Saturday, March 20, 2010

Problem with private insurance

Private insurance is aimed at maximizing profits. They will deny or restrict coverage for people who need insurance most. They will increase the premium on renewal on those who had claims. Those who are caught by these practices have no choice, as other insurance companies will not accept them. These points are raised by President Obama in his speech urging reform of the health care system in America. This same challenges apply to  motor insurance in Singapore.

Experiences with websites

Please share your experiences with websites of big organisations. Which website is easy to use? Which is terrible?

Overseas orders for my books

I am starting to get overseas orders for my books. I suspect that they are Singaporeans who have migrated or work overseas. They bought the financial planning book, intelligence quiz and the shape quiz mini-pak.

FISCA website


"FiSCA's website (Financial Services Consumer Association) has been updated to make it easier for you to find out what's happening in the financial world that relates to you, the consumer. The news, views & reviews section will include updates from writers that will help promote independent financial education. Members can also participate in the discussion to tap on the wisdom and experience of our members and volunteers.

Do pay the website a visit. You can follow FISCA on RSS, or why not just join FiSCA. Here's why you should join FiSCA."

A responsive call center

The Straits Times published a reply from Singapore Airlines, promising to improve the responsiveness of their call center. 

This problem is faced not only by Singapore Airlines but also by many large organisations in Singapore, i.e banks, telephone companies, airlines and government agencies. The key causes of the poor response are:

a) large volume of incoming calss
b) outsourcing of calls to third countries
c) mis-use of technology that frustrates the customers, e.g. automated voice response systems
d) poor method of handling the calls

A good example of a responsive call center is NTUC Income. I called 63 462663 (63 INCOME) a few days ago. The call was answered by a human voice on the 3rd ring. The staff recognized me, as my mobile phone was registered with them. They have a simple verification of caller.

I asked this question, "I have several policies with NTUC Income. Can you check if any of my policies are overdue and not paid?" This question, which required a search of life, general and health insurance policies (kept in different databases), was answered in 1 minute, "All your policies are paid up to date".

NTUC Income achieved the global award (#1) for innovation and customer service 4 years ago, when I was the CEO. It was achieved through the innovative use of low cost technology backed by a practical, common sense approach in providing customer service. I am happy to note that the high standard of customer service of the call center has persisted over the years.

Tan Kin Lian
Note: If you deal with an organisation with a bad call center, ask them to consult me at

Decreasing term assurance for 25 years

Dear Mr. Tan,
My insurance adviser has given two proposals for me to increase my coverage:
a) critical illness protection for 35 years
b) whole life policy with critical illness rider
Which is better for me?

For the term insurance policy, ask the adviser to give you the following options:
a) Level term for 25 years and 35 years.
b) Decreasing term (or mortgage protection) for the same period.

You can compare the rates with the benchmark rates quited in my book on financial planning. My benchmark rates are quite high, so you should be able to get a rate lower than the benchmark rate. You have to decide on the term insurance that suits your needs, by looking at the cost and coverage.

In my view, the most suitable is a decreasing term insurance policy for 25 years. I avoid critical illness policy or rider, as they are usually too expensive (i.e. poor value for money).

Courtesy of a reply

If someone writes a personal e-mail to me, I will always give a reply. It can be a short reply like "ok" or "thank you" to acknowledge receiving an information that does not require any action (which is quite common).

If someone ask me my advice on a complicated matter, my usual reply is "let me think about it". I will give a more detailed reply in a few days time, unless I overlook it. In many cases, I will answer some of the questions immediately, and answer the rest later.

Some people are fair and considerate to me. They spend time to think about their issue and put it down in clear terms. I will try to help them as best as I can.

Other people are quite inconsiderate. They do not make the effort to write them their issue clearly to me and expect me to spend a lot of time to understand their question and find the answer. I usually give them a short reply, "Sorry, I cannot help you".

A few people send me materials to post in my blog quite regularly. They do not expect a reply from me for each e-mail. But I do send them a reply occasionally to acknowledge that I appreciate their contribution. They can also see my indirect reply, when their contribution appears in my blog.

I want to encourage people to give a reply. It is only courteous.

Tan Kin Lian

Avoid tele-marketing call

I can recognize a telemarketing call within 10 seconds of receiving the call. My immedate answer is "I am not interested" and I put down the phone immediately.  The telemarketer recognize a rejection and do not call back. If the telemarketer calls back (which never happens), I will lodge a complaint for harassment.

