Richard Lu wrote about the special place of HDB in Singapore's history and how the role has changed (in the wrong direction) over the years. Read his article here
My comments
I agree with his view that HDB flats should be kept affordable and should not be a means of generating wealth. .
Monday, April 19, 2010
World Movement for Democracy
This organisation held its general assembly in Jakarta. President Yudhoyono opened the meeting. This important meeting was not covered in our Singapore media. Here is a report in Temasek Review.
From 5Cs to 5 Ks
Are Singaporeans still craving for the 5C's : Car, Condo, Credit Card, Club membership and Career?
Looks like Car & Condo will be elusive because of Higher COEs and High Property Prices for now whereas, on the other hand, looks like some are concerned about the 5K's
Kiasu (scared of losing)
Kiasee (scared of dying)
Kiabor (scared of wife)
Kiaboh (scared of having nothing)
Kiachenghu (scared of government)
LN
Looks like Car & Condo will be elusive because of Higher COEs and High Property Prices for now whereas, on the other hand, looks like some are concerned about the 5K's
Kiasu (scared of losing)
Kiasee (scared of dying)
Kiabor (scared of wife)
Kiaboh (scared of having nothing)
Kiachenghu (scared of government)
LN
Sunday, April 18, 2010
US Securities Exchange Commission sues Goldman Sachs
The US Securities and Exchange Commission has taken the bold step to sue Goldman Sachs for fraud in connection with the creation of complex financial products that are sold in the market. They involve the packaging of the sub-prime mortgages into collateralized debt obligations and credit default swaps. One argument put forward by the SEC is that Goldman Sachs knew that the sub-prime mortgages were already in trouble at the time that these products were created.
This is only the first step. Many other investment banks were also involved in creating similar products and may face similar actions by the SEC.
Our equivalent of the SEC is the Monetary Authority of Singapore. I hope that our MAS will also see if there is scope for similar actions to be taken in Singapore in respect of the complex products that were sold here. These products, such as the Mini-bonds and Pinnacle Notes, have caused huge losses to the retail investors in Singapore.
Tan Kin Lian
News clippings:
http://dealbook.blogs.nytimes.com/2010/04/16/s-e-c-sues-goldman-over-housing-market-deal/
http://www.reuters.com/article/idUSTRE63F3LM20100416
This is only the first step. Many other investment banks were also involved in creating similar products and may face similar actions by the SEC.
Our equivalent of the SEC is the Monetary Authority of Singapore. I hope that our MAS will also see if there is scope for similar actions to be taken in Singapore in respect of the complex products that were sold here. These products, such as the Mini-bonds and Pinnacle Notes, have caused huge losses to the retail investors in Singapore.
Tan Kin Lian
News clippings:
http://dealbook.blogs.nytimes.com/2010/04/16/s-e-c-sues-goldman-over-housing-market-deal/
http://www.reuters.com/article/idUSTRE63F3LM20100416
Overseas orders for Financial Planning book
I received a few orders from overseas for my book, Practical Guide on Financial Planning. I am not sure if they are from Singaporeans who live or work overseas or from foreigners who like to learn about financial planning for their own environment. A large portion of my book contain financial education that is applicable in other countries as well.
Tan Kin Lian
Tan Kin Lian
COE and car prices
I spoke to someone, who is familiar with the motor trade. He made the following points:
a. The recent change resulted in a drop of 40% in COE allocation. This caused COE prices to shoot up due to the cut and also to increased demand generated by fear of further price increases. It is better to have a more stable market, rather than fluctuating prices to drive consumer behavior.
b. Taxis are now in the same category as private cars. They should be kept in a spearate category as the owners of taxis are driven by commercial consideration.
c. There is need to improve the feeder services, so that more people will take the train and buses at the interchanges.
d. Taxis should be considered as public transport. They are more efficient than cars and do not require parking spaces. The taxi fares should be simplified into a flat rate structure. Taxi drivers should be allowed to own a taxi licence and build a taxi business, rather than be renters of taxis.
I agree with these points and will bring them up at the TV program tonight. I will also raise them in other occasions in my blog.
