Saturday, October 03, 2015

An easier way to make a refund

This is a cheque for $11 issued by Transit Link to refund the money to me. It is handwritten and carries two signatures. The staff must have spent much time to write the cheque, collect the two signatures and mail the cheque to me.
Now, I have to send time to bank in the cheque. And the bank will have to spend time to clear the cheque.
It would have been more efficient for Transit Link to refund the money to my credit card (the same one which the money was drawn from).
I hope that they will update their process. They should not continue an outdated process for so long.

GPS Navigation Software - AGIS and Google Map

I started to use the GPS Navigation system about 10 years ago. I found it to be very useful. I bought the special device from AGIS, which is a local company. I encouraged my friends to use them.

I found some difficulty in using their system. I provided feedback to AGIS on how to improve their system. They were practical suggestions on how to make their system easier to use for the ordinary users.

They were not listening. They gave many reasons why my suggestion could not be implemented.

Recently, I changed to Google Maps on my Android phone. I must say that their design is perfect. i do not have any issue with it. They seem to have given a lot of thought on how to make their app really easy to use, and to suit the ordinary people.

I was told that Google bought the software from an app developer.

If our local company AGIS had been listening, they could have improved their software and  sold their software to Google for a few  hundred million dollars.

Abuse of power

 In 1965, the government introduced Operation Cold Store to detain people whom they labeled as "communists". At that time, the newspapers painted a bad image of the detainees.

Many people now know the fuller facts from other side. Some of the detainees were wrongfully detained on allegations that were not substantiated. The families of the detainees were destroyed by the government action. Some  people consider the government action to be an abuse of their power.

This is what happens when the power is absolute and there is no check against the abuse of power.  This is also what happens when the ordinary people have full trust in the government to exercise its power honestly. This blind trust could lead to abuse of power.

During the early years of Hitler's Germany, many ordinary Germans felt that it was right for Hitler to act against the Jews, communists and trade unionists. It was necessary for the security of their country at that time. We now know what had happened.

It is dangerous for ordinary people to give absolute power to their leaders. The abuse of power may affect other people, but it could be your turn one day.

Can you see what is right?

Are you a person who can only see what is wrong? Can you see what is right? Are you able to take a stand? Why not give it a try, and cast your vote on the issues shown in this website.

Eradication of corruption

There is a country, which I shall not name, that has rampant corruption over the past decades.

The corruption exists in all sectors of their society and involves politicians, civil servants, the courts, tax authority and the law enforcers. The people knows about the corrupt practices and accepts it as part of their life.

This country has, in recent years, taken steps to reduce the corrupt practices. They created an  independent  bureau with the power to investigate and prosecute corrupt practices. They appoint people with integrity to manage the bureau. The people, by and large, respect the bureau and its office bearers (but there are exceptions).

This country also has an independent media. The newspapers are willing to write about the corrupt practices and to expose them. They could criticize the judgments passed by the courts or the actions, or lack of actions, taken by the law enforcers. They also expose the corrupt practices of the politicians.

The media are subject to law suits for defamation. But the exposed parties do not take the defamation suits as they are not certain of winning their case. They prefer to ignore the news reports knowing that there is insufficient evidence to prosecute them.

It is difficult to eradicate the corruption in this country. due to its long history of corrupt practices, but they are putting the framework to address this challenge.

In contrast, there is another country (which shall also be unnamed) that is respected for its clean practices. The civil servants generally act with integrity and dare not demand or  receive any bribe.

This country has a mainstream media that is quite tame. It does not write about corrupt practices.

Some bloggers use the social media to describe what could be an unethical or corrupt practice. Some of these bloggers have been threatened or sued for defamation. The law courts takes a harsh stand against allegations of corruption that could not be proved.

If there is any corrupt practices involving powerful politicians, it could hardly surface in the mainstream media. The law enforcers are under orders of the politicians. They do not act independently.

Which country will have a better future - the first or the second?

Tax evasion and tax avoidance

What is the difference between tax evasion and tax avoidance?

Here is the simple answer. Tax evasion is illegal and the taxpayer could be sent to jail or pay to pay a big penalty. Tax avoidance is legal.

Here is a fuller answer.

1) In both cases, the government does not receive any tax on the specific earnings of the tax-payer.

