Saturday, April 18, 2009

Financial Advisory Approach

Contributed by Zhummmeng

A financial advisory approach is entirely different from product pushing.  The advisory approach aims to put the interest of the clients first and to address the cleints' interest on a reasonable basis.Products are solutions.It is assumed that the advisers have no inkling of the product suitable for the clients until the clients' needs are uncovered.

The product pushing approach is aimed at selling the products with the highest commission that benefit the salesmen and NOT the clients.It is peddling the products upfront. It is fast and quick way of making money for the insurance salesmen. All MDRT, COT or TOT aspirants use this method and to make a lot of commission to qualify for these dubious awards because it is commission based.MAS must address this if it wants to see a fair dealing outcome for consumers.

In an advisory process it begins with gathering of data , needs, goals fears and concerns of the clients, financial circumstances, preferences etc and then followed by analysis and then recommendation and implementation of the recommendations or executions and monitoring.

The advisory is a 6 step approach:
1.Establishment of relationship between client and adviser, defination of goals and objectives gathering.
4.Recommendations/a plan constructed
6. Monitoring and review

The whole process is documented in the fact find form, from analysis to recommendation and reasons of recommendation..This plan is portable and can be reviewed by another adviser to continue the advisory work if the client wants a change of adviser.

So, you see, the whole process isn't what the insurance agents are doing. Do you think your needs can be settled within an hour? Sure, your "needs" will be short changed if you are product sold. Not only that, you are likely to be mis-sold ,misrepresented all because of the greed or incompetence of the insurance agents. It is very clear insurance agents pushing products have no desire to help the clients meet their goals.

To solve this problem.
1. Make the advisory need based approach compulsory for most if not all cases. Who needs this most? The ordinary man in the street needs this help. They are clueless, ignorant and not financially savvy. Usually these people make up the major clientele of any adviser and not the rich or savvy who don't need advice.
2. Make all advisers or insurance agents accountable and liable for their recommendations. This is to prevent product pushing and malpractice.
3. Remove the commission and replace with fee . (commission is the major cause of mis-selling and conflict of interest)
4.  Set a review body to help clients review their existing policies for mis-selling or conflict of interest and inappropriate recommendations.
5. A product advice or no advice WARNING to savvy clients. A warning must be verbally told to client and stated in the fact find form that choosing the options of 'product advice' and 'no advice' will put them at a disadvantage and by their action their rights to redress will be forfeited and waived if the product bought is wrong.

This is necessary to prevent abuse by insurance agents who try to avoid fact finding or to decieve the cleints that fact find is inconveneint to them and messy. This is also to stop the insurance agents from short changing the clients.Currently it seems that insurance agents' clients are financially savvy.The fact it is the opposite. All clients must be assumed to be clueless in order for a proper process to take place.


Friday, April 17, 2009

Speak out for others

Article printed in The Online Citizen

Survey - Sale and marketing of unlisted investment products

The protem committee of FISCA (Financial Services Consumer Association) intends to submit the following paper to MAS giving our views on its proposals regarding the sale and marketing of unlisted investment products (including life insurance and structured products).

Give your views to FISCA's proposals in this survey.

Thursday, April 16, 2009

Recession 'fuels insurance fraud'


Opinion from Queen's Counsel

In December, I asked a lawyer to approach a Queen's Counsel for an opinion about the legality of the prospectus used for the credit linked notes.

The Queen's Counsel indicated an extremely high fee for the legal opinion. As this fee was many times more than the initial budget, I decided not to pursue this matter. I informed the group leaders about this decision.

Investors who wish to pursue the class action can contact the group leaders indicated in this blog. Please get an update from the group leader directly.

I have arranged with a lawyer to provide assistance to investors who wish to pursue the matter through FIDREC or the subordinate court on an individual basis. This is an alternative to the class action. Those who wish to make consider this option can send an e-mail to me at

Tan Kin Lian

Thoughts For The Week: Tyranny

Contributed by Ho Chew Seng

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy: that is the search for a superior moral justification for selfishness." : John Kenneth Galbraith

"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy" : John Pierpont Morgan

Wednesday, April 15, 2009

Erosion of ethics and honesty

Previously, we can trust business to be ethical and honest. The standard of ethics has deteriorated much in recent years. Many oraganisations think about profits and do not hesitate to cheat their customers.

I received a cheque in payment of providing a service. I did not bank in the check and it expired after six months. 

