be careful not to invest your precautionary savings in risky funds!

A poignant moment, undoubtedly a polished vocabulary of the insurance police officer, but a reminder that the order is clear and understandable: insurers, banks or brokers who sell life insurance should not forget about their duty to advise. And above all, do not encourage your customers to invest their precautionary savings in funds where money is not available immediately.

SCPIs, structured funds, or other unit-linked assets (UCs) that demonstrate attractive returns promise: the interest of these life insurance funds is in no way in doubt. But they should not be offered without serious and individual advice. In conclusion, this is the statement of the Office of Prudential Control and Problem Solving (ACPR), Banking and Insurance Police, in a press release issued on Tuesday, May 3: the institution, supported by Bank de France, calls on life insurance distributors to better respect obligations. language to advise clients who are financially unstable or have difficulties.

I mean, some distributors – but the regulator does not specify which family of distributors – clearly did not fulfill their duty to advise forgetting to warn customers who have financial difficulties on the poles, where it is necessary to provide a delay in the issuance of money. Here again, you should read between the lines of this press release, but the incriminated UC funds are reminiscent, in particular, real estate funds and SCPI, structured funds, as well as in general life insurance contracts with high entrance fees.

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Unstable customers without precautions

Some life insurance contracts are available may worsen their financial situation as they have no precautionary savings to meet its short-term cash flow needs, writes ACPR. Thus, they may be subject to special entry and management fees if they are forced to quickly repay their life insurance contract due to lack of cash, while these contracts aim to create stable long-term savings.

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The insurance policeman insists on UC funds that are potentially profitable in the long run but risky in the short term: some distributors sold risky media to customers when they were inappropriate. Obviously, they were not aware of the risk of losing capital to these UC pillars.

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Therefore, ACPR recalls the basics of the obligation to advise life insurance distributors, in other words banks, insurers, brokers or financial technology. They must take into account the possible fragility [de son client], its financial difficulties and the level of liquid savings; and offer a level of investment risk adapted to his knowledge and experience in financial matters.

The press release does not mention any sanctions or tightening of controls, but ACPR says it is particularly vigilant in this regard. Translation: this is a public warning before playing.

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Preventive savings: 2 months of minimum income per book

A small mattress for 2 months of the minimum wage, to cope with the financial blow, keep in a savings account or at least in a current account: this is the definition of the minimum precautionary savings. The ideal remedy is the eternal Livret A or, better yet, the Livret d’epargne populaire (LEP), if you have access to it. Once precautionary savings are accumulated, you can invest with a clearer mind.

Precautionary savings: how much, on what account or book?