Tan Kin Lian's Blog: Bonus is likely to remain low

Thursday, November 27, 2008

Bonus is likely to remain low

I organised a collective protest against the bonus cut made by NTUC Income earlier this year. I reached a settlement as follows:
http://tankinlian.blogspot.com/search?q=collective+protest+settlement

I promised policyholders that I would monitor the situation and give an update.

Recently, I decided to surrender my Living policy, which was affected by the bonus cut. I received a surrender value that included the special bonus to compensate for the bonus cut. In this case, I was slightly better off (with the special bonus included).

During the past six months, there has been turmoil in the financial market resulting in a large markdown of asset prices. I do not know whether the "compensating" special bonus will be withdrawn or reduced in the next few years of the global financial crisis.

Earlier, I wanted to press for the bonus cuts in past years to be restored due to the good financial results up to 2007. With the large drop in asset price in 2008, it will now be difficult to press for this measure. It is also likely that future bonus will remain at a low level, until after the global economy has recovered.

On the bright side, the cash value of a life insurance policy remain largely protection (although the yield is low) during a bad period. It does not suffer the capital loss that comes from shares and other investments.

27 comments:

Anonymous said...: Hi Mr Tan,
Pardon my ignorance.
Living policy gives poor return but covers you for life against the 30 CIs. I am sure no matter how bad the financial situation is, the guaranteed sum assured will still be paid if a claim is made and approved.
After you have surrended this policy received a lump sum of money, you still have to think of a place to park.
What are your views?
Thanks.

Jasmin; November 27, 2008 8:53 AM
adego said...: I suggest consult zm, he talk like a pro, he is a good blog-financial-advisor.

I suspect he will charge a fee, maybe FOC for Mr. Tan

his fee is likely to be affordable, and probably willing to do biz even he can't survive on the fees collected

he may lived in confusion in a free-capitalized-market, but surely, he will do a good job

he will be a good role model of our dream financial advisor. hooray!; November 27, 2008 1:03 PM
Anonymous said...: Hi Jasmine,

Living policy is a good idea, but the fees and expenses the insurance companies made it into a bad one.

The advice Mr Tan meant should be to buy insurance for the sake of insurance, and do the investment yourself.

The sum covered under the living policy should be pretty low, ~100,000 perhaps?

Perhaps you can reconsider why you want a insurance policy. Is it really necessary to have a policy that covers you for life till you are 80? 90?

If you decided its not really necessary, and that when you reach the age of 80, you would have seen enough of the world, you can consider purchasing term insurance.

The latest figure i have is that most insurance company have term insurance that costs about 300 dollars annually. Its a 20 year term for a 30 year old none smoker, it covers death and permanent disabilities.

A promotion by Great Eastern (i do not know if it is still available), covers 1,000,000 for death and disabilities for 980 annually for 20 years. (i personally think its a reasonable price to pay for that sort of coverage, and your family will be well taken care of in case something happens)

If you compare the premiums for a 200K coverage, ~300sgd compared to dunno what for a life insurance, well, surely you would ask questions.

Of course, i made a lot of assumptions above, and individual cases are definitely more complex, your case and needs may be totally different. But i hope its a point for you to reconsider your insurance options.; November 27, 2008 3:30 PM
Anonymous said...: I usually do not bash Temasek (that much) except for when they irked the Thais and then the Indonesians. Temasek lost almost US$2 billion of a badly-timed US$3 billion in Shin Corp at a peak of 49.25 baht (Shin shares are now trading at around 15 baht) in 2006. The investment was not a bad one but the way they handled it (same in Indonesia) was appalling.

Being neighbours, Temasek should have known that certain assets will be viewed as sensitive and incursions will be seen as colonisation somewhat. You cannot stand behind the guise of being a professional asset manager when you are buying critical companies. Its the arrogance, its the attitude, we've got the money, so we can buy ... just like the way Singaporeans do not know how they appear in the eyes of their neighbours everytime they go traveling in the region ... we all cringe when some bloody tourists would exclaim "Waahhh, so Cheeaappp"... we know they have to be Singaporeans.