I sent an email to ask for a replacement cheque. I did not get any reply. I sent a hard copy letter by post. I did not get any reply. I did not get the replacement cheque. Another six months had passed.

I suspect that the accounts staff of this large and respected organisation probably felt that it was all right for the company to write back the forfeited amount as its profits. This is a very sad state of affairs.

Tan Kin Lian

The Standard:Yam yields on minibonds

The Hong Kong Monetary Authority has given way to legislators' demands to show them a censored part of a report investigating Lehman Brothers minibonds.

HKMA chief executive Joseph Yam Chi-kwong, who had previously refused to disclose the sealed findings citing the public interest, agreed on Monday night to present the findings to legislators for discussion, according to Raymond Ho Chung-tai.

Ho, who represents the engineering sector, expects lawmakers to discuss the matter on Friday at a closed-door meeting, with the next hearing taking place on Tuesday.

Yam, who testified at a Legco hearing for the first time yesterday, said the HKMA bears a strong responsibility to handle problems caused by the minibonds saga even though it issued warnings before the Lehman collapse.

In response to legislators such as Emily Lau Wai-hing, who accused Yam of ``falling asleep'' when handling complaints about the sale of minibonds, he said the HKMA is doing its best. But the search for justice would take time.

``Our heart goes to investors and we really want to help them,'' Yam said at the three-hour hearing.

``We will not be softhearted when we handle the complaints as they will affect our banking system. We are in a hurry to complete them.''

Almost 300 investors protested outside Legco yesterday, accusing Yam of turning a blind eye to questionable selling practices behind the derivatives.

The territory's de facto central bank aims to complete handling 70 percent of the more than 20,000 complaints it has received by March next year.

More than 6,000 cases have been settled or nearly settled, according to Yam.

From the end of 2007 to early 2008, eight banks adjusted ratings of credit linked products _ including minibonds _ to ``high-risk'' among 16 banks being investigated, Yam said.

In answer to a question by Ronny Tong Ka-wah, Yam suggested the term minibond may be misleading.

He had read minibond prospectuses, which referred to the derivatives as bonds.

But Yam reiterated that the Securities and Futures Commission is responsible for approving securities products and the HKMA has no right to give opinions when they are approved.

SCMP:HKMA chief to disclose full report at closed-door Legco meeting

The Hong Kong Monetary Authority chief has finally agreed to disclose its full report on the sale of Lehman Brothers-related products, but only to the Legislative Council subcommittee investigating the saga.

"We have been asking Joseph Yam [Chi-kwong] to give us the omitted parts of his review report, which was submitted to the financial secretary at the end of last year," Raymond Ho Chung-tai, chairman of the subcommittee set up to study the minibonds debacle, said yesterday. "He wrote back to us yesterday afternoon saying he would be willing to give us the whole report under closed-door conditions and explaining why he is seeking public interest immunity."

Both the HKMA and the Securities and Futures Commission prepared reports on the lessons learned and issues they identified during an investigation into complaints about the Lehman Brothers-related products at the request of Finance Secretary John Tsang Chun-wah. But some parts of the reports were not disclosed because the banking and securities regulators said their investigations would be affected by doing so.

The closed-door meeting on the report will be held as early as Friday, Mr Ho said. Asked if the subcommittee would make the non-disclosed part public, he said lawmakers would decide on this.

REUTERS:HKMA says it gave risk warnings before minibond failure

HONG KONG, April 14 (Reuters) - Hong Kong's central bank chief on Tuesday said he had warned investors about the risks of buying derivatives long before Lehman Brothers collapsed, but revealed that Lehman minibonds had been ranked "high risk" by only half of the 16 banks investigated.

More than 40,000 Hong Kongers ploughed nearly US$2.5 billion into failed structured products, known as minibonds, offered by U.S. investment bank Lehman Brothers, which collapsed last September.

Hong Kong Monetary Authority Chief Executive Joseph Yam, answering questions on the sale of Lehman minibonds in the Legislative Council, said he had issued several warnings in the media from the middle of 2006 about the risks of investing in derivatives products. By June 2008, banks in the city were no longer offering the Lehman products, he said.

"In terms of forewarning of risk, I think we have done enough," Yam said. Investors, however, claim they were misled over the sale of the products, which were called "minibonds" but were actually complex derviatives products, and have demanded full compensation.

Yam admitted that in late 2007 three banks distributing the bonds had ranked them as "low-risk" investment products and another five banks were selling them as "medium risk".

