Saturday, January 29, 2011

Singapore's national debt is high

Dear Mr. Tan
Please refer to Looking at the above site, USA, Canada, Western Europe, Japan and SINGAPORE seems to be having serious national debt problem. Is Singapore is worst than USA since debt per person for Sgp is $41.7k while USA is $25.8k. Do educate, thanks.

I am not familiar with this topic. I will post your question and ask other people to comment.

Family Life 1.1 is now in beta mode

The game can now be played at:

It can be quite fun. Try it. Here is the description of the game:

A video will be prepared soon.

Friday, January 28, 2011

A bad investment product

The investment-linked policy is probably one of the worst type of investment that is sold to a consumer in Singapore. Here are the reasons:
  • The consumer takes the investment risks, without any commensurate return
  • The consumer is locked into the policy due to the excessive upfront charge
  • The insurance company levies a high fee to manage the investments
  • The insurance company is not good at investing the funds (generally)
With all of these negative factors, why are consumers investing in these policies? They are given bad advice by the financial adviser, who pushes the product to earn a fat commission. Some financial advisers tell lies to mislead the consumer. Other advisers are quite naive about the nature of these products and sincerely believe, quite wrongly, that they are helping the client to get a better yield compared to CPF.

Many investment linked polices have a reduction of yield of 4% p.a. If the investment earn 6%, the net yield to the consumer is 2%. This is a poor yield for locking up the money for 25 years. It is not sufficient to cover inflation. It is a very poor yield, considering that the consumers takes all of the investment risk. I wonder why the regulator allow consumers to be given such a bad deal on their long term savings.

At least whole life and endowment policies provide some guarantee for the policyholder, in return for the low yield.

If you can find an investment linked policy that takes away less than 1% per annum for the management fee, and invest 100% of the premium from the first month (i.e. the premium is not used to pay commission and other distribution cost), then the investment linked policy is acceptable. So far, there is no such policy in the market. The best choice is to invest in the STI exchange traded fund, available in SGX.

Tan Kin Lian

US Financial Crisis Inquiry Commission

Here is the report of the inquiry commission set up by the US government to look into the causes of the financial crisis of 2008.

It concluded that the crisis was caused by a number of factors:
  • Failures in financial regulation, including the Federal Reserve's failure "to stem the tide of toxic mortgages"
  • A breakdown in corporate governance that led to "reckless" actions and excessive risk taking by financial institutions
  • Households taking on too much debt
  • A lack of understanding of the financial system on the part of policymakers
  • Fundamental breaches in accountability and ethics "at all levels".
My comments
It is frank and direct to the point - no hiding of the truth.

Sample financial plans

Here are the sample financial plans for:

Age 25
Age 35
Age 60

The reflect the financial situation of people at various stages of their life. You can view the financial plans to understand the approach and request for a projection for your own situation in this website,

Even those who approach retirement need a financial strategy on how to invest their retirement savings to get a good yield. The sample projections show the importance of:
  • Adjusting the capital sum and monthly income at retirement for the effect of inflation
  • Getting a yield at least 2% higher than inflation
  • Avoid buying the bad financial products that gives a low yield or have high risks.
Tan Kin Lian

Thursday, January 27, 2011

Unethical practice by insurance agents

I recently came across a practice by some agents which i find rather uncomfortable. But there is nothing much I can do about it so I hope you can raise some awareness about this so as to prevent more people from falling victim.

The scenario is as follow: Agent/financial advisor went back to all his/her existing/orphan clients with an regular ILP plan and told them about a new plan which is a similar ILP(change in version/name) and advise them that they can get more coverage with the same regular premium. client took up the plan without realising that the first ILP will be going into non forfieture.

After 2 years, the client can terminate his first ILP and get back a sum of money.

This is very unethical as the client as the client could have avoid unnecessary charges by maintaining the initial plan instead of getting the new ILP.
Agent/FA gets away with the commsion, production as non forfieture is not considered as replacement for some Insurance company.

I guess you have better resources to educate the client or to engage the relavent department to put a stop to this. Hope to clear the bad name of insurance.

It is very sad that insurance agents are acting unethically and the insurance company and the regulator are not taking action to stop the abuse. This type of case is quite rampant. It is easy to catch the financial adviser who engage in this abuse, if the regulator is willing to take the trouble.

Big professional liability risk

Financial advisers are not aware that they face a big professional liability risk. They are selling large life insurance policies to high net worth individuals, without explaining  the distribution cost (more than $100,000) or the effect of deduction (more than $500,000).

