Thursday, June 30, 2016

Buying the right size of air conditioner

According to this website, a room 25 ft X 20 ft requires a 12,000 BTU air con to cool the room by 12 Celcius, i.e. from 30 Celcius to 18 Celcius.

The website also gave this example: One 2,000-square-foot-home with normal insulation conditions in Washington, D.C., needs a 48,000 BTU air conditioner for adequate cooling in summer. It suggest that a 5,000 sq ft room needs 12,000 BTU, ie. 1/4 of the house.

However, one air con contractor recommended a 18,000 BTU unit and another recommended 1 24,000 BTU unit.

The 24,000 BTU unit can cool the room by 24 Celcius from 30 Celcius to 6 Celcius. It sounds like close to freezing.

Did I get the correct calculation?

After Note:
I found these two websites that shows 12,000 BTU to be adequate. They advised against buying an oversized one.

Pushing commuters to take premium taxi

At the airport terminal taxi queue, the usher asked the commuter in front of me. "Do you want the white taxi". "No". He pointed her to another taxi. He asked me. "Do you want the white taxi". "No". The white taxi is a Mercedes Limo and looks very expensive.

He asked me to go to the taxi at No. 7. It was a black taxi, Prestige brand with a starting fare of $5. That looked like a premium taxi.

I walked away to take another taxi, which is a standard taxi.

This dishonest practice of pushing commuters to the premium taxi is now getting to be quite blatant. It shows the "free market" taxi fare system to be very bad.

Wednesday, June 29, 2016

Rising cost in Singapore

We face a serious problem about rising cost in Singapore. Here is another example.…/higher-opera…/2901662.html…

The high cost is due to:
a) High cost of property and rental
b) Inefficiency

We are now paying high prices for labor and all kinds of services.

Tuesday, June 28, 2016

Removal of jump in bonus

When the policy was bought many years ago, the projection showed a low rate of bonus for many years. On the 20th, 25th and 30th anniversary, the bonus had a "big jump". This was supposed to be a terminal bonus that occurs only on these years.

Many years later, the policyholder found that the "big jump" had disappeared. The surrender value was much less than initially projected.

He requested for a Post Sale Benefit Illustration. It showed that the "big jump" on these special years had disappeared.

The policyholder asked for my views.

I had raised this issue with MAS many years ago. I said that it is bad for a policy to be designed in this way. The insurance company pays a low surrender value for most years, if the policyholder has to surrender the policy.

The MAS official said that that this was the design of the policy. The policyholder had the choice of waiting for the special anniversary to enjoy the higher value.

I do not like the MAS position, but I had to accept it. If the policy is designed in this manner, it is wrong for the insurance company to withdraw the special anniversary bonus arbitrarily.

If the insurance company has to reduce the bonus due to poor investment return, they have to implement the cut fairly across the board. All policyholders have to bear their fair share of the cut. It is wrong for the insurance company to take away the special anniversary bonus, as those affected had to suffer a larger cut compared to the other policyholders.

MAS requires the board of directors to ensure that the policyholders are treated fairly when they have to review the bonus rates. It will be difficult for the board to prove that they have been fair to the affected policyholders when they take away the special anniversary bonus.

Capacity of air conditioner

If you have to cool a room of 25 ft X 20 ft X 10 ft high, what BTU of air conditioner do you need? You can get the answer here. You have to exercise some judgement to get the right answer.

Sunday, June 26, 2016

Takes time for the business to build up

A new stall opened in Midview City Food Court recently. It served western food. There was no queue for the stall. Most of the other stalls had long queue.

I decided to patronize the stall to avoid the queue and also to help them to get some business. I ordered chicket cutlet. It was delicious.

The price was $6.50. It is cheaper than similar food served in restaurants, but more expensive than other food served in the food court - where the average was $4. That was perhaps the reason why they do not have many customers.

I asked the attendant how was business. She said okay.

I had since patronized the stall a few times and also given a treat to my staff at that stall.

Recently, I asked the cook how the food was prepared. He said that the cutlet was already marinated by the supplier, so he had just to roast it. The sauce was also provided by the supplier.

TKL - how is business?
Chef - not good. it is a struggle.

I hope that they can last a few months longer for the business to build up.

Invest for the future

The UK is leaving the European Union. The global stock markets are in turmoil. Bonuses on life insurance policies will be cut further.

How should ordinary people invest their savings for the future? Learn about the investing opportunities by attending this talk.

Saturday, June 25, 2016

An unnecessary referendum

Mr. Tan
One of our super minisers described the UK referendum as "an unnecessary referendum".He had implied that many of the voters were ignorant and cast their votes without understanding the harmful consequences. The referendum has backfired and the global economy is in turmoil. Do you agree with this view?"

Of course, to the people in power, it is an unnecessary referendum. These people like to stay in their ivory tower and to enjoy the privilege of power without being accountable to the people who are affected badly by their decisions.

