Saturday, February 20, 2010
Accountant interested in Pro-Investor
I introduced the Pro-Investor simulation game to an accountant. She was fascinated with the game and said that she would like to try it. It allows the player to practice and develop the skill of picking the right stock. Click here.
Good response to rechargeble torchlight
I gave the rechargeable torchlight to two friends. They found the torchlight to be most useful and were surprised that the price was only $6.50. One friend bought 10 pieces to give away. At the talk on financial planning, the participants bought all the 10 pieces of the torchlight that I brought along.
You can buy the rechargeable torchlight ($6.50) at 15% discount in February (promotion code BLOG). The discount is also available for the books. Order here. Click on "details" to see a photo of the torchlight.
You can buy the rechargeable torchlight ($6.50) at 15% discount in February (promotion code BLOG). The discount is also available for the books. Order here. Click on "details" to see a photo of the torchlight.
Talk at Pasir Ris Library - Financial Planning in Time of Crisis
I am giving the above talk at the Pasir Ris Library today (20 Feb 2010) 5 to 6 pm.
Please register at the NLB website or come early to the Library to register on the spot (subject to availability).
To register:
http://golibrary.nlb.gov.sg/Event.aspx?EventID=31770
Please note that the talk shows the previous title - which has now been changed.
Please register at the NLB website or come early to the Library to register on the spot (subject to availability).
To register:
http://golibrary.nlb.gov.sg/Event.aspx?EventID=31770
Please note that the talk shows the previous title - which has now been changed.
Title - Financial Planning during Time of Crisis
Speaker - Tan Kin Lian, President, Financial Services Consumer Association
Place: Pasir Ris Public Library
Date: Saturday 20 February 2010
Time: 5 - 6 pm
Increase in motor insurance premiums
Mr Tan
I've been told by my motor insurer that there was a general increase of motor premiums of about 20% across the industry from last year. This is within your understanding?
REPLY
I believe that this is the situation, but you can call the General Insurance Association of Singapore to find out.
http://www.gia.org.sg/
I've been told by my motor insurer that there was a general increase of motor premiums of about 20% across the industry from last year. This is within your understanding?
REPLY
I believe that this is the situation, but you can call the General Insurance Association of Singapore to find out.
http://www.gia.org.sg/
Shared bicycles at University of Indonesia
The University of Indonesia has 14,000 undergraduates.
It provides 500 bicycles for shared use by the students. The students do not need to own their bicycles or to lock the bicycles when not in use. This save parking space.
This photo shows the students riding the shared bicycles along the bicycle path.
The university also operates shuttle buses to transport the students within the campus.
Friday, February 19, 2010
Affordable housing - 3 years of average income
According to this article, an affordable housing represents 3 years of average earnings. I have recommended that the price should be not more than 4 to 5 years, so I am already stretching on the high side. Many people are buying properties representing 7 years or more of their earnings. I consider it to be far too high.
Products at Internet Shop
You can now view the pictures of the books and other products at Internet Shop. Click on "Details" for the specific product. There is a discount of 15% for purchases up to 28 February 2010 under the Promotion Code - BLOG.
To order: http://projects.easyapps.sg/iShop/public/common/Order.aspx
The Shape Quiz is now available in a book ($6) or a mini-pak ($2). They contain 4 plastic pieces to form 100 shapes. It is fascinating and interesting. Many people enjoy this puzzle. Some customers bought a few mini-paks to give to their children - one for each child. After 15% discount, the price is $5.10 and $1.70 only
To order: http://projects.easyapps.sg/iShop/public/common/Order.aspx
The Shape Quiz is now available in a book ($6) or a mini-pak ($2). They contain 4 plastic pieces to form 100 shapes. It is fascinating and interesting. Many people enjoy this puzzle. Some customers bought a few mini-paks to give to their children - one for each child. After 15% discount, the price is $5.10 and $1.70 only
Get compensation from distributor
Dear Mr Tan,
I received a check for my Mindbond series 1, representing 21% of my investment. Fidrec has scheduled my hearing in March. The Fidrec officer told me they will continue to adjudicate my case, but I feel the hearing is meaningless. Could you kindly give me your advice please?