When the customer learns about these huge charges at a later date, they are likely to engage a lawyer to sue the financial advisers for negligence. It will be easy for the lawyer to prove that the financial adviser had failed to give proper advice, or worse still, had deliberately withheld relevant information or misled the customer. The damages could be large and the legal fees will add to the damage. One strong argument is that the financial adviser had breached the code of ethics and professionalism.

The financial adviser will not be able to hide behind the excuse that "they are disclosed in the benefit illustration". It is the duty of the financial adviser to explain these key points to the customer, so that the customer can make an informed decision. The failure  to provide the proper explanation will be taken against the financial adviser - who has a fiduciary duty. The insurance company can get away by saying, "we rely on the financial adviser to give proper advice to the client" but it will be difficulty for the financial adviser to escape the liability.

It is likely that some lawyers may take the case for the consumer on a special understanding, similar to a contingency fee arrangement. When this type of arrangement is made, it is likely that many cases will be taken up. Financial advisers should be careful about their role, or they can be easily bankrupted by a few of these legal suits. The days of lax supervision and non-accountability may be over.

Tan Kin Lian

Unfair conversion rate

Dear Mr. Tan,
I am a customer of a bank and responded to their RMB timed deposit promotion, which pays an interest slightly above norm. The bank converted my existing savings in SGD into RMB at their "internal exchange rate" at 36 pips above market rate and did not get my prior approval to the conversion or provided any documentation of the transaction. Is this transaction fair to the consumer and is this valid?

It is not fair for the bank to convert your money at their exchange rate without getting your agreement to the rate. Here are the steps that you can take:

1. You can write a letter of complaint to the CEO of the bank giving your account of what has happened and why you felt that you were not fairly treated, i.e. if you were told about the conversion rate, you would not have placed the deposit. You can ask them to reduce the spread from 36 pips to say 10 pips or whatever you consider to be a fair rate.

2. If you do not get a satisfactory reply, you can lodge a complaint with FIDREC. See for the process. You can also pay $50 to FISCA ( for someone to help you to write the complaint.

3. You can also consider writing a letter to the newspaper.

Single Premium Heritage Plan

Dear Mr Tan
I will like to ask you on your opinion on Single Premium Heritage plan from Manulife Financial. Please advise if it a good plan for investment.

I find the policy to be quite complicated and not easy for me to understand. My advice to you is never to buy a policy that you do not understand, especially when you are putting in a large single premium.

It is the job of the agent to explain the policy to you. As the agent can earn a big commission by selling the policy to you, you should be wary that the agent may not tell you the full picture, so you should not invest your money until you are completely satisfied and has verified the details.

I saw that the distribution cost (i.e money taken from you) is more than $100,000 and the effect of deduction could be more than $1 million. Are you sure you want to give away so much money?

Beautiful scenes of Switzerland

Here are some beautiful scenes of Switzerland [Mike Hansford]

40% discount on books

Enjoy 40% discount on the 5 book bundle and other discounts at You can buy the bundle and share with your friends or present them as a gift.

Bundle of 5 books

Practical Guide on Financial Planning (enjoy 33% discount)

Lunar New Year Gift

Plan for retirement at age 65

Mr Tan,
What are your views on the raised retirement age? This would mean that an adult who joined the workforce at 25, has 40 years working. Does it change any traditional assumption that you make when planning, considering the assumption has always been 25 years?

In my financial planning tool, I advise people to plan for retiring at age 65. If they start work at 25, they have a working career of 40 years. They have to be prepared to be out of work for a few years during this period, due to voluntary or involuntary termination of employment. They can plan for a few years of further education, if their finances are adequate.

I advise people to buy term insurance for 25 years only, say from age 25 to 50 years. When they reach age 50, they should have adequate savings in the event of premature death or illness. By that time, their children are likely to have grown up. The financial planning tool can be found here. This financial plan is explained here.

Wednesday, January 26, 2011

Poor yield on Vivo-life

A consumer showed me the benefit illustration for a Vivo-life. He found that the deduction at the end of 25 years appeared to meet my benchmark of 20%. The deduction was 20% based on a gross yield of 3.75% and 32% at the gross yield of 5.25%.

I was surprised at the difference between the two deduction figures of 20% and 32%. The difference is too wide and does not make sense. It suggest to me that there is something wrong with the system of allocation of bonus to produce such wide results. I asked him to get the insurance company to confirm the figures. I am quite worried that as insurance companies introduce complicated and exotic tables of bonus rates, they may end up with mistakes that are quite unfair to certain groups of policyholders. I hope that MAS is paying attention to this feedback.