If someone wishes to market any product to me, they can send an e-mail to me. I can decide whether to read it or to delete it.

Suggestion to regulate all types of investments

The Monetary Authority of Singapore publishes an "alert list" in its website that identifies a long list of companies that operates investments that are not regulated by MAS. They even state that this is not an exhaustive list. This approach is not helpful to the general public.

A better approach is for Parliament to legislate the types of investments that should be regulated. I suggest the following definition, "any contract involving a return of money or delivery of future services, where the contract is advertised to the public through the media or a public talk, excluding contracts where the sum involved is less than $500".

For the avoidance of doubts, the following types of contracts required to be regulated (give a list of the types of transactions, including land banking, time sharing and many multi-level types of marketing scheme). The legislation can also identify the types of transactions that do not need to be regulated. The legislation can give the power to MAS to add or remove from the inclusion or exclusion list from time to time, with the right to appeal to the Minister.

I hope that some of our hardworking members of Parliament can bring up this suggestion to Parliament.

Please give your views on this approach and suggestions on the inclusion and exclusion list.

Tan Kin Lian

Red light area gets out of line

Crime is now getting out of hand at the red light area in Singapore  Read this article by Seah Cheang Nee.

Danger on Asian Buses

There is an article in the Reader's Digest in 2005 about the danger of taking a long distance bus on many countries in Asia. The roads are bad, the buses are in poor conditions, the drivers are reckless and tired (driving for long hours). There are many accidents on the road.

Has the situation improved? When I took the tour to Giuzhaigou last year, it was quite safe.

Inflation rate, measured by Reader's Digest

A copy of Reader's Digest cost $1 during the 1950s. Fifty years later, it cost $9.50 (in 2005). The rate of inflation during this period is 8.1% per annum.

Parker Korean Restaurant, 209 Upper Thomson Road

My friends started this restaurant. Please give them your support.

Sense a trap

Dear Mr. Tan
Thanks for highlighting on Landbanking Issue. I received many SMS to attend a Seminar at Nee Ann City with no obligation and free gifts to be collected. I left the presentation prematurely for sensing a "TRAP". I did not sign anything on the dotted line.


MAS Investor Alert

These companies are NOT regulated by MAS.

From time to time, MAS receives information on persons who are possibly conducting activities regulated by MAS without authorisation. These persons may target Singapore consumers, or overseas consumers by giving them the false impression that they are operating in Singapore.  Some of these unregulated persons may sometimes use names similar to that of entities regulated by MAS. 
Consumers should exercise care when dealing with these persons. Overseas consumers who receive solicitations by persons who claim to have an operation in Singapore should also exercise care and check if they are in fact dealing with persons who are regulated by MAS.
Below is a list of persons, on whom MAS has received information, who are not authorised by MAS in respect of the carrying on of regulated activities. The list is not exhaustive and will be updated.

Friday, March 19, 2010

Resort World Sentosa - how's business?

Last week, I posted an optimistic analysis by UBS about this resort. In today's papers, there is a suggestion that the crowd for the opening of Universal Studios was below expectation. Some observers had speculated that visitors to the casino has also been disappointing - although the management refuse to comment or give any figures. However, I hear that the taxis are doing good business, possibly due to higher tourist visits.

When Marina Bay Sands open next month, there will be additional competition. So, it is a confusing situation. Any news from insiders?

Lower standard of service in Singapore

There were several complaints about the deteriorating standard of service in Singapore. In my view, the main causes are:

a) Dependence on foreign workers who are not familiar with the Singapore environment
b) Over-crowding, leading to congestion and highly stressed workers - leaving a negative impact on service.
c) Managers and owners are too focused on profits, and ignore customer service
d) Customer complaints are being ignored - as consumers are weak.

What are our views? What can be done to improve customer service?

Tan Kin Lian

Good service in Singapore

Please share examples of good service that you find in Singapore.

The eating places near my workplace and home provide good service. The stall holders are hardworking, friendly and charge reasonable prices. They are not greedy for excessive profits.

Taglines used by trourist promotion agences elsewhere

Several countries have taglines to bring tourists to their countries. Malaysia's tagline is "Malaysia, truly Asia". What are the taglines used by other countries? Which tagline do you like best and why? Share your views.

