Managing personal risk - importance of savings

I wish to recommend this article to the lay person. It is about managing personal risk and the importance of having savings and getting an adequate yield on the savings. Many life insurance agents will give bad advice to consumers and get them to buy a life insurance policy that gives a poor yield or charges too much for the insurance cover. The agent has a conflict of interest. They can earn a higher commission by selling an expensive policy to the consumer.

Read the relevant FAQs in my website, www.tankinlian.com/ask.aspx. Read my book, Practical Guide on Financial Planning (click on iShop at the right panel).

Cost of term insurance

Dear Mr. Tan,
I just talk to 4 different insurance companies asking for their term insurance. One company try to sell me life insurance when I asked for term and I have to pay 4.5K per year. Even for term insurance, the price quoted is not that cheap comparable to life insurance.


Is it true that Critical illness only can be bought with a Life Insurance with Death Coverage and not as a stand alone policy? This is what an agent told me. Xan I really get a term policy valued at 500K at around 1K plus per annum as reported in the papers?

REPLY
You can buy a stand alone term and a stand alone critical illness cover under the SAF group insurance policy, if you are a reservists. Read this FAQ: http://tankinlian.com/admin/file.aspx?id=116

A term insurance for $500,000 cost about $768 a year. You can buy critical illness separately. But you do not need to insure a large sum. An insurance of $50,000 or $100,000 for critical illness is sufficient, as it is supplemented by term insurance.

Read my book, Practical Guide on Financial Planning and attend the educational talk conducted by FISCA. They are meant to educate consumers to make a better choice.

Read the FAQs in www.tankinlian.com/ask.aspx to find out why many agents are not giving the proper advice to consumers, due to their conflict of interest.

Online courses

Learning in Dorm, Because Class Is on the Web

Online education is finding its way into more colleges,
many of them public institutions facing tight budgets.

http://www.nytimes.com/2010/11/05/us/05college.html?pagewanted=all

 

How to Pick Your Next Computer

http://online.wsj.com/article/SB10001424052748703506904575592331036629858.html

 

Guiding a child to financial independence

Parents of adult children face all types of challenges, even in the best of times, but the tough labor market for young people can make it even more difficult.

Here are some tips:
http://www.nytimes.com/2010/11/05/business/businessspecial5/05LAUNCH.html

Measure of economic progress

U.S., China and eating soup with a fork
Are economists the world over using an outdated tool to measure economic progress?
They are widely used to compare standards of living in one country with those in another
but critics say GDP is too narrow to be a realistic indicator.
Joseph Stiglitz, the Nobel-prize winning American economist, has complained that
world leaders make a fetish out of it and suffer from GDP-obsession.
http://blogs.reuters.com/great-debate/2010/10/29/u-s-china-and-eating-soup-with-a-fork/

Reply to Jeffrey Tan, President of IFPAS

I am looking for some consumers to come forward and send a reply to the letter from the President of the association representing the life insurance agents. http://www.straitstimes.com/STForum/Story/STIStory_599561.html

Jeffrey Tan said consumers to get the advice of the insurance agent who will help them to select the most suitable products to meet their needs. From the questions sent to me, it seemed that many consumers were confused about the product that has been sold to them, and when they learned at a later date about the poor yield on the life insurance policy, they regretted having made a bad decision.

If you have suffered this unfortunate situation, I ask you to come forward and write a letter in reply to Jeffrey Tan. This will help to clean up the bad practices where many insurance agents continue to take advantage of the ignorance of the consumers.

If you are willing to share your experience, you can write a draft to me at kinlian@gmail.com. I will help you to polish up the letter.

Tan Kin Lian

Bread Talk and Bread Life

I saw two shops in a mall in Jakarta that have similar name. Bread Talk was probably the original company. Bread Life follows the same concept. The Bread Life shop has many customers, and the Bread Talk shop was almost empty.