That was partly because the products were less risky before the credit crisis spread in 2008, Yam said.

"The risk for CDOs (collateralised debt obligations) suddenly shot up," Yam said. "We warned the market ... It did not mean banks were wrong, it was just that banks did not respond in a timely manner."

Only two distributors, Sun Hung Kai Financial and KGI Asia Ltd, have agreed to compensate Lehman minibond investors so far.

A spokeswoman for Bank of China (Hong Kong) declined comment on media reports that the bank, the largest distributor of the Lehman products, was in advanced talks with the Securities and Futures Commission about compensating investors.

The HKMA and the Securities and Futures Commission have separately made recommendations on how to better protect investors, including forcing banks to separate their deposit-taking and retail investment businesses from the end of September at the latest.

Investors in Singapore and Indonesia have also lost money on the products.

SCMP:Monetary chief defends actions in minibond saga I'm not shirking role: Joseph Yam

Monetary Authority chief Joseph Yam Chi-kwong stressed yesterday that the Securities and Futures Commission should be responsible for monitoring the disclosure of information on financial products.

"I'm not shirking responsibility," Mr Yam said. "The division of labour is very clear the HKMA does not have the power" to review the commission's work, he told a Legislative Council public hearing on the minibond saga.

While he conceded that the authority was responsible for regulating banks on the sale of structured products, he said: "My colleagues and I have done what we can do and we have fulfilled our responsibilities to get the job done to the best especially the job of regulating banks on the selling of structural products."

He was the second official to testify before the Legco subcommittee on Lehman Brothers-related financial products, after Chan Ka-keung, secretary for financial services and the treasury.

More then 48,000 investors in Hong Kong bought HK$20 billion worth of Lehman minibonds and structured products. Minibonds are not corporate bonds but consist of high-risk credit-linked derivatives that are marketed as a proxy investment in well-known companies.

Mr Yam was asked if the regulator had failed to protect investors by allowing high-risk financial products such as minibonds to be sold to ordinary investors.

He said the disclosure of information about financial products was beyond the responsibilities of the authority; the SFC, however, should be accountable. He also said that banks and brokers, rather than the regulators, should be responsible for assessing the risk of financial products.

Still, Mr Yam said the authority requested that banks raise the risk level of derivatives such as minibonds after it found in 2007 that only half of the 16 banks it investigated ranked those products as high-risk.

Mr Yam said he had repeatedly warned the public about the risk of buying derivatives products from the middle of 2006. Local banks were no longer offering Lehman minibonds by June last year.

He revealed that from April 2003 - when the Securities Ordinance came into effect - until Lehman Brothers' collapse in September last year, the authority had found 178 suspected cases of the mis-selling of financial products by banks. Of the 33 cases that have been closed, in nine cases banks were found guilty and were penalised.

Democratic Party lawmaker Emily Lau Wai-hing said the process was too slow and the authority had only finished investigating about 6,000 of more than 20,000 complaints related to Lehman products.

Mr Yam said the watchdog would recruit more staff, but some people found investigative work "disgusting". He expected to have dealt with 70 per cent of complaints by next March. About 300 investors who bought Lehman-related products protested outside Legco before the meeting yesterday. They said the regulators should be blamed for letting banks sell high-risk products.

China Daily:HKMA in defense over minibonds

HONG KONG: Chief Executive of the Hong Kong Monetary Authority (HKMA) Joseph Yam Chi-kwong admitted the government body is duty-bound in the Lehman Brothers' minibond saga, but it did enough in warning the market and monitoring banking businesses.

Yam was the second official, after Secretary for Financial Services and the Treasury Chan Ka-keung, testifying in the Legislative Council (LegCo) subcommittee's hearing which probed issues related to the investment products sold by the global financial services firm.

Lawmakers criticized the HKMA for its incapacity in monitoring the sales of structural products.

"I started to warn the market about the high risk brought by derivative instruments since mid-2006. Banks were given guidance on selling derivatives...I think the risk warning was quite enough," Yam said in his first testimony.

Lehman Brothers collapsed on September 14, 2008. Its minibonds cost nearly 50,000 Hong Kong investors billions of dollars.

He agreed that minibonds were complicated and the name misled people into thinking that the products were bond.

Yam said it was the responsibility of banks but not monitoring bodies to explain the nature and risk of products to investors, though he did frequently communicate with the financial secretary and financial services chief on market fluctuation.