They are so obsessed with their arrogance and self-perceived wisdom that they do not need to listen or act on the feedback or suggestions from the ordinary people.

They already know best, so why bother to hold a referendum? If they get their way, they will like to dispense with the regular general election as well.

They may be a significant proportion of the voters who voted without understanding the big picture of the global economy. However, we must not ignore the "wisdom of the crowd". Many of the voters voted based on how their daily lives were affected by the issues that concern them.

The people who voted wisely (even though they voted differently from what the establishment leaders would have wished them to) outnumbered those who voted ignorantly.

The conditions affecting the ordinary people in the UK, and in many other countries in the world, are unsatisfactory. The surprise vote to leave the European Union is a reflection of the anger of the ordinary people at these unsatisfactory conditions.

Friday, June 24, 2016

Google Map is more useful than our million dollar transport minister

I visited a friend in Oxley Biz Hub and took bus 70M to my home late at night. I could not see the roads and stops as I pass by, because it was dark outside. My eyesight was not good.

I am reminded again of how useless is our super transport minister KBW. He expects the commuters to be able to see at night and to know the roads and where to alight the bus.

He refused to provide any digital display on the bus or give any voice announcement.

I took out my mobile phone and looked at Google Map. It showed me where I was on the map. Being familiar with Singapore, I got my orientation and was able to know where to get off. What about other passengers who are not familiar with Singapore or with Google Map?

Maybe most of them will take a taxi and complain about the high cost of taxi fares and the high cost of living in Singapore.

If Google Map can give be so useful, why do we need to pay a million dollar salary to a useless transport minister?

Peer to peer lending - another ponzi scheme?

An IT expert told me that many people are losing their capital on peer to peer lending. This was supposed to be a platform to allow
small businesses to borrow working capital and provide a good interest rate to the investors.

The promoters were able to pay a good interest rate on the lending at the initial period. After a while, the promoter disappeared and the investors lost their money.

TKL - This sounds like another ponzi scheme. The promoter took the investments of the later investors to pay the attractive return to the early investors.

As more people pour in money to invest in this scheme, the promoters were able to pay the high interest rate, while siphoning off a significant portion of the investments.

Another ponzi scheme in the making. Wow!

Thursday, June 23, 2016

MAS Balanced Score card

Raymond Fong read the "balanced score card" guidelines from the Monetary Authority of Singapore set out here. He made this comment.

I can tell you that none of the few agents who sat me down over the years did even a quarter of those listed in the guidelines. They only pushed me products and did not explain the products in breadth nor depth to me. 

When I started commenting about the low rates of return and upon my pointing out that the low rates included the non-guaranteed portion, they would then ask me how much I expected the rates to be. When I said 10% pa, they told me they were not investment but savings that were better than banks'. 

I replied that the time horizon was too long at 20-25 years and the exclusion of non-guaranteed rates made the returns even lower and which couldn't even cover inflation rates. That was when they would show their disinterest in me and started to leave me alone. 

What kind of professionalism and attitude were those? How many parts of the guidelines have they not adhered to? How were they regulated for their treatment of me as their potential client?

My view:
The balance scorecard is MAS's approach to solve the problem of mis-selling of insurance products. It does not seem to achieve its purpose. The mis-selling continued to be rampant.  MAS needs a new approach to address the problem, rather than rely on impractical guidelines.

Lost retirement savings on bad investment

Many years ago, John (not his real name) met me. He worked as a security guard. He looked sad. He told me that he had invested $300,000 in buying several plots of land from Profitable Group. It was supposed to give him a retirement income. His investment was stuck. He had to work as a security guard to earn an income. His health was not good, but he had no choice. He had made a big mistake.

A few years later, he saw me again.

John - Mr. Tan. What do you think about my investment in the land plots. Do you think that I have a chance to get my money back?

TKL - Honestly, there is no chance. The company had been raided by the police. You had the titles to the land plots. You have to look for a buyer. Nobody is interested to buy the land plots at the price that you had bought.

John - (really sad face). Why does MAS allow this type of company to sell the investments to ordinary people?

TKL - I don't know. Sorry.

Recently, John saw me again.

John - Mr. Tan, my wife and I voted for you during the Presidential election. Are you able to help me to get my money back?

TKL - I really don't know how.

Over the years, John had become more angry and more desperate. I felt pity for John, although it was unfair of him to harass me over his financial problem.

Is an annuity good for retirement?

Mr. Tan,
Is an annuity good for retirement?

It depends on the annuity terms offered to you, the investment options that you have, and what your needs are.

If you are talking about the CPF special account, you do not have any choice. You have to buy CPF Life.

If you are talking about your own savings, you can compare the terms offered by the insurance company with the terms offered by CPF Life. If the insurance company can offer terms better than CPF Life, then you can consider the deal, If the terms are far worse than CPF Life, you can forget about it.

