Sunday, January 09, 2011

Financial Planning Book and Answers

Hi Mr. Tan,
I am an undergraduate who reads your articles with interest as they give me good insights into the basics of financial planning from a relatively unbiased point of view.
You mentioned about distribution costs = 100% of annual premiums and deduction costs = 20% of total premium value as 'benchmarks'. May I ask how did you arrive at these figures? 

I was recommended to a financial advisor. He introduced me to a limited (25yr) whole life insurance which covers 150,000 life and CI rider for $250/month. I rejected it as I have no intention of getting insurance now since it'll eat up too much of my monthly allowance. After reading your articles, I was shocked to realize the true meaning of distributive/deduction costs involved. I'd like to clarify the 'figures' you quoted.
REPLY
you have to find the answers from my book on Financial Planning or the FAQ in my website. I am not able to give individual coaching on these matters.
www.tankinlian.com/ishop
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1 comment:

Spur said...

Dear Undergrad,

If you have real interest in finance and money matters, you can apply time value of money to calculate the expense ratio that Mr Tan advocates as a fair value to both insurer and policyholder. You'll understand why with this reasonable & fair expense ratio, the total bill extracted from your hard-earned savings is at most 20%. Read his book for more details.

Currently the expenses of the insurance companies in Singapore are too high due to factors like big commissions, big bonuses, fancy office buildings with expensive renovations, lavish incentive overseas holidays and monthly buffets in 5-star hotels. Where do the insurance companies get the money for all these? From your expensive premiums. That's why after 25 years, your returns from par insurance is so low.

January 09, 2011 11:59 PM

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