Here are some surveys of the most livable cities around the world. Singapore missed the top 10 but is not too bad (e.g. ranked 18 in the Monocle Survey).
In the Mercer survey, Singapore ranked 34th based on 39 factors including political, economic, environmental, personal safety, health, education, transportation and other public service factors. Cities were compared to New York City which was given a base score of 100.
Saturday, February 13, 2010
Vancouver is rated the world's most liveable city
I visited Vancouver last year and found it to be a nice city to live in. It has been rated the most liveable city in this report. Seven of the top 10 cities are in Canada and Australia. I hope that Singapore can learn from the lessons to improve the quality of life here.
Achive top position in life insurance sales
Life insurance companies compete yearly to achieve the top position in life insurance sales. This is an indicator of success and the productivity of the sales force. Several decades ago, the competition was based on annual premium on new policies, but in recent years, 10% of the single premiums are added to the annual premium to get the weighted premium as a measure of the sales.
To achieve sales and energize the sales agents, the life insurance companies introduce new and innovative products every year. These new products are variations of the old products, but have some changes to allow the agents to market the product. The variations may take the following forms:
a) a shorter period to pay the insurance premium
b) additional risks that are being covered
c) change from guaranteed to investment-linked payouts or back
As each new product is launched, the insurance agents have the chance to go back to the old customers and get the customers to terminate an existing policy and buy a new policy under the new product with the special features.
The customers are taken for a ride. They are not aware that the existing products give better value and that replacing the products is costly and against the interest of the consumer. In most cases, the consumer has to give up two years of premiums as upfront cost. The customers were also not aware they can buy separate insurance, at low cost, to cover any new needs. (I shall write separately on these matters).
Some insurance agents make a good living by replacing the existing policies of their customers every few years with the new "better" products, but making their customers poorer in the process. With the huge loses on the replaced products, the consumers are never able to accumulate sufficient savings for their retirements, even if they had been frugal.
An insurance agent can achieve the top sales position by making it possible for the sales agents to exploit the ignorance of their customers through the replacement of existing policies. The sales agents are happy with this arrangement, as they can earn high commission by selling the new policies, and it is easier to replace existing policies than to find new customers.
This bad practice of replacing policies, also known as "twisting" is made illegal in some countries. It is discouraged in Singapore, but the enforcement is weak.
An ethical insurance company will protect the interest of its customers by disallowing replacement of existing policies. An unethical company will make it easy for the sales agents to explot the ignorance of the existing customers to make new sales by replacing existing policies, and achieve the top sales position.
Tan Kin Lian
To achieve sales and energize the sales agents, the life insurance companies introduce new and innovative products every year. These new products are variations of the old products, but have some changes to allow the agents to market the product. The variations may take the following forms:
a) a shorter period to pay the insurance premium
b) additional risks that are being covered
c) change from guaranteed to investment-linked payouts or back
As each new product is launched, the insurance agents have the chance to go back to the old customers and get the customers to terminate an existing policy and buy a new policy under the new product with the special features.
The customers are taken for a ride. They are not aware that the existing products give better value and that replacing the products is costly and against the interest of the consumer. In most cases, the consumer has to give up two years of premiums as upfront cost. The customers were also not aware they can buy separate insurance, at low cost, to cover any new needs. (I shall write separately on these matters).
Some insurance agents make a good living by replacing the existing policies of their customers every few years with the new "better" products, but making their customers poorer in the process. With the huge loses on the replaced products, the consumers are never able to accumulate sufficient savings for their retirements, even if they had been frugal.
An insurance agent can achieve the top sales position by making it possible for the sales agents to exploit the ignorance of their customers through the replacement of existing policies. The sales agents are happy with this arrangement, as they can earn high commission by selling the new policies, and it is easier to replace existing policies than to find new customers.
This bad practice of replacing policies, also known as "twisting" is made illegal in some countries. It is discouraged in Singapore, but the enforcement is weak.
An ethical insurance company will protect the interest of its customers by disallowing replacement of existing policies. An unethical company will make it easy for the sales agents to explot the ignorance of the existing customers to make new sales by replacing existing policies, and achieve the top sales position.