Bring tourists to Singapore

The Tourism Board has used the following tagline in past years:

Instant Asia
Uniquely Singapore
Your Singapore

Which tagline do you like best? Do you have any other suggestions? Share your views here.

View from a local consultant

Hi Mr Tan
Like what the article said, the money spent is only one part of the equation. The ministry / branch of government using the consultant must get value out of the consultants' delivery and must make sure that they manage these people properly.

I do some consulting work for the government, for specific industry related issues. My job is it identify these issues, put them into something that these govt people can understand, and use to have a sensible discussion with people from the industry to resolve them. Its something they will not be able to get a handle on, or take a very long time to fully comprehend. You can say that I provide external expertise, but nothing unique in the sense if they hire people with the same background with 15 years experience they can have the same in-house view / expertise.

I think I do add value in some respect, in the sense that my work do get used in actual life. I see white elephant projects in cases where money is spent but the deliverable is lousy, or does not make an impact at all in many ways.

Many orders in i-Shop

I sent an e-mail to customers who bought from i-shop in the past and told them about the new books available on i-shop and the Shape Quiz promotion. Over 20 orders were received in one day. Click here.

Here is a video on how the Shape Quiz can help in developing the thinking process. It is good for children, adult and seniors.

A few customers have asked for the earlier volumes of the Intelligence Quiz as they enjoyed this type of puzzle. A few copies are still available at i-Shop.

Consultants and Government

Consultants earn a lot of revenue by providing service to governments. Read this article.

Over the decades, all government administrations, in all jurisdictions, have been spending public money on consultants without managing the value delivery side of the equation. Consulting firms know that once they get through the procedurally intensive selection process they essentially have an open-ended license to generate revenue.

Does this also happen in Singapore? I have heard of large sums of money being paid by the government agencies to management consultants. Share your views.

Tan Kin Lian

Thursday, March 18, 2010

Video on the Shape Quiz

Here is a video to explain the Shape Quiz. It is fun, challenging and develops creativity. The mini-pak can be purchased for $2 at i-Shop. It is also a suitable gift for children and older people, including seniors.

A reader's view - importance of financial planning

Financial planning should form a very important part of anyone's journey through life. Unfortunately, it is not taught in most school's curriculum and perhaps due to other immediate priorities, many people could ignore financial problems are on the horizon until those problems are right in their face. I only got interested in financial planning after going through some difficult times in my early years as a youth when my father's business failed.

I am now a 39year old accountant and have benefited from careful financial planning from early years. My investment portfolio has grown steadily through the years and I am now looking into the future with more confidence despite all the financial turmoil (although it could have been better, but it is ok. Must not be greedy lah!).

Have just bought 3 copies of your Practical Guide To Financial Planning to be given to my younger brothers. As it is at a good price, I do not want to save money by buying one copy and pass it around. I prefer they read the guide and have a copy with them for easy reference when they want to refresh their learnin. Spend $12, the returns will be many thousand times later. How's that for ROI? I hope they will do better than me from getting financial advice at an earlier age (they are late 20s to mid-30s). Be educated, be empowered.

Why do you visit my blog?

My blog receives an average of 2,400 unique visitors every day. Someone asked me what is the secret to write a blog that is actively visited?

I do not know the answer. So, I like to ask the frequent visitors to give their reasons. How often do you visit my blog and what do you look for?

Spend $12 and save a lot of money

Many young people are sold a life insurance policy soon after they start work. Based on the benefit illustrations that I have seen on the policies that they bought, most of them  lose over $5,000 in distribution cost and over $100,000 in deduction from their accumulated savings. This is a lot of money and will make them poorer when they need the money for retirement.

They can avoid this large financial loss by being educated. It cost them only $12 to buy my book, Practical Guide on Financial Planning. But, to really benefit from the simple tips in my books, they have to spend time to read the book (but it is quite easy and simple to read). They should also attend my talks which are organised by FISCA and the National Library.

If you have bought my book already, do tell your friends to buy it also. Do a good deed to your friend. Better still, buy the book and present it as a gift to your friend. You can help them to save a lot of money too!

Do not accept a poor deal

Dear Mr Tan,
Thank you for your good advice; I have learnt much from your blog and your Practical Guide on Financial Planning. It is really useful! Now I have a small but decent portfolio of ETFs and individual company stocks.