Cheated on inferior products

A consumer bought a few boxes of local sweets in a store at 8 yuan. Later, she saw the same product sold at another store for 3 yuan. She bought a few boxes at the lower price to average down. She was told later that the cheaper product could have expired. Her immediate remark was - I have been cheated. She felt that it the product had passed the expiry date, the store should not have sold the product to her without telling her.

Cheating is to sell a product without disclosing relevant information or providing misleading information about the product to the consumer.

If a consumer can felt cheated of a few dollars in a consumable product that has expired, how would the consumer feel if he or she has been sold a financial product that locks out the savings for 30 years and takes away 50% of the savings, amounting to more than $200,000, without being told? Is this cheating or not cheating?

It is important also to look at the degree. There is no much harm of being cheated of a few dollars. But if one is being cheated of a large sum, one should pursue the matter rigorously.

Tan Kin Lian

Global Economic Turmoil

I expect a global economic turmoil within the next few years. My views are expressed here. I will be happy if I am wrong, but it is better to be prepared in case it materialises.

www.tankinlian.com/latest.aspx

Family3

A consumer asked for my views about the Family3 policy. He was approached by an agent and was not sure if this is a good policy to buy.

I advised the consumer to read my FAQ on Family3 in my website, www.tankinlian.com/ask.aspx. (Search for Family3). There are a few FAQs written on this policy.

I also advised the consumer to read my book, Practical Guide on Financial Planning, available at www.tankinlian.com/ishop and to attend the educational talk on financial planning organised by FISCA (www.fisca.sg).

I hope that consumers will spend some time and money to be educated, so that they do not buy the wrong insurance product from an insurance agent who is unable to explain the product to the consumer and cannot be trusted to give the right advice to the consumer, due to the conflict of interest.

Tan Kin Lian

How people vote

Contributed by DareToAct
In "Why empathy matters?", the author J D Trout pointed out that it is dangerous to think that people know what they want and can choose what they want. "When we choose poorly, these failures do not have a pure pedigree.  They are part individual irrationalism, part unconscious influence, and part lousy choices."

When we are unhappy with the behavior of our first choice, or that the logical "right" choice  disappoints, we might behave irrationally, especially under influence, and choose one of the lousy choices available.

Underestimating the potential of irrational voting can be detriment to any incumbent.    


DareToAct

Is exclusion of liability for injury caused by negligence lawful?

I refer to the letter "Indemnity forms unfair to participants" by Mr David Kwok Ng Kan (Nov 1).
Given the prevalence of this practice in the workplace and educational institutions,
perhaps it should be made a criminal offence
for anyone to purport to exclude liability in such circumstances.
Peter Wadeley
http://www.todayonline.com/Voices/EDC101103-0000045/Is-exclusion-of-liability-for-injury-caused-by-negligence-lawful?

My view
I agree that it is unlawful for a party to exclude liability in circumstances where they were negligent. The exclusion is unfair to consumers and goes against the established law of negligence.

Instead of waiting for Parliament to pass a new law, the relevant authority has existing power to tell these parties that they are doing something that is illegal. The relevant authority should step forward and exercise the powers that they already have, instead of standing by and watch.

Choice of insurance plan hinges on affordability, buyer's needs

Published in the Straits Times

WE REFER to the recent discussion
(Mr Tan Kin Lian,
 'Why insurers, agents may turn a deaf ear to SM Goh's appeal'; Oct 27)
on Senior Minister Goh Chok Tong's appeal to the insurance industry
('Keep insurance affordable: SM Goh'; Oct 23),
and would like to share our views on
term insurance versus traditional whole life and investment-linked plans.
Such plans and their suitability are largely dependent on the consumer's
financial needs as well as affordability.

Term insurance, which charges cheaper premiums, does not offer any cash value.
Such plans are often temporary solutions to permanent whole life plans.
Most term life plans do not offer coverage beyond the age of 85.