You also have the choice of investing the savings in the STI ETF and draw out the dividends each year. If this is not sufficient, you can sell some of the units every year to supplement your income.

There is no simple answer to your question.

The best approach is for you to find a financial adviser and pay for his or her advice and time. Maybe you can set aside $200 to $500 for the advice. If you are investing $50,000, the advice of $500 represents only 1% of your investment. You should pay for it.

If you do not pay for advice, and you invest $50,000 in an annuity, and the insurance company takes away 5% for its expenses and profit, you are actually spending $2,500 on the purchase. If the front end charge is 10%, you are spending $5,000.

Many people make the mistake of buying a bad product and suffering a high front end cost. They can spend much less for good advice, but they have to pay for the advice.

When you are sick and see the doctor, you have to pay the doctor's consultation fee, right? If you do not pay the fee and the doctor makes his margin by selling medicine to you, will they sell you the most expensive medicine, which is not necessary for you, to make a living?

Visitor to the Singapore Cricket Club

I have been a member of the Singapore Cricket Club for 40 years. This was the first club that I joined. I continued the membership up to today. If you are interested, I don't play cricket. I also do not use the sports facilities.

The club is located at one end of the Padang in Singapore. It has members (like me) and guests (people who are introduced by members to dine at the club). It had one person called "the Visitor".

Who was "the Visitor"?

He was Mr. Lee Kuan Yew. When LKY was the prime minister and had his office in City Hall, he visited the club once a year and had dinner with the committee. He was given the title of "the Visitor".

I did not know how long he continued the practice and if this practice was passed to other prime ministers during the years.

Now that Mr. LKY is no longer with us, I wonder if the club still has "the Visitor".

Perhaps I should apply to get this special title. During the past 40 years, I visited the club an average of one time a year. Unlike Mr. LKY, I did not dine with the committee and have to pay my subscription as a member.

However, my application is likely to be ignored. This is the standard operating practice in Singapore. Perhaps there are many other members who have the same qualification as me. Hahaha.

Pay for proper advice and make the right choice

A young graduate was advised to buy a Term Insurance policy with a premium of $1,700 a year.

If the graduate had approached an adviser who does not earn commission on the sale, the adviser would have given her the options set out in this PDF. The information are available from the MAS Compare First website:

If you were the graduate, which option would you choose?

a) 20 year term insurance for $400,000 - $224 a year
b) 37 year term insurance for $400,000 - $338 a year
c) 37 year term insurance for $400,000 with critical illness cover - $990 a year
d) The policy recommended by the agent - $1,700 a year

Are you prepared to pay $100 to an adviser to prepare the information to help you make a proper decision and save more than $1,000 a year for the next 37 years?

MAS approach is to use the "balanced score card"

Raymond Fong said

I wonder how agents are regulated at the operational level. Commissions based work in any field has been argued to be not in the interests of consumers due to the conflict of interests.
There should be a ban on commissions model and move on to consultation fee model instead. If the argument is that products need to be pushed to enable those industries to survive, then it is very telling that either the consumers are not familiar with the need for those products and/or the industries are not doing enough to create awareness and knowledge of their needing them.

It's time to move on to increase the awareness and knowledge of consumers rather than to rely on agents' monetary motivation to push products via commissions.

My sarcastic reply is that MAS solved the problem by introducing the "balanced score card". It is a hogwash. It does not address the root of the problem, which is the payment of commission. The bigger the premium, the higher the commission.

Dishonest practice by Sing Tel (2)

I complained about the low speed of my fibre broadband connection. I signed up for 100 Mbps but the speed test for Wifi showed only 10 Mbps to 15 Mbps.  Sing Tel finally sent a technician to my office.

He checked and said that the speed is now 40 to 50 Mbps, which is quite good for Wifi. The usual speed should be 20 to 30 Mbps.

I checked on my desktop and found that the speed had increased to 40 to 50 Mbps.

I told him that it showed only 10 to 15 Mbps yesterday. My colleague also reported the same low speed.

Technician - Most likely it was the problem with Sing Tel backend.

TKL - How does this affect the speed?

Technician - When you upgrade the speed, the backend profile might still be showing the old speed, or there could be some conflict. Perhaps they have rectified it now.

The technician is an ITE graduate. He knows his job and is honest.

Why can't Sing Tel approach this problem in an honest way? If the customer reports a low speed, and if the backend could be an issue, they should have given the correct information to the customer and fix the issue in a transparent way. Perhaps the staff at the help desk does not really know what he is doing. Perhaps, he is based in the Philippines (he spoke with that accent).

They make things more complicated by trying to deceive the customer, or by refusing to look at the root of the problem.

Wednesday, June 22, 2016

Fight to get back her money

A few months before the collapse of Profitable Group, Sally (not her real name) sent an email to me asking for help. She had invested a large sum of money in the products of that company and had an inkling that there was something wrong. The payment that was due to her on maturity was delayed by a few months.