When I graduated, I was not savvy enough and bought 2 policies. Based on your book, I have analysed them as follows: 

Policy 1 shows effect of deduction contributing very high, about 27.8% in year 25 of policy, but drops drastically to only 3.4% during maturity in year 28 of policy. Sounds too good to be true? What is the loophole?.

Policy 2 (ILP) shows a ridiculous low projected return. I would be better off just buying term insurance.

However, I remember you mentioned that distribution costs are mostly incurred in first 2 years. 
Since we have paid them, should as well continue. Is this still the best way to go? 


For Policy 1, a large part of the projected value at maturity on year 28 is non-guaranteed. It is difficult for the policyholder to be sure that this non-guaranteed portion will be paid, especially if it shows a big jump compared to the non-guaranteed value in the earlier years. If the company give some reason at that time to be unable to pay the non-guaranteed value, or to pay less, what can you do?

For Policy 2, the effect of deduction is more than 50% of the accumulated premium. Although you have already paid the upfront distribution cost, it seems that you will continue to suffer a large loss each year due to the "effect of deduction".

I suggest that you take the following approach:

a) Ask your insurance adviser to explain the above two points to you, and address your concern.
b) If you do not get a satisfactory explanation, write to the insurance company
c) You may to lodge a complaint to MAS about the type of policy that you have been misled into buying (i.e. you would not have bought these policies if you knew what they really were). 
d) Write to the newspaper.

Do not allow people to sell you a bad product, and you have to suffer the uncertainty and poor return for a lifetime.

Puzzle - find the safe path


Two guardians watch over a fork in the road. One path leads to safety, the other to a grisly death. One of the guardian is a knight, meaning that he always tells the truth. The other is a knave, meaning that he always lies, answering “yes” to questions whose correct answer is “no”, and vice versa. You do not know which guardian is a knight and which is a knave. With a single question, how will you find the safe path?

Order books

Credit card points

I called the hotline of my bank to ask how many credit card points is in my account and how much are they worth.

The hotline staff have difficulty in converting the points into the value of the vouchers. She got the value wrong by the factor of 100 times. She told me that my points are worth a lot of dollars, when it really is worth that amount in cents.

If the hotline staff of a bank does not understand the value of a point, how can you expect the ordinary customer to figure out?

Over the years, I have allowed the points on my credit card to expire, as it is really so troublesome to use these points. The customer has to get the voucher, wait for it to arrive in the mail, and make the effort to visit the outlet. The bank also arrange with some outlets to allow instant redemption but finding the customer service desk or a knowledgeable staff may be another hassle.

I suggest that the bank should allow the customer to convert the points into cash, to be added into their account. After all, it is their business to deal with money, rather than with points.

Tan Kin Lian

Improve a corporate website

Many corporate websites have a lot of information. It is extremely difficult to navigate the website (also called a spider web) to find the right page. Each page contained a lot of information, and usually contains ambiguity which is not easily understood by the general public.

The staff handling inquiries expect the customer to know where to find the webpage and how to understand its contents. The staff usually does not understand that the general public has to deal with many other issues and understanding information from the website is not easy.

A good corporate website provides an easy way for the general public to send an e-mail or call a number to ask a question. The inquiry staff can respond with the answer. The best response is a specific answer to the question, with a link to the webpage for more details.

The corporation should know that their website is really the source of reference for their staff to get the information to send to the public. They cannot expect the public to know how to navigate or understand their spider web.

Tan Kin Lian

Wednesday, March 17, 2010

Video on Financial Education

Dear Mr Tan
 The following site is conducting an ongoing series of financial lectures on video. They have added video #40 just last night. Hope you could use them, one video at a time, to educate the public.

Postings on Land banking

For investors who are caught in land banking investments or have been approached, you can read my postings on this topic by clicking on the label "Land Banking" on the right.

Debt and delusion

This is an interesting book about the collapse of capitalism.

Postings on Benefit Illustration

I have made over 20 postings about the benefit illustration that comes with a life insurance policy. I have collected them together under the label "Benefit Illustration" shown on the right. I urge consumers to follow my tip and understand what to look for in the benefit illustration.

