Saturday, November 19, 2011

Cinnamon Lakeside Hotel, Colombo

I am staying at the Cinnamon Lakeside Hotel. The service is excellent. The staff are knowledgeable and helpful. It is the best service that I have experienced in a hotel. Here are some photos of the view from the balcony overlooking Cinnamon Lake and of the breadfast at the executive lounge of the hotel.

I tried Kiri Bath, which is rice baked with coconut. It was delicious.

I had to connect three devices to the wifi network of the hotel. The I.T. staff came to my room to allow the multi-access. He was knowledgeable and got all of them working soon. He also told me what the issue was and how he solved them.He logged into his server to allow access to the 3 devices.

Make better use of natural resources

During the past two decades, we have been over-consuming our natural resources. We extract the mineral resources at low prices and used the low wages in developing economies of Asia to manufacture products at low prices. The prices are so low that it is better to buy and throw away, rather than repair them, when they become faulty. We neglect to count the cost of disposal, and dispose products in a manner that damages the environment.

The days of low prices is probably over. We now see ballooning prices for mineral oil, gold, silver and other commodities. Food prices are escalating.  Wages are also escalating in many countries are also moving up. The flood in Thailand, tsunami in Japan and other natural disasters are reducing supply and jacking up costs.

The days of cheap manufactured products are over. We have to get used to more expensive products and have to use them more carefully. We have to change our wasteful habits. This education process has to start with our young people, as they are brought up in a wasteful environment.

Make your own flexible annuity

This article explains that you can get a higher annuity when you buy it at a time when interest rate is high. But, the problem is that you do not know whether interest rate will go higher or will fall. So, you may be waiting for a long time.

A better way is to have a flexible annuity that you build on your own. This is explained in my Financial Planning workshop that is held on 26 November 2011.

Friday, November 18, 2011

Colombo, Sri Lanka

I will be in Colombo, Sri Lanka for the next five days to attend a conference and also to take a holiday. I am staying at the Cinnamon Lakeside Hotel. The staff are polite and helpful. This is the best service that I have experience in my years of travelling.

Tips on life insurance coverage

A young man asked me, "How much life insurance do I need and what type of policy to buy?" The answer can be found here:

The world’s local bank... but I wish it wasn’t!

Contributed by Anthony Hobrow

I am trying to get my partner a joint bank account with me and a credit card. This will take two weeks the bank says. BUT worse is that the bank regards this as a new relationship requiring another minimum holding of S$200,000. This is for a customer who has been loyal to this bank for 43 years!! So if I complied I would have S$400,000 on deposit with this bank, earning almost zero interest. Luckily I had my London branch manager fix it for me and I have not had to do the deposits. I am not sure it is good that this bank is the world’s local bank – it seems to me they are hugely better in London than here in Singapore. Ten days on and I still don’t have the new cards or accounts!!

They even told me I couldn’t change my relationship manager unless I started a new account. Believe me, we have no relationship and a fresh start with someone new is in the interests of both me and the bank!

Anthony Hobrow
Direct Asia

How to buy Term Insurance

Hi Mr. Tan, I am so happy to find your blog where provides me some good advises for buying insurance. I know that you suggest people to buy "term" and invest " ETF". I agree with your points to do so. However I found it is not easy to find " guaranteed renewal term" policies. Can you please advise. 

Read this FAQ

Thursday, November 17, 2011

Cheating - as defined in the Penal Code of Singapore

Cheating – Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he or she would not do or omit if he or she were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".For example, A cheats if he intentionally deceives Z into a belief that A means to repay any money that Z may lend to him when A does not intend to repay it, and thereby dishonestly induces Z to lend him money.Cheating is punished with imprisonment of up to one year, or a fine, or both.
Cheating is a crime and action has to be taken by the state, i.e. it is not a civil matter. If a person deceives another person and receives money from the victim, the person is committing the crime of "cheating".

If a forex trainer claims that his technique is guaranteed to make money, and the representations are false, the trainer is deceiving the students and can be charged for the crime of "cheating" them of the fees that are being paid.

Effect of Deduction

Hi Mr Tan.
I am signing a policy soon. But I don't understand what the effect of deduction is. It's a AXA policy called INSPIRE FLEXI 2. After reading your blog, I tried to do the calculation but am more puzzled. Attached are the 3 pages of the illustrations. I hope that you can advise me.

The Effect of Deduction is the amount taken away from your future savings. You can see that this is a large amount. Why are you investing in a life insurance policy when so much is being taken away?