The authority to examine and approve investment products lies in the Securities and Futures Commission (SFC), and the HKMA has no power to re-check its work, he added. The SFC is also responsible for determining if the disclosure of a product's information is enough.

Facing criticism from lawmakers, Yam emphasized he was not shirking the responsibility of the minibond incident.

"In monitoring banks' activities, including the sale of mortgage-linked products, I and my colleagues have done what we can within our authority," he responded.

Responding to charges that HKMA's benchmark was too lenient when eight-mortgage linked products could be rated low-risk and medium-risk, Yam shrugged off the allegation, noting that investment risks rose sharply with the onset of the global economic crisis.

Yam noted that the SFC (Securities and Futures Commission) failed to require lenders to re-evaluate risks entailed in their products once the market changed.

He added that in response to HKMA intervention some lenders did raise risk evaluations to high. Some lenders also stopped recommending high-risk products to investors. Yam told lawmakers HKMA referred 178 alleged illegal sales to the investigating committee between April 2003 and September 2008. Yam admitted the HKMA has limited power in investigation and punishment, otherwise the probe into the minibond debacle could be speeded up.

However, he rejected allegations that the investigation was too slow.

Around 6,000 of the 20,000 complaints have been handled since last year, while 6000 cases have reached settlement with banks. Yam expected to complete investigation of 70 percent of complaints by next March.

Over 200 people are deployed to deal with the complaints. Yam said it is not easy to hire new staff and training takes time.

"But I guarantee that our heart lies with the investors. We want to help them," he added the authority would not tolerate any illegal behaviors but will handle it in an impartial manner.

Yam will be summoned again to the fifth hearing next Tuesday. Yet subcommittee chairman Raymond Ho Chung-tai did not predict how many times Yam will testify.

Around 200 minibond investors protested outside the LegCo during Yam's stay yesterday morning. They accused the HKMA of not being able to keep an eye on the investment products.

Peter Chan, chairman of the Alliance of Lehman Brothers Victims, requested Yam to resign as he never apologized for the incident.

Rule of law - lesson from Thailand

The popularly elected government of Thailand, led by supporters of Thatsin Sinawatra. was deposed by street rallies, culminating in the disruption and closure of Bangkok Airport, conducted by the yellow shirted followers of the Democratic Party.

The new government was formed by the Democratic Party with some defections from the previous ruling party.

The red-shirt followers of Thatsin now follow the example of using street rallies and public disorder to cause chaos in Thailand during the recent Asean Summit.

Chaos will come to a society where the rule of law is not respected. I hope that democratic institutions, and the will of the people, are respected.

Tuesday, April 14, 2009

The Standard:BOC set to seal minibond dea

Bank of China (Hong Kong) (2388), the city's largest distributor of minibonds linked to failed US investment bank Lehman Brothers, is in advanced negotiations with the Securities and Futures Commission to settle the issue, market sources told The Standard.

A settlement may involve payment of about HK$600 million to the bank's disgruntled minibond buyers.

It would also serve as a benchmark for talks between the SFC and other banks to wipe off their respective minibond exposures, the sources said.

The reports come as thousands of minibond buyers prepare to rally on July 1.

BOC (Hong Kong) is estimated to have sold HK$5.6 billion out of HK$14 billion worth of Lehman minibonds bought by 48,000 local investors.

So far, only two institutions - SHKI, a unit of Sun Hung Kai & Co (0086) and KGI Asia Ltd - have settled their minibonds claims.

SHKI distributed payments of HK$85 million among 310 clients while KGI Asia paid five customers about HK$1.6 million.

The talks with SHKI are being used as a model by the SFC for current negotiation with BOC (Hong Kong), sources said.

They said the authorities are keen to settle with BOC (Hong Kong) ahead of July 1 so as not to have angry minibond investors join traditional rallies.

The organizer, Alliance of Lehman Brothers' Victims, yesterday estimated that up to 100,000 of its supporters will march on July 1.

About 400 to 500 investors will protest today against the Hong Kong Monetary Authority and the SFC outside the Legislative Council as HKMA chief executive Joseph Yam Chi-kwong attends a subcommittee hearing on the issue, the group said. Another 2,000 investors plan to march on Sunday from Causeway Bay to the SAR government headquarters.

Earlier this month, the HKMA said it had found sufficient grounds for disciplinary action against some bank staff accused of mis-selling minibonds.

Even though some investors have settled with banks, they only recovered 30 to 50 percent of their investment, the group's chairman, Peter Chan Kwong-yue, said.