Tan Kin Lian
Friday, February 12, 2010
Logic9 (pocket sudoku) $4
Logic9 (pocket sudoku) vol 3 and 4 is now available at Internet shop. Each volume contains 128 puzzles at 4 levels (32 puzzles for each level). It can be kept in a pocket and can be used on the train, bus or plane. This is available at a discount of 15% during February (net price $3.40). Order here.
The Future That I Like To See
A reader asked me to summarize my views on social, economic and political topics, which have been expressed in various postings in this blog. I have made my first attempt here.
Government regulation
Some people expressed surprise that I advocate more regulation. They point to examples of oppressive and bad regulations.
Society need to be regulated. The poor and the weak have to be protected against abuse and exploitation. This has to be achieved through law and regulation. Regulation should not and need not be intrusive. They do not need to impinge on personal freedom. So, there has to be a proper balance.
In a democratic and free society, the citizens will help to determine where the line should be drawn between regulation and freedom. So, we need a democratic and accountable authority. I am giving some brief thoughts here, and will develop this idea more more in subsequent postings.
Tan Kin Lian
Society need to be regulated. The poor and the weak have to be protected against abuse and exploitation. This has to be achieved through law and regulation. Regulation should not and need not be intrusive. They do not need to impinge on personal freedom. So, there has to be a proper balance.
In a democratic and free society, the citizens will help to determine where the line should be drawn between regulation and freedom. So, we need a democratic and accountable authority. I am giving some brief thoughts here, and will develop this idea more more in subsequent postings.
Tan Kin Lian
Risky new financial product
A new financial product has been created that could cause systemic risk. Read about it here.
America addresses its shortcomings
The American system has its strength - openness, accountability and freedom. However, it has its weaknesses - a political system in gridlock. It is difficult for American to take the actions that are needed to address its shortcomings, due to the obstruction caused by some legislators.
The shortcomings have been acknowledged and some people, including President Obama, are stepping forward to deal with these issues, to find a way to get the country to act and solve its long term problems. The willingness to recognize its problems, to discuss them openly, and to act on them, may well be the strengths of the American system. I hope that they will succeed in this challenge.
I hope that Singapore can adopt some of this new approach, and find new ways to solve problems that have not been solved for several decades, such as the high cost of living, long working hours, poor quality of life and the low birth rate.
Tan Kin LianPublish Post
The shortcomings have been acknowledged and some people, including President Obama, are stepping forward to deal with these issues, to find a way to get the country to act and solve its long term problems. The willingness to recognize its problems, to discuss them openly, and to act on them, may well be the strengths of the American system. I hope that they will succeed in this challenge.
I hope that Singapore can adopt some of this new approach, and find new ways to solve problems that have not been solved for several decades, such as the high cost of living, long working hours, poor quality of life and the low birth rate.
Tan Kin LianPublish Post
Government regulations
Many people dislike government regulation and prefer to leave matters to be sorted out by the free market. This is the approach that has led to asset bubbles and the collapse of the global financial system. It is the government stimulus and financial support that have led to the restoration of confidence in the market. However, this government actions are only temporary props to the system. The underlying root of the problem has not been solved.
Some people like the free market as it provides opportunities for innovation and initiative. But it also provides opportunity for cheating and exploitation, which are the fastest and easiest ways to accumulate wealth (especially in an environment where enforcement of business ethics is lax).
To have a more fair and stable market, we need regulations. The regulations have to be of the right type and not the wrong type. The regulations should not be rigid and cannot solve all the problems, but they should be able to solve more problems than create them. Leaving the free market to solve the problem will not work, as the profit motive and vested interest will find ways to take advantage of the situation.
There is a need for the state to provide more of the social services required by the people, such as education, health care, security, infrastructure, transport, housing and old age pension. The state does not need to employ people to run these services, but they can be outsourced to the private sector - but the fees, charges and standard of service should be regulated.
The state needs to provide up to a basic standard and leave the space for the higher income to buy additional services from the private market. But the state benefits should form the benchmark to compare the services provided in the private market.
This is the approach adopted by many social democracies, such as those in Europe. They are able to provide a better quality of life for their people.