Tan Kin Lian
a. The recent change resulted in a drop of 40% in COE allocation. This caused COE prices to shoot up due to the cut and also to increased demand generated by fear of further price increases. It is better to have a more stable market, rather than fluctuating prices to drive consumer behavior.
b. Taxis are now in the same category as private cars. They should be kept in a spearate category as the owners of taxis are driven by commercial consideration.
c. There is need to improve the feeder services, so that more people will take the train and buses at the interchanges.
d. Taxis should be considered as public transport. They are more efficient than cars and do not require parking spaces. The taxi fares should be simplified into a flat rate structure. Taxi drivers should be allowed to own a taxi licence and build a taxi business, rather than be renters of taxis.
I agree with these points and will bring them up at the TV program tonight. I will also raise them in other occasions in my blog.
Tan Kin Lian
Vera has artistic intelligence
I made the shape of a cat using the tangram pieces. I asked my grand-daughter Vera (3 years old) what is the picture. She looked at it for a short time and said "Cat". Next, I made the shape of a man sitting down. She said, in a naughty manner "House". Later. She said "Man". My tangram book containing 100 puzzles and solutions, will be available soon and can be bought online. I will take advanced orders now.
Tan Kin Lian
Tan Kin Lian
Inadequate savings for retirement
The Sunday Times have an article that showed that many people have inadequate savings for retirement. Why is this the case? The same question was posed to me by a journalist recently. I gave the following reasons:
1. People spent too much money on their property.
2. They got a poor yield on their savings in life insurance policies, due to the high charges which takes away more than 30% of their accumulated savings
3. They were badly advised by insurance agents to switch from an earlier policy to a new policy, incurring the high upfront charges again. This can occur several times during a working lifetime.
Better late than never. Consumers should be educated to avoid bad investment decisions. They should spend $12 and 12 hours to read my book, Practical Guide on Financial Planning. This book also contains tips to the consumers on:
a. What to do with their existing life insurance policies
b. What should they do with their future savings?
c. How should they invest their money during retirement?
d. What type of life annuity should they pick?
3. How much should they spend on a property?
They should advise their children to start their working career on a proper footing and avoid making the same mistakes. Order online.
Tan Kin Lian
1. People spent too much money on their property.
2. They got a poor yield on their savings in life insurance policies, due to the high charges which takes away more than 30% of their accumulated savings
3. They were badly advised by insurance agents to switch from an earlier policy to a new policy, incurring the high upfront charges again. This can occur several times during a working lifetime.
Better late than never. Consumers should be educated to avoid bad investment decisions. They should spend $12 and 12 hours to read my book, Practical Guide on Financial Planning. This book also contains tips to the consumers on:
a. What to do with their existing life insurance policies
b. What should they do with their future savings?
c. How should they invest their money during retirement?
d. What type of life annuity should they pick?
3. How much should they spend on a property?
They should advise their children to start their working career on a proper footing and avoid making the same mistakes. Order online.
Tan Kin Lian
Investors of Pinnacle Notes
A US law firm, Kirby McInerney, has spoken to investors about possible legal action that can be taken in US Courts in connection with the Pinnacle Notes. 45 investors have expressed interest to join this action. Other investors of Pinnacle Notes who are interested can send an e-mail to tkla.km@gmail.com quoting the following: your name
mobile phone
email address
amount invested
type of Pinnacle Notes.
Tan Kin Lian
Saturday, April 17, 2010
Existing life insurance policies
Many people asked me about their existing life insurance policies - should they keep it or terminate the policy? In many cases, the policies were bought for them by their parents and are now transferred to them to pay the premiums. My usual advice is, "Keep your existing policy. You have already incurred the high upfront cost. Going forward, it should provide you with a modest return. "
However, if they have difficulty in paying the premium or they have better options to invest their savings, they can consider terminating the existing policies. Before they do so, they should calculate the return on the existing policy for the next five years. Read this FAQ.