Life insurance - effect of deduction

When an agent tries to sell you a life insurance policy, he (or she) is required to give you a benefit illustration. It is a detailed document comprising of more than 15 pages and contain a lot of confusing information. You only need to look for 1 figure - "effect of deduction" at the end of the 20th year. Calculate this amount as a percentage of the "accumulated premium". If this percentage exceeds 15%, you should avoid the policy. For example, if the effect of deduction is $25,000 and the "value of accumulated premium" is $100,000, the effect of deduction is 25%. As this is higher than 15%, you should NOT buy the insurance plan. In this example, you are paying $10,000 more than is fair to the consumer.

For investment linked plans, you are not given the value of accumulated premium. In this case, you have to add up the "total cash value" with the "effect of deduction" to get the "value of accumulated premium. Take the figures based on 5% projection (as 9% is unrealistically high). If the total ash value is $100,000 and the effect of deduction is $30,000, the "value of accumulated premium is $130,000 and the effect of deduction is 23%, which is too high.

Do not invest in any insurance policy, where too much of the accumulated premium is taken away from you. It is your money, and you deserve a fair rate of return for your years of hard work and savings. Do not give it away. Buy a term insurance for 25 years and invest your savings in a low cost investment fund, such as the STI ETF, Read about this concept in my book, Practical Guide on Financial Planning.

Tan Kin Lian

Tuesday, March 16, 2010

Need for stronger regulation

I spoke to a professor in a UK university who was previously an actuary working in the insurance industry. He told me about the background of the regulatory environment and the mis-selling over the past decades.

For many years, the authority in the UK regulated the sales process, disclosure of information and expected financial advisers to observe  ethics and professionalism. It did not work. Many agents sold bad products to their customers to earn high commisison. The regulator imposed heavy fines on the financial institutions  but it still did not solve the problem.

The regulator has finally decided to ban the payment of commission to agents. This will take place in the near future.

Singapore followed the UK approach in regulation. But the authority in Singapore did not impose the heavy fines on the institutions for mis-selling. The situation is quite bad in Singapore and many consumers are offered bad products that gave them a poor return on their savings. What will Singapore do, now that they role model (UK) has found their approach to be a failure?

Tan Kin Lian

False hope

I spoke to an investor in a land banking product. He has invested for nearly two years and is still waiting for his  invested sum to be returned to him. He has not even collected the interest payment of 12.5%. He has since lost his job and his money is tied up in this investment. He has been promised a few times that the company is finalising the sale of the land and expects to repay the investment in the near future. It never materialised but he still remained hopeful and naive.

He is reluctant to lodge a complain with the authority or talk to the newspaper as it might cause the company to collapse. He still harboured the hope that his money will be repaid to him in the future. He even hoped that the company would be successful in the sales to new investors, so that they can collect the money to repay him. This is a selfish attitude, which reflects a shameful character of many Singaporeans.

What this investor does not realise is that there is virtually no chance of getting approval to develop the land or for the land being sold at a profit. The company tells a false story to keep the naive investors from taking action to enforce their rights. As time goes by, their chance of recovering their invested money will diminish, and it will soon be too late. Even if the company is able to get new funds, they will not repay the naive and weak investors. They will just cook up another excuse to give false hope.

If you are caught in this situation and you wish to meet other investors in the same situation, give your particulars here.

Trapped in a bad investment

Note: If you are trapped in this type of investment and wish to meet other investors in similar situation, give your details HERE.

A company selling foreign land plots and other products gave a put option to the investor to sell back the product at the end of 6 months with interest at 12.5%. Many investors invested on this product on the basis of the put option. At the end of 6 months, the investor exercise the put option, but the company refused to honor it. They gave many excuses and did not pay back the money as promised. In the meantime, the company continued to sell similar products to many new investors.

The investors were at a loss. Some engaged a lawyer to take legal action, but it is taking a long time, is costly and uncertain. Some complained to the authority, but were told that it is a civil matter for which they have to engage a lawyer. What is the best way for the investor to act now?

Can the authority stand by and do nothing, while more investors are being trapped in this type of investment?

Tan Kin Lian

Singapore's Big Bet is about to Pay Off

Here is an optimistic report about the impact of the two integrated resort on tourism and economic growth for Singapore.

Leaders should address important issues

For many years since its independence, Singapore has been a model of excellence in governance. However, the situation has grown to be quite pathetic during in recent years. Here are some of the problems:

a) rampant cheating, e.g. land banking, toxic products
b) escalating cost of living and housing prices
c) stagnant wages, stressful and poor quality of life
d) wastefulness, such as the episode on payTV platforms

It is time for our leaders to address these issues.