I asked Sally to meet me to discuss the problem that she faced and the strategy to get her money back. She did not respond. Later she told me that the will take action on her own first, before approaching me again.

I learned from her later that she went to the office of Proftable Group, which was located near her office almost every day during her lunch hour and created a scene. The director of that company got her aside and discussed with her. To get rid of his problem, he paid her off.

Sally was one of the few people that managed to get her money back. She was prepared to fight to get back her money, and take whatever action was needed. She was prepared to become a nuisance to the company.

Most other people expected other people to fight for them After getting back their money, they are not prepared to pay for the time spent and the service rendered. They disappeared without a trace.  They had achieved their goal. They do not believe in compensating other people for their effort. 

Display of Next Bus Stop

I took the bus home late tonight. I could not see the landmarks on the road. I was reminded that our super transport minister KBW had been in the job for more than 6 months. He has still not done anything to improve the display or voice announcement in the bus to tell commuters which is the next bus stop.

KBW probably thinks that every bus commuter, including the elderly, have super eyesight that allowed them to see the landmarks at night. Perhaps he thinks that we could be morphed into owls.

I was hopeful that Tower Transit, being new in Singapore, would have acted differently from the other two bus operators and taken my suggestion to introduce the display or voice announcement in the bus.

I was sadly mistaken. Tower Transit had embraced the local culture within the first week. They do not reply to suggestions sent by email. When they received some negative publicity in the social media (from me), they immediately replied and said that they would look into the matter.

Nobody contacted me or gave a reply for the past month. They are plainly not interested. They have even adopted the standard operating procedure of giving a nicely worded reply and filing the matter away. They have already achieved their target. This must be the SOP adopted in the civil service under our dear PM, LHL.

I resorted to using Google Map to get my location. I managed, with effort, to get down at the correct stop.

I will be developing a mobile app with the sole purpose of showing the Stop Number of the next bus stop. The three transport operators can download the app from Google or Apple for free into their tablet and use it as a big display in the bus. Maybe, they are wating for the free app to be available.

Compare First website

For someone who is familiar with insurance, the Compare First website launched by MAS provides excellent information.

I am able to find the information that I needed easily. However, the ordinary consumer may not know what to look out for.

The solution - go to an insurance agent or a independent financial adviser. Ask them to search for the information and explain the results to you. Pay them a fee for this service. Be prepared to pay $100 to $300 for the service.

You will be able to save s thousand dollars or more by buying the insurance cover that you do not need. You can also watch out for which companies are overcharging you for the product that can be bought cheaper from another company.

A dishonest way to run a business

I am quite fed up with the dishonest way that SingTel runs its business.

Recently, I upgraded my fibre broadband speed to 100 MByte. I observed that the speed does not improve. I contacted Sing Tel to ask if they needed to change some of the configuration to allow me to enjoy a higher speed.

SingTel replied that there is no need to change the configuration. They do not bother to find out if I am getting the higher speed that I paid for.

I complained about the slow speed. They help desk called me to help me to go through a speed test.

I carried out the speed test according to instruction. I get a reading of 10 MB to 15 MB.

Help Desk - But sir, you are using Wi Fi. You will get a correct speed if you make a direct connection to the router.

TKL -  I know that Wi Fi is slower than direct connection, but should be difference be that much? Surely, you know what the difference should be? Is 10 MB accepted for Wi Fi when I am supposed to get 100 MB"?

Help Desk - Okay sir, we will send someone to your office to check tomorrow.

Clearly, the Help Desk staff was trying to deceive me. If they can get away with it, why not? This seems to be the dishonest way that Sing Tel runs its business.

Easy to scare consumers into paying big premiums for risks with low claim ratios

Many consumers, especially ladies, pay a big premium to be covered for critical illness. They are helping the insurance companies to make tens or hundred of millions in profit each year.

The following table shows the obscene profit margin made by the insurance companies offering this type of cover.

It is easy for the agents to frighten the consumers to pay a large premium because nobody likes to be struck with cancer.

The consumers should also be aware that there are also many people who are injured through traffic accidents each year, and they are not paying humongous premiums to be covered for this risk.

Paying too much for a Term Insurance policy.

A 28 year single lady told me that she just bought a term insurance policy with an annual premium of $1,700. I said that the premium is too high. I checked the MAS Compare First website and found that she could be adequately insured for a premium of only $224 a year.

The agent wanted her to buy a bigger policy than she really needed and to cover for a longer period and also to include critical illness cover, which produced a high profit margin for the insurance company.

The detailed figures are shown in the PDF attached to this article.
The figures can be obtained from the MAS Compare First website.

The life insurance landscape has changed considerably

During the 30 years that I was CEO of NTUC Income, I followed a simple but very important principle - the insurance products that are sold by NTUC Income should give good value to the policyholders, i.e. that they should get insurance coverage at a lower cost and an investment return that is higher than what they can get from other types of investments.

I was not only giving them a better return compared to other insurance companies, but I aimed to give a better return compared to other types of investments.

