A long-term investment that adapts to every cycle
Although the sentiment in the Finnish equity market has been gloomy in recent months, interest in unit-linked insurance among investors has remained high.
“It seems that investors are increasingly turning to unit-linked insurance when they are looking for alternative ways to save and invest,” says Pekka Luukkanen, CEO of Nordea Life Assurance Finland.
“Perhaps the current down cycle is highlighting the benefits of unit-linked insurance from our customers’ perspective.”
Flexibility allows investors to react quickly
The fundamental idea behind unit-linked insurance is to allow investors to invest in a range of instruments under one contract. You can also switch investment instruments within the contract at no cost and without immediate tax implications. You will only pay taxes on the return once you withdraw money from your contract. This allows you to benefit effectively from compounding.
“Many of our customers want to be able to switch investment instruments without costs or immediate tax consequences. This flexibility allows them to react quickly to changes in the market,” Pekka Luukkanen explains.
According to him, being able to diversify your investments extensively under one contract mitigates risks and improves the expected return. As an example, investors can adjust their exposure from equities to fixed-income funds, or vice versa, depending on the market.
“This makes unit-linked insurance an investment that can adapt to every economic cycle,” Pekka Luukkanen says.
Unit-linked insurance is also suited to budding investors
Unit-linked insurance policies are sometimes seen as complex investment products that are only suitable for more experienced investors. According to Pekka Luukkanen, this is not true.
“It’s a myth that unit-linked insurance policies are complex products. In its simplest form, investing in unit-linked insurance is no different than investing in funds. We can create an optimal investment contract for each customer based on their risk appetite, expected return and investment horizon”, Pekka Luukkanen explains.
Capital protected investment alternatives also available for unit-linked insurance
Fluctuations in value often pose a challenge for investors, especially with high-risk investments. This is why Nordea has decided to also offer more secure alternatives.
“As an example, we are currently offering a capital protected real estate basket, which invests directly in high-quality Finnish properties in fast-growing locations,” Pekka Luukkanen says.
The real estate basket is a similar investment solution to an investment fund and it encompasses a variety of property types. Capital protection means that you don’t expose yourself to a risk of capital loss.
“Property investment is a popular investment type in today’s world and a good way to further diversify your assets. Interest rates are expected to continue to fall, which is excellent news for property investors,” Pekka Luukkanen adds.
Innovative investment solutions for various needs
According to Pekka Luukkanen, Nordea has the resources to offer a wide range of investment alternatives for various needs due to its scale.
“As the largest asset manager in the Nordics, our offering includes solutions that many smaller companies don’t have. We can also create innovative solutions for our customers, such as the capital protected real estate basket I mentioned earlier,” Pekka Luukkanen says.
He encourages investors to take advantage of the flexibility that unit-linked insurance policies offer since it comes in handy especially in the current market.
“We hope that our customers take the opportunity to switch the investments within their unit-linked insurance and do this frequently. As we have seen in recent years, the world is constantly changing and it’s very useful to be able to change your investment allocation depending on the current market environment.”