Traditional whole life plans, on the other hand, offer bonuses -
albeit non-guaranteed, but which become guaranteed once declared -
that will be added to the basic sum assured.

Investment-linked policies offer more flexibility and transparency
as to how cash values are accumulated.
As it involves investment, it is not suitable for risk-adverse consumers.

Not all term insurance policies pay a lower commission
than traditional whole life and investment-linked policies.

Pricing of insurance products is a matter of actuarial science
determined by insurers.

There is documentation of the financial planning process that is signed off by the client.
The recommendations based on the fact-find are further checked by managers
for compliance and can be audited by regulators.
Financial representatives subject themselves to mandatory training hours
in compliance, knowledge and skills,
while disciplinary actions are taken to address unethical practices.
The Life Insurance Association's report released on Aug 5 stated that
72 per cent of life insurance applications were completed
with a full or partial fact-find.

Ultimately, consumers would have to decide for themselves
on the advice given as well as the option to compare and choose plans
across the various insurers.
The answer to SM Goh's appeal should be multifaceted,
whereby insurers, industry players and financial representatives
work to educate consumers on the importance of adequate insurance coverage.
Examples include MoneySense and public forums.

Jeffrey Tan President Insurance and Financial Practitioners Association of Singapore
http://www.straitstimes.com/STForum/Story/STIStory_599561.html

My view
My consumers have sought my advice on the insurance policies that they have bought. They were shocked to learn about the high dedction, amounting to more than 50% of the accumulated premium. They were not aware about the high charge as it is not explained by the agent.

I hope that these consumers will write to reply to the letter from Jeffrey Tan. Consumers who have been cheated should now voice their unhappiness. They cannot stand on the sideline and expect other people fight for them.

If you wish to write a letter to the St Times but is not confident about how to write the letter, you can send a draft to kinlian@gmail.com. I will help you to polish up your draft. You should talk about how you were sold a life insurance policy, and how much you understood or did not understand the product, and how shocked you were to learn about the high percentage that is deducted from the policy, giving you a large loss for a lifetime.

Do take this chance to write, and help to change the bad practice and dishonest selling that is happening for a long time in the life insurance industry.

Guilin, China

I was in Guilin for the past four days. I went on a vacation by the inaugural flight to Guilin on Jetstar. It was an excellent trip to visit a beautiful place with nice people. The service by Jestar was excellent.

China still blocked Google and Youtube. I was not able to access my blog. But I was able to get the Google Mail.

I met many new and old friends on this trip. The enjoyed the shape quiz that I gave to them. They were fascinated by the challenging puzzles. They also enjoyed the amazing numbers. Many of them wanted to buy the Shape Quiz book, which is available here.

Risk of Private Shield

I have seen several examples of the problems encountered by consumers when they change from Medishield to Private Shield or from one Private Shield to another plan. They encountered rejection of their claim due to failure to disclose previous medical conditions. In some cases, the previous medical conditions were quite trivial and are not material to merit rejection of the claim. However, the claim officer is "trigger happy" in rejecting the claims, so that they can make more profit for the insurance company.

The purpose of insurance is to pay claims, especially for legitimate claims. It is not to make excessive profit for the insurance company. In some countries, it is illegal for an insurance company to reject a claim for unjustified reasons. If they wish to cite "non-disclosure", they need to have reasonable grounds. As the situation seem to be quite bad in Singapore, it is best for consumers to avoid changing insurers or to avoid upgrading of Shield plans.

The behavior of the insurance company is bad in another respect. Even if they are entitled to reject the claim, it is still their duty to pay the Medishield portion of the claim, as this cover is supposed to continue from one insurer to another, and from one plan to another. By rejecting the claim, the insurance company is failing in its duty to treat its customer fairly.

If you are caught in this situation, and your claim is unfairly rejected, you have the following options:

• Lodge a complaint to FIDREC (www.fisca.sg) for your claim to be mediated or adjudicated
• Write a letter to the newspaper to complain about the unfair rejection

You can read several stories about unfair rejection of Shield claims in my website. Go to www.tankinlian.com/ask.aspx and search for 'Rejection" or "Shield".