They should think carefully before they put in more savings in a new life insurance policy. They should NEVER terminate any existing policy to buy a new policy - as it means incurring the high upfront cost all over again. They should avoid the insurance agent who makes this recommendation as the agent usually wants to make commisison at the expense of the client.
Some of these tips are given in my book, Practical Guide on Financial Planning.
Tan Kin Lian
However, if they have difficulty in paying the premium or they have better options to invest their savings, they can consider terminating the existing policies. Before they do so, they should calculate the return on the existing policy for the next five years. Read this FAQ.
They should think carefully before they put in more savings in a new life insurance policy. They should NEVER terminate any existing policy to buy a new policy - as it means incurring the high upfront cost all over again. They should avoid the insurance agent who makes this recommendation as the agent usually wants to make commisison at the expense of the client.
Some of these tips are given in my book, Practical Guide on Financial Planning.
Tan Kin Lian
Tips for young people
I wrote the book, Practical Guide on Financial Planning to educate young people who has just started work, about the importance of savings and the need to invest the savings in a liquid form so that they can be withdrawn without any penalty for urgent cash needs. You can save lot of money by avoiding high interest payments on borrowings or installment payments.
You should NOT lock up their savings in a life assurance policy that has a high distribution cost, poor liquidity and a heavy penalty on withdrawal. Be careful of insruance agents who will approach you soon after you started work. They are well trained to tell one-sided stories about the benefits of life insurance, but not the serious drawbacks.
Do not worry about protecting yourself against the risk of death. You only need to worry about it when you get married. If you can buy a group term insurance (i.e. SAF or SAFRA) or personal accident insurance, go ahead. If not, it does not really matter that you are not insured when you are still young.
Remember: when you sign on the dotted line to buy a high cost insurance policy, you will be giving away one or two years of your hard earned savings.
You should spend $12 and 12 hours to buy and read my book which is available online. By being educated, you can save several thousand dollars by avoiding bad investment products. Do your friend a favour. Order additional copies to sell to them or present as a gift to them. It may be the most valuable gift that you can give them.
Tan Kin Lian
You should NOT lock up their savings in a life assurance policy that has a high distribution cost, poor liquidity and a heavy penalty on withdrawal. Be careful of insruance agents who will approach you soon after you started work. They are well trained to tell one-sided stories about the benefits of life insurance, but not the serious drawbacks.
Do not worry about protecting yourself against the risk of death. You only need to worry about it when you get married. If you can buy a group term insurance (i.e. SAF or SAFRA) or personal accident insurance, go ahead. If not, it does not really matter that you are not insured when you are still young.
Remember: when you sign on the dotted line to buy a high cost insurance policy, you will be giving away one or two years of your hard earned savings.
You should spend $12 and 12 hours to buy and read my book which is available online. By being educated, you can save several thousand dollars by avoiding bad investment products. Do your friend a favour. Order additional copies to sell to them or present as a gift to them. It may be the most valuable gift that you can give them.
Tan Kin Lian
Bid for COE
I found that a car buyer can bid for the COE and, after being successful, is given 6 months to find a car. The deposit to bid for a COE for a car is $10,000 and the balance of the COE price is payable on the purchase of a car.
If you have $10,000 in cash, you can bid for a COE on your own and benefit from any drop in price. You may be negotiate a better price for a car, if you have a COE and can go to shop around. If you do not have $10,000 in cash, perhaps you should not consider buying a car?
If you have $10,000 in cash, you can bid for a COE on your own and benefit from any drop in price. You may be negotiate a better price for a car, if you have a COE and can go to shop around. If you do not have $10,000 in cash, perhaps you should not consider buying a car?
Escalating COE prices
The COE prices has increased sharply due to a reduction in COE available for bidding, and has been exaggerated by greed and fear.
We have to accept that COE prices will be high, due to limited supply and high demand, but we should try to avoid the large fluctuation in prices caused by the current bidding system. The system should be changed to reduce the volatility.
Some people have suggested the "pay as you bid" approach. I think that it has merits. The other change is to make it easier for consumers to bid for COEs directly, instead of relying on the motor dealers to do the bidding. Their profit on the COE increases the cost of ownership.