Tan Kin Lian

Unwillingness to take responsibility

There is a company that advertises regularly on television that sells land banking and other products.

For the past two years, they have been offering their products to investors with an option for the purchaser to cash out  at the end of 6 months with interest at 12.5%. On maturity, they find many excuses to delay the payment and kept some  investors waiting for more than a year.

Several investors had lodged a complaint with the Monetary Authority of Singapore and the Commercial Affairs Department, but were told to engage their own lawyer on this matter.

This company continued its mode of operation and more unwary investors are being caught in this type of investment. I was told that several millions of dollars are being collected each month. The company was even able to produce a certificate of "Singapore Quality" issued by Spring Singapore.

Some investors asked me, "Mr. Tan, why is the Government not willing to act on this matter, when many ordinary people have complained about being cheated? Does this company have strong connections with certain people in the Government?". I replied that this is not likely to be the reason.

The likely reason is that one agency will point finger that it is the responsibility of another agency, and nobody wishes to take responsibility to act. This is quite typical of Singapore and is a shameful state of affairs.

Tan Kin Lian

Professional fees and moral values

Several months ago, I received a letter from a big legal firm in Singapore threatening to take legal action against me for posting an article in my blog about a land banking company. The article was reproduced from the website of a UK newspaper. The article made several allegations about the operations of this land banking company that operates in Singapore.

The letter from the lawyer asked me to prove the facts that were contained in my blog. I asked if their client had written to the UK newspaper to correct the facts, but they refused to answer my question and continued to threaten and harass me.

When I related this matter to a friend, she asked the question, "Does this reputable legal firm feel ashamed of acting for a company that goes about to cheat the public?" Some time later, the legal firm suddenly dropped the matter for reasons that are not clear to me.

I now read a report about Lehman Brothers and the large fees earned by their auditors and lawyers in helping to hide the facts about the financial situation of the company during its last few months. Are the fees for these reputable firms more important than moral and ethical values?

Tan Kin Lian

Coffee shop and the bank

I had a bowl of wanton noodle for $2.50 at a coffee shop. I looked at the ingredients that make up this meal - noodle, soup, meat, chili and more. I thought about at the labor that went into the preparation and the rental that has to be paid for the stall. How can the stall holder survive on the profit margin that goes into this bowl of noodles?

I then thought about the charge of $50 that my bank imposes on a late payment on a credit card and the charge of $80 to transfer a small sum of money. How much does it cost the bank to handle each transaction? It seems to take less labor that making a bowl of noodle.

The banks, which makes billions of dollars of profit a year, forget that many people in Singapore have to work 8 hours a day to earn $50, which is the amount that they charge for a small banking service. Perhaps our Government, which gives the licence to the bank to operate the essential banking service, also forgets this point.

We cannot rely on the free market to determine the banking fees, as there is virtually no competition and the banks are happy to operate a cartel on these excessive charges. The Government has to regulate the fees charged by banks for essential banking services to be at a reasonable level.

Tan Kin Lian

Sands Resort Complex to open in April

Here is an article in New York Times.

Interest in a sales career

Hi Mr Tan,

I have read your book <Practical Guide on Financial Planning>. I really love the book and find the information very useful and practical compare to many other books i have read. It is very simple to understand too. After reading the book, I have decided to seek your advice of asking you questions regarding about my upcoming career after my national service.

 I have decided to go on sales career path and have the intention to become a property agent or an insurance agent. However, I am quite confuse now after reading your book as it makes me feel that a Finacial Planners or advisers are more like having a commision interest at heart rather than wanting to help the customer. May I ask, are most advisers more interested to earn commission rather than to help customers by buying the best product that suit them most.

Is it true that a property agent will earn more money than a successful financial planner? My interest has always been in sales and wanting to become an entrepreneur and run a business of my own in the future. I also have the interest in investment and business related issues. I feel that being an financial planner is the most suitable job for me based on my interest. 


You can be a financial planning and act ethically to sell the products that are good for consumers, and earn a modest amount of commission to make a living. It is up to you to decide on whether you wish to sell products to earn more commission or to sell the products that give the best long term value to customers.

A few countries have banned the payment of commission on financial products. Singapore may follow this trend in the future. Under the new system, the financial adviser will be paid a fee charged transparently to the consumer. This is like paying a fee to the doctor for medical advice. At that time, the conflict of interest will be removed.