For the particular policy, the premium was paid for only 5 years. It is not appropriate to use my benchmark which is based on premiums being paid for 25 years. For the Vivo-policy, the calculation should be based on the premium period of 5 years. here are the figures:

A Prem
Gross yld
Net Yld

I was shocked that the cash value at the end of the premium payment period is lower than the total premiums. This gives a negative yield. The total deduction is excessive, as shown by the above table.

It does not make sense for a consumer to be paying $59,680 in premium for 5 years to get a cash value of only $53,349. The consumer loses $6,331 for 5 years. The cost of the insurance cover for 5 years should be probably be $500 (in total) and not $6,300. It is such a bad deal for the consumer!

Tan Kin Lian

Act with honor and integrity

I find it despicable for a corporation to impose a charge on an unsuspecting consumer and to waive the charge when the consumer finds out and make a protest. The corporation is behaving like a crook, without honor and integrity.

I was in Suntec Mall. A young man approached me to get me to subscribe for a credit card. He showed me a free gift. The annual fee is waived for the first year.

I asked, "What is the annual fee after the first year? ". He replied "aah, uuh, aah ...... $190". I walked away. He said "nobody pays the renewal fee. If you call the bank, they will waive it". I know that the bank will waive the annual fee for consumers who knows about it and who have the clout. They hope to make the fee on the unsuspecting  consumers who did not notice the charge or do not have the clout. I find this practice to be despicable, just like stealing. I refused to take the credit card.

I am writing with this strong language, knowing that some of my blog visitors are from the banks and are involved in this despicable practice. I hope that they agree with me, and will pass this message to their management. I also know that people from MAS read my blog. I hope that they will pass the message to their management also, so that they can take steps to get our banks and corporations to be more honorable in their dealings - and stop behaving like crooks.

Tan Kin Lian

Deposits with M V Land

This developer ask the owners to pay deposits before giving a permit to start renovation work or to move in the furniture. They may not have the legal right to impose these requirements. It is like asking for a ransom. Read this letter that I wrote to the directors of M V Land. I have to fax the letter to them, because they do not read e-mails sent to their company, even though they give out the e-mail address:

SingTel services to Tan Kin Lian & Associates

To Duty Manager, SingTel

My office is now in Ang Mo Kio Industrial Park 2A. I used two telephone lines (6555 5762 and another number) and have internet connection provided by SingTel. I am relocating my office to Midview City in 24 Sin Ming Lane #02-107.

My staff told me that SingTel will be charging the following fees to me:

  • Current charges for two lines is $80 per three months
  • One time relocation charges for two lines is $60 + $10 for registration for retention service
  • One time internet connect $60
  • Subsequent charges per three months are $80 (2 lines) and $48 (2 lines) for retention charges (retaining same tel numbers)
Please explain to me why you have to impose an internet connection charge of $60 and an additional charge of $48 every 3 months to retain the existing number (when there is no charge to get a new number). Are you incurring additional work or cost to provide these services? Or is SingTel just taking the opportunity to impose additional cost to your customers to boost your profits?

I wish to remind you that you are already getting subscription for the basic service. I hope that this is already sufficient to give you a profit without levying additional charges that are excessive.

Tan Kin Lian

How to buy Term Insurance

Hi Mr tan, is
Is there any group insurance that I can look into beside the SAF Group Insurance, because I am not eligible to join them.

If you are a SAFRA member or a Public Servant, you can try NTUC Income. If not, you can buy the a term insurance here:

Tuesday, January 25, 2011

Lion City 1957

Singapore in the old days, where life was enjoyable and not stressful.

Sale of insurance over the telephone

Hi Mr. Tan,
A couple of days ago, my elderly mother received a call from AA (automobile association) promoting some personal accident insurance. I always believed that consumers should only get insurance that fits our requirements and needs, but the lady on the phone was just trying very hard to sell the insurance. I feel that it is not the right thing to do because:

1) My mom does already have a personal accident insurance when she did not really needed it.

2) The marketing person was highlighting the benefits, but did not talk about the fine prints
3) Consumer are not able to read the terms and condition for insurance sales over the telephone.

My mom has been paying for an insurance bought from a marketeer over the telephone and was charged monthly on her credit card. This is misleading and not fair to consumers who are not street-wise. Can anything be done to protect or educate the general public?

I find it bad for insurance to be sold over the telephone. I am also against marketeers calling me on my mobile phone as they are intruding on my privacy and interrupting what I was doing. I will find some way to bring this matter up for public attention. I am quite angry that our government leaders and MPs do not seem to care about these types of issues.

Most capitalist country

My friend from Sweden, who had worked in Singapore for a few years previously, came back for a short visit. He was surprised at the high cost of living here. He said that milk powder in Cold Storage cost 4 times the price in Sweden. Most of the other items here are more expensive than Sweden.

