Inflated claim

Many motorists have encountered this experience. The car in front stopped suddenly. The car at the bank knocked into the bumper. It was a small scratch. Both parties agreed not to file any claims.

Later, the motorist of the rear car received a claim, usually through a lawyer, for a sum that is way above the actual damages. It seemed that the damages have been inflated. If you do not settle the claim, the lawyer would file a legal suit and take you to court.


What would you do, if you received an exaggerated claim? Share your views here.

Tan Kin Lian

Land banking - Gathering on 12 June

The leaders of the investor group are arranging a gathering of investors as follows:

Date: Saturday 12 June 2010
Time: 10.30 am
Place: Speaker's Corner, Hong Lim Park

They wish to organise the investors to seek the recovery of their investments on the land banking products. If you are involved in this product, you can attend the gathering and submit your particulars and make contact with the other investors. The gathering can decide on collective action.

They have invited me to speak at this gathering. The organisers will be alerting the media for this gathering to be publicised and covered.

Please take part in this survey.

Morality and money

Would a reputable lawyer advise a client to write a contract that is "within the law" but in essence is cheating the public?

Many people consider this situation to be all right for the following reasons:

- it is all about making money, i.e. legal fees
- their duty is to the client (who pays their fees)
- if the law is not clear, it is acceptable for the lawyer to take advantage of the unclarity.

I wonder if the lawyer has a duty that is above making money? Do they have a moral duty to ensure that the society is honest and fair?

I remember an episode in the move "Godfather" where the inhouse lawyer consider it to be his duty to protect the mafia family from being prosecuted under the law, but in all other respects, what the mafia family does is not his concern. Has this type of thinking invaded our society?

The shady practices used to be the work of small time lawyers who seek quick profit. In recent years, these types of practices appear to be acceptable to reputable firms, who have become motivated by greed.

Tan Kin Lian

School holidays

I estimate that 20% of Singaporeans are on holiday during June. This is reflected by less cars on the road and less vistors to my blog in June. If you access to some official statistics, please share them here.

A fine society

Singapore used to be a "fine" society. There is a fine for littering and for jay-walking (i.e. crossing the road against traffic regulations". This has been relaxed for the past one or two decades. Nowadays, jay-walking is no longer enforced.

The environmental agency is now taking action to enforce littering. It is time to take action to enforce other aspects of our law, such as jay-walking and cheating. We need to revert back to our fine and orderly society.

Tan Kin Lian

Inflated repair cost

Hello
I'm a 23 yrs old guy who got into an car accident few months back. the accident happened like this, it was red light and when it showed green light the car infront started to move. I was moving at low speed as well and before i knew it, he braked. I managed to brake in time but unfortunately I kissed the back of his bumper and there was no scratches no dent.


I passed him my NRIC, name and contact. However, I did not take down his particulars and did not take any pictures or report to the police about this incident because I thought it was a small matter. Today, he sent me a letter claiming over $6,000 in repair and over $2,000over on 16 days of car rental.

I saw your internet forum about car fraud. How can I prove that the original damage was small? I did offer him to go to workshop to sort this out together but he refused. As there wasn't anyone in my car, I got no witness and evidence. How could i use his evidence against him?

REPLY
You can pass the case to your insurance company to handle. you can make a report that it was a small dent and that both parties agreed not to report the accident and make a claim.

Life time savings

I posted a story of a non-working woman who invested all of her savings in a 21 year endowment policy. She would have paid $18,000 in premium and obtained a return of $16,000 on maturity. This gave a negative return. Part of the premium went into paying for a rider to provide additiona insurance protection, but this was over-priced.

She obtained a meagre return of less than 1% per annum on the savings portion of the premium. The insurance company would probably have earned an average yield of 5% per annum. More than 80% of the gains went into the commission, expenses and profit. The meagre return could not even cover the inflation during the years. To this woman, it represented most of her lifetime savings, which has been denied of a fair return for a financial plan that was traditionally supposed to be trustworthy.

When I think about the million of policyholders who have suffered this fate, I wonder about the harm that the life insruance industry and the advisers had done to the people. Perhaps this applied to only some of the companies and agents, and that the other companies could have offered a more decent return. But, to my knowledge, quite a large number of people have suffered from the poor return.