Reading you blog became my daily routine but recently I found limited information on the minibond issue. I think many victims have decided to give up like myself. I really appreciate what you have done for us victims.
REPLY
You should continue to attend the FIDREC adjudication and fight hard to get some compensation from the distributor for your loss of 79%. This should be on top of the refund that you have received.
I received a check for my Mindbond series 1, representing 21% of my investment. Fidrec has scheduled my hearing in March. The Fidrec officer told me they will continue to adjudicate my case, but I feel the hearing is meaningless. Could you kindly give me your advice please?
Reading you blog became my daily routine but recently I found limited information on the minibond issue. I think many victims have decided to give up like myself. I really appreciate what you have done for us victims.
REPLY
You should continue to attend the FIDREC adjudication and fight hard to get some compensation from the distributor for your loss of 79%. This should be on top of the refund that you have received.
Biggest speculation of a lifetime
The biggest speculation that most people can make in their lifetime is in property. This is a big transaction that takes 5 to 10 years of their earnings. If they get it right, they are rich. If they get it wrong, they have to pay for this mistake over many years.
Many took this decision out of fear that the price of a home will become more expensive in the future. Some speculate out of greed, to make money while the bubble continues. In most cases, the losers are the consumers who are ignorant of market trends and economic forces, have to depend on gossips, and can be exploited by the property agents and developers.
The property market in many countries have gone through cycles of boom and bust. They are the results of greed, fear and exploitation. This is not a fair market. It is an exploitative market. Many do not realize that it is a big speculative gamble - because it is clouded by the false belief that they are "making an investment".
A good government can shelter its citizens from the exploitation of the market by regulating the market. It can manage the economic forces to ensure that property prices bear a fair multiple to the average wages of a country. Each working person should be required to set aside a certain percentage (say 25%) of their earnings for a decent home. They should not be required to be exploited and pay more (say 35%) for this cost of living.
If a government has control over most of the land, it can set a benchmark for the market to follow. If the government allows the speculative forces to set the market price and then use it to justify its own pricing, it will contribute to instability in the property market - which is harmful for the economy.
It does not matter whether the people are buying or renting a property - it is more important that the cost is fair. I am referring to a decent housing at a fair rental or purchase price. If any person is willing to spend more for a larger house, it is their personal decision.
Many people have clamored for "affordable housing". It is an important role of a good government, especially one that has control over the cost of land.
Tan Kin Lian
Many took this decision out of fear that the price of a home will become more expensive in the future. Some speculate out of greed, to make money while the bubble continues. In most cases, the losers are the consumers who are ignorant of market trends and economic forces, have to depend on gossips, and can be exploited by the property agents and developers.
The property market in many countries have gone through cycles of boom and bust. They are the results of greed, fear and exploitation. This is not a fair market. It is an exploitative market. Many do not realize that it is a big speculative gamble - because it is clouded by the false belief that they are "making an investment".
A good government can shelter its citizens from the exploitation of the market by regulating the market. It can manage the economic forces to ensure that property prices bear a fair multiple to the average wages of a country. Each working person should be required to set aside a certain percentage (say 25%) of their earnings for a decent home. They should not be required to be exploited and pay more (say 35%) for this cost of living.
If a government has control over most of the land, it can set a benchmark for the market to follow. If the government allows the speculative forces to set the market price and then use it to justify its own pricing, it will contribute to instability in the property market - which is harmful for the economy.
It does not matter whether the people are buying or renting a property - it is more important that the cost is fair. I am referring to a decent housing at a fair rental or purchase price. If any person is willing to spend more for a larger house, it is their personal decision.
Many people have clamored for "affordable housing". It is an important role of a good government, especially one that has control over the cost of land.
Tan Kin Lian
Insurance brokerage and conflict of interest
The brokerage fees paid to brokers for selling insurance has led to conflict of interest that is harmful to consumers. Read this report.
