Saturday, November 10, 2012

An issue of justice and conscience

A number of academics and research economists,
including establishment figures,
have recently criticised the PAP,
mostly in modest language but sometimes rather strongly.
Their main criticism is
the continuing mass intake of “cheap” foreign workers
and the adverse impact it has on Singaporeans.
Another area they seek to speak up on is
the public accusation of unequal job treatment in favour of the newcomers.
Some of these academics may feel compelled to take a stand now
for fear that the problem will become even more serious.
Ambassador-at-large Tommy Koh
is the latest to add his voice
to speak up for the little guys, the poor and the needy.
Several months ago,
the former state economic adviser, Prof Lim Chong Yah,
had a dramatic proposal to narrow the economic gap.
Prof Tan Khee Giap of the Lee Kuan Yew School of Public Policy
hit out at the state’s foreign recruitment policies
and called for better protection of locals.
Another surprising critic was Yeoh Lam Keong,
former chief economist at the GIC headed by Lee Kuan Yew.
Prominent commentator Chua Chin Leng
praised these elites for speaking up.
“It must be a matter of conscience, of a sense of justice.”

Misleading disclaimer notice

Retailers are putting up notices on "no refund, good not returnable". This is illegal in Malaysia.

We need to check on the law in Singapore.

Telling lies

My friend in Indonesia told me this story. He met an insurance agent working for a multinational company. The agent said, "Don't buy insurance from the local companies. They will not pay your claims. They are financially weak."

My friend told her, "I will report you to the Government. You are telling lies. How do you know that all local companies are weak? Have you made any research to back up your statement?" The agent was scared and never see him again.

I told my friend, "The insurance agents from a multi-national company in Singapore has been making similar statements like this over the years. This is how they can sell their high cost, low return product. They just spread lies".

A newly recruited agent working for this multi-national company recently told me that his agency manager has trained him to tell the same "marketing  line". I call it a "plain lie".

Insuring against medical cost for the elderly

Is there a good insurance plan to protect you against the high medical cost for the elderly?

Get a return higher than inflation

The life insurance companies are doing a roaring business because their product offer a better return, compared to the low interest rate paid on fixed deposits. Consumers may not realize that they are locking up their savings for a long period, sometimes up to 30 years, for a return of 2% per annum. This will not cover inflation.

Consumers should invest in a low cost index fund, such as the STI ETF, and earn a much higher return, that is likely to be much higher than inflation. The difference over a 30 year period can be about 40%. Do you prefer to collect $500,000 or $300,000?

Friday, November 09, 2012

Transparency of insurance contracts

Do you want to know clearly what is covered or excluded under your insurance policy? It is not just a matter of the use of simple language in the policy contracts. The application of insurance principles and the interpretation of the claims officer play a bigger part.

Thursday, November 08, 2012

Humor on politicians

Over-insurance and moral hazard

What is an appropriate amount for a person to insure him or herself? Why does a life insurance company refuse to accept an application for insurance for an amount that they consider to be excessive? How does the insurance company decide on what is this limit?

Tuesday, November 06, 2012

Structured investments

Dear Mr. Tan
My friend Alice recently attended a property fair at Marina Bay Sands. She was approached to join Company A which do structured investments for clients with guaranteed capital gain of 115% annually, i.e. if you put in $100,000, you will get $115,000 annually.  Alice was surprised and was informed that the money collected is used to purchase properties in USA to generate the yields.  Her question was whether such form of investments are legal and are endorsed by the regulator? What is your 'feel' of such products, Mr Tan?   

This product is not regulated. You give $100,000 to a company who gives you a piece of paper and do what they like with your money. If the company does not pay back your investment, what can you do? Never trust this type of unregulated investments.

Risk Management and Insurance

Here are my points to students towards the end of the term. I want them to take away more than just the technical aspects of risk management. They should also be confident about making decisions.

Starhub Roaming Service

I travel to Indonesia and Thailand regularly. I refuse to use Starhub roaming service as the charges are too high. Starhub charges $15 a day for data access. I bought a data card from Indonesia that is a valid for use for 1 year for about $30.

Starhub sells a prepaid card for $17 with 100 MB of data, SMS and talk time. I assume that their local partners provide the service at similar charges to their customers on their pre-paid card.

I am willing to pay $8 a day for data access (up to a certain limit), local calls and SMS. If Starhub partners can make it available at this price, I will buy the service. This can be shared between Starhub and the local partner.

If Starhub and its Conexus partners continue to charge unrealistic rates, consumers like me will continue to find other channels. I refuse to take incoming calls and will buy a local data card, even if it is a little inconvenient.  Starhub should be realistic and charge reasonable rates.

Beware of this type of financial trap

Ms. Kim (not her real name) is a foreigner who come to Singapore to teach in our local university. She save a large part of her monthly salary to be used for her husband to start a business in a few years time in her home country. She was approached for an independent financial adviser who recommends to her an investment plan.

Being trained in financial matters, she asked carefully about the charges from the investment plan. She was told that the charges are less than 1%, which was acceptable to her. She received a monthly statement that showed the monthly savings, the modest charges, and the investment units purchased from her savings. It looked quite satisfactory.