He also said that Singapore has become the most capitalist country. I asked him to explain this statement. He saw two 20 year old condominiums in Holland being torn down to build new condominiums that are higher and smaller. While this can bring profit to the developer, it is wasteful to tear down a building that is still relatively new and replace it with smaller apartments in taller buildings. This must reduce the quality of the living space, for the sake of short term profit.

I agreed with this view. I have always been against the practice of tearing down relatively new buildings.

Tan Kin Lian

Lunar New Year Gift

My friend invited me for a grand dinner at his home. I gave him a few sets of my books as gift for him to give to the children that visits him on Lunar New Year. His wife remarked that it is innovative and better than the traditional ang pows.

Try this new and innovative way here.

Lunar New Year offer
Enjoy 50% discount on Tangram and Shape Quiz books when you buy 5 copies or more at my office ($3 each after discount, pay by cash)

BEST - business simulation game

I wish to introduce you to the BEST business simulation game.
You can click here:
Watch the video to learn how to play the game.
It develops your skill in running a business and is suitable for undergrads studying business and management.
It is free and fun. You can win a prize in the contests every night.

Tan Kin Lian

Monday, January 24, 2011

Excessive charges by SingTel

I am moving my office. Singtel wants to charge me $120 to move 2 telephone lines and 1 internet line. Actually, they are not moving any line. They are just changing their computer records. Why do they have to charge so much? I am writing to the manager of Singtel to get a written explanation.

They also want to charge me an additional $40 every quarter to retain my number. Why is this necessary? Are they incurring additional cost to retain the number? Are just finding an excuse to charge their customers to boost their profit? I am asking them for a written explanation.

I search their website for a statement on corporate social responsibility. I could not find any statement. The search button returned "no document found". At least Singtel is honest in declaring that they do not believe in corporate social responsibility - so they can charge their customer anyhow without feeling guilty about it.

Tan Kin Lian

Bad experience with M V Land

I continue to have bad experience with M V Land. They want me to pay them a deposit of $2,000 to allow me to move my furniture into the building. If I refuse to pay, they will stop my people to move in the furniture. This is highway robbery and holding people to ransom.

They probably feel that they need the deposit in case I cause damage to the building by moving their furniture. But they owe me $60,000 in renovation subsidy which they have paid to me. So, why do they need me to pay this $2,000 deposit? They are causing a lot of unnecessary work for themselves and for their customers. The arrogance of this developer is beyond belief. They act like the government.

Tan Kin Lian

SGEP Editorial

Read the new editorial in SGEP

Poor yield from Vivo-life policy

Dear Mr. Tan
I got a quote for a Vivolife policy from an agent. I did my calculation. Apparently, the effect of deduction on the 25th yr is far from your benchmark. I also calculated the actual yield of return which is roughly 2%.

I wondered whether is the current market now offers this kind of policy to me? As in most of the company offering roughly the same amount of deductions as well, hence offering even lower yield of return?

I have looked at the benefit illustraiton. As this policy requires the premium to be paid for 15 years, it is better to calculate the yield at the end of 15 years. The situation is worse than what you have calculated.

Taking the cash value at the end of 15 years, I found the yield to be between 0.2% to 1.1% The reduction in yield is 3.6% to 4.1% from the gross yield. My benchmark for the reduction in yield, to cover the cost of insurance and the investment service, is 1.5% for all durations. The deduction from the Vivo-life policy is far too high.

Is is better for you to invest in a low cost investment fund, such as an indexed fund or exchange traded fund, as explained in my book on financial planning. If you need insurance, you can buy insurance under the SAF group insurance scheme. Do not invest into any life insurance policy that provides a poor return.

Guaranteed Life Annuity

Dear Mr. Tan
I am 50 years old. I do not invest in shares and keep my money in the bank to earn a low rate of interest. An agent has told me about the guaranteed life annuity from NTUC. The agent said that it gives a return of 3 – 5% per annum and I can terminate the annuity anytime and get the principal back plus interest. If you retire early U can also start the annuity payment early. Appreciate your advice.

Please ask them to give you the benefit illustration. You can send it to me.
You should also buy my book on financial planning, to learn about better choices. See this brochure.

Potential fraud

I have been receiving this message regularly. I believe that it comes from a crook.

Dear Account User,

Due to anonymous registration of our email service,there would be removal of all unused Gmail Accounts.You will have to confirm if your E-mail is still active by filling out your login info below after clicking the reply button, or your account will be suspended within 24 hours for security reasons.

Customer ID:
Pas word:

Note: This email is only for Account owner.
Thank you for using Gmail !