Thursday, February 18, 2010
TKL Intelligence Quiz Vol 3
Have you heard about the Intelligence Quiz created by Albert Einstein? If has baffled many people over the past decades. The quiz is contained in this website, together with the technique to solve it.
If you enjoy this type of logic quiz, my new book TKL Intelligence Quiz Vol 3 has been released. Vol 1 and 2 have been sold out. You can buy Vol 3 at the major bookstores ($7.90). The book contain the tips and 72 puzzles (24 puzzles at each of 3 level).
You can also buy this book or other books at this website and enjoy a discount of 15% when you enter the promotion code - BLOG (valid until 28 February 2010). Many secondary and tertiary students enjoy this type of logic puzzles as it helps to train their logical mind.
To order, click here.
Tan Kin Lian
If you enjoy this type of logic quiz, my new book TKL Intelligence Quiz Vol 3 has been released. Vol 1 and 2 have been sold out. You can buy Vol 3 at the major bookstores ($7.90). The book contain the tips and 72 puzzles (24 puzzles at each of 3 level).
You can also buy this book or other books at this website and enjoy a discount of 15% when you enter the promotion code - BLOG (valid until 28 February 2010). Many secondary and tertiary students enjoy this type of logic puzzles as it helps to train their logical mind.
To order, click here.
Tan Kin Lian
Social insurance
Some types of insurance cannot be operated on a private basis, e.g. unemployment insurance and health insurance, due to the problem of underwriting. Some people will not be able to have access to insurance due to their higher risk factors, e.g. certain types of occupation or poor health.
These insurances have to be operated by the state (through social insurance) and is made compulsory for every eligible person. There is no need for underwriting, as everybody is covered for the standard benefits,which are usually provided at a basic level. The insured people pay a premium that meet a major portion of the cost and any deficit is usually funded through tax revenue.
There are significant savings in operating a social insurance scheme, as there is no marketing and underwriting expenses. There is lower administrative expenses. The saving in cost can amount to 30% to 40% of the premium that would be charged by a private insurer for a similar set of benefits.
It is possible for a state scheme to be abused but this can be controlled - as it would be a crime to cheat the state. A state scheme may be operated inefficiently, but this can be properly managed.
It is better for the basic needs of the people to be provided by social insurance and for the private sector to provide additional benefits on top of the state benefits.
Tan Kin Lian
These insurances have to be operated by the state (through social insurance) and is made compulsory for every eligible person. There is no need for underwriting, as everybody is covered for the standard benefits,which are usually provided at a basic level. The insured people pay a premium that meet a major portion of the cost and any deficit is usually funded through tax revenue.
There are significant savings in operating a social insurance scheme, as there is no marketing and underwriting expenses. There is lower administrative expenses. The saving in cost can amount to 30% to 40% of the premium that would be charged by a private insurer for a similar set of benefits.
It is possible for a state scheme to be abused but this can be controlled - as it would be a crime to cheat the state. A state scheme may be operated inefficiently, but this can be properly managed.
It is better for the basic needs of the people to be provided by social insurance and for the private sector to provide additional benefits on top of the state benefits.
Tan Kin Lian
Giving up an existing investment-linked policy
Dear Mr Tan,
I currently have an investment link life policy. I calculate my loss to be $6000. I decide to surrender this policy and take up term insurance. Is my decision to surrender this policy a wise choice? Should I buy the term insurance from Aviva or NTUC?
REPLY
Normally, it is better to continue an existing policy, rather than to terminate it, as you have already incurred the upfront cost. However, you should look at the continuing cost, before you take your decision.
I suggest that you ask both Avivia and NTUC Income to give you a quote for the term insurance. You can compare the premium rates and make your decision based on the facts.
You can get more guidance from my book, Practical Guide on Financial Planning. It can be bought here:
http://projects.easyapps.sg/iShop/public/common/Order.aspx
I currently have an investment link life policy. I calculate my loss to be $6000. I decide to surrender this policy and take up term insurance. Is my decision to surrender this policy a wise choice? Should I buy the term insurance from Aviva or NTUC?