Tan Kin Lian
Some people like the free market as it provides opportunities for innovation and initiative. But it also provides opportunity for cheating and exploitation, which are the fastest and easiest ways to accumulate wealth (especially in an environment where enforcement of business ethics is lax).
To have a more fair and stable market, we need regulations. The regulations have to be of the right type and not the wrong type. The regulations should not be rigid and cannot solve all the problems, but they should be able to solve more problems than create them. Leaving the free market to solve the problem will not work, as the profit motive and vested interest will find ways to take advantage of the situation.
There is a need for the state to provide more of the social services required by the people, such as education, health care, security, infrastructure, transport, housing and old age pension. The state does not need to employ people to run these services, but they can be outsourced to the private sector - but the fees, charges and standard of service should be regulated.
The state needs to provide up to a basic standard and leave the space for the higher income to buy additional services from the private market. But the state benefits should form the benchmark to compare the services provided in the private market.
This is the approach adopted by many social democracies, such as those in Europe. They are able to provide a better quality of life for their people.
Tan Kin Lian
Low takeup rate of training places
According to the Straits Times, there is a low take up rate of training places. Small businesses are not sending their workers for training and skill upgrading.
The government leaders and planners should not continue to live in their own world. Their policies and strategies for the past decades have not worked. To get better results, they have to understand the real issues facing the small businesses and the workers.
Business conditions are difficult. Small businesses are not able to get a decent margin, due to excessive competition and wasteful activities. The cost of running a business is high, compounded by unnecessary activities such as compliance with GST and other requirements.
The workers have to work long hours and do not have the time, energy or attention to be upgraded.
Tan Kin Lian
The government leaders and planners should not continue to live in their own world. Their policies and strategies for the past decades have not worked. To get better results, they have to understand the real issues facing the small businesses and the workers.
Business conditions are difficult. Small businesses are not able to get a decent margin, due to excessive competition and wasteful activities. The cost of running a business is high, compounded by unnecessary activities such as compliance with GST and other requirements.
The workers have to work long hours and do not have the time, energy or attention to be upgraded.
Tan Kin Lian
Financial Literacy for Secondary Students
Someone asked for my views about the content of a financial literacy talk for secondary students. After some discussion, we agreed on the following:
* to set aside savings, from parent's allowance or part time work, in a bank account
* to distinguish between necessary and avoidable expenditures
* to calculate the interest charges on installment payments for computer, mobile phones and other items
* to avoid investing in products that are inflexible and have high charges, e.g. life insurance policies
* to have flexible savings that may be needed to pay for education and other necessary expenses
* financial burden to parents on sending children for education in overseas universities
These points are covered in my book, Practical Guide on Financial Planning which is available here.
Please share your views on other points that should be included.
Tan Kin Lian
* to set aside savings, from parent's allowance or part time work, in a bank account
* to distinguish between necessary and avoidable expenditures
* to calculate the interest charges on installment payments for computer, mobile phones and other items
* to avoid investing in products that are inflexible and have high charges, e.g. life insurance policies
* to have flexible savings that may be needed to pay for education and other necessary expenses
* financial burden to parents on sending children for education in overseas universities
These points are covered in my book, Practical Guide on Financial Planning which is available here.
Please share your views on other points that should be included.
Tan Kin Lian
Financial Literacy for Primary Students
Someone asked for my views on the content of a financial literacy talk to primary students. After discussion, we agreed to cover the following:
* to spend what is needed from the parent's allowance, and set aside savings
* to put the savings in a bank to earn interest
* to pay for what they like from their savings, rather than depend on their parents
* to learn about what the parent has to do, to earn the money to support the family
My friend told me this story. His elder son, who is five years old, wanted to buy an expensive toy. He said, "Patrick, daddy can buy you this toy, but he has to stay back at the office until late at night to earn the money to pay for this toy. Do you wish daddy to come home earlier, or stay back at the office until late at night?" Patrick decided that he did not want the toy.
What are your views on the financial literacy matters that should be taught to primary students?