It is also all right to be a property agent.

Wish you all the best in your career.

Monday, March 15, 2010

Opposition chief tells Singaporeans: Don't be afraid

Kenneth Jeyaretnam, whose late father and veteran opposition leader
was bankrupted in defamation lawsuits by the ruling People's Action Party (PAP),
said his two-year-old Reform Party was encouraging people
to come out and offer different views.

"Firstly, do not be afraid.  You have a right to exercise, to have a say, in how your country is run,"
Jeyaretnam told Reuters in an interview at his apartment...

"Singapore is not going to collapse.
 Competition in politics is as necessary as it is in economics to ensure efficiency."

Commission paid to financial advisers

Dear Mr. Tan,
First UK, then Australia is next to cut commission. When will Singapore follow?

By Elizabeth Fry

Published: June 28 2009 17:32 | Last updated: June 28 2009 17:32

The large funds running Australia’s $A1,000bn (£490bn, €573bn, $800bn) superannuation industry have finally bowed to public and political pressure and moved to scrap commissions charged by financial advisers in favour of transparent upfront fees.

The charter has been developed by the Investment and Financial Services Association and has to some extent pre-empted new government regulations that are likely to be introduced following the federal government’s first ever review of the world’s fourth largest pension market.

As of early next year, the commission system will cease altogether. This is likely to be well received by investors who are deeply distrustful of the way “super” funds bundle their fees and administration charges together to hide the cost of each service. They are equally distrustful of financial planners who demand upfront or trail (annual) commissions for selling particular financial products.

Once the charter is approved by regulators, super funds and advisers will be forced to differentiate between real advice and general plan service. For the first time superannuation investors will have the choice to opt in or opt out of advice payments depending on their circumstances.

Investors will be charged with instructing financial planners on how much advice they want and are prepared to pay for. Thus, they will be able to see what they are paying for and can match that payment with the value they get for advice.

Richard Gilbert, chief executive of the IFSA, says: “The charter makes a major statement to the industry. The commissions were the focus of a debate that raged for seven years. We were distressed by the tenor of the debate and the only way to fix it was to deliver a result.”

In his view this puts Australia firmly in the lead in terms of disclosure and investor friendliness.

 “Commissions aren’t often disclosed in Asia, there is not a lot of transparency around commissions and brokerage for the US 401k plans and in the UK the commission figures are high,” says Mr Gilbert.

The charter, which applies only to the IFSA’s members, who make up the lion’s share of Australia’s retail and wholesale superannuation, fund management and life insurance industries, has not stopped at restructuring fees and abolishing commissions.

Under the new code, funds will be accountable for misleading advertising and it is specific about what can and cannot be said.

All promotional and advertising material must provide actual past performance figures so that super members can be confident that the information they see relates to an actual investment option.

And while it is currently common practice for some in the industry to use performance data based on averages to promote or advertise products, the use of average or aggregated performance and fee data has been banned following funds’ poor performance in the wake of the global financial crisis.

“Advertising is a very big deal,” says Mr Gilbert. “We were forecasting future returns for 40 years based on past performance when 16 of those years saw a bull market,” he says.

“Using past performance and fee information as the basis of projecting future investment outcome is misleading. The returns over the last 18 months have especially highlighted the risks of making long-term projections.”

Other significant measures contained in the charter include making performance reporting an industry-wide standard so consumers can compare “apples with apples”.

In addition to better disclosure, better reporting and stringent marketing rules Mr Gilbert expects the charter to foster competition. He wants to see the rules around default super funds changed.

“The retail funds in Australia have been locked out of the mandatory super scheme for default funds and there are monopolies and oligopolies developing and for which rent is being charged. We want to be in that competitive race,” he says.

He is referring to last year’s decision by the Australian Industrial Relations Commission, which returned many key industry funds to default fund status.

This decision effectively resulted in a return to the “closed” system of 1992, designed to benefit industry funds that the AIRC was historically linked to at the expense of competitors that could offer more features.

Industry funds, which account for about half the workforce, claim competition for default funds will only become a reality when the retail funds perform as well as the industry funds do. The new code may go some way to help achieve that.