REPLY
Normally, it is better to continue an existing policy, rather than to terminate it, as you have already incurred the upfront cost. However, you should look at the continuing cost, before you take your decision.
I suggest that you ask both Avivia and NTUC Income to give you a quote for the term insurance. You can compare the premium rates and make your decision based on the facts.
You can get more guidance from my book, Practical Guide on Financial Planning. It can be bought here:
http://projects.easyapps.sg/iShop/public/common/Order.aspx
Switching to a new policy with special benefits
Sometimes, a new life insurance product is introduced with an additional benefit, such as the waiver of premium during retrenchment. This type of rider usually has small print to restrict the entitlement to the benefit, such as circumstances of retrenchment or the waiting period.
While the value of this type of rider is debatable, it should not be used as a reason for a policyholder to terminate an existing policy to switch to this new policy. The policyholder will incur a large loss on the existing policy by making this switch, and will have to pay the upfront cost again on the new policy.
Switching policies is a costly exercise and should be avoided. An ethical agent will not give this type of wrong or harmful advice to their customers.
Tan Kin Lian
While the value of this type of rider is debatable, it should not be used as a reason for a policyholder to terminate an existing policy to switch to this new policy. The policyholder will incur a large loss on the existing policy by making this switch, and will have to pay the upfront cost again on the new policy.
Switching policies is a costly exercise and should be avoided. An ethical agent will not give this type of wrong or harmful advice to their customers.
Tan Kin Lian
Wednesday, February 17, 2010
Home: our planet Earth
Here is a 90 minute video about the earth and the need to protect our environment.
SCMP: Government may compete for insurance. Government may vie for insurance business. Proposal aims to keep private firms 'honest' in volunteer medical plan
17 Feb 2010
The government is considering setting up its own insurance company to compete for the proposed voluntary medical insurance scheme in an effort to keep the existing players "honest".
A government official said such a "public option" could ensure there was real competition in the market, to guard against price-fixing. But the official said the government did not plan to turn its new programme into a social insurance scheme with itself as the sole provider.
The proposal will be put forward during negotiations with the insurance industry over the voluntary insurance scheme, which is part of the coming health care reforms.
The government will launch a public consultation later this year about the voluntary scheme, which it sees as a way to relieve the financial pressures on the heavily subsidised public health sector.
Insurance providers are in talks with health officials about the scope of the coverage, and on how to use the scheme's HK$50 billion start-up fund to attract more people to sign up for voluntary insurance.
The South China Morning Post reported last week that the issue of whether patients with pre-existing conditions will have to pay a higher premium has emerged as the major roadblock in the negotiations.
Now the government "does not rule out the possibility" of setting up a subsidiary insurance company to compete with the private insurers. There are concerns among officials that, as the six biggest companies control 80 per cent of the medical insurance market, they could easily co-operate to control the market and push up prices.
"To keep the insurance companies honest, the government may set up a company to compete with them so if their prices are too high, consumers can choose the public option," the official said. The insurance company set up by the government would run on "commercial principles", he said.
But Chan Kin-por, the insurance sector legislator, criticised the idea. "The government is not good at insurance services. It should leave it to the private sector I can't see the extra benefits in doing it. There will be a transparent mechanism on premium adjustment in future, to guard against any possible cartels."
But Peter Tam Chung-ho, executive director of the Hong Kong Federation of Insurers, said the industry "would not feel threatened" by the public option. "It will be good to have more competition in the market {hellip} but we need to know the details before commenting further, such as if the company will operate on commercial principles or with a public subsidy," he said.
In a recent submission to the government, the insurance sector outlined an agreed "basic plan" that removes exclusions for mental illnesses and congenital diseases, and makes premiums age-specific. But the sector is standing firm on not including people with pre-existing conditions in the basic plan, meaning chronically ill patients would have to pay a higher premium for coverage.