A better long term strategy is to reduce the demand for private car ownership by improving public transport and the use of taxis.
We have to improve the feeder service to bring commuters from their homes to the MRT stations or bus interchanges. The feeder services should have a waiting time of less than 5 minutes and be affordable (say 40 cetns).
We should also reduce the cost of taxi fares and increase the supply, so that more people can use taxis instead of cars. Each additional taxi on the road can reduce the demand for cars by 5 to 10 times. The cost of taxi fares can come down by reducing the taxis and levies on taxis and by removing unnecessary regulations that add to the cost of operations. If more people uses taxis instead of private cars, there will be less demand for parking spaces.
Tan Kin Lian
We have to accept that COE prices will be high, due to limited supply and high demand, but we should try to avoid the large fluctuation in prices caused by the current bidding system. The system should be changed to reduce the volatility.
Some people have suggested the "pay as you bid" approach. I think that it has merits. The other change is to make it easier for consumers to bid for COEs directly, instead of relying on the motor dealers to do the bidding. Their profit on the COE increases the cost of ownership.
A better long term strategy is to reduce the demand for private car ownership by improving public transport and the use of taxis.
We have to improve the feeder service to bring commuters from their homes to the MRT stations or bus interchanges. The feeder services should have a waiting time of less than 5 minutes and be affordable (say 40 cetns).
We should also reduce the cost of taxi fares and increase the supply, so that more people can use taxis instead of cars. Each additional taxi on the road can reduce the demand for cars by 5 to 10 times. The cost of taxi fares can come down by reducing the taxis and levies on taxis and by removing unnecessary regulations that add to the cost of operations. If more people uses taxis instead of private cars, there will be less demand for parking spaces.
Tan Kin Lian
Friday, April 16, 2010
Dental health
Recently, I changed my brushing habit. Apart from using the ordinary brush, I spent a minute to use the interdental brush to remove the food particles between the teeth. It was quite easy and is likely to be quite useful.
Like to share your experience on dental health?
Here is a picture of an interdental (christmas tree) brush.
Property market in USA and China
Hi Mr Tan,
Here is an interesting article about the housing crash continuing in US even after all the stimulus.. I suspect that China(Shangai and HK) and eventually Singapore will suffer the same fate. http://patrick.net/housing/crash.html
Here is another interesting article on possible crash of china propery bubble for you to read.
http://www.dailymarkets.com/economy/2010/04/09/jim-chanos-on-the-coming-collapse-of-chinas-property-market/
Here is an interesting article about the housing crash continuing in US even after all the stimulus.. I suspect that China(Shangai and HK) and eventually Singapore will suffer the same fate. http://patrick.net/housing/crash.html
Here is another interesting article on possible crash of china propery bubble for you to read.
http://www.dailymarkets.com/economy/2010/04/09/jim-chanos-on-the-coming-collapse-of-chinas-property-market/
Thursday, April 15, 2010
Why Life Insurance Is Not an Investment
Life insurance is one of those things that most of us need but none of us enjoy talking about.
When it does come up in conversations, it’s mostly because someone is complaining about being sold a whole life insurance or variable life insurance that is both expensive and complex, who would be better off with a plain term insurance policy.
http://bucks.blogs.nytimes.com/2010/04/12/why-life-insurance-is-not-an-investment/
My comment
The same message is given in my b ook, Practical Guide on Financial Planning ($12) which is available here. Spend $12 and save a few thousand dollars by avoiding a bad investment.
When it does come up in conversations, it’s mostly because someone is complaining about being sold a whole life insurance or variable life insurance that is both expensive and complex, who would be better off with a plain term insurance policy.
http://bucks.blogs.nytimes.com/2010/04/12/why-life-insurance-is-not-an-investment/
My comment
The same message is given in my b ook, Practical Guide on Financial Planning ($12) which is available here. Spend $12 and save a few thousand dollars by avoiding a bad investment.
Develop thinking skills with puzzles
Singaporeans need to develop the ability to think independent and to solve problems, rather than rely on their bosses for detailed instructions at every step of the way. This confidence and skill can come from a liberal arts education and can also be developed through practical training.