High pay of Singapore Government Leaders - a view by Rex

REX comments as follows,

I have heard of the "sour grapes" argument several times before. Some people think that commenting on Minister's pay is a sign of "jealousy". I don't think so. "Jealousy" means you don't have something, you want something others have. In the bible it is called covetousness, and it is one of the sins under the Ten Commandments.

It is not jealousy because, I don't even want $3 million a YEAR. It is good enough for me to have $100,000 a YEAR to be comfortable (even less, if i have been already working for 30 years, since i have accumulated wealth already). 
I cannot be jealous of something i don't need. What I am going to do with 3 million a year? There is a law of diminishing returns. Too much of something IS COMPLETELY USELESS. It is a waste of resources. It is like forgetting to close the tap, the water just wastes away, it could hae been put to better users. THAT IS THE WHOLE POINT. Not Jealousy.

Another reader suggested that our PM is much better than President Obama, so he deserves his salary. Even if I agree with the reason he gave (which I don't), where do we stop - pay LHL 5 times Obama's salary? Why not 6 times? Why not 10 times? How about 100 times? How do you calculate the number that leads to their salaries, if they are so good?

I went to the Minsitery of Finance Singapore Budget website and check out the Prime Minister's Office staff costs. It was only about 0.3 % of the Total 2010 Budget of Expenditure of Singapore. Oh yes, if you compute salaries by relating to budget of the country, you may say 0.3% is peanuts. But this is unfair playing with statistics.

I give example: An agent who spent 1 hour selling a $1 million house gets commission of 2%($20,000). He coud spent the same time to sell a $100,000 house and get only $2,000. Is there significant difference between the efforts made selling a bigger house and a smaller house, to justify such a huge commission? Commission is a dirty word, because 
the percentage cuts are pegged to items which don't necessarily relate to the effort put in. Same as in the political scenario as per the salary.

Finally, the argument that "we should move on and stop grumbling about their salary". It is none of my business if CEO of XYZ company gets paid huge amounts. It is a commercial entity and the company is profit driven and can pay him what they like to. However, minister's salary are TAXPAYERS money at source. Taxpayers money can be allocated to many other areas of development in a country, unlike a commercial private company which is duty bpund only to make profits and nothing else.

Open your eyes big big.
Do not be like a deaf frog, cannot hear.
Do not be like sheep ready to be led to slaughter, day after day, year after year.


Review of GST

Malaysia has decided to defer the implementation of GST (goods and services tax or value added tax) for the forseeable future. They cited the burden and difficulty to low and middle income earners. A similar move by Hong Kong a few years ago was shelved for the same reason.

Why is GST, which is a part of the taxation landscape in the western countries, not acceptable to these Asian countries? I guess the key reason is the lack of a minimum wage and the wide disparity of income in the Asian countries. In this economic environment, GST will be a burden to the low income earners.

I have another strong objection to GST. It is a wasteful tax. It adds to the cost of doing business. The actual cost to business (and ultimately paid by consumers) is much higher than the revenue collected by the state. This situation applies to Singapore as well.

I suggest that GST in Singapore should be replaced by a flat rate tax of 4 percent on salaries and profits. A special approach will have to be taken for investment income (to be discussed separately). The employer can be allowed to recover the flat rate tax of 4% on salaries earned above $1,000 per month and will absorb this cost for employees earning below this salary.

Tan Kin Lian

Sunday, March 14, 2010

History of productivity in Singapore

Read this article.

Count on PM Lee - Dick Lee

 Here is a new version of our Singapore song.

Land banking in UK

Read this article from a UK newspaper.

The Consummate Joker

Read this article.

Pay of Government Leaders

Click here.

Willingness to change

Many people think that the older workers are not prepared to implement change, and that younger workers are more daring.

From my observation, this trait of "fear to change" apply to both older and younger workers. In many cases, the younger workers are less willing to change, as they do not have the experience to manage change, and are more fearful of its negative impacts.

The fear to change is a large part of the cautious approach of Singaporeans, and reflects the unwillingness to take risk.

There is also a tendency to focus on the negative, i.e. "what can go wrong"  rather than the positive, "what are the advantage to be gained by making the change?"

We have to go a long way to change the culture and the mindset of Singaporeans. But, it is a challenge that must be taken. For nearly three decades, we have spent time to "say the right things" but have not gone into the root of the problem.

This is the first change to make, i.e. to change our approach towards making a change.

Tan Kin Lian

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