A developer recently dropped a bombshell on the French investment community: open-source code that lets anyone simulate the real returns of a CTO (securities account) versus an assurance-vie (life insurance contract). The findings challenge decades of conventional wisdom about which wrapper delivers better net performance.
The Simulation That Started It All
The controversy began when a software engineer with banking experience released Python scripts modeling multiple scenarios for both investment vehicles. Unlike the simplified calculators pushed by financial institutions, this simulation accounts for the granular details: progressive taxation scales, social contribution timing, and even notary fees upon inheritance.
What makes this tool radical is its transparency. Anyone can inspect the code, challenge the assumptions, and adapt it to their specific situation. The simulator lives online at app.cayas.fr/tools/cto-vs-av, while the full codebase is publicly available on GitHub. This level of openness is unheard of in France’s traditionally opaque financial advisory landscape.
Breaking Down the Mechanics
The CTO: Flexibility With Tax Transparency
A CTO operates like a standard brokerage account. You buy stocks, ETFs, or bonds, and pay taxes only when you sell. Since 2018, most gains fall under the PFU (prélèvement forfaitaire unique, or flat tax) of 30%, which includes 17.2% in social contributions.
The simulation reveals a critical detail: in a buy-and-hold strategy, you defer taxes for years, letting compound growth work on the full pre-tax amount. When you finally sell after a decade or more, the 30% bite hurts, but you’ve had years of untaxed growth.
The Assurance-Vie: The Wrapper Everyone Loves (But Should They?)
The assurance-vie combines life insurance with investment options. Its main selling points are tax advantages after eight years and smooth inheritance transmission. Withdrawals benefit from an annual allowance (€4,600 for individuals, €9,200 for couples) before taxes kick in.
But here’s where the simulation exposes cracks. The model shows that fund euro returns, the supposedly “safe” backbone of most assurance-vie contracts, rarely beat inflation after fees. One commenter noted these funds often advertise returns “net of fees but gross of taxation”, a subtle distinction that masks immediate social contribution liabilities.
The Taxation Trap No One Talks About
The real controversy lies in how each vehicle handles social contributions. With a CTO, you pay 17.2% only upon realizing gains. With assurance-vie, these contributions hit fund euro distributions annually, even if you reinvest them.
The simulation demonstrates this with brutal clarity. On a €100,000 investment growing at 5% annually over 15 years:
– CTO strategy: Net value after taxes ≈ €155,000 (assuming 30% PFU at withdrawal)
– Assurance-vie fund euro: Net value ≈ €148,000 (after annual social contributions and final income tax)
The gap widens further if you’re in a higher income tax bracket. The assurance-vie’s promised advantages evaporate when you model the compounding drag of premature taxation.
Why Fund Euro Promises Are Under Fire
Many investors choose assurance-vie for the fund euro’s capital guarantee. But the simulation’s comment thread reveals growing skepticism. One analyst pointed out that these funds distribute returns arbitrarily, using reserves from early subscribers to subsidize promotional rates for new ones.
This practice means your returns partially fund someone else’s marketing incentive. The open-source model quantifies this: across major insurers, the effective yield lag behind risk-free rates by 1-2% annually after all costs.
If you’re investing for a short-term project, the eight-year lock-in period for optimal tax treatment makes assurance-vie questionable. For wealth growth and succession planning, the simulation suggests it’s often a suboptimal choice.
When Each Vehicle Actually Makes Sense
The simulation isn’t a blanket condemnation. It shows assurance-vie can win in specific scenarios:
Choose CTO when:
– You have a long horizon (10+ years)
– You invest in equity ETFs or individual stocks
– You plan strategic withdrawals rather than regular income
– You’re comfortable managing your own asset allocation
Choose assurance-vie when:
– You need a simple wrapper for mixed assets (stocks + bonds)
– Inheritance planning is your primary goal
– You might need partial withdrawals before eight years
– You value the psychological comfort of a capital guarantee
The Broader Investment Landscape Context
This debate coincides with French investors rethinking “safe” assets. Many are discovering that supposedly stable vehicles like SCPIs (Sociétés Civiles de Placement Immobilier, real estate investment trusts) carry liquidity risks, while traditional assurance-vie strategies face skepticism.
The simulation’s timing is significant. With French wealth declining relative to EU peers and pensions under pressure, optimizing net returns matters more than ever. The difference between a CTO and assurance-vie strategy could mean retiring months or years earlier.
Inheritance: The One Assurance-Vie Advantage That Holds
Where assurance-vie consistently wins is succession. Upon death, beneficiaries receive the portfolio value with no probate delays and generous tax allowances (€152,500 per beneficiary tax-free after age 70). The simulation factors in notary fees for CTO assets, which can reach 2.5% of value.
For investors focused on intergenerational wealth transfer, this might justify lower returns. But for those building wealth for their own use, the math favors CTO.
Crowdfunding Platforms Feel the Heat Too
The transparency movement isn’t limited to traditional investments. Crowdfunding platforms like Fundimmo and Finple face similar scrutiny over their performance metrics. Investors now demand open data on default rates and recovery processes, mirroring the CTO vs assurance-vie debate’s push for clarity.
The Fundimmo controversy shows what happens when platforms lack transparency. Their 22.6% default rate and 36.2% of projects delayed over six months only came to light after investor pressure. The open-source simulation movement applies the same principle: verify, don’t trust.
Practical Steps for French Investors
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Run your own numbers: Use the public simulator with your exact parameters, age, tax bracket, investment horizon, and target returns.
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Audit your assurance-vie: Check if your fund euro’s net return justifies the fees. Many contracts charge 0.8-1.5% annually, eroding the tax advantage.
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Consider a hybrid approach: Use CTO for growth assets and a minimal assurance-vie for inheritance planning. The simulation shows this beats an all-assurance-vie portfolio after year 12.
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Factor in your exit strategy: If you might need the money before eight years, the CTO’s flexibility outweighs assurance-vie’s eventual tax benefits.
The Bottom Line
The open-source simulation proves that blanket recommendations are obsolete. A 35-year-old in the 11% tax bracket with €50,000 to invest for retirement gets different optimal advice than a 60-year-old planning succession.
What makes this debate spicy is its challenge to France’s financial orthodoxy. For decades, advisors pushed assurance-vie as the default. Now, transparent modeling shows many investors would end up richer with a simple CTO and disciplined buy-and-hold strategy.
The controversy isn’t about which vehicle is universally better, it’s about who benefits from the status quo. When you can calculate that a CTO saves you €15,000 over 15 years, you start questioning why that wasn’t the recommendation all along.
Before making any moves, consult the raw data yourself. The simulation code doesn’t have commission incentives or sales quotas to meet. In French finance, that’s the most revolutionary tool of all.