I was focusing on the investments that are available to ordinary people, e.g. unit trusts, fixed deposits and bonds. At that time, the low cost index fund (such as the STI ETF) was not available. If someone is an expert in investing in shares, he or she is not "an ordinary people" and can do better than buy a life insurance policy from NTUC Income. I was not focusing on these investment experts.

I was not focusing on how much profit could be made by NTUC Income. It has to make a profit but the maximizing of the profit was not the objective. The objective was to provide insurance products that the buyers can get good value, i.e. low cost insurance coverage and a good investment return.

I was able to achieve this goal by operating efficiently and at low cost. At that time, NTUC Income was operating what can be described today as a "low cost index fund".

Due to competition, the other life insurance companies had also to provide returns that are not that far short of what was available from NTUC Income.

The environment today is different in many significant ways.

First, most life insurance companies how have the goal to generate as much profit as they can. They do not care much about the return earned or the losses suffered by their policyholders.

Second, the regulator, namely the Monetary Authority of Singapore, does not pay attention to the fair treatment of policyholders. They expect the policyholders to be educated to look after their own interest. This is a mistaken concept, but it has been operating for the past two decades.

Third, NTUC Income, under its new management, does not seem to be keeping its expenses at the low level in the past. It is also offering new insurance products that do not provide better value to the policyholders compared to other types of investments.

Fourth, ordinary people can now invest in a low cost index fund, such as the STI ETF, to enjoy the benefit of diversification and get an attractive return over the long term.

Under the new environment, I advise consumers to avoid investing in all types of life insurance products. To get the insurance coverage, they should buy term insurance or personal accident insurance.

Friends in life insurance

Tan Choon Hong said:

When I started out in my working life, I had several friends in life insurance, which in those days, was a highly lucrative career without professional qualifications like a degree and such. All that was needed was the gift of the gab and persistence.

I was closed out by two classmates. One sold me an endowment policy which upon maturity was not particularly profitable as its value was eroded by inflation especially in the last 3 decades. The second policy was a whole life plan and it turned out to be a dud too. Somewhere along the way I used the deemed proceeds to pay the premiums and eventually discovered I could surrender as fully paid for a reduced sum assured. Of course one should look upon insurance as protection first and investment second, and understand the protection part is a bell curve that rises as one heads towards middle age with family and responsibilities, and drops thereafter.

Thanks to your incisive and insider information on the workings of the insurance business I have advised my children not to make the same mistakes as I did.

My comment:
To understand a better way to plan  your financial future, without being ripped off by bad financial products and sales practices, attend this talk

All NS men will be covered by insurance paid by SAF

This is a sensible decision. But it took the PAP government 50 years to realize it.

This is better late than never, but it shows that Singapore needs a better way of making government policy decisions.

Monday, June 20, 2016

Do not fall into this trap

Many people are likely to fall for this trap, if they are not careful. There are many agents who go around to mislead people and get them to invest in a life insurance policy - which will lead to a big loss of their savings.$2,000

To avoid this trap, I advise consumers to attend this talk. Spend 3 hours and learn some knowledge that will prevent them from falling for this kind of trap or other similar trap.

Act now. Failure to act can lead to disaster!

A generous donation of $2,000

Five years ago, a Chinese educated woman asked for my help. She was persuaded by an AIA agent to invest $50,000 in a life insurance policy. He told her that she could earn much more than leaving her money in the CPF. She made the investment with her own savings (not CPF).

After making the investment, she received a regular statement showing that the value had depreciated a lot. She could not understand the statement. She asked the agent for explanation. He was evasive and difficult to reach.

A year later, she received a letter for AIA asking her to pay another $50,000. She asked the agent why she had to pay this additional sum. The agent told her to ignore the letter.

Afterwards, she was told by AIA's office that the policy had lapsed and is does not have any value now.

She approached me for help to get back her money.

I told her that she had bought an policy that required her to pay $50,000 in premium every year. She was shocked. She did not have the means to pay this kind of annual premium. All along, she thought that it was a one time investment that was supposed to give a return better than a bank deposit.

There are many people in Singapore who do not know the difference between a one time investment and a regular premium policy. Surely, AIA should have known that an annual premium of $50,000 is outside the reach of many people. Don't they care?

The policyholder's request for a refund of her premium was rejected. She was supposed to be aware of the policy that she had taken. I helped her to write two letters, in strong language, to be sent to AIA.

A few months later, she told me that the received the refund of her $50,000. I asked her to make a donation to FISCA. She asked, "how much?". I said "Up to you. Maybe $200, $500 or $1000". She gave me a cheque for $2,000. That was the most generous donation received by FISCA.

