Investment-linked insurance schemes a trap for unwary investors

It started with a referral from a friend. For Connie Choi Shuk-mei, it ended in claims of fraud, a police investigation and the founding of Hong Kong's first anti-insurance-product activist group.

A client of AXA Swiss Privilege, Choi invested in an investment-linked assurance scheme (ILAS) and is now leading a campaign to ban the controversial product from Hong Kong after finding several like-minded individuals via media reports and the internet.

Typically, an ILAS allows an investor to enrol in a long-term savings plan, pay a regular premium and choose between a range of funds to invest in.

Such schemes have emerged as a lucrative instrument for banks and financial advisers. But buyers have become increasingly concerned about high fees, poor performance and misselling. Much of the concern centres on the fact that agents are typically paid a fee upfront for products that tie in investors for many years.

Choi, the managing director of Hong Kong-based Yee Cheong Pharmaceutical, which sells nutritional supplements, has opened several investment accounts with Swiss Privilege, a division of AXA Group.

Initially, she was very happy with their service. "I have a good memory of Swiss Privilege. A lot of golf events, fine dining, luxurious overseas travel, birthday celebrations at Mission Hills golf courses while the World Cup was going on," she says. "But when a problem appeared, there was no more Swiss Privilege, only AXA, which looks like a witch."

Choi claims her broker doctored the application forms by modifying a previously agreed payment structure and by forging a number of supporting documents. In late 2010, her agent recommended she take out an AXA Privilege Personal Portfolio policy. The agent no longer works for Swiss Privilege and has not returned phone calls and messages from the South China Morning Post.