Tan Kin Lian
* to spend what is needed from the parent's allowance, and set aside savings
* to put the savings in a bank to earn interest
* to pay for what they like from their savings, rather than depend on their parents
* to learn about what the parent has to do, to earn the money to support the family
My friend told me this story. His elder son, who is five years old, wanted to buy an expensive toy. He said, "Patrick, daddy can buy you this toy, but he has to stay back at the office until late at night to earn the money to pay for this toy. Do you wish daddy to come home earlier, or stay back at the office until late at night?" Patrick decided that he did not want the toy.
What are your views on the financial literacy matters that should be taught to primary students?
Tan Kin Lian
Thursday, February 11, 2010
TKL Intelligence Quiz Vol 3
BOOK ADDED TODAY - INTERNET SHOP.
TKL Intelligence Quiz Vol 3 is now available for sale through Internet Shop. The usual price is $7.90 and the promotion discount of 15% is available for the month of February (Promotion code - BLOG).
Vol 1 and 2 of this quiz book were sold out. So, I decided to publish volume 3. This quiz contains 72 puzzles (at 3 levels of difficulty - 24 puzzles at each level) based on the popular puzzle that was purported to have been created by Albert Einstein, the scientist. The puzzles were published weekly in The New Paper for several months, but has stopped now. There are many people who are addicted to this puzzle. It is fun and is like a Word Sudoku.
Order here. You can also order the other books and item and enjoy the 15% discount, only for February.
TKL Intelligence Quiz Vol 3 is now available for sale through Internet Shop. The usual price is $7.90 and the promotion discount of 15% is available for the month of February (Promotion code - BLOG).
Vol 1 and 2 of this quiz book were sold out. So, I decided to publish volume 3. This quiz contains 72 puzzles (at 3 levels of difficulty - 24 puzzles at each level) based on the popular puzzle that was purported to have been created by Albert Einstein, the scientist. The puzzles were published weekly in The New Paper for several months, but has stopped now. There are many people who are addicted to this puzzle. It is fun and is like a Word Sudoku.
Order here. You can also order the other books and item and enjoy the 15% discount, only for February.
Year of the Tiger
Best wishes for a Happy Lunar New Year. Wish you good health and happiness.
Tan Kin Lian
Tan Kin Lian
Low cost of living
I watched a TV program. It featured a worker earning $2 a day in a poor country. The worker said, that the $2 was additional income to the family, who depended on farming as their primary livelihood. Although they are poor, they do not have any financial stress, as they have low cost of living.
I recall the conditions of Singapore in the 1960s and 1970s. HDB flats were sold for $15,000 to $35,000, representing about two years of average earnings. Most people could find jobs that paid sufficient wages to pay their flats, accumulate savings in the CPF and live comfortably as long as they are willing to work. They have better financial security.
The financial condition worsened after 1980 when public housing was allowed to appreciate under the "asset enhancement" policy. It is now a financial burden to buy a modest HDB flat which has to be paid with a high proportion of the earnings when jobs are no longer secure. This has caused a lot of financial stress.
I believe that it is possible to rebuild a new economic structure that gives more financial security and less financial stress.
Tan Kin Lian
I recall the conditions of Singapore in the 1960s and 1970s. HDB flats were sold for $15,000 to $35,000, representing about two years of average earnings. Most people could find jobs that paid sufficient wages to pay their flats, accumulate savings in the CPF and live comfortably as long as they are willing to work. They have better financial security.
The financial condition worsened after 1980 when public housing was allowed to appreciate under the "asset enhancement" policy. It is now a financial burden to buy a modest HDB flat which has to be paid with a high proportion of the earnings when jobs are no longer secure. This has caused a lot of financial stress.
I believe that it is possible to rebuild a new economic structure that gives more financial security and less financial stress.
Tan Kin Lian
Improve the business practices
Somebody attacked me for "lambasting" the practices of banks and insurance companies after I "left the industry".
I believe that banks and insurance companies can play a useful role in the economy. They should adopt good and fair practices, which they had done in past years.
In recent years, several bad practices had taken root in the relentless drive for bigger profits. Some of these practices were unfair and unethical, and could even be illegal (if the authority were to take action). My purpose is to point out these bad practices, so that the practitioners will realize the difference between good and bad, right and wrong.
A few cynics also attacked me for being idealistic. I do not post their comments. If they dislike the views expressed in this blog, they are not required to visit this blog. If they wish to express their views, they can do so without attacking me personally or attacking my views.