A convoluted system

The headline says, "1.54 million Singaporeans to get GST vouchers and Medisave top-ups this year. "

Here are the thoughts that crossed my mind.

a) Are there so many people in Singapore who need financial assistance from the Government?

b) Are there many people who deserve financial help but are cut off due to the "calibrations" by the Government? For example, low income pensioners living in landed property are not given the vouchers?

c) Surely it is better for the government to pay a pension to the elderly, rather than to go through the "some get" and "some don't get" vouchers?

d) Are there people who have migrated to other countries and left a mailing address with their parents in the smaller HDB flats? Do they get the generous vouchers from the Government?

I do not like the system of the vouchers. I prefer a simpler and more comprehensive approach, such as:

a) A minimum income to ensure that all those who work full time earn enough to support a family.

b) A pension to people above a certain age.

c) Lower the cost of living by removing levies, wastefulness and inefficiencies.

Saturday, June 18, 2016

Cheating game

My grand niece, who is now 6 years old, enjoys playing the "cheating game". She asks for this game when she sees me.

I gave her four plastic pieces and asked her to form any of the shapes shown on the card. For example she has to form the house shown as picture #17. It is difficult for her. Even an adult will not be able to form the shape.

I told her that she is allowed to "cheat". She can turn the card over and see the solution which shows the four pieces separately.

She enjoys the game better when she is allowed to "cheat". By "cheating", she learns how to solve problems. It is a fun way to learn.

MAS fail to carry out its duty

I do not blame the consumers for being careless to fall into the trap of unethical sales practices by insurance agents and the marketing officers of banks.

My family members had fallen into the trap a few times. They visited a bank and were told by a marketing officer about a special product. After listening to the presentation, they were convinced that it was a good product.

The trouble was - the presentation was misleading. The marketing officer could be deliberately telling a lie or was innocently giving a wrong picture of the product.

In some cases, my family member was able to cancel the contract after consulting me. In other cases, they were caught in the bad product and had to wait 5 years to get their money back, with hardly any return.

I blame the Monetary Authority of Singapore for allowing the financial institutions to sell these bad products that cheat the consumers of getting a small return on their hard earned savings.

Unethical sales practice

An reinsurance executive told me that his wife met a life insurance agent at a road show. The agent asked to take 5 minutes of her time. He explained to her about a life insurance product. The wife is not familiar with insurance. The agent asked me to sign on an application form in case she is interested. He promised her that the case will not be submitted without her permission.

The following day, the wife received a SMS notifying her that a sum of $15,000 was deducted from her credit card for the insurance policy. The agent did not keep up to his promise. The husband  was familiar with the 14 day cooling off period. He was able to help the wife to cancel the policy and get a refund of the premium.

On my suggestion, the reinsurance executive will be submitting a complaint to the Monetary Authority of Singapore on the bad sales practice.

If this case happened with someone who is totally unfamiliar with the 14 day cooling off period, the policyholder will find it difficult to get a refund of premium for the unwanted policy.

Friday, June 17, 2016

Bernie Sander's message is relevant to Singapore

This message from Bernie Sanders is also relevent to Lee Hsien Loong and all his ministers and political leaders in Singapore. I hope that all of them pay attention to his message.

Thursday, June 16, 2016

Bank finally agreed to compensate the customer

A marketing office in a bank sold a life insurance policy to a customer. He explained that it is a 5 year investment. He explained the product detail in a tablet. The customer signed on the tablet to make the investment of $70,000.

The customer did not realize that the product was actually a life insurance policy which required an annual premium of $70,000 payable for 5 years and the policy will only mature at the end of 10 years.

The customer could not pay the second premium. The policy lapsed. The customer lost the full sum of $70,000. The bank and the insurance company refused to refund the $70,000. They asked the customer to approach FIDREC.

The policyholder came to me for help.

I posted her story in my blog, but removed detail that could identify her.

I advised the policyholder to "fight the case" in FIDREC, to take legal action and also tell the story in the media.

The policyholder waited for mediation by FIDREC. After a month, she told me that the bank had decided to refund the full sum of $70,000 to her and that the marketing officer had been terminated for mis-selling the product.

The bank was probably embarrassed by the strong words in this article:

This was a fortunate outcome for the policyholder. I asked her to make a voluntary donation to FISCA.

Streamline the bus services - reduce travelling time

I have advocated that the bus system should be changed to use express services (with limited stops) to run on the main roads and feeder services to bring commuters from the neighboring areas to connect to these express services.

I have carried out some calculations and found that the travelling time will be reduced quite significantly.

Are you willing to give away $170,000. No?

If you invest $6,000 a year ($500 a month) over 30 years and earn a return of 5% per annum, the accumulated savings will reach $420,000.

Are you willing to give 40% of this sum away, and get back only $250,000? Will you give away $170,000?

No? Are you sure?

Well, most people are giving away this sum - and they don't even realize it.

To understand how all of this work, spend 3 hours to attend this talk. You will learn a better way to invest your savings and keep the $170,000 for yourself.

Act now. If you miss it, you may fall into the trap of investing in the wrong product in the future.

