Saturday, March 03, 2007

Learn to use our public transport system

Too many people rely on private cars and taxis to move around Singapore, because they are not familiar with the public transport system.

The solution? We have to educate the public on how to use the buses and trains.

After leaving NTUC Income, I have started to learn about the public transport. I find the service to be excellent.

My tip? You can paste on your ez-Link card, the bus services that serve your neighbourhood, and also the nearby interchanges.

If you have to take a bus from anywhere in Singapore, you can see the services listed at the bus stop. Look for a service that reaches your nearby interchange or pass our home. You can reach home easily with a direct bus or one change of bus.

Heavy demand for taxis

In Today paper, several readers wrote about the difficulty in getting a taxi during the peak period. There is clearly a heavy demand for taxis that cannot be met, especially during the peak period.

One reader commented that we have proportionately more taxis in Singapore than in Hong Kong, relative to the population. The taxi service in Hong Kong is better.

Increasing the number of taxis does not help. It will depress the earnings of the taxi drivers.

The solution: Find a more efficient way to use our available taxis. I suspect that the current system is too complicated, and result in wasted resources and higher cost.

Insurance agents faced a conflict of interest

Insurance agents face a conflict of interest.

They have the choice of selling an expensive product that pays a high commission, or a low cost product that pays a low commission. Which should they sell?

If the agent thinks about the commission that he can earn, he will naturally sell the expensive product. This means that the customer has to pay more for the product.

The insurance company has to design the product so that it looks much better than it really is. They train the agent to market the product.

In reality, the product does not really give much more valuable coverage for the customer. It is a way to make more commission for the agent, and more profit for the insurance company.

The same point can be said for many of the structured deposits and structured products that are being sold on the market today.

My advice: As a consumer, you have the choice to buy the simple products that offer the necessary coverage at a reasonable price.

Do not be taken in by a well trained agent who can mislead you into buying the frills that are not really necessary, but cost you a lot more.

NTUC Income has been offering simple products that give better value to the customer. You can approach an insurance adviser from NTUC Income or visit the business center in Bras Basah Road. It is a safe bet.

No reply because of wrong e-mail address

Mr Tan,

It is not fair to bother you with this matter since you have left INCOME on 20-Feb. But I just want to share with you my experience with INCOME service.

I have sent out another query to INCOME on 26-Feb-2007, and guess what Mr Tan, they don't even bother reply my email or call me.

I don't know why no one of the recipient of the email try to take ownership of this matter and try to solve the problem. What would you do if you were me Mr Tan?

I really am admiring you on how you, as CEO, answered personal email from customer or non customer within your busy and tight schedule and, after you have left INCOME, still active helping people to save their hard earned money spending on buying unnecessary insurance product.

Thanks a lot for educating us in buying/investing in the right insurance product.


My reply:

I will ask X to look into this matter again. I suspect that you did not get a reply earlier because you used a wrong "reply address", which may have caused the reply to be "lost".

Logic9 (Sudoku) is well received

At the wake of my father-in-law, I met many friends and relatives. I introduce Logic9 (Sudoku) to them.

All of them (young and old) were interested in the puzzle, especially the three tips that I gave to them on solving the difficult puzzles.

Most of them have seen the puzzle before, but they did not know how to solve them. They enjoyed the puzzles, after learning my tips.

I was surprised that many young people were not familiar with the puzzle, although it has appeared in Today paper and MyPaper for a few months. When I taught an elderly lady, she became so engrossed in the puzzle that she spent a few hours on it.

Flying into Kuala Lumpur

When I fly into KLIA to visit Kuala Lumpur, I usually take the train. It cost MYR 35 (one way) and reaches KL within 30 mins.

Earlier this week, I had to visit Petaling Jaya (a residential town next to Kuala Lumpur). I bought a taxi voucher at the airport for MYR 58.

The taxi voucher is a good system. It ensures that the passenger is not hassled or over-charged by the taxi driver.

Friday, March 02, 2007

No load investment fund

An overseas insurance company is seeking my advice on the setting up of a no-load investment fund.

This fund does not have any front-end load. All money are invested in full to buy units at their net asset value (or bid price).

The fund manager takes an annual fee of 1.5% to 2%. This is used to pay for the expenses of managing the investments and to pay the commission to the adviser.

The investor is happy to pay a higher annual fee, as it is taken from the annual return on the fund. For example, if the fund earns 8% and the annual fee is 1.5%, the investor earns a net of 6.5% (assuming an annual fee of 1.5%).