2) Tax avoidance is ethically wrong, as the tax payer is not paying tax on earnings that have been avoided.

3) The tax payer, who is usually a super rich person, can avoid the tax by paying large fees to accountants and lawyers to look for loopholes in the tax code and device schemes to avoid the tax. The loss of tax revenue to the government  is the gain of the accountants, lawyers and the tax payer.

4) The super rich person could include a wealthy, corrupt politician, who has a vested interest in creating tax loop holes that he can use. 

What's Wrong #7 - Making refund

Some companies and government agencies in Singapore prefer to make refunds by cheque. They refuse to adopt a more efficient way to refund the money, such as crediting the credit card or bank account where the initial payment was made.

Why are they reluctant to change?

It could be plain laziness. It could be lack of initiative. They could be waiting for someone above them to tell them to change.

But, it could be due to dishonesty. The refund cheque could have got lost in the post or have been overlooked by the payee.

When the refund cheque are not banked in for six months, the paying company or agency is able to write back the refund and treat it as revenue for their organization.

What's wrong?
It is costly and inefficient for the economy, for the bank, for the business and the customer to continue with the old practice. This cost is borne by other parties, and not just the payer.

It is dishonest for the payer to benefit from the failure of the payee to bank in the refund cheque. They payer will continue with the inefficient and outmoded practice.

How to put it right
The government should pass a law that require all unclaimed refunds to be donated to a charity. The paying company or agency cannot benefit from the unclaimed refunds. 

If the unclaimed refund in a year is less than a threshold, this requirement can be exempted.

Friday, October 02, 2015

Get experienced people to head the Education Ministry

PM Lee appointed two ministers for the Education Ministry who do not have any experience in this field.
It would have been better for him to appoint experienced people from outside of Parliament. He would have access to a larger pool of people with the expertise and experience.
Do you agree?
You can vote on this issue in the Wisdom of the Crowd website.

Win sports medals "fairly"

Hi Mr Tan,
I just read some article and comments on facebook regrading china bought player winning silver for singapore in a recent table tennis Asean championship. There are some comment saying that we singaporean ancestor are immigrant of china and we should respect this.

I have a few thoughts i like to share with you.

There are always people mentioning that singaporeans are immigrant from china and india and we should still allow this culture as singapore is a diverse country. What they do not realize is that, this happen 100 years ago during colony time.

Their logic are telling me that, spanish immigrant to america and african taken from africa to america as slaves 100 years ago. So current america should let in the whole of spanish and african freely.

Coming to foreigner bought talent to play for games. This have been a topic for decade. Personally i felt that this is not an honorable thing, nothing to be proud of. If its a singaporean, born, breed, train and fought for singapore in the game, then its a true pride. Even if he does not get qualify or a gold medal(like how we been doing for world cup) it is still an honorable try and we have to face it that singaporean is at that level and try harder next time.

Buying players from china to play for singapore is not an honorable thing. This make many young singaporean loses interest in sport or become a full time athletics. This is very unhealthy for singapore.

I agree with your views. If we want to win medals, we should win them "fairly".

Thursday, October 01, 2015

Should I invest in an ETF or an actively managed fund?

An exchange traded fund (ETF) or index fund is "passively managed". It is invested in the component stocks of a stock market index, such as the Straits Times Index in Singapore or the S&P 500 index in America.

An actively managed fund or unit trust is invested more actively according to the discretion and skill of the fund manager.

Here are some key points that you should be aware of.

a)  The annual charges in an ETF is about 0.3%. The annual charges for an actively managed fund could be 1% to 3%. The difference of 2% in the charges can amount to more than 20% for an investment that is held for 10 years. The difference will be much more, if the investment is held for 20 or 30 years.

b)  The active fund manager may claim that they can produce a better return than the market index as they use their judgment to pick the better stocks. However, independent studies have shown that this claim is not true. On average, the active fund managers performed worse that the stock market index (even before deducting fees) over a long period.  Some active managers may better better, but others perform worse. The average performance is worse than the market.

c)  The active fund managers may speculate and bet large sums on certain stocks. They may show a better return over the short term. When the market turns for these speculative bets, they will show a poor return. They are likely to sell the speculative bets at a bad time. This leads to a poorer return on average.

d)  Some dishonest fund managers may buy a few bad stocks for their funds. They pay a higher price than what the bad stocks are really worth. They may get hidden commission or bribes for buying these bad stocks. They will usually invest only a small portion of their funds in these bad stocks, so that the bad results are not obvious. But their funds will show a poorer return, than average, due to these bad stocks.

e)  An index fund or ETF is usually better diversified. It is invested in a more shares covering most of the sectors. The sectors may have their own cycles, but over the long terms, say 10 to 20 years, the cycles will average out.