Even life insurance companies that offered decent return in the past could change their strategy to focus on making profit for their shareholders and agents. Their policyholders would be placed in a helpless situation, unless the regulator steps forward to protect the interest of the public. In some countries, the regulators were appalled by the type of predactory practices and have taken steps to control the excesses.

Tan Kin Lian

A matter of chance

Here is a puzzle. You have to guess a number from 1 to 4. Each day the correct answer is drawn. You have 1 out of 4 chance of getting it right. You repeat this exercise for 6 days. What is the probability (chance) of getting the right number for 6 days, 5 days, 4 days, 3 days, 2 days, 1 day and 0 day? Please show in percentages to 2 decimal places. The total must add up to 100%

Send your answer to kinlian@gmail.com. The first correct answer will win my Tangram book.

Competition Law

I am surprised that SISTIC should be charged, found guilty and fined nearly $1 million for breaching the Competition Act. Here are my reasons:

a) SISTIC competed fairly to win the contract from the venue owners to handle the ticketing of their shows.
b) It is more sensible for the venue owner to get one ticketing company, rather than several companies, to handle the sale of the tickets.
c) The ticket charge (presumably $2) is a small charge for the work of issuing a ticket
d) ticket charge can be considered as part of the total cost of the show. If the customer does not like the total price, the customer is not required to  watch the show.

The ticket charge is small, as compared to the charge of $30 imposed by the banks to transfer US$100. If SISTIC should be fined for this charged for this fee, why are the banks allowed to impose a charge that is 15 times of this sum? The work is similar in both cases.

I am not sure if I got my facts and issues correctly, so I look forward to getting the views of other people on this matter.


Tan Kin Lian

Poor return from endowment policy

Dear Mr Tan,
In 1995, my mother was sold an endowment product. The policy is maturing in about 5 years time. By that time, she would have paid a total of $16,000 in premium for the life policy and $2,000 for the critical illness rider. The insurance company said that the guaranteed payout after 21 years is $14,000 and the projected payout is about $16,000.


This is really a ridiculous situation. If she had left her money in FD over 21 years, she would have got a better return than this endowment product. This product is giving a negative returns over the 21 year period! At that time, my mother was not working and the premium was all she could afford. It is sickening that there are people out there who will even try to milk money out of such poor people, as the agent sold the policy as a "savings plan".


Is there any action that I can take against the insurance company? The agent who sold the policy has long since vanished.


MY REPLY
I agree with your views. A fair return for 21 years should be 3% p.a. This would give a maturity benefit of $21,800, instead of $16,000. Another insurance company has advertised that it gave a return of more than 5% over a similar period in the past. This would have produced more than  $27,200. 

I suggest that you write a complaint to MAS and to the newspaper.

Avoid markeeteers

In the past, many people have approached me on land banking and time sharing products. These are people who meet me at various events and claimed to know me. They gave me a business cards indicating their involvement in these companies. They wanted to market the products to me. I declined. Some of these marketeers called my home telephone to tell me about the investment opportunities. I also declined to talk to them.

I make it a point to avoid every one who markets investment products. I know that they earn commission from their sales to investors. It is easy for them to tell stories about how much profit can be made from these investments, so that they can close a sale and earn their commission. But the stories of the potential profits are mostly exaggerated.

I do not even bother to spend time to due research on these investment products. I just avoided all of them. This is why I did not know about the min-bonds, pinnacle notes and other credit-linked notes until they busted.

Tan Kin Lian

Medical insurance

Dear Mr. Tan,
I hope that you can post some advice in your blog on choosing between the Medishield, Shield and hospital insurance.

Reply
You can view some of my postings on medical insurance here. You can get a more complete writeup in my book, Practical Guide on Financial Planning.

My advice is to buy a Medishield plan (from CPF) or a Shield Plan B from an insurance company. There is no need to insure the co-payment and deductible, as these expenses are small and can be paid out of Medisave.

Lawyers and shady practices

Dear Mr. Tan,
The land banking company that is mentioned in many blogs for failing to return the investments on maturity is being advised by a big legal firm in Singapore. This firm is headed by a well known lawyer who is also a MP. How can the Government allow the MP to be involved in advising a company that is engaged in shady practices? Is this why the relevant bodies are not prepared to investigate this land banking company, in spite of many complaints being lodged with the CAD and MAS?

REPLY
I do not know whether this MP is aware about the practices of the land banking company. Perhaps, it is another partner that is advising the company.