It is better for you to invest on your own, e.g. in the STI ETF, as advised in my book. You can buy term insurance for your life insurance protection. Please read my books for a better understanding on this matter.

You can also attend the FISCA talk on 26 Nov 2011 - register here:

In the meantime, you should not take up the life insurance policy, especially as you do not understand these important matters.

Ask Mr. Tan

I have received question from readers of my blog on life insurance and financial planning. I usually ask them to read my books which are available from Often, the answers can be found in these books. In the future, I will ask them to make a donation of $200 to FISCA, before I look into their question.

Higher business costs

I met the owner of a chain of coffee shops. He told me that his business is being squeezed by higher rentals and shortage of manpower. His employees keep resigning, as they can get better wages elsewhere, after the government clamped down on the work passes. He feels the pressure of squeezed margins.

I said that to look at this matter in a different perspective. The higher rentals and wages apply to all of his competitors, and does not hit him alone. So, the higher costs will have to be translated into higher retail prices for his products. As long as he is more efficient that his competitors - and he is selling this coffee and breakfast at lower prices - he will be able to do well. People will still need breakfast and coffee, so they will continue to patronize his outlets, even after he has adjusted his prices to cope with the higher costs.

Higher prices are bad for the consumers - but this has to be solved at the government level - to moderate the rentals for business outlets. It is good for wages to be adjusted upwards, as the workers need to earn enough to feed their family.

I welcome the move by the government to build more markets at HDB estates - and hope that these outlets will be rented at non-tender prices. If they are at moderate levels, it will help to moderate the rentals in the private sector as well.

Flexible Pensions

The state pension systems adopted in many advanced countries are now in deficit, due to ballooning cost and under-funding. This does not mean that the pension system is inferior to the provident fund system (such as the Central Provident Fund operated in Singapore). The provident fund system also has its pitfalls.

The key weakness of the pension system is its rigidity. It aims to pay the pension in predetermined amounts when asset values and economic conditions can fluctuate significantly. A better solution, which has not been tried, is to have flexible pensions, i.e. the amounts will be changed according to the underlying value of the assets. This type of flexible values are already embodied in mutual fund investments and can be applied to make pension payments flexible and keep the system solvent over the long term.

There are two key advantages in the pension system. First, it provides for pooling of investments over the long term, by professional fund managers. This is much better than allowing the retirees to take out their provident fund savings to invest on their own - as most lay people cannot manage their own investments.

The second benefit is the pooling of longevity risks. Those who die younger draw out less, and allows the pension fund to pay the pensions to those who live longer.

The fear about insolvent pension schemes can be addressed by building in the flexibility to the pension payments.  In good economic times, the pensions can be bigger. In bad times, they can be smaller. The pensioner can cope with fluctuating pension amounts (provided that the adjustments are modest and made every six months). When they receive a smaller payment during an economic downturn, the cost of living will probably be lower - so the smaller pension payments may still be adequate.

It is time for Singapore to convert CPF Life into a flexible pension scheme and to make it attractive for retirees to invest their savings (other than the CPF minimum sum) in a sound pension scheme.

Wednesday, November 16, 2011

FISCA Financial Planning Workshop - 26 Nov 2011

The next FISCA financial planning workshop is available for registration now at
The last workshop was well received. Here are two feedbacks:
Ong:  I think the seminar is very relevant especially for young people who have recently joined the job market. It can really help make good investment decisions and avoid pitfalls that could ruin people's lives. The talks on Financial Planning today were both interesting and enlightening. Mr Tan Kin Lian's delivery is frank and very helpful, especially in understanding financial planning and  insurance policies. Kindly keep me inform of his future talks.
Najmi: Thank you for such an informative session earlier. I thoroughly enjoyed it and learnt a lot from you and Mr Ling today.  
One participant sent an e-mail to all his friends to recommend that they attend the workshop.

Rates of GST

Here are the current rates of GST adopted in various countries:

Australia 10%
Canada 5%
Hong Kong (abandoned)
India (to be introduced in 2012, rate not decided)
New Zealand 15%
Singapore 7%
Germany 19%
Japan 7%
Sweden 25%
UK 20%

I am not able to draw any conclusion on this matter. I dislike GST and prefer the government revenue to come from income tax. But, it seemed that many countries are implementing GST.

My view: In Singapore's case, there is no need to have GST as the government collects a lot of revenue on sale of land and vehicle tax. Furthermore, welfare benefits in Singapore is quite low. We are in a similar situation as Hong Kong, which does not have GST. 