Its CEO, Ho Ching committed S$401 million in ASX -listed ABC Learning Centres at near the peak price of A$7.30 and then averaged down at between A$1.20 and A$4.00, bringing its commitment to over S$500 million. That investment is now essentially worthless although Temasek has yet to write it down. If you examine the biggest bust ups owing to the current financial crisis in Australia, its not the usual mining company or even the highly leveraged Macquarie or Babcock & Brown which are hogging the headlines. Its ABC Learning Centres - the company is not very big, but the audacity, excesses and sheer inept management in the company that brought about its implosion are now fodder for bar talk. Temasek does not have many Australian listed assets, hence it must be close to striking the lottery for them to be persuaded to pick ABC Learning Centres. What is galling is that with the many highly paid experts in Temasek, they did not manage to uncover anything in the due diligence. Though I was loathed to believe it when Buffett said "its dumb money", but I am persuaded now.

The company also bought 19% of LSE- listed Standard Chartered in 2006 only to see the market value of that stake melt 55% by November 21st. More bank stakes include a 975 million pound stake in Barclays Bank bought at the peak of 740 pence (with a further 100 million to subscribe for a rights issue at 282 pence), which have now sunk over 70% at 138 pence.

Their stake in Merrill Lynch got converted into Bank of America, that was OK, but there are rumours that Bank of America might not be able to go through with the buyout because Merrill's assets are too toxic. Most heinous of all is its US$6.88 billion stake in Citigroup bought with a minimum conversion price of $31.34. Citigroup has since plunged 88% to $3.71 (even though it has now rebounded to $6.30), single-handedly delivering almost S$9 billion of red ink to Temasek's books.

What all this showed is that NO ONE in the whole of Temasek saw the early subprime imploding, or the credit excesses, or the CDOs danger, or the CDS potential liability. NO ONE. You mean no one warned about even ONE OF THE ITEMS? Well, obviously not in the past 12 months, not in the past 24 months, heck, not even in the past 5 years. I am not trying to be hindsight harry here. The point I am trying to make is that Temasek has chalked up supernormal gains every year from 2004-2007 thanks largely to their global banking stakes. China, the US, India, Indonesia... you name it..they have a bank or two there. Many have lauded Temasek's superior performance then, what about now? This showed me one major fault with Temasek: its outperformance was largely the wave and trend which carried them rather than from superior stock-picking or market strategy.

If you cannot read sectors properly or have solid equity strategy or stock picking skills or market timing ... what have you then... just a bunch of overpaid people. Which is why I always say that most analysts, economists and investment bankers have one big fear when they go off to bed at night... they all have the same nightmare (I hope no one finds out how average I am!!!). Good night and sleep tight.

Overall, the paper loss on these investments has exceeded S$35 billion as of October 21st. On a population of 3m, that works out to be about S$11,666 for every man, woman and child - a household of 4 might have had S$46,666. Could be worse I guess, could have been from my country; November 27, 2008 4:57 PM
zhummmeng said...: Adego,
I suspect that you are protecting an interest. Your comments are childish.
Instead of engaging me you confuse yourself. What do you mean by "free capitalized market"? You mean a free capitalist market?
Let me educate you. In a free market there there is no intervention . The market forces determine the prices. Setting a commission contravenes this principle. The commission should be negotiable between the buyer and the seller.In life insurance this commission is NOT disclosed and is assumed by buyers that it is not negotiable.
Charging fee is breaking free from this obsolete and unfair convention
to allow buyers to negotiate for a fee that is fair to him. If there is no meeting of minds no business is done.This is transparent.
In fact the FAA requires the sellers to disclose the commission charged but you don't hear of any insurance agent voluntarily disclose it. .The buyer pays about 2.5 years of the premium and the agent gets 150% of it..; November 27, 2008 5:18 PM
Anonymous said...: "On the bright side, the cash value of a life insurance policy remain largely protection (although the yield is low) during a bad period. It does not suffer the capital loss that comes from shares and other investments"

this is a self consolation. It is good at a time to feel like this but don't get into the habit. It is illusion and that is what the insurer wants you to feel.
Morgan has a more realistic answer to the woes of Jasmin. Wholelife living is not a wholelife product simply because it is NEVER kept to whole life and you will see it when you come to it.
For Adego, he seems skeptical about something. Not sure what it is. I notice he is a distractor and detractor.