The insurance sector has called on the government to use some of the HK$50 billion start-up fund to subsidise the higher premiums for people with pre-existing conditions. But the government official said that was unacceptable.
"The purpose of insurance is to share risk: what is the point of selecting only the healthy people in the pool? Before asking the government to commit to any subsidy, the insurance companies have to do their work in cost control first," the official said.
The government has also, for the first time, revealed some key ingredients for a "basic" voluntary medical scheme:
Clear, standard coverage and benefits large enough to pay for medical services in the private sector; Standardised claims structure providing packaged benefits for certain kinds of operations or illnesses, for higher transparency and predictability, such as fixed compensation for operations and hospital stays; Transparent premium adjustment mechanism; Savings element to encourage people to get prepared for their future medical expenses;
Various incentives to encourage policyholders to stay with their plans. For example, insurance companies should not terminate plans after claims or policyholders' retirement, and should provide no-claim benefits and discounts for those who enrol with the plan earlier;
Insurance companies must share risks with each other through reinsurance;
Patients will be required to pay part of the medical bills to avoid abuse of services;
Insurance coverage is limited to local medical expenses only.
The official said the move by the insurance sector to remove exemptions for mental or congenital diseases has very limited benefit for the overall population. "People suffering from these diseases make up a very small portion of the population. Only a very small number of mental patients require hospital care and there is no such service in the private sector," the official said.
The government is considering setting up its own insurance company to compete for the proposed voluntary medical insurance scheme in an effort to keep the existing players "honest".
A government official said such a "public option" could ensure there was real competition in the market, to guard against price-fixing. But the official said the government did not plan to turn its new programme into a social insurance scheme with itself as the sole provider.
The proposal will be put forward during negotiations with the insurance industry over the voluntary insurance scheme, which is part of the coming health care reforms.
The government will launch a public consultation later this year about the voluntary scheme, which it sees as a way to relieve the financial pressures on the heavily subsidised public health sector.
Insurance providers are in talks with health officials about the scope of the coverage, and on how to use the scheme's HK$50 billion start-up fund to attract more people to sign up for voluntary insurance.
The South China Morning Post reported last week that the issue of whether patients with pre-existing conditions will have to pay a higher premium has emerged as the major roadblock in the negotiations.
Now the government "does not rule out the possibility" of setting up a subsidiary insurance company to compete with the private insurers. There are concerns among officials that, as the six biggest companies control 80 per cent of the medical insurance market, they could easily co-operate to control the market and push up prices.
"To keep the insurance companies honest, the government may set up a company to compete with them so if their prices are too high, consumers can choose the public option," the official said. The insurance company set up by the government would run on "commercial principles", he said.
But Chan Kin-por, the insurance sector legislator, criticised the idea. "The government is not good at insurance services. It should leave it to the private sector I can't see the extra benefits in doing it. There will be a transparent mechanism on premium adjustment in future, to guard against any possible cartels."
But Peter Tam Chung-ho, executive director of the Hong Kong Federation of Insurers, said the industry "would not feel threatened" by the public option. "It will be good to have more competition in the market {hellip} but we need to know the details before commenting further, such as if the company will operate on commercial principles or with a public subsidy," he said.
In a recent submission to the government, the insurance sector outlined an agreed "basic plan" that removes exclusions for mental illnesses and congenital diseases, and makes premiums age-specific. But the sector is standing firm on not including people with pre-existing conditions in the basic plan, meaning chronically ill patients would have to pay a higher premium for coverage.
The insurance sector has called on the government to use some of the HK$50 billion start-up fund to subsidise the higher premiums for people with pre-existing conditions. But the government official said that was unacceptable.
"The purpose of insurance is to share risk: what is the point of selecting only the healthy people in the pool? Before asking the government to commit to any subsidy, the insurance companies have to do their work in cost control first," the official said.