I have created four puzzles (i.e. tangram, shape quiz, einstein quiz and sudoku) that are useful in developing the thinking skills. These puzzles can be downloaded here. Watch these videos to learn about how these puzzles help to develop the thining skills.
You can buy the puzzle books here. Spend some time to learn the thinking skills and develop the confidence through practice. It is also fun and interesting.
Tan Kin Lian
I have created four puzzles (i.e. tangram, shape quiz, einstein quiz and sudoku) that are useful in developing the thinking skills. These puzzles can be downloaded here. Watch these videos to learn about how these puzzles help to develop the thining skills.
You can buy the puzzle books here. Spend some time to learn the thinking skills and develop the confidence through practice. It is also fun and interesting.
Tan Kin Lian
Singapore Talking - COE, 10.30 pm Sunday 18 April
I have been invited to be in the panel on Singapore Talking this Sunday at 10.30 pm on Mediacorp TV. The topic is on the high price of COE. I will be giving my views about moderating the fluctuation in price of COE and more importantly, about making public transport and taxis more comfortable and affordable.
Good signages to show directions
It is important to provide good signages to help people to find their way. In recent years, there is too much focus on getting revenue for advertisements that result in signages being hidden or difficult to find. Here are some examples:
1. Whole buses are now being painted as a moving advertisement. It is difficult for the commuter to know if it is a public bus.
2. There are many advertisements in MRT stations and bus interchanges that the essential signages, such as EXIT and PLATFORM number, are difficult to find.
3. Even gantry gates of car parks are being converted into advertisements for property agencies.
When I visit an unfamiliar place, I have a lot of difficulty to find the way due to poor signages, but I get distracted by many advertisements.
There has to be a balance between the desire for advertising revenue and the need to give property signages and instructions to commuters. I hope that the regulatory authority comes into the picture. If the transport operators are restricted in their advertisements, it will create opportunity for other media, such as the newspapers and the television. This may be better for all.
Tan Kin Lian
1. Whole buses are now being painted as a moving advertisement. It is difficult for the commuter to know if it is a public bus.
2. There are many advertisements in MRT stations and bus interchanges that the essential signages, such as EXIT and PLATFORM number, are difficult to find.
3. Even gantry gates of car parks are being converted into advertisements for property agencies.
When I visit an unfamiliar place, I have a lot of difficulty to find the way due to poor signages, but I get distracted by many advertisements.
There has to be a balance between the desire for advertising revenue and the need to give property signages and instructions to commuters. I hope that the regulatory authority comes into the picture. If the transport operators are restricted in their advertisements, it will create opportunity for other media, such as the newspapers and the television. This may be better for all.
Tan Kin Lian
Consumers can force reforms
Read this post in FISCA about the work being done by the Consumer Union of USA to force reform of bad practices. Join FISCA to strengthen consumer protection and education!
New MRT interchange stations
The best interchange stations were at City Hall and Raffles Place. It was possible to change from one line to another on the same level. This was possible as the two lines were developed at the same time.
The worst interchange stations were at Outram Park and Dhoby Ghaut. The commuter has to walk a long distance to change from one line to another. Similarly, the walking distance between the two lines at Bishan is quite far. When a new line is built at a later time, after an existing line is operational, it is necessary to build the station at a distance from the existing station, due to safety and engineering reasons.
But there is another approach that allows the interchange stations to be build close together to reduce the walking time. In developing the new station, it is possible to build a new platform for the existing line, and to divert the existing line to use the new platform at a later date. I hope that the engineers consider this possiblity, so that the walking distance is reduced.
Tan Kin Lian
The worst interchange stations were at Outram Park and Dhoby Ghaut. The commuter has to walk a long distance to change from one line to another. Similarly, the walking distance between the two lines at Bishan is quite far. When a new line is built at a later time, after an existing line is operational, it is necessary to build the station at a distance from the existing station, due to safety and engineering reasons.