I wish to point out one specific good practice. A few months ago, Great Esatern Life, with the approval of their parent OCBC Bank, decided to give 100% refund to the investors of their investment linked product that had were invested in structures similar to the Pinnacle Notes. Many investors accepted the refund offer, and were relieved of the stress of watching the value of the notes drop, as more entities entered into default. This move caused several hundred million dollars to Great Eastern Life and OCBC Bank, but were appreciated by the policyholders.
Tan Kin Lian
I believe that banks and insurance companies can play a useful role in the economy. They should adopt good and fair practices, which they had done in past years.
In recent years, several bad practices had taken root in the relentless drive for bigger profits. Some of these practices were unfair and unethical, and could even be illegal (if the authority were to take action). My purpose is to point out these bad practices, so that the practitioners will realize the difference between good and bad, right and wrong.
A few cynics also attacked me for being idealistic. I do not post their comments. If they dislike the views expressed in this blog, they are not required to visit this blog. If they wish to express their views, they can do so without attacking me personally or attacking my views.
I wish to point out one specific good practice. A few months ago, Great Esatern Life, with the approval of their parent OCBC Bank, decided to give 100% refund to the investors of their investment linked product that had were invested in structures similar to the Pinnacle Notes. Many investors accepted the refund offer, and were relieved of the stress of watching the value of the notes drop, as more entities entered into default. This move caused several hundred million dollars to Great Eastern Life and OCBC Bank, but were appreciated by the policyholders.
Tan Kin Lian
High interest rate on bank borrowings
I know of a person who runs a small business. Due to the economic slowdown, his income was reduced, but his family expenses continued to be high. He had to use an bank overdraft secured on a second mortgage of his house. This overdraft accumulated to $50,000 within two years. He had to pay a high interest rate of 2% a month on the overdraft. The interest cost him $1,000 a month. It was a burden to him, as his income stream has not recovered.
Fortunately for him, he was able to approach a family member for financial assistance to pay off the overdraft, saving him $1,000 a month. Instead, he paid $1,000 a month to repay the loan, free of interest. In this way, he would be able to repay the loan within four years.
The bank pays interest at 0.5% per annum to depositors and charge 24% per annum on loans to borrowers - secured on a second mortgage. It seems that this bank is exploiting the desperation of people who have to borrow to meet their living expenses.
Tan Kin Lian
Fortunately for him, he was able to approach a family member for financial assistance to pay off the overdraft, saving him $1,000 a month. Instead, he paid $1,000 a month to repay the loan, free of interest. In this way, he would be able to repay the loan within four years.
The bank pays interest at 0.5% per annum to depositors and charge 24% per annum on loans to borrowers - secured on a second mortgage. It seems that this bank is exploiting the desperation of people who have to borrow to meet their living expenses.
Tan Kin Lian
Wednesday, February 10, 2010
Large fee paid to swap counter-party
Dear Mr Tan,
I received the letter from HSBC on the recovery value of my Minibond Series 5. I am shocked by the huge fee paid to Lehmen LBSF for the settlement fee. The letter has these figures:
Series 5
Proceeds from liquidation – 82.30% (100% = principal amount)
Cost at underlying level – 0.47%
Swap payment to LBSF – 50.81%
Receivers fees – 0.38%
Legal fees – 0.48%
Other costs – 0.31%
Net proceeds to noteholders – 29.85%
A whopping 50.81% or $35 million is paid to LBSF.
Another friend, who has Series 10 has a liquidation value pf 104% but reduced by 41% fee to LBSF:
Series 10
Proceeds from liquidation – 104.04% (100% = principal amount)
Swap payment to LBSF – 40.60%
Receivers fees – 0.42%
Legal fees – 0.26%
Other costs – 0.33%
Net proceeds to noteholders – 62.43%
It is not true as reported in papers that some series has low recovery value due to nature of underlying assets or long maturity. The fact is huge fee has been paid to LBSF. Is this why Australia’s Lehman notes have been able to recover 85-95% instead (recently reported in your blog)? I feel HSBC and Receivers have failed the noteholders - a total of $200+ million has probably been paid to LBSF for this unfair settlement.