There is possibly a need for a "trailer fee". This is deducted from the proceeds, if the investor sells the funds during the initial 3 to 5 years. The trailer fee can be, say, 0.5% for each remaining year of the minimum period.

I believe that this type of fund is available in Singapore, although it is not well marketed.

My occupation?

I have to give a talk. The organiser ask how I am to be described?

I have the following options:

* Former CEO of NTUC Income
* Consultant
* Self-employed
* Blogger (just joking)
* Chairman & CEO of Tan Kin Lian & Associates

I have not decided how which description to use. I shall think more about it.

Working from home

For the past week, I have been working from home. It is great.

I am able to keep in contact with external people by e-mail and telephone. If I have to discuss business, I send some brief details in an e-mail, and fix a time for a telephone discussion. (This is similar to arranging a physical meeting).

It is quite easy to discuss matters over the telephone. It is much more productive than a physical meeting.

I have some people working part time for me from their homes. I also keep in touch with them in the same way.

I try to keep the paper work to a minimum. Even paper work can be scanned and sent through an e-mail or fax.

I shall share more about my experience in this new working style.

Visitors to my blog

My blog receives an average of 440 visitors a day. I shall try to keep it interesting and relevant.

Thank you for visiting. Ask your friends to read my blog.

If I hit 1,000 visitors a day, I shall state my occupation as "blogger". (Just a joke).

An unexpected death

My father-in-law passed away yesterday morning, from a heart attack. He was 74 years old. His early death was unexpected.

He had always been quite fit and in good shape. He had seen a specialist a few months earlier for a medical checkup. The seriousness of the condition was not detected.

Life is unpredictable.

Thursday, March 01, 2007

Money market fund earned 3.44% annualised

The money market fund of NTUC Income was 1.046 per unit on 30 Nov. It increased to 1.055 at end Feb. The gain was 0.88% for 3 months. This is annualised to 3.44% for 1 year.

The money market fund is earning an attractive return.

Lee Kum Tatt's Blog

I am managing a blog on behalf of Dr Lee Kum Tatt. He is a leading scientist, creator of the RISIS orchid, and a very interesting and philosophical person. He has many creative and innovative ideas.

I have encouraged Dr Lee to send his ideas to me for posting into this blog. You can view his blog using the link in the right column.


Larry Haverkamp's Blog

Larry Haverkamp writes for The New Paper in the Dr Money column. I have persuaded Larry to send a summary of his articles for me to post into his blog (which is being managed by me).

You can visit his blog by clicking on the link in the right column. It contains educational articles on financial matters.

You can also see the Dr Money's website for other information.


Take public transport to Raffles City

Two days ago, I had to attend a meeting at Raffles City. I took the bus to the MRT station and then the train to Raffles City. The journey took 40 minutes.

It was hassle free. I do not have to drive in the busy road, and worry about parking.

We have an excellent public transport system. It is better to leave the car at home, or not own a car at all.

Mayor of New York takes public transport

When I was in Kuala Lumpur, my friend told me that the mayor of New York takes the public transport every day to work. He gets to experience daily, how the service affests the ordinary people.

He wished that his government leaders also take the public transport. This will give them the motivation to improve the public transport system.

My personal portfolio dropped by 5%

I printed out a listing of my personal portfolio in Singapore shares on 24 Feburary.

I planned to reduce my holdings, as the stockmarket was too high. I missed the chance. When the market corrected, the drop was too fast, too sharp. This is the nature of the stockmarket.

My portfolio has since dropped by 5%.

I think that the Singapore market will correct further, so I shall have to think about reducing my holdings, even at the lower price today.

Just my personal view.

Tuesday, February 27, 2007

Market correction - how serious, how long?

Someone asked for my views on how serious is the market correction today, and how much is the market likely to fall.

It is difficult to say.

If the shock is temporary, the market may fall by 10% (ie the ST index go down to 3,000) before it recovers.

I will prefer to wait for the market to correct by 20% (say 2,700) before I make further investment. In the meantime, I am happy to earn 3% on the money market.

In 2000, the ST Index was around 2,400. It fell by almost 50% during the next two years (ie 1,200 points), before it started its recover from mid 2003.

Monday, February 26, 2007

How to select a housing loan

Someone asked for my advice on how to select a housing loan.

My preference is:

* choose a loan with the interest rate linked to an external benchmark, such as the swap offer rate

* choose a flexible loan that you can break off at any time

This is the best way to ensure that you get a good deal. As the lender has to compete with other providers, they will offer you the best rate, and keep it competitive all the time.