Tan Kin Lian

Amazing Number cards

I have arranged the numbers into in a format that allows you to print them into small cards. You can print out the page, paste into a hard card and cut out the small cards. You can try the trick with your friends. Click here.

Ask Mr. Tan in www.tankinlian.com

I have now written about 100 articles on insurance, investment and financial planning in the Ask Mr. Tan section of my website, www.tankinlian.com. You can access this section directly from the "Ask Mr. Tan" button on the top of the right frame of my blog. When you are at the website, you can search for an article easily by entering a keyword, such as "health insurance" in the Search tab to get all articles on this topic.

In the past, I post these articles in my blog but they quickly disappear from the top of my blog after a few days.
By putting them in the TKL website, they can be easily retrieved in the future, using the search function.

I am a regular user of this Search function. When someone ask me a question, it is easy for me to retrieve the article or FAQ using this search and give a link as a reply. But I want to encourage my readers to search for the article on their own, rather than give me the additional burden of making the search.

SM Goh & NTU Forum [3]

More comments about the NTU Forum can be found at General Election Portal

Rechargeable torchlight

Watch this video
The torchlight can be ordered here at $6.50 (Promotion: $20 for 4 pieces).

Managing personal risk

This article explains the importance of managing the risk of unemployment and inadequate savings for retirement and how to tell the difference between a good and bad life insurance policy. Read this article.

You can search for other FAQs and articles in www.tankinlian.com/ask.aspx or the link "Ask Mr Tan" on the right.

Buy financial planning book here.

Key tips for a new job entrant

When a graduate starts work for the first time, he or she is likely to be targeted by an insurance agent who will sell a life insurance policy to protect against the loss of future income. The life insurance policy is likely to give a poor yield for the future savings, and the protection need is not really necessary. But, it is easy for the job entrant to be misled by the well trained agent.

Read this article about the uncomfortable experience of a job entrant in being sold a policy that he does not really want, but find it difficult to say "no" to an agent who is his friend.

Read this article to find out about the insurance that you really need. And read this article about the importance of having personal savings that you are kept in flexible form - which you may need for a future emergency.

PDF Centric website - some views

14 people participated in the survey.

71% like the PDF centric website (www.tankinlian.com). They find it easy to search and read the information and to download the PDF for offline reading or sending by e-mail. 29% dislike it. They find it difficult to open the PDF on smartphones or Mac browsers.

77% replied that they find it easy to search for information on the PDF centric websites. 23% prefer to use the Google search.

A few people asked for direct links to the PDF rather than to search for it using the search function. My purpose is to get people familiar with visiting the "Latest" tab and using the "Search" tab. I do not want them to only refer to the specific PDF that is directly linked to my blog.

Buy High, Sell Low

Its your money and your responsibility.
Neither the Fed Chief, nor your advisor nor any guru nor blogger nor Jim Cramer.
You are the one who is going to be either going to live in comfortable retirement,
or eating cat food tacos.
http://www.ritholtz.com/blog/2010/10/investor-advisors-buy-high-sell-low/?

My view
Some consumers ask for my advice on whether it is the right time to buy or sell any stock or other investment. This is not a fair question to ask of me. Even if they pay a fee to the adviser, they will not get any good outcome. The investor should do their own homework and take their own punting decision - after all it is their own money.

How much is 1 trillion dollars?

The US deficit is $1.3 trillion dollars in 2010. How much is it?
http://www.creditscore.net/trillion-dollars/

The myths about entrepreneurs

http://grasshoppergroup.com/the-top-myths-about-entrepreneurs/

Is the auditing of firms and other sectors that bad?

IN the wake of the recent global financial and economic crisis,

the role of audit was queried.

