It was 2012, I was newly out of debt and looking for what to do with my savings. I knew I wanted the money to grow, I knew I should invest it, but I didn't know how to start. Fortunately one of my friends had given my name and phone number to her investment advisor. He gave me a call and I decided to meet up with him. Ashley got a free Ipad for referring so many friends. Well done Ashley!
I let him know I wanted a short term investment, that I had a low risk tolerance, and that I was saving several thousand dirhams each month. He suggested I sign up to a 5 year savings plan* and that I could withdraw my money at any time as long as I didn't touch the first several months of premiums.*
I read the fine print, I asked many questions. I thought I was making an informed decision based on the advice of a financial professional who worked for a respected firm from the UK. All of the documents looked legitimate.
After about 3 years of sending money away to this plan, I noticed that my balance wasn't growing in line with the performance of the stock market. There had been a record-setting bull market, and I should have been seeing large returns, but I had only just broken even. Something was off.
I read through all of the policy* documents. I started searching for the company's name and the word "scam." I found out that I had not invested my money in the various mutual funds my advisory showed me, but rather that I had purchased a life insurance policy (note the wording: plan, policy, and premiums). A life insurance policy cleverly disguised to look like a stock market investment product. A product so complex with layers upon layers of fees that drained my "invested" money. Most of my losses were not evident until I withdrew my funds in a "full surrender."
I hemmed and hawed. I poured over every financial education website I could find. I discovered the FIRE movement. I read Andrew Hallam's first two books, I found the local group that later became SimplyFi.org and commiserated with others in the same situation.
In the end I got off easy. A full surrender only lost me about $5000 USD of my original "investment". Some lost much more. Not to mention the opportunity cost. Thankfully some of these insurance backed investment schemes are no longer sold here in the UAE.
I lost a significant sum, but what I gained was invaluable. I learned the difference between speculation and investing. I learned to reduce fees and stay away from complex financial products. I learned that anything more than 1% is too much because both costs and returns compound over the long run. I learned how to invest on my own without needing a financial advisor's support.
Now, with my savings properly invested using the Bogleheads philosophy, with the help of my friends at SimplyFi.org, I am at a point known as "CoastFI" and I'm approaching my life in a "SlowFI" fashion. I'm able to take my foot off the gas and relax a bit because I know my financial house is in order.
I know that I have a financial safety net. I know that If both my partner and I lost our income sources at the same time we would still be able to afford a basic life. I can now truly choose the life I want to live, instead of having my finances dictate my opportunities.
All of this was made possible by what I learned from that one financial mistake.
For a while I struggled with blaming myself for my poor financial sense with this "long term savings plan" but in retrospect it was actually a $5000 investment in my financial education.
*Red flags. If you have invested in product and it uses language like "savings plan" "premium" "payment holiday" "policy" it's likely you're in a similar scam. Technically it's a legitimate (and expensive) life insurance policy, but it's sold under the guise of being an investment--hence a scam. If you do find yourself in one of these situations, your best option is to stop payments immediately and start learning. The sooner you do a full surrender and reinvest your money properly, the better off you will be in the long run.
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