To avoid the risks of investing in actively managed funds or unit trusts, I usually advice the ordinary investors to invest in an index fund or ETF. They do not need to spend time to select the capable, prudent or honest fund managers. They do not have reliable information to make the right selection.

Just invest in the ETF to enjoy low annual fees and better diversification and free of worry.

Principles of long term investing

The drop in the stock market has got some investors into a panic. They are badly advised on investments, in spite of paying high fees. Here is an example.

Dear Sir
I purchased a fairly large amount of Unit Trust ( Blackrock Global Multi Asset Income Fund Sgd A6 ) from OCBC in Mid July.

It has been performing rather badly since August and drop has been rather fast and approximately 4 percent.

I am not sure as to how this fund will fare and the reason for purchasing it was to earn some extra money for our retirement. I am 56 years old and was hoping to see this fund do fairly .

Should i just cut the losses and move on or just hold on to the fund. Am also not sure what share the funds are trading in and why it is performing poorly.

Please register here and provide your full details

You can buy this e-book and learn about the principles of long term investing.

Can you be a better Member of Parliament?

If you are elected as a Member of Parliament and you have to vote on issues that are presented to the house, what will be your decision?

Will you vote according to the party whip, without thinking, or will you debate the issues seriously and cast your vote according to what is best for your constituents?

Practice now on voting for these issues and show that you can be a better MP than those who just sleep in Parliament.

Wednesday, September 30, 2015

Read a $6 book for financial advice worth a few thousand dollars

A woman approached me to advise on two life insurance policies that is recommended for her daughter. When she learned that my consulting fee is $150 per hour, she felt it was too expensive.
I asked her to look at the "distribution cost" shown in the benefit illustration of the two life insurance policies. She got a bigger shock. It was several thousand dollars.
She came back and agreed to pay $150 for advice on a suitable financial plan for her daughter. I referred her to this $6 book.
I am not prepared to spend a few hours to give advice on financial planning for $150. The insurance company charges a "distribution cost" of a few thousand dollars and the insurance agent don't even do a proper job.

Insurance agents who sell bad life insurance products

Some insurance agents get angry when they read my advice to consumers to avoid life insurance policies that lock up their savings over the long term and give a poor return. They attacked me personally.

Some of these agents, who are supposed to be trusted professionals, who do not know why the policies are bad for their clients. They do not understand how the "effect of deduction" reduce the return on the policies from the projected yield of 4.75% down to 2% or less. At a yield of 2%, the return cannot cover the inflation rate.

If the policyholder cannot continue the policy to the maturity date, they will suffer a large loss of their savings on termination during the early years. Many policyholders suffer this fate. These agents are responsible to cause large losses to the clients who trusted them.

Some agents already know that these policies are bad for their clients. But they think only of the commission that they earn. They are dishonest and unethical. I would even call them "crooks".

Personal attack
These agents, who are either idiots or crooks, were surprised to read my views and pointed out that I had headed a life insurance company for many years. They don't know that the life insurance policies that were sold by my company (actually a cooperative) gave a yield of 5% or higher, which was more than able to cover the rate of inflation.

It was able to give a higher yield as the "effect of deduction" was much lower. The commission paid to agents was also lower.

Get young people to make the right financial decisions

The taxi driver who took me to the airport was recently retrenched. He worked as a technician in a large beer company that merged with another company. His service was not needed as the other company also had a technical department.
His daughter worked as a flight stewardess with a budget airline. She is 24 years old and earned a monthly income of $3,500 inclusive of flying allowance. This was higher than the father's pay with 20 years of technical experience.
I was quite surprised that flight stewardess can earn so well. Perhaps, their earnings is for a short period. When they are older, they are grounded and will lose their flying allowance.
His son, who is younger, also plan to be a flight steward after completing polytechnic.
I advised the taxi driver to tell the two children to save a part of their income (and not spend all of the income). They should also avoid investing in a life insurance policy that locks up their savings for a long term and give a poor return.
I am sure that the father will find it difficult to pass my advice to them. They are likely to join 30,000 young people each year who lock up their hard earning savings to earn a poor return - while the insurance companies make humongous profits.