But there is another approach that allows the interchange stations to be build close together to reduce the walking time. In developing the new station, it is possible to build a new platform for the existing line, and to divert the existing line to use the new platform at a later date. I hope that the engineers consider this possiblity, so that the walking distance is reduced.
Tan Kin Lian
Polite drivers
Recently, I found a few instances of polite drivers on the roads in Singapore. On two occasions, I had to change lane at the last minute, due to unfamiliarity with the road. The cars behind slowed down to let me pass. They did not sound the horn.
On another occasion, I was waiting to make a left turn. I was temporarily distracted and waited much longer than needed. The car behind waited for one minute before sounding the horn softly to remind me. It was quite nice of the driver.
Tan Kin Lian
On another occasion, I was waiting to make a left turn. I was temporarily distracted and waited much longer than needed. The car behind waited for one minute before sounding the horn softly to remind me. It was quite nice of the driver.
Tan Kin Lian
Autograph session for Financial Planning Book
I will be at MPH at Citilink Mall (1 Raffles Link, Basement B1-26A) at 7.pm to 8.30 pm on Friday 16 April for an autograph session of my book, Practical Guide on Financial Planning. If you are interested to buy an autographed copy of my book, please turn up for this session - no need to pre-register. Pass the word around to your friends.
Land banking story on Channel NewsAsia
Channel NewsAsia interviewed me for a story on land banking. It will be telecast on Sunday 18 April, 9.30 pm. A staff of a land banking company has also said that the boss of that company has also be interviewed.
Adjudication in FIDREC
Some people have complained that they were unfairly treated at the FIDREC adjudication hearing. Perhaps they form a minority and that other cases had been handled satisfactorily and fairly. I invite you to share your story in this survey. I may use some of these stories to provide feedback to the appropirate persons, but will not reveal your identity.
Transport woes in Singapore
Read this article.
My comment
The solution is to improve public transport in Singapore and to make better use of taxis. More taxis should be put on the road and the cost of taxi fares should be reduced, e.g. by removing some of the tax on taxis and treating them as public transport.
My comment
The solution is to improve public transport in Singapore and to make better use of taxis. More taxis should be put on the road and the cost of taxi fares should be reduced, e.g. by removing some of the tax on taxis and treating them as public transport.
Selling life insurance
There were some questions asked about how a life insurance agent can make a living, if the agent only sell term insurance to earn a low rate of commission.
Here is my answer. Similar to a general insurance agent or a stockbroker or a doctor. Earn a remuneration that is based on the value of the service that is given to the client, and not a high rate of commission that exploits the ignorance of the client.
A general insurance agent earns a commission of 15% on the premium that is paid to cover the risk. In Europe, the commission for motor insurance has decreased to 5% of premium, as the premium is high and the work involved is routine. The insurance agent can still make a living.
A stockbroker charges a commission of 0.3% of the invested sum, share between the firm and the remisier. They do not have to take away 150% of the annual amount of savings.
The doctor earns a fee based on the time spent on consultation and a markup on the medication. Due to competition, the fee is reduced to a rate that the ordinary people can afford. The doctor has to pay the rental of the clinic and the staff to man the reception.
Life insurance sales can also be made using the above approaches. Many people need a large amount of term insurance, say $500,000. They also need disability insurance and medical expense insurance. They can afford to spend up to 2% of their earnings (say $500 to $800 a year) to cover these personal risks. A 15% commision on this premium can be quite attractive.
The life insurance companies have to change its mode of marketing. Most importantly, they have to remember their responsibility to provide good value products and take care of the financial well-being of their clients.
Tan Kin Lian
Here is my answer. Similar to a general insurance agent or a stockbroker or a doctor. Earn a remuneration that is based on the value of the service that is given to the client, and not a high rate of commission that exploits the ignorance of the client.
A general insurance agent earns a commission of 15% on the premium that is paid to cover the risk. In Europe, the commission for motor insurance has decreased to 5% of premium, as the premium is high and the work involved is routine. The insurance agent can still make a living.
A stockbroker charges a commission of 0.3% of the invested sum, share between the firm and the remisier. They do not have to take away 150% of the annual amount of savings.