RED Map

I wanted to look for GSM building in Middle Road. I went to the RED map, type in "GSM" and found the map immediately. It is easy to use and fast to search. I found that the nearest MRT stations were Bras Basah and Bugis.  RED map is available at: http://projects.easyapps.sg/propinfo/Map.aspx

Practical Guide on Financial Planning

I wrote this book to contain tips that are important to every person, from the time that a young person starts work to the later stages of life of raising a family and approaching retirement.

The tips cover:
- need to set aside savings
- investing the savings in a low cost fund
- avoiding structured and unregulated investments
- managing risks of volatile markets
- withdrawing savings during retirement

The book cost only $12 but you will need to spend 12 hours to read and understand the concepts. This can save you a lot of money later on, by avoiding the investments that are bad for you.

The book can be ordered online here. It is an excellent gift for young people who are starting work.

I also give a monthly talk on the key principles contained in this book. The talks are organised by FISCA. Many people attend the talk to ask questions that has been worrying them, especially on advice that were given to them by financial advisers.

Tan Kin Lian

Lawyer to handle a complaint

Dear Mr. Tan,
I wish to engage a lawyer to handle my complaint on the Vista investment plan. I have not been properly adviced about the penalty charges on the early termination of this plan. This has caused me to lose a large part of the amount that I have invested. Can you recommend this lawyer?

REPLY
I am not able to give you a name right now. If I come across a lawyer that is interested to take this case, I will inform you.

Discounted value of bonus on life policy

Dear Kin Lian
I have a GE policy with bonus @ $14,000. Recently I applied to withdraw the bonus instead of cancelling the policy or take a loan. Apparently I am granted only @ $8,000.


I was informed that my sum assured still remain the same. What I am disturb about is what happen to the balance $6,000. Will I loose it totally just because I draw out $8,000.

REPLY
A bonus of $14,000 is the amount that is payable on the maturity date of the policy or on death. So, this is an amount payable many years into the future. If you wish to withdraw the bonus now, you will get the present value of the bonus, i.e. the discounted value. In your case, the discounted value is $8,000. This is probably a fair amount depending on the rate of discount used to compute it.

General election - 2010 or 2011

A reader asked me to conduct a poll on the current government. I have already done the poll on a few occasions in the past year. I believe that the results would probably be the same. You can view the results here:
http://tankinlian.blogspot.com/search?q=general+election

US Debt of USD 13 trillion

The debt of the US Federal government has readed USD 13 trillion, is 13 followed by 12 zeroes.

Many governments faced large debts amounting to a high proportion of the GDP. They include many countries in Europe, the UK and Japan. We have seen what happened with the Euro when Greece, Spain and now Hungary gets into trouble. It will be a matter of time, before the loss of confidence affects the US dollar. When that happens, there will be a bigger financial crisis.

I do not have an answer about what can be done to protect our savings from this impending disaster. Perhaps, the best form of investments is in productive assets, i.e. the shares of companies that run an operation and earns a profit. While the values of the shares may drop in a crisis, the company should continue to earn a profit and pay a dividend. If business is bad, the company can cut cost by reducing their workforce.

It is important to reduce debts. When a crisis hits, the banks will pull back the loans. Those who have borrowed money will have to sell assets at highly depressed prices to repay the loans. This will include borrowings to buy investment properties.

The prognosis for the global economy is discouraging. It reflects the failure of the capitalist and free market system. We do not need to revert to full socialism. A better model is a regulated market, fairer distribution of income and higher taxes for those that earn extreme incomes.

Tan Kin Lian

Car park wardens

I visited the National Skin Center two weeks ago. On driving into the car park, I was guided by a uniformed warden to a vacant space. I talked to him and learned that he was 66 years old.

It is a good idea to provide this type of employment for our older workers who need a job to get by. It keeps the elderly worker physically fit and active, and improves service to visitors of the car park. The warden can also provide directions.

If these decisions are left to individual businesss, most of them would prefer to save cost and not create this type of employment. However, if they are mandated to be necessary for car paks of certain sizes, there will be more jobs that are created for our older workers.

Tan Kin Lian

Public transport fares, service and profits

A vandal broke in to a MRT depot and painted graffiti on a train. The vandalism was not noticed by the employees for some time, until a video was posted on Youtube by a passenger. What does this tell us?

SMRT has cut down its employees to be bare minimum to reduce cost and improve profits. It would have been better if SMRT had employed more people and show a smaller (but still healthy profit). This will create jobs for more people to provide better security and improve customer service. They should also run more trains to reduce the congestion and waiting time.