Tuesday, September 29, 2015

We need private sector experience in the cabinet

Mat Alamak said:
Basically almost all ministers and junior ones, past and new, and including PM and DPM, are from the following categories.
1. ex senior civil servant
2. ex university academic
3. ex senior SAF officer
4. ex stat board/GLC senior officer

For those from private sector, only Dr Ng Eng Hen and Shanmugam (previously in private practice as doctor and lawyer respectively) have made it to minister level.
So without much diversity in terms of private sector business and non profit areas, there is a danger that they may think alike and even reinforce each other. And this may not bode well for the future of Sinkies.

I agree with this observation. The cabinet lacks entrepreneurs and private sector business, people who have faced competitive challenges, and found the practical answer through trial and error. (Even the doctor and lawyer from the private sector lack this type of challenge).

We lack the entrepreneurial spirit in dealing with our long term problems, such as an aging and declining population, loss of productivity, high cost of living and others.

Our cabinet ministers lack the willingness to take risks, to experiment, to make mistakes and to take responsibility. They like to "play safe".

Monday, September 28, 2015

Wisdom of the Crowd - Transport Minister

The people voting in The Wisdom of the Crowd website makes the correct guess on the choice of  Transport Minister.

Vote on "Suspend GST totally"

You can now view the pie chart of the votes for "Suspend GST totally".
The results is based on only 10 votes, which is not representative. Why not cast your vote, and also get your friends to vote on the issues in the website.
We need more votes to get more reliable results.

To register and vote

Training session for Business Simulation Game

If you are interested to try the Business Simulation Game, you can take a look at this page. It shows how the profit is calculated and how the price and capacity affected the final profit.

If you want to try the game, you can go to the home page, click on View Game, select a game and click on Join Game. You are ready to compete with the other players.

I will be conducting a training session on Saturday 10 am. If you are interested, come to my office for the training session. But, send an email to to register for the training session. It is FREE.

Invest for the long term

Dear Mr Tan,
In April, I invested $50,000 in the Asian Income Fund from NTUC Income. Right now, I have incurred a paper loss of $6000. What should I do?

You are investing for the long term, maybe 5 to 10 years.

Right now, all the stock markets in the world are down by 20%. But, it will recover in a few years time. So, be patient and hold on to your long term investment.

The government should do its duty

Chng Kim Hai (who was commenting on the mis-selling of life insurance policies in the banks) said:
So sad to see this happening in Singapore. So unfair to allow insurance companies do take advantage of our people and we are all helpless. Only our Government can do something to help the people of Singapore.
The Government is neglecting its duty. It is allowing the banks and insurance companies to rip off the poor consumers. The amount of savings that is lost through these bad products run in the hundreds of million dollars each year (this is just my wild guess).
The Government is not a hero when they step in to help the people. It is their duty in the first place. That is what they are paid to do.

Sunday, September 27, 2015

Does Singapore have a good education system?

Does Singapore have a good education system? Cast your vote in this website.

Should Lee HL continue as PM for the full term?

Should Lee HL continue as PM for a full term of 5 years or step down earlier?
Cast your vote in the Wisdom of the Crowd website

Rampant mis-selling in the bank


The bank and the insurance don't care how this case was closed or whether the poor old lady could continue with the premium. To both the bank and insurer and the salesman/wealth manager, the case is a revenue and commission to them. Everyone is happy except the old lady when she found out that she could not pay and the loss of part of her saving.

This is RAMPANT in the industry. Even with the so called 'raised' standard of advice by LIA, the salesmen and their insurance companies are circumventing it.

The cart before the horse approach is common, i.e. sell the product first then think of how to write the fact find to justify the recommendation. All is done with collaboration of all parties in the chain of command, i.e. from the salesman to supervisor and to the independent auditor , all with the blessing of the company CEO.

Why is MAS so naive or ignorant to know what is going on in the insurance companies and the banks? Why? why? The regulator must be beholden? have vested interest? or obeying directives from the top top boss or the politicians?