The government has also, for the first time, revealed some key ingredients for a "basic" voluntary medical scheme:
Clear, standard coverage and benefits large enough to pay for medical services in the private sector; Standardised claims structure providing packaged benefits for certain kinds of operations or illnesses, for higher transparency and predictability, such as fixed compensation for operations and hospital stays; Transparent premium adjustment mechanism; Savings element to encourage people to get prepared for their future medical expenses;
Various incentives to encourage policyholders to stay with their plans. For example, insurance companies should not terminate plans after claims or policyholders' retirement, and should provide no-claim benefits and discounts for those who enrol with the plan earlier;
Insurance companies must share risks with each other through reinsurance;
Patients will be required to pay part of the medical bills to avoid abuse of services;
Insurance coverage is limited to local medical expenses only.
The official said the move by the insurance sector to remove exemptions for mental or congenital diseases has very limited benefit for the overall population. "People suffering from these diseases make up a very small portion of the population. Only a very small number of mental patients require hospital care and there is no such service in the private sector," the official said.
Difficult to cross Singapore roads
Singapore roads are wide. Vehicles travel quite fast, unless they are caught in a jam. It is difficult to cross the roads, especially for older people. The overhead bridges and traffic lights are not conveniently located and require a long walk.
The former athlete, Tan Eng Yeow, was knocked down and killed while crossing Upper Thomson Road, close to where I lived previously.
I prefer the traffic situation in Vancouver. In the city, there is a low speed limit. Most vehicles travel slowly. The drivers are courteous.
The former athlete, Tan Eng Yeow, was knocked down and killed while crossing Upper Thomson Road, close to where I lived previously.
I prefer the traffic situation in Vancouver. In the city, there is a low speed limit. Most vehicles travel slowly. The drivers are courteous.
Toxic products and traffic control
Someone told me an interesting analogy.
The Authority allowed the toxic products to be sold but require the issuer to put into a statement into the prospectus, "This product carries risk. You may lose some or all of your money".
It is similar to making a statement, "If you are on the road, you may be knocked down by a vehicle". After making this statement, the Authority does not need to control the behavior of the drivers and the vehicles on the road, i.e no need for traffic controls, rules or their enforcement. After all, the Authority has discharged its responsibility by giving the warning.
Tan Kin Lian
The Authority allowed the toxic products to be sold but require the issuer to put into a statement into the prospectus, "This product carries risk. You may lose some or all of your money".
It is similar to making a statement, "If you are on the road, you may be knocked down by a vehicle". After making this statement, the Authority does not need to control the behavior of the drivers and the vehicles on the road, i.e no need for traffic controls, rules or their enforcement. After all, the Authority has discharged its responsibility by giving the warning.
Tan Kin Lian
Switching between guaranteed and investment linked returns
Over the past years, insurance agents have earned high commissions by getting their policyholders to switch from guaranteed to investment-linked returns and back again.
When the stock market is hot, they tell their customers to move to investment-linked returns by enticing them with high projected values (which were not guaranteed). When the stock market fell, they tell their customers to move back to guaranteed returns.
Each time that the customer took the advice to make a switch, the insurance agents earn a high commission on the new policy that was sold. The customers were not aware that they were exploited and given poor financial advice. They were "taken for a ride", time and again.
An ethical agent will advice the customer to stick to the existing policies. They can invest additional savings in the new policy, rather than move the entire savings from an existing policy to a new policy.
If you have been misled by an agent using this technique in the past, you can send an email to kinlian@gmail.com
Tan Kin Lian
When the stock market is hot, they tell their customers to move to investment-linked returns by enticing them with high projected values (which were not guaranteed). When the stock market fell, they tell their customers to move back to guaranteed returns.
Each time that the customer took the advice to make a switch, the insurance agents earn a high commission on the new policy that was sold. The customers were not aware that they were exploited and given poor financial advice. They were "taken for a ride", time and again.
An ethical agent will advice the customer to stick to the existing policies. They can invest additional savings in the new policy, rather than move the entire savings from an existing policy to a new policy.
If you have been misled by an agent using this technique in the past, you can send an email to kinlian@gmail.com
Tan Kin Lian
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