Adious to U; November 27, 2008 8:02 PM
Anonymous said...: In this financial turbulent time cash value is a life line to many people..If you are not in that situation maybe you should hold on and give the NEW management a chance to deliver the special bonus.
From the grapevine ntuc is splurging more on unnecessary events.It should be a good custodian of policyholders' money and they don't belong to the agents.; November 27, 2008 8:20 PM
Anonymous said...: Some people like Li Ka-Shing has golden touch. They buy at low price and sell high. However some people like Ho Ching has bad touch, buy at high price and suffer for their lack of foresight. I am beginning to doubt her ability. Just look at all the investments she made. I think Forbes and Time magazine should stop ranking her as influential figure. We Singaporeans do not respect her. In fact, I am angry that Singapore is making a loss and incurred the wrath of our neighbours. We should not invest in their sensitive industries, likewise we do not like foreigners to invest in our telecommunication company.; November 27, 2008 10:21 PM
adego said...: zm, let's negotiate the advise fee:

this poor chap, after received advise from this famous zm advisor, concluded he needs H&S and a decreasing term for a start.

how much are u going to charge?

u pay money to get yrself educated, qualified...licenced whatever, are u charing $50, becos he is a poor chap?

say he is a family man, age 35, earns $1000+ per month,sole bread winner, 2 kids, barely can afford for anything extra, such as ins...

is the advisor going to charge a low fee, not forgetting there are liabilities, the fees must cover all these possible mishaps, if any

the fee easily exceeds $1000, this poor chap's insurance premium is probably $500/yr or less.

if u are the advisor of this poor chap, I think u probably have decided not to take him as client after the first meeting. becos he simply can't afford the fee.

when u don't understand certain mechanics, u try to say things like 'childish' and avoid the issue. I think u are hiding those things u don't know how to answer.

the 'fee only' system will squeeze this group of pple out instantly!

yr suspicions of protecting an interest is valid. here is one vulnerable group. their interest

QUOTE:
"The commission should be negotiable between the buyer and the seller.In life insurance this commission is NOT disclosed and is assumed by buyers that it is not negotiable"

strange thing is, are u really serious about paying attention to how much pple earn/profit?, after every products is sold???

if that's the case, I really pity u. u must be a busy man...
U wake up in the morning... the breakfast on the table, 'how much they make from my breakfast?', u step out of the door, 'how much they profit from the petrol / transport fare?', u buy groceries, how much... is their margin? u buy this house from gahment, how much these gahment make from us??

there is a long list waiting for u, yet u still have so much free time arguing over here. interesting!

I suspect u do a lot of bargaining. did u bargain with the garment when u buy hdb flat? did u bargain at the supermart? did u bargain when u pump petrol?

come, share with us yr personal bargain experience, that is good for consumers.; November 27, 2008 10:43 PM
adego said...: we should admire ho ching for her ability & foresight!

she knows sgporean can be easily tamed. she knows how to be the most powerful woman in sgpore.

worst case scenario, there is a role model, thaksin to follow, she just need to make sure USD and EUR notes are in their luggages, before they fly on the private jet and say saiyo nara; November 27, 2008 10:53 PM
zhummmeng said...: Adego,
I think you are getting disconnected or hard on understanding.We are talking about disclosure about financial products. This is REQUIRED by the law like charges and other costs.We need this transparency so that consumers can have an idea how much he or she is paying.
I find you veering off the subject rather irritating especially when you are talking cock about other things which are irrelevant..Those things you mentioned only show how desperate you are trying to win this argument or score some shit for your misplaced ego.
Come one , go read what I have written in another posting and please do your best to understand. if you don't please ask in a polite manner.; November 27, 2008 11:32 PM
Anonymous said...: Adego,

Your 35yr old example is flawed.