Perhaps, this issue of miss-selling should be brought up at the Hong Lim Park to protest against the authority for burying their heads in the cow dung. We don't hear of any enforcement by the regulator against insurance agents and the insurance companies and fine them heavily

The situation is bad. You describe it as RAMPANT. I get many requests from consumers caught in this trap. So, I tend to agree with your statement.


What's wrong #6 - Jobs Bank

The Jobs Bank was created by the Government to give priority for locals in searching for suitable jobs in Singapore.

The employers have to advertise the jobs in the Jobs Bank for a certain period and show that locals are not available before they can employ foreigners on work pass.

I have heard from many sources that the Jobs Bank is not achieving its goal. It has produced disappointing results.

I have tried to advertise jobs in the Jobs Bank and have received application from foreigners, rather than locals.

What's wrong?
Many employers find that the Jobs Bank are not helping them to get suitable local applicants. Perhaps, there is a real shortage of workers.

Some employers prefer foreign workers who have to stay with the job for the contract term. They are also more hard working and less prone to complain. They are not called up for reservist duty.

How to put it right
The Government should provide sufficient incentive for employers to employ local workers. The incentives should be offset the negative aspects of employing locals, such as the disruption caused by reservist duty and the cost due to job hopping.

Locals who are serious about getting a job should develop the job skills and should be assured that they will be employed, after getting the suitable skills.

We have to deal with this challenge effectively. We have to replace the half-hearted attempts that were adopted in the past, which had failed. A fresh approach is needed.

Voting for your Member of Parliament

When you vote for your Member of Parliament, you are voting for a person who can represent your constituency in Parliament. This person should be spend the time to understand the issues facing the constituents at large and bring up these issues to be discussed in Parliament and vote on the government policies to deal with these issues.

You are not voting for a minister to run the country. You are also not voting for an estate manager to run the town council!

The system of governance adopted by the PAP is bad for the country. This is why major issues are not addressed and have not been solved over the years.

Who makes a better Transport Minister?

Who will make a better Transport Minister?
Look at the pie charts and the comments here, and learn the wisdom of the crowd.

Josephine Teo

Khaw Boon Wan

The crowd has voted after considering the factors for and against each issue.

Incontestability clause under a life insurance policy

Life Insurance Association
Member Undertaking No. 53 4 February 2010

The requirement for an incontestability clause is neither a statutory provision nor a regulatory directive.
However it is an LIA members' undertaking since December 1991.
1. Insurers must have such a clause in their policy contracts.
2. The incontestability clause applies to Life policies as defined under the Insurance Act, and to Critical Illness policies.
3. For all other types of benefits, applicability of the clause is at the insurer’s discretion (i.e. on company policy basis).
4. Further, for all policies previously sold (before Dec 1991) without the incontestability clause, claims would not be rejected except for fraud, non-payment of premium or exclusions stated in the policy after it has been in force during the life time of the Life Assured for *one or two years (whichever is applicable) from the commencing date or re-instatement, whichever is later. *The insurer determines the duration, whether to be one or two years.

What's Wrong #5 - Upgrading of Shield plan

An elderly lady had incurred a hospital bill for $300,000 but the insurance company refused to pay the claim.

The elderly lady was insured by the insurance company under its Shield Plan C for several years. The agent approached her and  advised her to upgrade to an A plan. He asked her a few questions and entered them into the upgrading form. She relied on the agent to handle the paper work as she was not conversant in English. The upgrading was approved.

15 months later, the elderly lady was diagnosed for colon cancer in a public hospital. The hospital advised her to seek treatment in a private hospital as she was covered under an A plan.

Due to complications, the total bill for the treatment in a private hospital amounted to $300,000. She submitted a claim under the insurance policy. 

The insurance company rejected the claim on the grounds that she did not disclose that she was suffering from diabetes at the time that she upgraded the cover. The elderly lady said that the agent did not ask her the questions in detail, and she was not familiar with the requirements.

What's wrong?
The insurance agent probably took some short cuts in completing the upgrading form. Perhaps, the agent was also not familiar with the requirements.

The elderly lady or her family should have checked the coverage of the policy with the insurance company before starting the treatment in a private hospital.

How to put it right
Before accepting a new application or upgrading for Shield insurance from an elderly person, the insurance company should ask the policyholder to go for a medical checkup. 