Inefficient and bureaucratic bank process

Contributed by Anthony Hobrow

Banking in Singapore leaves me frustrated at every turn. I am not sure how much is the fault of the bank and how much is detailed regulation by MAS but the end result is a system where there appears to be no authority granted to the front line, excessive paperwork and very long process times. It is not the same in London.

With the same international bank I can get an overdraft facility in one short phone call. Here it has taken paperwork and two weeks! I even had to provide copy payslips when the bank has access to every receipt and payment in my account in UK and in Singapore and has access to 40 years of my banking history!! What possible purpose can a payslip serve?

I needed a new credit card as my card failed sometimes to work when I was travelling. In UK this would have been couriered next day to wherever I was. Singapore could not send me a new card. I had to be with a faulty card until the end of my trip and then collect a new one when I got back. BUT the worst thing was they cancelled my old card and took the account off the internet banking facility, before I had the new one! The card was not lost or stolen, just worn and intermittently didn’t swipe well.

Anthony Hobrow

Direct Asia

Mortgage insurer in big deficit

It seems that there will be extremely difficult times ahead for the USA. The Federal Housing Agency insures the mortgages on many homes. They are facing a big deficit and need to be bailed out by the Government. Wow!

If we look at the problem of the housing market in the USA, the lesson is that property prices should not be allowed to go up too high - as it will eventually have to burst. A good benchmark in the past is that property prices should be 3 years of the average income of the main bread winner (and excludes the income of the spouse). The USA has allowed the property prices to go up under a deregulated environment - and is now suffering the pain of adjustment.

The situation in Singapore is worse, as our property prices - in relation to the average income - is worse than USA. It is now being propped up by foreign buying - but we cannot count on this source of support for a long time. (Note: Dubai was in a similar situation with its property market at a high level due to foreign funds, but it has now burst.)

Bank failed to get customers to accept fees

Pension and provident fund

There is a difference between the operations of a pension fund and a provident fund. A pension fund promises fixed benefits to the pensioners and may face a deficit when the value of its assets fall below its obligations. This is explained here:

In a provident fund, the amount due to the members vary according to the value of the assets. If the assets earn a low yield, the interest credited can be quite small and may fall below the rate of inflation. The members have to bear the fluctuations of the market.

I am personally in favor of a provident fund system, as it is better for the risks to be spread among its members, rather than in the government. But, it is also important that the provident fund be invested efficiently to earn a market rate of return for its members, and the administration expenses, including the cost of managing the investments, be kept at a low level (which is possible due to the economy of scale).

The Central Provident Fund in Singapore started on the right track, but over the years, it has grown to be too complicated. It is time to move back to its basics.

Better to have small businesses

A good economic system has many small businesses that compete in the market to offer good service at a transparent price. You can see many good examples in the retail trade, food and in hair dressing, tailoring and other personal services.

Large businesses are needed for manufacturing, but the distribution can be done through small retailers. This is the model for the sale of household and electronic products.

It should be possible for banking services to be operated by small banks who can serve the customers in the community for banking services. There is no need for each bank to develop an expensive computer system, as they can tap into a common system, similar to the arrangement where the Singapore Exchange provide a centralized service to the stockbrokers.

The argument that we need big banks to be able to afford the investment in computer system to operate efficiently is flawed. It has led to large banks increasing their profits to excessive levels, by charging high fees to customers, and also engaging in risky trading. We now have the situation of "too big to fail" when banks make big losses on their large bets - which has to happen from time to time.  We need to make banks smaller, so that they can be subject to the discipline of the market. See

There is a similarity with the operations of large transport and telephone companies. There is a similar argument that they need to be large to afford the investment in the infrastructure. It is easy for these large businesses to abuse their pricing power to make big profits. A better approach is for the infrastructure to be developed and owned by the state and rented out to the service providers.

The current business model in many countries, including Singapore, favors big businesses, but it also leads to excessive profit margins for these businesses - leading to higher cost for consumers. We need to have a new economic and business model for the future.

Scam - invest in gold bars

This is a way for the scammer to mark up the price of the gold bar by 23%, without the investor realizing it. The scammer distracts the investors by offering a complicated structure of interest payment, buy back guarantee and delivery of the physical gold bar. The investor overlooked checking the real price of gold.

Tuesday, November 15, 2011

Live trading account shows profit

There were a few comments about a particular forex trainer who was able to impress the audience with a live trading account that showed profit. If I want to deceive people, I can also show a live trading account that shows profit for the previous day, and I can do it on any day. How do I do this impressive show? Make a guess. It is not difficult - for people who knows how to perform magic!