The doctor earns a fee based on the time spent on consultation and a markup on the medication. Due to competition, the fee is reduced to a rate that the ordinary people can afford. The doctor has to pay the rental of the clinic and the staff to man the reception.
Life insurance sales can also be made using the above approaches. Many people need a large amount of term insurance, say $500,000. They also need disability insurance and medical expense insurance. They can afford to spend up to 2% of their earnings (say $500 to $800 a year) to cover these personal risks. A 15% commision on this premium can be quite attractive.
The life insurance companies have to change its mode of marketing. Most importantly, they have to remember their responsibility to provide good value products and take care of the financial well-being of their clients.
Tan Kin Lian
Experience of an insurance agent
Dear Mr. Tan,
As im currently a new agent with one of the big insurance companies in Singapore, im finding its a lot different from what I was told or expected.
For example at the start we were told to emphasize needs based selling in order to meet the needs of our clients (basically what the MAS regulations said). Later I found out that nobody does needs based selling and all we do is get clients to sign on empty forms so we can go back to the office to fill them up later. End result : Client is clueless about what their needs are and how we are meeting them, if at all. Instead of talking to them about what THEY want, we spend our time giving presentations about interest rates and talking about how our relative racked up a huge hospital bill without insurance to pay for it.
The commission structure is also highly flawed and contributes to the high turnover rate of agents in the industry. There is absolutely zero incentive or point for agents to recommend products with lower commission rates. In fact, meeting a client to sell a term plan actually loses an agent money(unless it is a very big term plan) because the commission rate is simply not high enough to pay for the time + bus/MRT fare involved.
In my case, neither I or my colleagues were ever given product training on anything but the products with the highest commission rates. Also, this is actually a job that requires you to spend money in order to make money. The problem is that for most new agents, they will not be able to set sufficient appointments or close enough cases to make money for the first 1-2 months at least, unless they have a lot of contacts who are interested. The end result is they spend hundreds of dollars in food and transport expenses, and in the end all they keep hearing is "I'm not interested", and quit because they are heavily in the red and still can't find people who wants to buy insurance. It would be better if new agents were given a basic allowance of $400-500 for living expenses till they are seasoned enough to close cases on a regular basis.
With the high turnover rate of agents in the industry there is a high incentive to simply not train agents properly since a manager is spending too much time training someone who, according to statistics, will quit in a month or two anyway. Simply give them basic training, send them on whatever appointments they can make, and see if it works out. If not, oh well, go recruit more people. I was given a few days of training total, only a few hours of which was product related, and was told to go to my first appointment with the aim to do a presentation and simply convince him to buy and not ask questions. I ended up making stuff up when the client started asking about things I was not taught about. I felt pathetic.
As it is I am currently in the unenviable situation where I spend money travelling back and fro my office, making phone calls, doing surveys, doing coldcalls, mainly to hear phones ringing that people never seem to pick up (I never had any idea how under-utilzied handphones were in Singapore before) and I am not even able to set a single appointment because people keep postponing or simply dissapear off the radar and never pick up their phones again. All of this is costing me money and worst of all I cannot see a way to improve my situation. I do not have any senior agents I can look to for guidance since they are all busy rushing to meet quotas and my manager just keeps telling me to go out, do more surveys, make more phone calls, find and meet people, etc, but it is simply not working.
I have no clue where, exactly, I am supposed to find people interested in buying insurance or doing investments since almost everyone i meet simply recoils in horror at the mere mention of "savings" "investments" "protection" or any other key word that you can possibly use.
A scary amount of middle aged adults still believe themselves immortal and that they cannot possibly get hospitalized or worse, affecting their ability to provide for their family. Most young working adults simply go from paycheck to paycheck, saving $0 every month and heading straight for disaster the moment a situation calls for usage of emergency funds which do not exist, or they just dump a token amount into their bank account every month that dissapears into the newest xbox or ipod the moment they get enough. Most young working adults do not even have a clue what medishield or medisave is, other than that it is something CPF related.