They should not reject a claim due to non-disclosure, if the mistake was done by the agent. 

The regulator, i.e. Monetary Authority of Singapore, should set out the code of practice for rejection of health insurance claims of this nature. I have been approached by many policyholders on similar problems.

What's Wrong #4 - DBS Ideal 3 system

The Ideal 3 platform is used in corporate banking. It is a badly designed system.

Recently, I added two new staff as Beneficiaries to pay salary to them. I had to navigate through many confusing options, some of which appear to be duplicated and make many clicks to complete the process.

Although I had been using the system for two years, I keep getting confused with the workflow.

I encountered an unexpected problem. One staff appeared in my list of Beneficiaries in the payment screen, but the other staff could not be located. I checked and found that both staff records were listed as Beneficiaries in another screen.

I had to call the DBS helpline and explain my problem to the staff. I had to take her through many steps in the website for her to understand my problem.

What's wrong?
The hotline staff told me that there was a bug in their system. When I selected the bank for the the staffs, I had chosen DBS Bank for one staff and DBS Bank Ltd for the other staff.

She said that many other customers have encountered the same problem. They had put a request to the IT department to remove the wrong entry from the system.

The problem was actually more complicated. Both of my staff had POSB bank accounts. I could not find POSB, so I had to try DBS Bank.

How to put it right
DBS Bank should change the manager in charge of this platform. I have encountered dozens of problems with this system since its launch two years ago. Even now, I keep getting unexpected problems.

They should also provide a separate entry for POSB bank, even though it refers to the same code as DBS Bank. Many employees have POSB accounts and the user may not be aware that POSB is the same as DBS Bank.

Myanmar adopts a hybrid system

My friend told me about the system adopted in Myanmar to appoint the government.

The people vote for their representatives in Parliament. However, the military is allowed to nominate their people to fill up 25% of the seats. The direct voting is for the remaining 75% of seats.

Parliament elects the President to run the country. The President is not directly elected by the people.

The President can appoint his ministers from inside or outside Parliament.

The system in Myanmar is a hybrid system. It follows the British system - where the Parliament elects the head of the government.  However, it follows the French system where the President can appoint his ministers from inside or outside of Parliament.

However, my friend considered the privilege given to the military to appoint 25% of the MPs to be undemocratic.

A hybrid system is suitable for Singapore. It is important to give room for the Prime Minister to appoint his cabinet from outside of Parliament, as the suitable candidates may not be found among the 89 MPs.

The candidates to be appointed as ministers should be approved by Parliament.

Suspend GST totally

Should we suspend GST totally and find other sources of tax (e.g. income tax or payroll tax)?

More people will make the website more credible

We need to be positive.

I asked my Facebook "friend" to register and vote on this website. This is his reply.

Although i'm a fan of yours. To be honest, don't see the point as the sampling size is too small and skew as most of the people following you tend to side with opposition.

We need more people to join to make the results more credible.
So, why not join in and get more of your friends to join as well?

I just joined. Thanks for being a voice for some of us.

What's Wrong #3 - Mis-selling of life insurance policy in a bank

An elderly lady, who was not conversant in English, went to a bank with a deposit of $100,000.

A wealth manager advised her to invest in a life insurance policy with an annual premium of $40,000 payable for 5 years. He told her that she could rent out her apartment for a rental of $2,000 a month to pay the balance of the premium.

The elderly lady took his advice.

After paying the premium for two years, she could not afford to make the third payment. She was not able to rent out her apartment due to the weak market.

She asked for the annual premium to be reduced by half. The insurance company told her that she had to forfeit the excess premium that was paid during the first two years, amounting to $40,000. She would have to suffer this loss.

What's Wrong
The wealth manager had to meet his sales target. He is young and inexperienced and is not aware about the financial harm that he can cause to the elderly lady by encouraging her to buy a life insurance policy that she cannot afford.

How to put it right
The regulator, i.e. Monetary Authority of Singapore, should ensure that all life insurance policies provide a reasonable cash surrender value to the policyholder on the early termination of the policy. The expenses incurred in the terminated policy should be shared between the policyholder and the insurance company, and not borne entirely by the policyholder. The insurance company should not make a profit on the terminated policy.

If the insurance company suffers a loss on a terminated policy, they will introduce measures to avoid the loss.

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