An elderly retiree sold a five-year ILAS with a 'guaranteed' return

Conduct failures.

• The statement that the fund is 'effectively guaranteed' and has 'always returned at least 5% a year' is a misrepresentation. An ILAS has no guaranteed cash value and the investment risk is borne by the policyholder.
• The agent completed the risk profiling questionnaire alone and recorded 'aggressive' without discussing it with Mrs Chan. This defeats the purpose of the assessment and is a serious breach.
• No financial needs analysis was completed, so there was no documented consideration of her income, expenses, liquidity needs, time horizon or existing savings.
• The charges and the early surrender penalty were not properly disclosed, and there is no evidence that the key facts statement or product brochure was provided.
• Mrs Chan is a vulnerable customer: elderly, living on a modest pension, and committing almost all her savings to a five-year product with no guaranteed value.

Suitability. A product that locks up HK$2,000,000 of HK$2,200,000 for five years, with a 6% early surrender charge and market risk, is not suitable for someone who needs about HK$6,000 a month from savings and may need capital for medical expenses. The concentration in a single complex product and the mismatch with her liquidity needs make the advice unsuitable even if she signed the forms.

Cooling-off. For an individual life policy, including an ILAS, the policyholder has a cooling-off period of 21 days from delivery of the policy or of the notice of policy issuance, whichever is earlier. If she is still within that period, she can cancel in writing and receive the value of the units, adjusted for market movements and any charges permitted under the terms; it is not a full refund of premium. Two months after the sale she may already be outside the cooling-off period, so this route must be checked immediately against the delivery date.

Surrender. Outside the cooling-off period she can surrender, but she will bear the early surrender charge and market loss. She should not surrender before taking advice, because the loss may be substantial and may be recoverable through a complaint.

Complaints and remedies. She can complain to the Insurance Authority about the agent's conduct and to the Insurance Complaints Bureau if the dispute is claims-related. The SFC regulates the authorised product and its marketing. A civil claim for misrepresentation or for advice that was negligent or unsuitable may also be possible. She should preserve the sales documents, the risk profile form, the FNA and any WhatsApp or recorded messages. The agency and the insurer should be asked to review the sale; a complaint may lead to compensation or other redress.

The agent should have kept:

• a financial needs analysis signed by Mrs Chan, showing income, expenses, assets, liabilities, existing cover and liquidity needs;
• a risk profile questionnaire completed with her, not for her, with the rationale for the resulting risk level;
• the key facts statement, product brochure and benefit illustration;
• a written record of the advice, including why the product was recommended, the alternatives considered and the charges and risks disclosed;
• disclosure of the agent's remuneration and any conflicts of interest;
• the cooling-off notice and acknowledgement of receipt.

A proper process would have started with know-your-customer and suitability. Given her age, pension, expenses and need for accessible savings, the agent should have considered a simpler, capital-protected or shorter-term product, or a much smaller allocation. The agent should have explained that returns are not guaranteed, that the value can fall, that charges reduce the investment, and that early surrender is penalised. The recommendation should have been documented and the client given time to consider it. If she still chose the ILAS, the file should show that the risks were understood.