When it comes to wealth management, the rule of thumb is to think in terms of clients’ long-term life goals. What are their plans? Do they plan to change their lives? To move ? To start a new job? Do they have children, potential future students?
Once established, the general life prospects (which are, of course, never fixed) are a key indicator for the implementation of the heritage strategy, in which investments made on life insurance contracts have their place. .
The 3 major projects requiring long-term savings
While some “small” projects can be financed simply via existing cash or even a personal loan, others require upstream preparation, with the aim of building up, step by step, savings which will ultimately have to represent capital. therefore.
1. Buying your main residence
A 10-year savings horizon can be envisaged in this context. Three ways are used today to prepare the financing of your home:
Via a rental investment which, once sold, will serve as a contribution. Many young working people thus choose to remain tenants, while buying rental accommodation, often accompanied by advantageous taxation. After about ten years, they resell it, thus constituting a substantial contribution, facilitating the purchase of a more comfortable main residence;
Via a PER or even a PERCO: since the Pacte law in 2019, the conditions for early release of all or part of the capital have been relaxed and the purchase of your main residence is eligible for this release;
Via a life insurance contract which, after 8 years of existence, will allow you to benefit from a capital (all or part of the capitalized funds) accompanied by an annual tax deduction. It is a very interesting way because it is simple at all levels, from the creation of the contract to the release of funds.
2. Children’s studies
Some training courses are expensive, anticipating well in advance is a good strategy. A life insurance contract opened from the birth of the child, with scheduled monthly payments, allows you to slowly but surely accumulate the capital necessary to finance your higher education.
All you have to do is open a life insurance contract in the name of your child with periodic payments to build up capital that will allow him to finance his studies.
For example, paying €150 per month at birth can generate a capital of €45,000 for his 18th birthday.
3. Preparing for retirement
In this context too, it is wise to do it well in advance so that the savings effort is as “painless” as possible. Taking out a life insurance contract from the start of your professional activity, even before creating a PER (which we recommend at age 40) is a winning strategy.
How to invest in life insurance?
1. Several times is always better
If it is obviously always possible to deposit a large sum of money on your contract (after an inheritance, for example) in one go, it is interesting to pay funds little by little.
The programmed investment is a formula which implies a programming of the payments: 100 €, 200 € every month, for example. The interest is that the savings corresponding to its possibilities are invested over time. Because the best time to invest is to invest all the time, the scheduled payments allowing you to smooth your savings effort over time and get used to a regular savings practice.
The progressive investment is an option on the contract and applies rather when one pays a significant sum on his contract: one decides on a “target” asset allocation on which the funds paid on the insurance contract -life will be invested gradually over a defined period: 12, 24 months for example. Thus, we will immediately pay our funds into our contract in a secure medium and we will thus be able to “enter” the markets gradually up to 1/12th or 1/24th every month. This progressive investment smoothes the risk over a period determined in advance, while facilitating the diversification of units of account, by considering their interest in real time. The asset allocation policy can be defined for a given period (2 years, for example), and renewed or modified regularly depending on the context.
2. By dynamically managing the assets held in the contract
Investing in a life insurance policy with a long-term view has the advantage of being able to fine-tune your assets: riskier policy at the start to increase the return, then progressively safer as you go. is approaching the due date. Too many savers start a contract on low-risk (and therefore low-yielding) assets when they intend to keep it for 20 years!
On which mediums to diversify?
Traditional stocks and bonds, directly or via conventional UCITS, are not the only assets that can constitute a portfolio of a life insurance contract!
Real estate is reassuring for savers who appreciate its tangible and less volatile side than equities. Stone is a good substitute for euro-denominated funds whose yields are plummeting. Investing in SCIs is to be preferred because these supports are flexible and generate low entry costs.
Structured funds with capital coverage can also be subscribed. These alternative financial investments allow a better return, associated with a total or partial protection of the capital. They integrate several financial supports (bonds, shares, etc.) and return the initial outlay increased by a performance conditioned by the evolution of the support in comparison with an index known in advance.
Cryptocurrencies, if they are a source of diversification for a long-term investment and within the framework of a reactive and dynamic management, should be viewed with extreme caution when it comes to meeting life objectives because of their very high volatility.