These actions can be taken without increasing the fares, as SMRT is showing a healthy profit. The Public Transport Council has to be more vigilent in moniting the fares, level of service and profits of our bus and train operators.

This is an example of the failure of the unregulated market in getting the right outcome for the country.

Tan Kin Lian

Logic Quiz

Try puzzle 8 in this webpage. It is a new type of logic quiz.

Tip
Althought the structure of the quiz is different, I was able to apply the same technique as the Intelligence Quiz to solve this puzzle.

Trend towards contract work

Dear Mr. Tan
Without good paying jobs, consumption will suffer, which will cause even fewer jobs and less consumption:

http://money.cnn.com/2010/06/01/news/economy/contract_jobs/index.htm
 
JLN
 
My comment
I have observed this trend for some time. I agree with the findings. If workers do not have security of employment, things will continue to get worse.

How can top CEOs and bankers continue to make so much money, when other people in the economy suffer a drop in income? This is a consequence of our free market system. The solution is to get back to a more regulated economy - i.e. more regulation on terms of employments, hours of work, security of jobs, fair compensation and other factors.

Economic growth and asset prices

Some economies were able to achieve rapid growth over an extended period. During the initial years, they adopted economic policies that proved to be attractive for inward foreign investments. This created jobs and lead to a productive economy.

The next stage of the economic development was funded by the rapid rise in property prices. As these assets appreciated in value, the owners felt that they had become wealthy. The governments were also able to use the appreciated values of their assets to take more borrowings to fund national development and other spending. Some of these spendings become wasteful and were not economical justifiable.

After a few decades of inflated asset values, these economies will have to face their reality. Asset bubbles allow more debts and borrowings and do not really create productive wealth. There has to be a payback time.

We have seen the bursting of the asset bubbles in Japan in the 1990s and the continuing pain for two decades. We are now seeing this situation in the USA and Europe. Singapore is also funded on this type of asset bubbles. The high property prices have to be paid through many years of future hard work.

It is sad that in an asset bubble, the earlier owners (including foreign funds) creamed off the big profits and leave the burden of higher asset prices to be paid for by future generations.

Tan Kin Lian

How to end the meaningless struggle?

Extract from Tommy Wong's book, "Wisdom on How to Live Life"


Tom: Can you elaborate further on living as souls?
Guru: As we live as souls and we know that souls’ existence is eternal, we’re not too interested in undertaking tasks that are merely for the sustenance of our bodies.
Tom: So life is not about working for a living?
Guru: It should not be, but unfortunately many do and life becomes a meaningless struggle.
Tom: Meaningless, why meaningless?
Guru: Because many struggle just to keep their bodies going and yet their bodies are bound to perish. That’s why it’s meaningless.
Tom: Can we make life more meaningful?
Guru: Sure, by undertaking tasks that is good for the soul.
Tom: Such as?
Guru: To know spiritual truths, and to live with these truths and discriminate against falsehood.
Tom: Name one spiritual truth.
Guru: We are souls and not bodies.

Tommy Wong

This book can be purchased online here.

Training videos

Youtube is an excellent channel for businesses to upload videos for staff training, communication and marketing. It can be done in a simple, lost cost way and can achieve good results. Here is an example of the use of videos for marketing.
www.easysearch.sg/videos

Survey for university thesis

Dear Mr Tan,

I would like to request for your favor, if possible, to kindly help to publicize my survey on food consumption pattern in CBD. The survey consist of 10 questions and would only take approximately 3 minutes to fill up. The target audience would be anyone who is currently working in CBD area.


Survey Link : http://www.surveymonkey.com/s/8VH2DVG

The findings from this survey are going to be used for university thesis. Thanks in advance for your help. I really, really appreciate it.


Claire

Improvement in service

I wrote to my bank to suggest that they should allow the customer to enter a reference number for an ATM funds transfer. This will allow the recipient of the funds to know the party who has made the transfer.

The bank acknowledged my suggestion but did not give me any reply for several weeks. This type of poor communication is quite common in Singapore.

I sent a reminder to the service quality manager. She replied that the bank is now studying the technical feasibility of providing a virtual keyboard on the touchscreen of the ATM.

