Case Study: A combined solution gives near- and long-term benefits
Profile
PCS by Mercer client is an UHNW individual in her 50’s. She is married and has an adult child, who is an entrepreneur.
The family lives in the People’s Republic of China (PRC). They have substantial onshore assets and investments, including risk-based assets, mutual funds, and real estate.
Our client is currently planning her retirement and legacy transfer arrangements.
Key considerations/challenges specific to the client
As our client holds certain risk-based assets, she is looking for a solution that can also act as a diversified investment to help mitigate market risk and volatility.
The client also wishes to build her cash reserves while continuing her exclusive lifestyle. She is specifically looking for a comprehensive solution that provides her with a high and dependable income that can either accumulate or be withdrawn on demand. She stipulates the solution should begin paying out relatively soon and lasts for at least thirty years. Beyond cash flow, the client is looking to satisfying her significant legacy planning target.
For expediency, the client also wants minimal medical requirements in any solution.
PCS by Mercer Solution
We helped the client incept a Quick-Return Annuity, with an associated Universal Account. *
Premium: RMB 10M/year x 5
The benefits of the combined solutions for the client were:
Steady Cash Flow – The quick-return annuity policy begins generating fixed income returns of almost 2 million RMB per year from the 5th policy anniversary until the client turns 90. The cumulative dividend will contribute to the cash value growth.
Wealth Growth – The annuities and dividends will be deposited into the Universal Account with a guaranteed interest rate of 2% and a current** effective settlement rate of 4.5%. The client has the flexibility to withdraw from the Universal Account on demand.
Legacy Potential – x2.96 (projected) death benefit at age 90 and x4.39 (projected) at age 100 if the cash value is not withdrawn.
No medical check – The insurer is satisfied with the existing medical reports the client provided and issued the policy.
Key takeaways
PCS by Mercer’s local product knowledge and international experience in UNHW market means we have the ability to meet our PRC clients' individual needs for RMB onshore asset diversification.
We assist clients to respond to economic conditions in their wealth management. In the current low-interest rate environment, we help protect clients’ near-term benefits and future wealth transfer needs with combined solutions that achieve guaranteed as well as cumulative returns.
PCS by Mercer are able to source individualized solutions with simplified health underwriting requirements to facilitate clients' decision-making and improve efficiency.
*Universal Account is a category of life policy with low protection leverage at early stage and guaranteed/projected returns after the annual instalment (annuity + bonus) begins. For this specific policy, the death benefit equals the account value (cash value) after a few years.
**Current as of October 2023, subject to change.
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has more than 17 years of experience in the wealth management field in Mainland China, with a focus on servicing HNW/UHNW individuals. He has extensive knowledge of asset allocation and insurance solutions.
Prior to joining PCS, Nicolas worked for HSBC, DBS, and other well-known foreign and local financial institutions in Shanghai. He served as sub-branch manager at Hang Seng Bank and general manager of wealth management center at Noah.
Nicolas holds a Master of Business Administration degree from Fudan University and a bachelor's degree in management from Shanghai University of Engineering Science.
He is fluent in English and Mandarin.