She bought the investment plan because of the attractive bonus given to her upfront, which was subject to certain conditions - which she found to be acceptable.

After 18 months, the monthly statement started to show the charges to be 4% of the monthly savings. She was shocked. She approached the financial institution and was horrified to learn the following:

a) She had bought an investment-linked policy that have high distribution cost.
b) The 4% monthly charge would apply for 20 years, taking away a large part of her future gains and giving a poor return on her savings
c) If she terminate the plan now, she would have to pay a penalty that took away almost half of her accumulated savings, giving her a loss of about $50,000.
d) The page that was supposed to contain the charges was deliberately removed by the financial adviser. She could not prove this fact, and had signed a statement "I am aware about the terms and conditions of the policy".
e) The 18 month delay in applying the high charges was a deliberate design of the policy to get her to commit a lot amount of savings before discovering the nature of the contract.

Ms. Kim complained to the insurance company - which pushed the responsibility to the financial advisory firm. The firm investigated her complaint and said that she could not provide the evidence of being misrepresented.

She was very sore and felt cheated by "the system". She never imagined that she could be cheated in this manner in Singapore. Her faith in the integrity in Singapore was badly shaken by this event.

The insurance company and the financial advisory firm is still offering this investment product to the public. A few other high net worth individuals have been caught by the same trap.

Gold trading - many investors did not get their gold

Here is an update of the events in Malaysia. The amount lost by investors is scary.

So far, we do not have news about the investigation in Singapore. The flow of information is quite poor. We do not know the scale of the losses in Singapore, and how it compares with Malaysia.

Do not sell unregulated products

2 November 2012

Forum Page
Straits Times

Ms Grace Tan (ST 1 Nov, MAS spot on in handling buyback firm Genneva) said that a financial professional had
been urging her to invest in the Genneva Gold scheme for two years. 

I have also heard that financial advisers had been actively involved in the marketing of unregulated investment
schemes, such as several land banking products that are also now under investigation.

The public may be told that the financial advisers are licensed by the Monetary Authority of Singapore and 
may not be aware about the difference between regulated and unregulated financial products.

I suggest that licensed financial advisers should be disallowed from selling unregulated products, to avoid
misleading the public.

Tan Kin Lian
Financial Services Consumer Association

Provide a common authentication service

3 November 2012

Forum Page
Straits Times

The Straits Times reported that Standard and Chartered Bank has introduced an 
innovative ATM card that doubles as a security token (ST 3 November 2012).

This report remind me of the messy arrangements that now exist in Singapore
to authenticate a person for online transactions.

I now carry three separate tokens issued by the same bank for my personal bank account and
for the bank accounts of two corporate entities that I am responsible for. The banks also require me 
to authenticate payments by my credit card using my mobile phone.

Soon, there will be the need for government agencies to authenticate their online transactions
as well.  Will this mean more security tokens?

It must be quite costly and wasteful for each organization or agency to issue its security token and to set up 
the infrastructure to authenticate them. The high cost will ultimately have to be born by the public and 

It is now the right time for Singapore to set up a national framework to authenticate a person.  This framework should allow several authentication service providers to be licensed and for consumers to choose their preferred provider. This will also reduce the concentration of risks in one provider serving the entire population.

Under this framework, some banks may be interested to offer the authentication service to other commercial users for a fee. This will help them to earn fees to recoup the heavy cost of their investment, and provide a useful service to their own customers as well. It will also ensure the rapid adoption of the online authentication in Singapore. 

I hope that the Infocomm Development Authority of Singapore will take the lead in this effort.

Tan Kin Lian

National Framework to authenticate online transactions

LAST Saturday's report
about Standard Chartered Bank's innovative ATM card
that doubles as a security token
("ATM card doubles as a security token")
reminds me of the messy arrangements
to authenticate a person for online transactions.
The high cost will ultimately have to be borne by the public and consumers.
Now is the time to set up a national framework to authenticate a person.

Primary School Education

I agree with the views expressed by this writer in Today paper. 

Two facts primary schools cannot ignore
From Henry Tan Seng Lee
I refer to the excellent news feature, "Why are Finland's schools successful?" (Nov 3). Singapore's primary school system is designed oppositely: Trying to catch gifted talents early and increasing resources to nurture them under the Gifted Education Programme.

It continues to ignore two facts. First, gifted talents are obvious at early ages in only a few fields, such as music and mathematics, and there is no need to categorise them through mass testing. Slower developers are the ones who need more help.

Second, pupils are at a great age to interact, to experience and learn a wide range of living skills and to develop values and good behaviour.

Unfortunately, we emphasise a narrower range of learning and create unhealthy stresses at a tender age by putting them through much competitive testing and grading, which is more appropriate when they are mature.

Our system has given us too many people who over-invested their time preparing for examinations at the expense of character-building and a more rounded life. They are good at content but not so at connecting the dots.

They are less self-confident and less certain in real-life situations than their counterparts elsewhere. Those who do better do so despite, not because of, our system. We need bold steps to change our primary school education.

In particular, we must de-emphasise its competitive, stressful aspects and reallocate resources to help slower developers. This would benefit children, parents and, in the longer term, our society.