Positive experience with online website

I have made online bookings with a few airlines. My best experience is with Sri Lanka Airlines. Their website is simple. I completed the online booking with little effort and quite quickly. They focused on what needed to be done, and did not distract the customer with options that are not really needed.

Simplify and make life better

I have quoted a few examples about how things are being done in Singapore that lead to a stressful life ,  unnecessary work and expenses. They are caused by blind adherence to rules, disregard for the trouble caused to the other party and excessive focus on security (even for small amounts or risks). I have also suggested some practical ways to simplify these processes for the benefit of the customers and the staff.

We should be ready to ask "Can we simplify the way that things can be done, to make life easier for all?" I like to ask my readers to help identify other issues and suggest how they can be simplified.

Bank fees

Banks are adding new fees and increasing existing fees to boost their profits. This is happening in America and is likely to be implemented in Singapore in the future.

Monday, November 14, 2011

Difficulty with booking an air ticket

I booked a ticket with JetStar. Their website is slow and buggy, so it was quite a hassle to make a booking. They offer many complicated and unnecessary choices - which are meant to give additional marketing revenue, but increased the difficulty of using the website.

After going through the hassle of selecting the itinery and the seats, I had to make payment. I painfully entered the details of my credit card (as MAS refused to allow the airline to store the credit card details) and confirmed the payment. I had next to wait to receive a verification code sent to the mobile phone. When it arrived (after some delay), I entered the verification code. There was a long wait and finally the website went blank. I clicked on another webpage and found that the payment was not processed - as the verification code had expired.

I went through the pain of making another booking. This time, it was rejected as it was a "duplicate booking". I am unable to recall the previous booking, so I deleted the original booking and make a new booking.
My third booking was  rejected as a "duplicate booking". So, I am now caught in limbo and don't know what to do. I searched for the hotline of Jetstar and could not find it.

I draw this conclusion - the website designers try to put in too many options, which made the process complicated. MAS comes in to impose requirements in the name of security, but no one looks at the whole process and think about simplifying the process for the consumer.

Creating hassle

I wrote a cheque for ABC Property for $1,000. There was a mistake in the name - as it should be ABC Properties. The bank refused to bank in the cheque. They refused to call me to verify if I had intended it to be for ABC Properties. They just returned the cheque for correction.  It had to be sent to the payee who has to mail it to me. And I have to mail it back.

Wow - this is Singapore! All this hassle for a relatively small sum. The bank is so rigid and so unthinking; the staff prefer to avoid responsibility and stick to the rules blindly. Do you wonder why life is so stressful and costly in Singapore? The reason is found all over the place!

Difficulty with Open Net

I had a lot of difficulty with Open Net. A few months ago, they sent me a letter asking to arrange for installation of Open Net in my home. I responded.

Their engineers were not able to install the line. There was some problem that involved the PUB. I do not understand what the problem was. The matter was not attended for four months.

This morning, I called the hotline of Open Net to find out the status. I made many calls over two hours. Their automated system keeps saying "all our lines are busy". Busy - the whole morning? No indication on when they are able to take my call? I wonder if they really have any staff answering the phone calls!

This type of bad service is quite common with many organisations in Singapore - government agencies and businesses. I suspect that they created so much hassle with their regulations and procedures that they staff are not able to cope with the calls for assistance.

Let me relate my experience with a telco in Cambodia. They may be less advanced in their infrastructure, but they have much better service on their call centers. When I was placed on hold, the message was ... "you are placed 5th in the queue". This keeps reducing on each announcement. I did not have to wait long to be served.

How an expatriate avoided mis-selling by his bank

Dear Mr. Tan,

Soon after I moved to Singapore I was offered an investment product from one of the world’s largest banks. It purported to guarantee me a return about four times higher than the then interest rate on deposits. I asked what the risk was and how the product worked; clearly there was risk – the bank was not going to pay me all that return for nothing. The bank representative was totally unable to explain the product or the risk and just ended up saying “well a lot of my customers bought it and they never asked me questions like you do”!! All I can say is more fool them if they bought without understanding. It was a gamble by the way on the movements between two currencies. As for the Bank..well to be mis-selling in this age of increased regulation and supposed consumer protection is indeed staggering.

Golden rules. If you don’t understand the product; don’t buy. If salespeople cannot explain a product in simple, clear language, devoid of jargon, then they don’t understand it; don’t buy. If it sounds too good to be true; don’t buy.

Anthony Hobrow

Direct Asia

Blind adherence to rules

I am worried about several negative aspects of the Singapore mindset. One is the blind adherence to rules. We follow rules blindly and are not prepared to make exceptions, even when the consequence is negligible and helps to remove stress for other people.

