To boost your life insurance contract, or to simplify your life, you want to delegate its management to a professional thanks to pilot management. But how to choose it well? Here’s what you need to know about management mandates, and 5 tips to help you choose.
Life insurance funds in euros returned 1.91% on average in 2022. Less than the Livret A currently paying 3% and above all much less than inflation which rose to 3.4% in November according to the latest figures from INSEE. Even though the average expected return this year for euro funds is 2.5%, you may be wondering how to get more return.
Diversifying your assets on your contract via investment in units of account (UC) is a good solution. But you have little or no time to devote your investments. Furthermore, limited knowledge of financial markets is a hindrance. A solution remains to be considered: pilot management. Fees, risk of loss, investment horizon… Find here some keys to help you choose the right management profile.
Life insurance: choosing pilot management, is it really a good idea?
Pilot management, what is it?
Pilot management or management under mandate returns delegate an external participant to the distribution and arbitration between the different assets of your life insurance contract. This is often the insurer who manages your contract. In fact, however, it is portfolio management companies (Rothschild Gestion, Lazard Frres Gestion, Oddo BHF AM, Carmignac, La Financire de l’Echiquier, etc.) which manage the management and indicate to your insurer on which funds it must invest.
Today democratizes, pilot management is more accessible: 100 euros minimum investment for the Meilleurtaux Life Investment contract, 300 euros for Fortuneo Vie, 500 euros for Direct Life Investment or even 1000 euros for Yomoni Vie or Linxea Avenir Spirit 2.
Five tips to help you choose
And you also need to determine your risk profile in advance. That is to say the level of risk the manager can take with your money and which will influence the distribution between the fund in euros, guaranteed support, and the units of account (equity, bond, money market, diversified funds, ETF, etc.).
1. Read the general conditions carefully and do not stop at the names of the mandate
Depending on your contract, you will be able to access two, three or even dozens of different profiles. Most often, the choice will have to be made between cautious, balanced and dynamic. Be careful, however, not to rely on these names alone. In fact, there is no standard! Each insurer is therefore free to define its investment conditions by profile.
You should also not rely solely on the information, often succinct, presented on the websites of banks and brokers, but read carefully the general conditions of the contract. This document contains in particular the description of the different arbitration mandates proposed. By leafing through several notices, you will then notice more or less precise objectives on interest rate products, in other words the least risky assets.
2. Dwell on the risk rating
each management profile is also associated with a score of 1 to 7. This is a risk indicator, the SRRI. The higher this is, the more the management company will bet on volatile funds but the higher hope of gains. To put it simply, this indicator corresponds to the average of the individual SRRIs of each underlying fund.
This SRRI rating has the merit of being synthetic… perhaps too much since two profiles can have the same risk score and yet contain very different funds. A manager will thus be able to place half of the savings in a euro fund and the other half in very volatile equity funds and obtain an SRRI of 4. Another management company will choose SCPIs and units of account rated between 3 and 4. The score will be the same but the potential gain (or possible loss) will be different.
What is the maximum risk I want to take, in other words, how much can I lose if the market falls?
3. assess your maximum loss level
This is a question that the investor must ask himself: what is the maximum risk that I wish to take, in other words, how much can I lose at most in the event of a market fall?, explains Alain-Pierre Belchior, director of financial offer from the UFF. Depending on the answer to this question, you will know if you can risk the most dynamic profile, or the one with the highest SRRI rating.
4. Take a look at past performance of mandates
Once you have identified the level of risk acceptable to you and the corresponding type of allocation, it is time to compare past contract returns. If from one year to the next you notice that the rate differences are particularly large, this may mean that the mandate is deliberately invested in cyclical values. So, if you are not ready to see the value of your life insurance ride on a roller coaster, this profile is not for you.
There are mandates with diverse and themed investment objectives, particularly on asset contracts: by geographic sector, by activity or by type of support (for example, on bonds or ETFs), or a combination of these elements. Still other contracts offer mandates that secure assets as retirement approaches, such as the horizon management option of the retirement savings plan (PER).
The choice of your management profile can be made based on your investment horizon. Unsurprisingly, the longer this investment horizon, the more risk you can take.
The choice of management profile must be made based on its resistance to market shock but also based on its investment horizon, adds Alain-Pierre Belchior. It’s necessary put into perspective the short-term behavior of financial markets and the long-term horizon of his investment. Let’s take the example of a saver who chooses to invest over 10 years. If a correction occurs during the first year, it is necessary to extract oneself from the market momentum to judge the quality of the allocation with regard to the investment horizon.
5. Compare contracts by looking (in particular) at the different fees
The performance of pilot management obviously goes hand in hand with additional fees. Because a low rate of return can come from a gloomy financial context, but also from costs that reduce the profitability of life insurance. However, by opting for pilot management, you will pay a little more. You must therefore be particularly vigilant.
Pilot management of a life insurance contract: comparative operation 2023
In order to remunerate the asset manager, fund management fees are increased by a few tenths of a percentage. And they are added to the costs inherent to the contract, such as payment charges. In certain cases, it is the arbitrations carried out within the framework of this delegation which will be billed to you. More rarely, the manager is paid as a percentage if the performance of the allocation is positive.
In all cases, the management costs of the mandate and contract must be communicated to you precisely. It is then up to you compare different life insurance policies in terms of costs. You will then be able to select the contract with the most favorable return-cost ratio taking into account your risk profile. Since the summer of 2022, it has been possible to compare the costs linked to pilot management and those inherent to the units of account, thanks to the summary table of costs accessible on the insurers’ websites.
Life insurance costs: units of account closely monitored by the insurer watchdog
As a reminder, during the life of the contract, a change of mandate is always possible. This may, however, result in additional costs, particularly related to the necessary arbitrations. Most often, it is also possible to move from pilot management to free management, and vice versa.
Compare the best life insurance offers
What you must remember:
- Pilot management consists of delegate the management company partner of the contract to monitor your life insurance. This will make the selection of funds and the necessary decisions for you based on the level of risk you are prepared to take and your investment horizon.
- This acceptable level of risk is materialized in the management mandate that you take on. Please note, depending on the brokers and asset managers, two mandates qualified as prudent may include very different supports. Hence the interest in carefully reading the description of the management profile.
- For compare pilot management, past performance and fees charged allow you to complete your analysis.