I suggested that they should just implement the numeric input, which just involves a simple change to the software and is quite easy and inexpensive to implement. There is no need to make any hardware modification to the ATM machine and can be done with ATM machines that do not have a touch screen. It will probably meet the needs of most people involved in the funds transfer.

It is better to look for simple and inexpensive ways to implement improvements. There is no need to spend a lot of money or time to make comprehensive and complex changes. They should also learn to call and talk to the customer, rather than work independently to find their own solutions.

Tan Kin Lian

Positive thinking

Some people have a habit of looking at the negative side and to focus on what could go wrong. This habit is developed over the years, and could be attributed to the education system. They do not acquire the skill of looking at the positive side.

Here is an example to illustrate my point. My friend, who is a skin specialist, wanted to create a website for patients to submit their case for consultation through the internet. I helped him to carry out a survey.

Several respondents to the survey pointed out why this approach would not work, as the specialist needs to see the patient to be able to give the right treatment.

They overlook to see the cases where this approach might work, e.g. where the symptoms are adequately described in the laboratory tests or medical reports. In these cases, a personal visit and examination may not be necessary.

Even if the specialists needs to see the patient before coming to a medical decision, the earlier submission of the medical reports and tests would be helpful in reducing the time that needs to be spent by the patient or the doctor at the visit. So, the website would still be useful.

If we learn to see the positive side, to see what can work (rather than what cannot work), we will have a different outcome. We need to learn to have a positive approach and see the positive side.

I wish to share a story that is almost 30 years old. A minister was chairing a meeting to develop a recreational facility for workers. The planners came and give several reasons why the site was not suitable. The minister asked them to go back and look for the reasons why the site was suitable. They planners came back with these positive reasons. The project went ahead. This story, which was told to me by a friend, showed that there is a positive and negative side to any issue. The correct approach is to see both sides and come to a balanced decision.

Tan Kin Lian

Dual currency investments

A reader asked why dual currency investments are risky. I have described this type of risky investments in several postings in my blog. You can read them here:
http://tankinlian.blogspot.com/search?q=dual+currency+

There is a chapter in my book, Practical Guide on Financial Planning, that explains the the risk of various tyoes of structured products, including dual currency investments, and of unregulated products, such as land banking, ponzi schemes and other scams.

Civil servant's pay

Mr Tan Kin Lian,

It came upon me an interesting article from BBC. UK government is making effort to make the salaries of senior civil servants transparent. The names of person who earns above GBP 150,000 per year were revealed.


This is what the British Prime Minster said. "Openness will not be comfortable for us in government, but it will enable the public to hold our feet to the fire. This way lies better government."

http://news.bbc.co.uk/2/hi/uk/10200387.stm


From Cashew Nut


Some 171 civil servants are paid more than Prime Minister David Cameron's £142,500-a-year salary, according to Cabinet Office figures.

Risky financial products

This article explains that the approach taken in Hong Kong may not be sufficient to protect the investors.

My comment.
There is a mention of Deposit Plus which is similar to the dual currency deposits sold in Singapore. It is risky and should be avoided.

Fraud in the financial sector

Read this article about securities and market fraud in Hong Kong.

My comments
The same challenges apply to Singapore.

Investor sues land banking company

Read this report.

My comment
Many investors have approached me for assistance on similar investments which were not repaid after the maturity date.

20 year impasse

Someone attacked me for posting my views about the 20 year impasse in reaching agreement on the bilaterial issues and challenged me to state what I would have done if I were "PM, SM or MM". It is difficult to be engaged in a discussion with a vile person whose primary purpose is to attack another person under anonymity.

I like to give my views in this hypothetical situation. It would not be possible to judge if my approach would achieve any useful results. I would approach this issue on the personal values that I follow:

- honesty
- fairness
- positive
- courage
- public service

If we are honest and fair, it would be easy to win the trust of the other party. Both parties can look at the positive aspects and focus on what each side could gain from the cooperation.

I sense that one side felt that the Points of Agreement was not fair to them (for whatever reasons) and although it was agreed, they would find other ways to get out of the deal. The other side insisted that "a deal is a deal" and should be honored. This explains the impasse that lasted for 20 years.   Both sides need the courage to recognise that the earlier deal would not work, and that a new approach had to be taken (without waiting for 20 years).

As this is a hypothethical case, no one know whether it would have worked. I invite other people, wishing to give their views, to give their name and to refrain from passing judgement in this hypothetical case, or to make personal attacks.

Tan Kin Lian