Bernie Sanders is justified to stand as a third party candidate

My American friend, who is a strong supporter of Bernie Sanders, told me this story.

When Bernie Sanders won Washington, Alaska and Hawaii by an overwhelming margin, the Democratic National Committee was in panic mode. They decided to adopt strong measures to ensure that Bernie does not get the nomination. This include "cheating" and rigging the election. They have been rigging the election earlier, but this time, they decided to carry it out more aggressively.

Some of the measures include removing some voters, who are likely Bernie supporters, from the register. This happened in New York. Other Bernie supporters, who were Independents, were not allowed to vote anyway.

In California, the Independents were allowed to vote. But they were given provisional ballot papers and these papers were not counted. Young voters, who were likely Bernie supporters, were told that the voting records got lost. They could not vote.

The Democratic National Committee also stopped the exit polls, which is a gauge of the likely votes. These polls ask the early voters which candidate they had voted for.. These polls are likely to show strong votes for Bernie and could conflict with the final "rigged" results.

There were also report that votes for Bernie Sanders were purged from the records after they were input into the system.

I find it amazing that these kinds of measures could happen in a country that champions democracy and in a party that has the name of "Democratic".

If this account is largely true, it gives Bernie Sanders all the reasons to stand as a third party candidate under the Green Party. I hope that he takes this decision.

Insurance fund adds an additional layer of cost to the investor

Hi Mr Tan,

Whilst I agree that investing through life insurance entails large (and hidden) transaction cost, S’pore REITs also exact multiple layers of fees. However, investors generally overlook this and just focus on dividend yield.

The insurance fund also invest in REITS.  The policyholder has to bear an additional layer of expenses when they invest in an insurance fund. The policyholder can invest directly in the REITS and save on the additional layer of expenses charged by the insurance fund.

You should look at the calculations in this way.

The REIT earn a rental yield of 7% per annum. Their expenses take away 2% from the gross yield. The REIT pays a dividend of 5% to the investors. 

It the investor invest directly in the REIT, the investor gets a yield of 5%. If the investor buys a life insurance policy and the fund invest in the REIT, the fund earns a yield of 5%. However, the insurance fund deducts 2.5% for their expenses, giving a net yield of 2.5% (or less) to the policyholder.

The insurance fund also invest in listed companies. The listed company earns a margin of (say) 7% on their sales. It also has operating expenses that takes away 2% from the gross margin. The listed company is able to give a return of 5% to its shareholder.

However, the listed company may distribute only half of its net profits as dividends. The shareholder then gets a yield of 2.5%. However, the undistributed profit goes back to the company to increase its future profits. This is why the share price is likely to increase over the years.

The investor has the choice of investing directly in REITS and shares and earn a yield of 5% (in my example) or invest through an insurance fund and suffer a further cut of 2.5%, leaving a net return of  2.5% from their insurance policy.

Don't lose your money in an investment scam

The best way to get a good return on your savings is to avoid investing in scams. You can learn this technique by being aware about the scams that are occuring every day, but are disguised so that the unwary will fall for them. You can avoid them by being aware of these scams.

This is discussed in this talk.

Invest in a low cost fund and get 40% more on your retirement

If you invest regularly in a low cost fund, you can get 40% in your accumulated savings compared to investing in a life insurance policy.

This concept of compounding interest is explained in this talk. You will also get tips on selecting the right kinds of low cost funds.

You can still buy your insurance protection separately at a surprising low premium.

Give yourself a head start by making the right investment - starting with investing 3 hours of your time in a talk that is specially prepared for the benefit of the consumers.

Take the step now. Register for this talk.

Wednesday, June 15, 2016

Live video cast from Bernie Sanders

Sisters and Brothers -
Washington, D.C. votes today in the final contest of the Democratic primary. Our staff and volunteers are working hard for every vote and every delegate in the District of Columbia because each is an important declaration of support for the values we share, and the issues that have powered our campaign.
When we started this campaign, I told you that I was running not to oppose any man or woman, but to propose new and far-reaching policies to deal with the crises of our time. And for the past fourteen months, through the entire primary process, we’ve sent the establishment a message they can’t ignore: we won’t settle for the status quo.
After today, the voting is done, but our political revolution continues.
I want to talk to you directly on Thursday night about what’s next for our campaign in a live, online video address at 8:30 p.m. EDT / 5:30 p.m. PDT. I hope that you will join:
This campaign is about more than Bernie Sanders. It is about all of us together. It is about millions of people from coast to coast knowing that we can do much better as a nation.
I hope that you will join the conversation on Thursday night and ask your friends to do the same.
In solidarity,
Bernie Sanders

Need for judgement

AK Tan commented about the HDB rules.

This is not even giving the messy rules that HDB has due credit. As with many government organizations, the rules are not clearly stated. There are stated rules on their web site which are very broad and in some cases, completely useless. And then there's also a set of unstated rules that only God knows what and who has the power to invoke them. And whenever you have a question, the reply is always "write in". The civil service in our country is as secretive as the CIA and unjustifiably so - and is therefore, in dire need of an overhaul.