First: I do not know the actual statistics, but a reasonable guess would be there shouldn't be a lot of cases like that in Singapore. And should someone like that approaches you, does it hurt to offer a scaled down(only pin point general direction) and free version to him? I guess it doesn't hurt to talk to him after hours in a food court where there is no rental to pay. I have no idea why you place such prestige in financial services, did you know that bankers were once a shunned occupation?

Second: Your view of high education high pay is flawed. Doctors surely are the creme of the crop, but their pay(although high), is based on their skills and man hours. Can the same be said for financial advisors earning big bucks last year? Skills? Man hours? Don't forget some doctors even provide free services.

Third: I wonder where you got the 1000 dollar figure from. Is that the compensation you are getting for every policy sold? Assuming a lowly rated financial advisor is paid 50sgd /hour (a A'Level' chem tuition costs more than that), roughly 2~3 hours per client(the client prepared all the necessary information and questions), and a 5 day work week, he would be taking home about 8K per month. Not enough?

Of course there are kinks needed to be worked out in this new system, but why are you saying it will not work even before trying? Do you mind telling us where does your interest lies? Is there a conflict of interest?; November 28, 2008 12:17 AM
adego said...: commission structure is good for the following:

- it's like a broad based tax, like gst, the wealthier u are, the more u pay. that is perceived 'fair' by our gahment

- it's a way to re-distribute wealth, if u are poor u pay less for consumption

there are flaws in any system, I did not say this is the only best system. basically, I found the argument very one sided, & think that there are more to one side of the story. if u have a open mind, and willing to discuss sensibly, I welcome any other views.

the fee based advise will make the rich even richer. they pay an agreed fee, and they can buy big bulk, the poorer one in the system, are indirectly or directly are paying more.

let's ask a simple question, who needs financial advise even more? the rich or the poor?

the fee based system is going to squeeze the poor even harder.

on the flip side, fee based advise does have its advantage, however, it is still not possible to eliminate mis-selling 100%.

the only way to solve problem of mis-selling is to cleanse one's soul from 'greed'.; November 28, 2008 11:34 AM
zhummmeng said...: Adego,
yes, the rich always have an advantage. They can afford to pay for good advice.They get richer.
Because the poor can't afford good advice they always get screwed up by insurance agents.And they are the ones who need help most instead they always end up as victims and poorer..
Like your example of a 35 year old man who can afford $50 a month for insurance.Leave it to insurance agents this man will end up with $15K whole life product when he needs $500K. Agents' excuse is "the man wants it, one" or " the man wants saving, wat"."You seeee, not my fault, hor: agents' defence. This scenario is very common.I am not sure if those lines for reasons of recommendation are written as they are in the fact finding form.
The poor are trapped in the poverty trap because the insurance agents don't help instead they dig the trap deeper for the poor.(many of the single parents with kids can testify to this)
The fee based advisory can change for the better for the poor because the agents are held liable for the outcome of the recommendation. No more $15K sum assured nor can he or she say, "the customer wants it, wat" or "the customers love the product , one" and expects to get away scotch free. The agents MUST make sure the cleint gets his need met.
AD ego, why do you think fee will "squeeze the poor even harder'?In fact,it will become cheaper for the poor. The poor get the correct product at lower cost and pay a tiny fee.
Wait, before you jump to the question, "how does the adviser survive earning his living?" My answer is 'the adviser has a choice.If he works with the poor he must expect to be paid less, charity.(There are doctors who work among the poor.) If he works with the middle class and the poor or mix of customers he gets both satisfaction of helping the poor and the money.
If he works with only HNWIs it must be the money but he must be a reputable adviser and has a good standing in the market place.
Mis-selling CANNOT be eliminated entirely but can be reduced drastically. It also depends on enforcement by MAS. If MAS is like in the last 7 years whatever regulatory regime is in place will become a white elephant. It takes the 3 parties to the deal to cooperate,
the customers must be forth coming with info, the adviser honest and competent, the regulator don't kelong and they will all live happily ever after.; November 28, 2008 6:18 PM
adego said...: zm, I quoted yr half-past-six, yet interesting 'free market' theory,