The external benchmark may fluctuate, but this should not bother you. You are repaying the loan over 20 years or longer. So, the interest rate should average out to a level that is lower than a "locked in rate".

Aviva advises to "Buy Direct"

There is a big advertisement from Aviva in Today paper, encouraging the public to "buy direct" from them. They offer an attractive product that pays 3.5% interest rate.

Insurance agents will be facing more competitive pressure from the direct channel. I strongly advise the agents to adopt technology, improve their productivity and reduce the cost to their customers. They should continue to add value.

This is the best way for agents to remain relevant in the competitive market.

My views on other insurer's products

Hi Mr Tan,

I have recently started to learn quite a bit from your blog and is taking the time now to review whatever I have bought in the past.

I have bought the above from POSB on May '04. The annual management charge is 2.7% which is very high. I am comtemplating to stop this policy, even though it may mean a loss of some money. I would rather invest it with NTUC later when the market cools down.

Can you please help to advise me?

(Details of 4 products from Aviva are attached).


My reply:

I am sorry. Generally, I am not able to comment on another insurer's products, because I am not familiar with them.

If you wish to find out if NTUC Income has a similar plan, I suggest that you visit the business center at Bras Basah Road, and talk to an insurance consultant.

Tan Kin Lian

NTUC Income funds

Dear Mr Tan

The various NTUC funds (growth, global equity, balanced) are very high now. What is your suggestion? Convert them into the money market fund or stay on?


My reply:

In my case, I decided to keep my existing investments in the Growth Fund, although it is quite high. My reason: I bought the units at a low price.

For new money, I invested in the money market fund and will wait for a market correction to convert into the Growth Fund or the Global Equity fund.

Tan Kin Lian

Should I invest my CPF special account in the Growth Fund?

Mr Tan,

Would you advise a 30 year old professional to invest in NTUC Growth Fund with CPF SA even though money in the SA is guaranteed 4% interest per annum?



My reply:

At this time, when the stockmarket is high, I do not advise you to invest your special account (interest rate of 4% p.a.) in the Growth Fund (from NTUC Income). It is better to keep the money in the special account and wait for the market to correct to a more modest level.

It is all right to invest your ordinary account (interest rate at 2.5% p.a.) in the Growth Fund now, if you intend to keep for the long term.

Tan Kin Lian

Should I buy an endowment policy to pay off a mortgage?

Dear Mr. Tan Kin Lian, Sir.

I have a query about endowment mortgage. The endowment is a European-originated Endowment 65 policy (maturing at 65 years old).

As I understand, with an endowment mortgage only the monthly loan interest is paid, and the loan itself will be paid off with the endowment's maturity payout.

What is your view of this product?


My reply:

Generally, an endowment policy gives a lower return compared to the interest rate that you have to pay on your mortgage. It is better to make a monthly repayment towards your mortgage, instead of investing in an endowment policy.

In some European countries, there is a tax advantage when you buy an endowment policy. With the tax savings, the net return on the endowment policy may be better than the interest on the mortgage. In such a case, it make sense to take an endowment policy to repay the principal sum on maturity.

This type of situation does not apply in Singapore.

There are many drawbacks of investing in an endowment policy, especially in a foreign country. You should avoid it, unless you are very clear about its implications.

Sunday, February 25, 2007

Mortgage aggregators in Australia

My friend told me that mortgage aggregators are doing a booming business in Australia.

These companies help the customer to source for the best mortgage loan available in the market. They sign up with several lending institutions and are able to find the best deal.

They are doing very well. The lending institutions find it costly to deal with the customer, so they are happy to let the mortage aggregators handle the customer.

I think that there is a similar need in Singapore. Customers find it quite difficult to get the best deal from several lending institutions. The terms are quite complex.

As the amount of mortgage is quite high, the customer can save a lot of money, if they can find the right deal.

Useful role for agents

Agents play a useful role to help their customers to sort out the complexity in our life.

For example, we need an agent to help us to plan our travel, to buy, sell or rent a property, or to handle a complex financial transaction.

The agent need to be adequately compensated for their time and effort, and also for the variable nature of their income (as they are paid on actual transactions).

To help reduce the cost to the customer, we need to find a way to make the agent more productive and to complete the transaction with less effort. The internet allows higher productivity to be achieved, but only if it is used effectively.

Agents should make the effort to embrace technology. By adopting the new way, they can increase their earnings (through higher volue), and reduce the cost to the customers. This is the win-win solution.

If the cost can come down, the customer will not find it necessary to handle directly.

There will continue to be a useful role for agents, but only if they can give value to the customer, and help to bring down the cost.

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