyone to grow her money.

When my daughter was a few months old, I bought this Educational Plan from Scholarship Plan of the Philippines from the Legacy Group of Co. I will get my investment once my child reaches college. For my P25,000 in 14 years I would have P125,000.  The agent was a friend. I cannot exactly recall the reasons why the agent converted our policy to a time deposit with the Rural Bank of Paranaque.  But I remember the agent asking me for the insurance policy. When she returned it to me she exchanged it with five time deposit certificates. Kind of stupid of me, right?

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Since AIG’s troubles hit the news, many of you have asked about the health of the Philam Group’s pre-need company.

Truth is, the entire financial system—banking, brokerages, pre-need, insurance, etc.—is working as one to calm jitters and restore confidence in the system. AIG/Philam’s troubles has affected everyone because confidence in one form of saving instrument or investment flows into the next, and loss of trust affects everyone.

Here are some official figures that you may want to take note of:
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BY MALAYA LARAYA

I recently conducted a half-day seminar on financial planning for some professionals and it was a rather enlightening experience on the mindsets of people when it comes to financial planning. As always there was an open forum at the end and quite a number of questions were asked – some were the usual and some were rather unusual. So for those of you who may have had some of these questions in mind but didn’t know who or what to ask; here is a small FAQ on financial planning.

What is the best investment? This is definitely the most common question that has been asked and the short answer is this : There is none. More specifically, there is simply no investment tool that is the best for all people all of the time. There are instead, instruments that are best suited to each individual’s particular needs, plans and current financial condition. Simply put, what is good for your friend, spouse, relative, lover, workmate, neighbour or child may not necessarily be good for you due to the undeniable fact that you and your friend, spouse, relative, lover, workmate, neighbor or child are two different individuals. Consequently, the two of you will have different sets of wants and needs at different times and will therefore need different solutions. Therefore, be very wary of anyone who tries to sell you a panacea for all of your investment needs as it simply does not yet exist.

Where can I get information about (x)? Despite the fact that we are very much in the online age, very many people still do not know where to get even the most basic information about financial products. From equities to managed funds to pre-need plans; people seem to be at a loss as to where to go. Here are some websites that you can visit as well as what you can expect to read.
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We all want to live comfortably, if not with an affluent lifestyle. But not all of us think about how to exit this life in style. Just today, I learned how that requires quite a lot of money!

A family estate at Loyola Memorial Plans, for example, now costs at least P5 million complete with an air conditioned family mausoleum. Five years ago, the same lot cost P3 million, quite a big jump in price. I think it was business columnist, author and public speaker Francis Kong who said one of his favorite investments is funeral lots! You know what they say about obstetricians and gynecologists – they are never out of business.

At The Heritage Park in Fort Bonifacio, a family estate costs P3.4 million – and that’s the cash price. The same lot goes up to P3.7 million if you pay in installment.

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Noet Ravalo answered a reader’s question on pre-need plans today in INQUIRER.net:

I have heard so much about pre-need plans — some good but a lot more of what I hear seem scary — and would like to know more without hearing a sales pitch. I have a very young family and I was wondering if it is time to consider an educational plan for the kids and perhaps a memorial plan for my wife and myself. If you think they useful, what should I look out for? — Ronald

Pre-need plans, especially for education, pension and funeral expenses, are financial planning instruments in “tingi”. They break down the costs of children’s education, retirement and funeral expenses. Buying in sachets, of course, is always more expensive than buying in bulk.

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