"Let me educate you. In a free market there there is no intervention . The market forces determine the prices. Setting a commission contravenes this principle. The commission should be negotiable between the buyer and the seller.In life insurance this commission is NOT disclosed and is assumed by buyers that it is not negotiable.
Charging fee is breaking free from this obsolete and unfair convention
to allow buyers to negotiate for a fee that is fair to him. If there is no meeting of minds no business is done.This is transparent."

- I suspect u are illustrating a fish market scene, to negotiate price??

- correct, free market not suppose to have intervention. the UK FSA, if they force the system to fee based advise only, and no more comm structure, that is intervention. understand?

- back to our real life, in today's free market, I hardly see much 'negotiation'. however, I do see willing buyer and willing seller transaction in free market. when there is no more demand for the goods, the price will compromise, nothing like the 'negotiation' u mentioned

- charging fee is transparent, yes indeed, so what? the cigarette sales hardly been affected, after the cigarette companies are forced to display those obscene pictures of ill smokers' mouth, lung & face. that is another form of disclosure, who cares? it is biz as usual.

if u know a little about 'humanity', u will appreciate the above facts.

thanks for yr education. its fun learning!; November 28, 2008 9:28 PM
zhummmeng said...: Adego, correctly said, the fish market is an example of a free market, negotiation by auction until an equilibrium price is reached. There is no cartel . The fisher men don't come together to force a price.There is PERFECT competition.
Similarly, in a fee based it is up to the parties to negotiate, and there is no fixed commission.
But today the life insurance industry is an example of inefficient market, or imperfect competition, for many consumers except for adego. Adego gets quotes from every insurer.He is able to make "comparison."
Spot on ,in a free market there is a willing seller and willing buyer and therefore there is negotiation.
Negotiation is the key pillar of free market.Nobody commands the prices.
In the life insurance consumers are forced to accept the price in order to be insured.For many they have no idea of the "best' buy and are exploited by insurance agents.For others ,like ADEGO,the street wise alley cats will try to go around this "monpoly" and source for the best buy but unfortunately there is none. IN a free market supply and demand dictate and fees will be subject to these forces too.
Prices don't compromise but adjust to the elasticity of supply and demand. 'O" level students learn this economic concept, no need go to U.
Another fact, advisers play a role in this free market provided not influenced by greed and other factors to interfere with the free flow of information.
I hope you find it fun. Learn these few concepts and you are an economist.; November 28, 2008 10:32 PM
Anonymous said...: ntuc has spent so much money from the life fund on advertisements, agents incentive trips , expesnive dinners and expesnsive speakers to teach the agents how to bullshit.They also lost so much money i=on investemnt.What bonus you expect. The mangemnt should cut their own bonuses and pay cut too like the civiel service.You wait long long; November 28, 2008 11:49 PM
Anonymous said...: Talking about Insurance, I wonder how safe is it to be insured? Assuming if the Insurance Company collapse like Lehman Brothers, can you claim portions of your money? I sincerely feel that diversification is the best option!
What is the difference between Insurance and Assurance? which is a better investment?; November 29, 2008 7:59 AM
Anonymous said...: Ways to overcome RECESSION:
Cut Bonus/Salary/CPF/GST/Lower Bus/MRT fares/Rentals/Taxes etc.; November 29, 2008 4:11 PM
Anonymous said...: wait long long. Ntuc lost so much of your special bonus in the investment and with all the advertisements and splurging on the agents and free gifts, staff bonus, annual dinner , how to give policyholders bonus.
Suggest salary cut from ceo down wards from 50% to 10% if not I see your annual bonus, although small, will go up in smoke.The company and agents are desparate now. They are pushing revosave with a large gift thrown in. But don't be conned. You regret for life. It is much cheaper to buy your own gift.; November 29, 2008 11:16 PM
freeier said...: adego has always comments in defense of the charges the insurance agents shld charge. he/she is trying to establish a case where if the poor man is left to pay small fees, the poor man will get bad advice.