Democratic Party member Andrew Fung Wai-kwong said he will file a judicial review for 11 cases before the end of the month against a Small Claims Tribunal decision on March 23 that resulted in all 135 cases being transferred to the District Court.

As of April 8, the HKMA had received 20,724 complaints, and 20,509 had cleared initial assessment.

Only 418 complaints relating to 16 banks were referred to the SFC.

As of last Wednesday, a total of 427 cases had been transferred to the SFC by the monetary authority.

Meanwhile, Liu Sui-fong, 84, is among 77 minibond investors seeking help from the Federation of Trade Unions. Liu said she had been ``misled'' by BOC (Hong Kong) staff to invest all her HK$520,000 savings in minibonds, which claimed to yield 4 percent interest a year.

Review of the public sector

Some people think that the recent cases of food poisoning in the markets reflect slackness in enforcement of cleanliness and health by the National Environment Agency.

But, the underlying problem is a deeper one. In recent years, many government agencies have reduced their manpower in the bid to cut cost. We now have insufficient number of people to enforce the law. This applies not only to this Agency but to many other government bodies as well.

It is one thing to cut down cost and manpower on unnecessary activities and red tape. It is a separate matter when the cost cutting lead to cutback in essential services and enforcement of regulations.

Are the reduced manpower put to better use in society? This is hardly the case. Many of the excess manpower find work in the financial and property markets. These financial experts, advisers and agents help to build up a big bubble that has now burst. Many of them have now lost their jobs or face the prospect of being retrenched.

We need to rethink our approach towards the use of manpower in our society. Public service is an essential source of employment. They can do useful work and can be for the good of society.

Does the reduction of manpower in the public sector lead to lower cost for the public? This may not be the case. Too often, the reduction of manpower is followed by huge expenditure on computer systems, management consultants and high salaries for the top people that run the agencies.

We need to reflect on this matter as well. Are we using the public funds properly? Is there a correct balance between employing people to do useful work or replacing them by expensive systems and so-called talents?

Tan Kin Lian

Protecting a democratic institution

The recent change in leadership in AWARE (Association of Women for Research and Education) has raised issues of concern. The old leadership, comprising of volunteers who has worked for many years to build up the values and stature of the organisation was unexpected toppled by a group of new members who voted in a new committee  at the annual general meeting.

To my collection, this type of unplanned leadership change has occurred in some other organisations in the past. The new leadership represent the views of a small group of people who attended the annual general meeting, and does not reflect the membership at large.

What can be done to preserve the democratic nature of an organisation and ensure that the elected leaders reflect the values of the membership?

Here are a few possible approaches:

1. Nominations for elected office should be submitted at least 14 days in advance of the general meeting. The nominees should be required to submit a statement to show their background and their plans for the organisation.

2. Voting should be allowed for all members, rather than those who attend the general meeting. With today's technology, it should be quite easy to vote through the internet. Those who attend the meeting can vote on the spot.

Many organisations in Singapore are weak. People are not prepared to serve in the committee. Each general meeting see the return of a few of the well known figures. Occasionally, an upset election results create big news.

We have to address these long standing problems. It is time for us to build stronger democratic institutions in Singapore.

Tan Kin Lian

Sunday, April 12, 2009

Online Tuition

Study the concept in this paper. Give your views in this survey.

Here are the survey results.

Survey: Landmarks to give road directions

Do we need landmarks to give road directions? Survey.

Here are the survey results.

A sense of loss as a Singapore (2)

Hi Mr Tan,
I have visited your blog again and have read the comments to my email. I'm not upset, don't worry.

I respect what you are doing. But I do not know whether it will succeed. Singapore has changed. The younger Singaporeans are pleasure-loving and hedonistic, the older ones are too busy struggling. And all of us are struggling in this over-populated country and intimidated by a government that can do whatever they like and manipulate whatever law they want. The worst is seeing younger Singaporeans sell out their countrymen for the love of money.

I empathesize with those who are poor and suffering. I would not mind contributing if you have any schemes to help them. under the present government, they are reduced to getting scraps " qiu sheng bu si, qiu si bu neng" (seeking life is difficult, seeking death is not possible). Perhaps it is possible to set up some sort of recruitment co that matches these people to employers who are willing to pay them fair wages and not exploit them.

As for me, I am thinking of leaving the country next time. I am tired Mr Tan. I am quite well educated, but I still have some integrity. I don't want to sell my soul for money like what some people are doing.

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