Mr Tan, do you think the large settlement fees to LBSF is fair? Thank you.
REPLY
I cannot understand why a large payment has to be given to the swap counterparty. I suggest that, as an investor, you ask the trustee on why the payment to the swap counterparty is so large. Maybe, you can get a few investors to join you in making a joint request.
FURTHER COMMENT
The swap is to take over the risk of default of the reference entities during the remainder of the contract. I believe that most of the reference entities are now quite secure, after the recovery of the global economy and markets. I am therefore surprised to find a large payment to take off the swap.
I think that the investors should ask the trustees to account fOR their decision to make this large payment, and ensure that it is in the commercial interest of the investors to accept this transaction.
I thought that the Monetary Authority of Singapore is monitoring this transaction, so they may have some information that may be helpful. We have to see if they make any statement on this matter.
I wish that we have a more active Parliament, similar to Hong Kong, where the legislators can ask questions, so that a clear explanation can be given to the public.
I received the letter from HSBC on the recovery value of my Minibond Series 5. I am shocked by the huge fee paid to Lehmen LBSF for the settlement fee. The letter has these figures:
Series 5
Proceeds from liquidation – 82.30% (100% = principal amount)
Cost at underlying level – 0.47%
Swap payment to LBSF – 50.81%
Receivers fees – 0.38%
Legal fees – 0.48%
Other costs – 0.31%
Net proceeds to noteholders – 29.85%
A whopping 50.81% or $35 million is paid to LBSF.
Another friend, who has Series 10 has a liquidation value pf 104% but reduced by 41% fee to LBSF:
Series 10
Proceeds from liquidation – 104.04% (100% = principal amount)
Swap payment to LBSF – 40.60%
Receivers fees – 0.42%
Legal fees – 0.26%
Other costs – 0.33%
Net proceeds to noteholders – 62.43%
It is not true as reported in papers that some series has low recovery value due to nature of underlying assets or long maturity. The fact is huge fee has been paid to LBSF. Is this why Australia’s Lehman notes have been able to recover 85-95% instead (recently reported in your blog)? I feel HSBC and Receivers have failed the noteholders - a total of $200+ million has probably been paid to LBSF for this unfair settlement.
Mr Tan, do you think the large settlement fees to LBSF is fair? Thank you.
REPLY
I cannot understand why a large payment has to be given to the swap counterparty. I suggest that, as an investor, you ask the trustee on why the payment to the swap counterparty is so large. Maybe, you can get a few investors to join you in making a joint request.
FURTHER COMMENT
The swap is to take over the risk of default of the reference entities during the remainder of the contract. I believe that most of the reference entities are now quite secure, after the recovery of the global economy and markets. I am therefore surprised to find a large payment to take off the swap.
I think that the investors should ask the trustees to account fOR their decision to make this large payment, and ensure that it is in the commercial interest of the investors to accept this transaction.
I thought that the Monetary Authority of Singapore is monitoring this transaction, so they may have some information that may be helpful. We have to see if they make any statement on this matter.
I wish that we have a more active Parliament, similar to Hong Kong, where the legislators can ask questions, so that a clear explanation can be given to the public.
Pension hit by lower investment returns
The low investment return has hit the retirement income of retirees. Read this article.
Discount on books for February 2009
A few customers bought several copies of the Practical Guide for Financial Planning. They may be giving to their children or friends, or may be buying on behalf of friends.
If you wish to buy the books at a discount of 15% (Promotion Code - BLOG), do so during February. The promotion will end on 28 February. The promotion applies to all the books and the rechargeable torchlight shown in the Internet Shop. The Shape Quiz book contains 100 challenging shape puzzles which can give hours of fun for children, adults and seniors. It trains their mind to be flexible and see out of the box. It is an important skill.
Click here.
If you wish to buy the books at a discount of 15% (Promotion Code - BLOG), do so during February. The promotion will end on 28 February. The promotion applies to all the books and the rechargeable torchlight shown in the Internet Shop. The Shape Quiz book contains 100 challenging shape puzzles which can give hours of fun for children, adults and seniors. It trains their mind to be flexible and see out of the box. It is an important skill.
Click here.
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