we can't fault him, he grew up in the system probably as an agent and need to meet his needs in pay/expensive taste of cars.; December 01, 2008 10:22 AM
Anonymous said...: Policyholders of ntuc can forget about the kind of bonus they used to get during Mt.TanKL's time. What ever bonus you are expecting is already burned .Now what do you think of the restructuring? It is damned bad idea. I am not surprised ntuc will be asking for more, ie. cutting more of your annual bonus to bail out the loss.
Before they do, why don't you cancel your policies.No point holding . It won't make much difference. The long term return will be only 3% or less.And the long term they mean 30 years and longer unlike in the past long term meant 10-15 years.It is going to be guaranteed loss if you adjust for inflation.
Don't wait. Cancel them.; December 01, 2008 5:29 PM
Anonymous said...: We must bring this bonus issue to Hong LIm Park next year and expose them.
Those who bought revosave and vivloife check the details and don't be fooled by the greedy and unethical agents. There is a promotion going on now. Don't be trapped.; December 01, 2008 8:40 PM
Anonymous said...: people who bought revosave ,check with a financial planner and have it examined for mis-selling and misrepresentation.Definitely you were misrepresnted it doesn't address any of your needs. It is a anticipated endowment, the most despicable of the endowment products.
Those who bought, especailly old folks, for retirement you have been taken for a ride.Report this to MAS, CASE or sue for refund.; December 02, 2008 8:47 AM
Anonymous said...: Mr.Tan, i have to tell you because I can't take it anymore. Despite what you did for ntuc agents during your time there are many ungrateful agents who slander you, like one called JAng who asked you not to take too much bittergourd and she would tell you off when she got chance to tarok you.She said you are bitter man. This ungrateful woman who once said during your time that without you she could not send her children to university She now turn against you because she is getting more commission form selling products.You can see how ungrateful they can change all because of money. They are shameless dogs and bitches.She is like many of them who cursed and swear at you and suck up to the new money bag and sing priases to the new balls.They are really ungrateful dogs and bithces. They have forgotten how you provided for them and their family.

disgusted; December 02, 2008 7:09 PM
Anonymous said...: i find the agents very unethical at the roadshows. they misrepresent both products as saving plans which are rubbish. They are also say the bonus no change after the restructure. i say how can. the fact we are going to get less annual bonus or no bonus because ntuc lost money in the investment. The AA already downgraded to minus(-) and is the only insurance company in Singapore to be down graded. But the agent keep saying double AAs.
Anyway, the agents are getting unethical when they sell revosave and vivolife together. i find it is cheating. How can you combine them. What do you get in the end? What if i cannot afford revosave and stop paying the premium what happen to vivolife.. They keep quiet. I know the other one is affected. First of all it is not right to combine. One gone both gone.must ask yourself what is the purpose of buying. If protection why not go straight . Why go round the bush. The agent just laugh and has nothing to say. he told me all the ntuc agents are selling this way because of year end to qualify for the incentive trip.He also must sell if not his manager will come after him. I ask he got revosave he say revosave not suitable for him. i ask why suitable for me. he shut up.
I agree with all the people to cancel the policiy and don't buy because the bonus no good and this year they will cut. ntuc agents now no conscience anymore under this new managers.; December 02, 2008 8:15 PM
Anonymous said...: disgusted of 7.09PM,
that J old woman is a shit and unethical always demanding and demanding that the company owe her something.She is duper unscrupulous insuurance saleswoman; December 03, 2008 12:48 PM

Thursday, November 27, 2008

Bonus is likely to remain low

27 comments:

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