My comment:
The problem is the confusing instructions given by the political leaders. They give vague instructions, and are not aware about the actual happenings in the ground.
The poor civil servants are lost in implementing these confusing instructions.
We need a system that requires competent people to take judgement, rather than to follow the confusing rules blindly.

Streamline the bus services

Many roads in the city area have several bus stops near each other. They need several stops because more than 20 services have to stop there. They have to separate 4 to 7 services at each stop. Examples are Bras Basah Road, North Bridge Road, New Bridge Road, etc.

Why do we have so many services in Singapore. This is due to the complicated and confusing system. When I could not for a service at a certain stop, I have to walk 10 meters down the road to the next stop - hoping to find it there.
Fortunately, I have a mobile app to guide me. What about other passengers who do not know how to use the app?
It is better to simplify and streamline our bus services. We need a smaller number of long distance services with limited stops which are supported by feeder services to serve the nearby areas.
This approach can reduce the number of services by half and still provide a faster and better service to the public. It will also improve operational efficiency.

How to get a better return for your retirement savings

The short answer is - "Avoid the mistakes that are made by over 80% of the population".

What are these mistakes?

a) Falling for investment scams that promises high returns with low risks. Most of these scams are not regulated. The government does not pay attention to them and do not take steps to stop them. They may act after many thousands of people are cheated, and that would be too late.

These scams include gold bars, land banks, agarwood trees, wine investments and many variations of these scams.

Some of them are ponzi schemes where the money from the investors are used to pay the high returns for the earlier investors, giving the illusion that the deals are credible!

b) Trading in stocks, currencies and other financial products. The investors, who are usually people who have lost their jobs and have some free time, think that they could use the free time to make some money on trading or "investing".

They do not realize that the tradings are actually gambling or speculation. They are gambling against professionals and big funds who can move the market against the small traders. They lose from the transaction cost, spreads between buy and sell price and the manipulated change in trend.

c) Investing in regulated products, such as life insurance plans, with high upfront and ongoing charges. These charges could take away 2.5% or more from the annual yield. If the long term yield is 5% per annum, the net yield after charges is only 2.5%.

Over a 30 year period, the deductions could take away 40% or more of the wealth or accumulated savings. This is why the financial institutions make so much profits and the public gets a poor return.

What do the 20% do?

They learn about the simple, reliable and proper way to invest their savings. These secrets are disclosed in the two talks organized by the Financial Services Consumer Association.

Tuesday, June 14, 2016

A fun way to learn retirement planning

An interesting video on retirement planning

Is it better to invest in a REIT?

Dear Mr. Tan
A friend told me that it is better to invest in a REIT, rather than a life insurance policy. He said that the REIT can give a better return. Do you agree with this recommendation?

The short answer is "yes". Here is the reason.

Over the long term, I expect a REIT to give a return of 5% per annum or higher. But you should invest in a few REITS to diversify your risk. You can also get a return of 5% by investing in the STI ETF, which is better diversified.

The life insurance fund can also earn a return of 5% per annum over the long term. But the insurance company takes away a large part of the return through their high expenses. Typically, the policyholder will have to suffer a reduction of 2.5% or higher on the return. If the fund earns 5%, the policyholder will get a return of only 2.5% (or less).

Over a period of 30 years, a reduction of 2.5% in the return will produce a payout that is 35% lower. This is for an annual investment of $X a year.

The "effect of deduction" that is shown in the benefit illustration usually shows a reduction of 40% or higher. This means that the reduction in yield is more than 2.5% p.a.

The life insurance policy gives you a poor return compared to investing in a basket of REITS or in the STI ETF. Any person who knows the fundamentals of investing will avoid the life insurance policy. The culprit is the "effect of deduction".

If you find this to be difficult to understand, I advice you to register for this talk.

The "Effect of Deduction"

John Thor Wu said:

Just one column! yes just one column! The Effect of Deduction! MAS can provide a simple and clear example on WHAT is this column then MAKE it a compulsory for AGENTS to bring all prospects to this column. This column is THERE...but NO insurance agent will ever BRING YOUR ATTENTION TO it! Why????? Because if they do, you are unlikely to buy the product anymore!!!! So??? Why the column is there but MOST prospects NEVER get to understand it clearly???? Mr. Tan Kin Lian are you able to champion something on this.


I have been writing about "the effect of deduction" for several years. Here is an article written last year.

Regulator need to be more stringent

Raymond Fong said:
May I share my thoughts on this? I feel that our regulator needs to be more stringent and active in the regulating the insurance industry, particularly the low sum assured and payouts for products that have a savings component and the complete removal of the non-guaranteed portion in the illustrations table. Regulators should also look into how agents are pushing products that are high in commissions rather than helping their clients conduct proper financial planning.

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