The audit model is not broken beyond repair, but it needs to be reworked.
http://biz.thestar.com.my/news/story.asp?file=/2010/11/1/business/7235769&sec=business

Call for control on hedge funds

Managers want them to be regulated like other funds in Malaysia.

http://biz.thestar.com.my/news/story.asp?file=/2010/11/1/business/7281333&sec=business

My view

Hedge funds are bad for the global economy. They should be controlled in the USA, Europe and Singapore, not just in Malaysia. 

 

PDF centric website - TKL website

PRIZE: The two winners, selected by a draw, are C Yee and Chen WL. Thanks to all participants.


My website, www.tankinlian.com is designed as a PDF centric website. The new design has been operational for about three months. It attracts over 400 unique visitors daily. The vistors come daily to view the new FAQ and articles on insurance and investments that are uploaded into the website regulary.

I am able to create a FAQ or article easily using Microsoft Word and to convert it into a PDF. It takes less than one minute to upload the FAQ or article and to write a description. The easy of uploading makes it easy for me to cerate a dynamic and active website.

The PDF centric website is also convenient for my readers to search and read the FAQs and articles. They can download the PDF into their computer for offline reading or to have a hard copy printout. They can also forward the PDF by e-mail to another person.

I can add graphics and pictures to the PDF easily, if I wish. The content of the PDF document can also be located with a google search.

I hope that my regular readers are now familiar with the style of the PDF centric website and like this format. Please give your feedback here.

PRIZE: My Financial Planning book (retail price: $12) will be given to two lucky persons who replied to this survey (selected by a draw).

Can people afford to retire?

This article explains the need for governments in the West to raise the retirement age, where the state pensions scheme is funded on a "pay as you go" method which requires young workers to contribute towards the pensions of the retirees.

The Singapore government does not face this problem because it operates a provident fund scheme, where each contributor takes back his or her personal savings in the fund. However, the retirees in Singapore face the same problem of rising life expectancy and high cost of living - there is inadequate savings in the fund for their retirement. So, people in Singapore will have to continue working longer anyway as they cannot afford to retire.

But the elderly in Singapore face another big challenge - the elderly find it difficult to get jobs that pay a decent wage. They have to accept extremely low wage and even so, it is difficult to find these jobs. These challenge has to be addressed by the government, not just in words, but in concrete actions.

Tan Kin Lian

Inflation, savings and life insurance

A consumer told me that he is willing to take a life insurance policy if he can get back the total premiums that he has paid over a period of 20 to 30 years, without interest. He considers that he is getting good value from the life insurance and does not mind giving up the interest - so long as he gets the total premium back.

The consumer is not savvy and does not realise that over a period of 30 years, the value of money could fall by 50% to 75% of the real value, due to inflation. The real cost of the life insurance protection is only 20% of the amount of interest that he is giving away.

Read this article. http://tankinlian.com/admin/file.aspx?id=253

Financial Literacy

Each day, I receive a few requests from consumers asking for advice. In many cases, I find the following weaknesses:

• The standard of financial literacy is quite low
• The consumer likes someone to decide for them.

It is risky for consumers to be so dependent on somebody else for advice. They are likely to fall prey to unscrupulous people who can take them for a ride. They can be harmed financially and lose a lot of money that should be earned on their savings.

The consumers do not know what kind of question that can ask or should not ask from another person. For example, it is difficult for anybody to know how high the stock market or gold will go, and when they will reverse. If you are not familiar, do not take this type of investment risk.

The consumer should also be aware about the vested interest of the people that they are asking for advice. If there is a vested interest, the consumer is likely to get bad advice. Your loss becomes the profit of the vested party.

There are some consumers who want me to give advice for free, when they are not even prepared to read the FAQ in my website (which is free anyway) or to buy my Financial Planning book for $12 or attend the FISCA educational talk for $30. This is dangerous. They will fall prey to a dishonest cheat sometime in the future.

Financial planning book can be bought here.

Tan Kin Lian