Monday, November 05, 2012

Blank cheque motor insurance

... I received a letter from my insurer
informing me about the other car driver's application
to claim the cost of his repairs from my insurance.
His repairs... cost $3,500,
which was double what I paid to repair the damage to my car.
Are there any regulatory bodies guarding consumer rights
when a car owner uses these workshops?
It seems to me that they may quote high prices
when they know the owner is likely to claim from the other party's insurer.

Settlement option of life insurance policy

on why it rejected client's option to settle matured policy

Our policy contract provides that
an election made by a policyholder in writing
to settle his insurance proceeds with AIA Singapore
is subject to acceptance by the company.
Due to the current sustained low interest rate environment
and uncertainties in market conditions,
AIA Singapore will not be able to accept elections for settlement options.
Malcolm Koh, Head of Customer Service
AIA Singapore

Why MAS should have acted earlier

2 November 2012

I disagree with several of the arguments put forward by Ms Grace Tan in her letter
"MAS spot on in handling buyback firm Genneva" (St 1 Nov 2012) 

Ms Tan said that "it is almost impossible for the authorities to investigate each firm 
to detect traces of fraud". Surely, when there are reasons to suspect fraud, e.g. when
the payback offer is "too good to be true", the regulator should have started investigation
earlier? A suitable time would be when the scheme is placed on the Investor Alert List.

Ms Tan said that by putting Genneva on the Investor Alert List, it is similar to placing a
road sign to warn about the danger. In this case, the danger sign is placed at the 
danger spot on the road and not somewhere else. In the case of Genneva, surely the 
warning should be placed outside its places of operation, rather than the MAS website?

Ms Tan said that "the Government cannot arrest anyone who looks like a crook 
unless the person commits a crime". But, how is the authority going to know if that 
person is a crook, unless an investigation is carried out? There are sufficient grounds
for the relevant authority to have started an investigation earlier, rather than wait for years 
to take action. MAS could have asked the Commercial Affairs Department to carry out
an investigation much earlier.

Ms. Tan also quoted the analogy of a person who break the law by jaywalking. There is 
a difference. A person who jaywalks can only harm himself. When a buyback firm breaks the law, 
the firm is harming thousands
of unsuspecting investors. 

Tan Kin Lian

Sunday, November 04, 2012

Affordable housing - a new category of HDB flats

The Singapore Democratic Party has proposed the creation of a NOM (non-open market category) of HDB flats. They will be sold at cost of construction and can only be re-sold back to HDB at its posted price. See details here.

This is similar to the proposal that I have made in my blog and Facebook two years ago. My recent survey also indicated that the general public is in favor of this new category of flats.

Here is my suggestion on pricing of flats under the new category (posted in 2010)

Why did people stake their hard earned savings?

I cannot understand why well educated Singaporeans would give away money to somebody who promises to pay them 2% a month and to repay their investment at the end of 3 months. They may be given a gold bar for 80% of their investment - so their risk is only 20%. But it is quite troublesome to keep the gold bar, so they are likely to entrust the gold bar to the company for "safekeeping". In that case, they are exposed to the risk of losing 100%, if the scheme is a fraud.

Could the "trust" be due to the following reasons?

1. That the person who sells the scheme to them is a person that they trust, e.g. a relative or friend?
2. That the company is able to "spin a story" that they make the profit from trading in gold?
3.  That other people had invested previously and got back their monthly return and their invested capital?
4. That they are willing to take a bet, and to lose their invested sum?
5.  That they are so greedy to get the attractive return that they lose their senses?

If you know of people who have invested, can you share their reasons?

Keep Medisave for the future use

31 October 2012

Editor, Voices
Today Paper

Jeffrey Law has suggested that Medisave be allowed to be used
for basic dental services at private clinics (Today, 31 Oct).

While I recognize that some people do not have savings to pay for 
these basic services, I wish to encourage the public to avoid using 
Medisave for small payments. Each withdrawal incurs an administrative 
charge of $3. 

The Medisave account can earn an attractive interest rate of 4% 
per annum, much better than the meager interest that they can earn 
on other savings. Most people will need their Medisave savings to pay 
their medical bills when they are get old, so it is best to keep the savings 
intact, where possible. 

The public should set aside some savings from their regular earnings 
to meet unexpected payments and emergencies, such as medical 
and dental treatment. 

They should attend the financial planning talks organised by the Financial 
Services Consumer Association (

Tan Kin Lian
Financial Services Consumer Association

Setting aside savings for a child

Many parents want to set aside savings for their children - maybe for education, for marriage or other purpose.

An endowment policy was the traditional method used in the past to set aside the savings. However, the endowment policy now provide a poor return, usually not sufficient to cover inflation, and should be avoided.

A better choice is to open a share account for the child and to buy the STI ETF (which is an indexed fund invested in the top 30 shares in Singapore) for the child. The account can be in the joint names of the parent and the child.

Attend the FISCA talk on investment and financial planning to learn about how this can be done, and how to manage the risk of investing in shares.

Twinkle - a matter of perspective

This is what Twinkle (my pet Schnauzer) looks like usually and after visiting the dog barber

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