Recently, I have to make the final payment for the purchase of my office. I have to apply for a cashier order (i.e. the vendor's lawyer will not accept my company's cheque). I also have to visit my lawyer's office with the company stamp and with the secretary to sign the documents in front of the lawyer. Why are all these requirements necessary? The roads were congested and there were insufficient parking space in the lawyer's office - so this requirement adds to the hassle and the cost.

The lawyer's assistant checked the cashier order thoroughly and found that the amount was short by 2 cents. Sorry, the cashier order cannot be accepted. She called the lawyer for the vendor who said that the amount has to be exact. I was asked to apply for another cashier order and to make another appointment to finalise the formalities. I lost my temper.

Finally, they agreed to take my 10 cents in coin to make up the difference. This will save me the cost of another cashier order (I don't know how much I am being fleeced) and a lot of money and hassle to make another trip.

I have seen so many examples of blind adherence to rules in Singapore. I am worried for the future of our country.

Playing with fire

Banks are supposed to do an honest business by taking money from depositors and lending them to businesses at a higher interest rate and to make profits from the spread in interest rate, less the operating expenses. To make profit, they have to work hard, provide good service to their customers, work efficiently and earn an honest profit.

But, the banks found an easier way to make super profits. During an economic slowdown, when savers are risk averse and accept negligible interest rate, the banks used the money to speculate in all types of asset classes - housing, forex and government debts. It seemed so easy to make money, especially on government debt which was considered to be "safe". They can make a good margin on lending money to the government to earn a high interest rate - better than the money lent to businesses.

But,governments can become insolvent. We now have a situation where the government of several European countries are not able to repay their debts and found it difficult to refinance their short term borrowings. This is the crisis in Greece and possibly Italy. When these governments cannot repay their debts, the European banks that bought their debts get into financial difficulty, causing a potential banking crisis.

Banks should be required to go back to their traditional business of handling payments and giving loans to small businesses. They should not be speculators in asset classes, including government debts. These asset classes should be invested by mutual funds.

Sunday, November 13, 2011

Bright Sudoku - qualify to be a Sudoka master

Do you qualify to be a Sudoku master? You can practice Sudoku and move up the grades, starting from white belt up to black belt (grade 7) and finally red belt (grade 8). This app available now on the Nokia platform and will soon be available on the Apple platform (iPhone & iPad). Watch this video:

Getting people to enrol for Forex training course

Dear Mr. Tan,
I heard from a friend who went his preview about how X (a forex trainer) slashed and reduced course price to attract people to join his course. My friend felt X was treating the audience like clowns. He mentioned X slashed the price until around $300. While everyone was running to the back to sign up, he then finish writing $300 per month, and not just $300.

I have attended other seminars before and I think it is normal, but not to the extent of not finish writing to somehow cheat people. Most people would just state their actual course fee was (example) $20k, slashed to $10k, $5k, eventually $2.5k to make people think they are having great deals (not just Forex).

Regarding the (named removed) website, I saw people complaining about him writing $X amount per month installment which added up to be more than the course fees. I believe it was 0% interest just like most schools are doing now. After searching around online for feedbacks, I felt many people are complaining about him that he is more of a motivational speaker and sales person than a trainer. I watched some videos of his and I felt too.

Hopefully people could be more caution before signing up for courses.

Staged accidents

A staged accident is created by a syndicate involving a criminal workshop. The workshop boss arranged for an accomplice to drive on the expressway and brake suddenly, causing the following vehicle to crash into its rear. Another accomplice will appear quickly with a tow truck to bring the accident vehicles for repair. This will be followed by a big repair bill for the vehicle in front (which belonged to the syndicate).

This type of staged accidents had been happening for many years, but nobody bothered to take any action. One day, the driver of the following vehicle was the son or a prominent politician. He related the matter to his father who brought up the matter to the authority. This caused the authority to take action. For the next few days, there were big stories in the media and the term "staged accidents" was coined. There was a furor, because this was considered to be reckless driving.

This happened in a certain country about 10 years ago. Guess the name of this country, where nobody takes action until it involves an important person's family member?

Re-admission to Universal Studio

The rules of Universal Studio Singapore said that "for same day admission, you must present the Studio admission ticket and hand stamp for re-entry".

I recall visiting the theme parks in America where they recognize the hand stamp (or similar tags). They do not require the admission ticket to be shown as well. I wonder if this reflects the peculiar  requirements in Singapore - where it is usual to add to the hassle for customers?

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