Them Gmail Team

Sunday, January 23, 2011

North South Expressway

The Government is spending $7 to $8 billion on the North South Expressway. This is a lot of money. The money is better spent to improve the feeder services, e.g. to bring commuters from their homes to the MRT station or bus terminal with a shorter waiting and journey time and capping the cost at the current level.

If the feeder service is improved, like in Hong Kong, many people will prefer to take public transport to work, rather than drive their cars. If 30% in the current cars are taken off the road, there will be no need to expand the road network and expressway for the next 10 years or more. It will be a better solution over the long term, and is environmentally sustainable.

Tan Kin Lain

Why are insurance agents wealthy?

All around the world, insurance agents have thrived on the ignorance of consumers. They used the risk of premature death to get consumers to part with a large part of their savings to be invested to get a poor yield. The consumers are not aware that they can buy term insurance to cover the premature death for 7% of their savings and invest the 93% to get an attractive long term yield. Buy putting their savings with the insurance company, they stand to lose 40% of their savings.

The difference of 33% make the insurance agent a top income earner and give a lot of profit to the life insurance company - but make the ignorant consumer that much poorer.

The insurance agents are trained to tell all types of stories to get consumers to part with their savings in a low yield policy, such as insuring the child, protection against critical illness and health. The consumers are not aware that they are paying far too much for the insurance, and that they can buy the insurance at much lower cost, if they buy a pure term or critical illness rider (covering a short term). Most consumers need insurance fo 25 years only, as their accumulated savings will be more than sufficient to provide for their financial needs, without insurance.

By insuring for the whole of life, the consumer becomes poor for life. My remarks apply to whole life or investment linked policies that take away 40% of the accumulated savings over a 25 year period. It does not apply to a life insurance policy that takes away 20%, which is a fair rate to give away for the insurance cover and the investment service. If you can find an insurance policy that takes away 20% after 25 years, it is all right to buy that insurance policy.

My new book, "Get Value on your Life Insurance" shows how much is taken away from you - based on the popular life insurance policies sold in the market today. Most of them vary from 35% to 50%, which is far too  high. If you have bought a life insurance policy, you will probably find it mentioned in a case study in this book. The book will be available on 15 Febuary 2011 (tentative).

Read my book on financial planning for guidance on how you can buy term insurance and invest the savings on  your won - if you cannot find a life insurance policy that takes away less than 20% over 25 years.

Tan Kin Lian

Low yield on Endowment policy

A consumer is unhappy about the low yield on a 20 year endowment policy that has matured. The insurance company did not revised the bonus rates during 2010, although the financial market has recovered. He asked for my views. Here is my reply:

I believe that this yield of 2.96% on your policy is probably what is paid for similar policies offered by several other companies during the same period. It may be slightly on the low side, but is not significantly lower. The only exception is NTUC Income that offers a yield that is probably between 4% to 5% for the same period.

You are unhappy that there has not been a revision of bonus rate for the past year. I am not aware if other companies have increased their bonus rate for the same period. I suspect that most of them still keep to the same bonus rate.

It will be difficult for you to get the insurance company to increase its bonus rate or for an external party, such as CASE, to make them do so.

Tan Kin Lian

Practical Guide on Financial Planning - discount

This book is available at a discount of 33%

Demystifying child insurance plans

This article, posted in Reuters, explain why child insurance policies are not good for the child or the parent, but is good mainly for the distributor (i.e. the agent who earns a big commission).

A better way to save for the child's future is explained in my book, Practical Guide on Financial Planning. The parent should save in a low cost investment fund, i.e. an indexed fund or exchange traded fund.

Easysearch Portal

I have developed many useful applications. They can be found in this portal, When you have some free time, do try these applications. You can also see many of the mobile applications that I have developed from Click on the link for the mobile and web applications on the front page.

Guidance on your Financial Planning

Some readers asked me to recommend a financial planner to guide them on their financial planning. I know a financial planner who charges a fee of $200 per hour for that advice.  Most consumers find that to be too expensive.

There is another way that you can get the guidance for $50. You can carry out the preliminary work  by generating your personal financial plan using this tool and consult one of the experts listed in this FAQ.

By educating yourself with this financial plan, you can avoid wasting a few thousand dollars buying a bad insurance policy offered to you by an agent. This message is most important for young people who have just started work, as you will be targeted by many insurance agents.

Social and political issues

SGEP now has a good summary of the social and political issues affecting Singapore. It is taken from the blogs, local and international media. Do visit it daily to keep abreast. There is a further summary in an editorial which is written every few days - with special effort put in by the co-editor C H Yak.

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