I feel like im constantly rolling dice and seeing if I can get a lucky combination just to find a single interested person. I would like to continue on in this line of advising people on financial planning, but I do not see how as most people simply want to go through life without any financial planning or insurance protection at all. And actually I don't even know whether what im doing can be considered financial planning anyway.
As im currently a new agent with one of the big insurance companies in Singapore, im finding its a lot different from what I was told or expected.
For example at the start we were told to emphasize needs based selling in order to meet the needs of our clients (basically what the MAS regulations said). Later I found out that nobody does needs based selling and all we do is get clients to sign on empty forms so we can go back to the office to fill them up later. End result : Client is clueless about what their needs are and how we are meeting them, if at all. Instead of talking to them about what THEY want, we spend our time giving presentations about interest rates and talking about how our relative racked up a huge hospital bill without insurance to pay for it.
The commission structure is also highly flawed and contributes to the high turnover rate of agents in the industry. There is absolutely zero incentive or point for agents to recommend products with lower commission rates. In fact, meeting a client to sell a term plan actually loses an agent money(unless it is a very big term plan) because the commission rate is simply not high enough to pay for the time + bus/MRT fare involved.
In my case, neither I or my colleagues were ever given product training on anything but the products with the highest commission rates. Also, this is actually a job that requires you to spend money in order to make money. The problem is that for most new agents, they will not be able to set sufficient appointments or close enough cases to make money for the first 1-2 months at least, unless they have a lot of contacts who are interested. The end result is they spend hundreds of dollars in food and transport expenses, and in the end all they keep hearing is "I'm not interested", and quit because they are heavily in the red and still can't find people who wants to buy insurance. It would be better if new agents were given a basic allowance of $400-500 for living expenses till they are seasoned enough to close cases on a regular basis.
With the high turnover rate of agents in the industry there is a high incentive to simply not train agents properly since a manager is spending too much time training someone who, according to statistics, will quit in a month or two anyway. Simply give them basic training, send them on whatever appointments they can make, and see if it works out. If not, oh well, go recruit more people. I was given a few days of training total, only a few hours of which was product related, and was told to go to my first appointment with the aim to do a presentation and simply convince him to buy and not ask questions. I ended up making stuff up when the client started asking about things I was not taught about. I felt pathetic.
As it is I am currently in the unenviable situation where I spend money travelling back and fro my office, making phone calls, doing surveys, doing coldcalls, mainly to hear phones ringing that people never seem to pick up (I never had any idea how under-utilzied handphones were in Singapore before) and I am not even able to set a single appointment because people keep postponing or simply dissapear off the radar and never pick up their phones again. All of this is costing me money and worst of all I cannot see a way to improve my situation. I do not have any senior agents I can look to for guidance since they are all busy rushing to meet quotas and my manager just keeps telling me to go out, do more surveys, make more phone calls, find and meet people, etc, but it is simply not working.
I have no clue where, exactly, I am supposed to find people interested in buying insurance or doing investments since almost everyone i meet simply recoils in horror at the mere mention of "savings" "investments" "protection" or any other key word that you can possibly use.
A scary amount of middle aged adults still believe themselves immortal and that they cannot possibly get hospitalized or worse, affecting their ability to provide for their family. Most young working adults simply go from paycheck to paycheck, saving $0 every month and heading straight for disaster the moment a situation calls for usage of emergency funds which do not exist, or they just dump a token amount into their bank account every month that dissapears into the newest xbox or ipod the moment they get enough. Most young working adults do not even have a clue what medishield or medisave is, other than that it is something CPF related.
I feel like im constantly rolling dice and seeing if I can get a lucky combination just to find a single interested person. I would like to continue on in this line of advising people on financial planning, but I do not see how as most people simply want to go through life without any financial planning or insurance protection at all. And actually I don't even know whether what im doing can be considered financial planning anyway.
Wednesday, April 14, 2010
How to spot a ponzi scheme
An early example of a ponzi scheme in Singapore was the Gemini Chit Fund that was promoted 40 years ago. Here is a brief story about this it. A more recent example is the Sunshine Empire.
In a ponzi scheme, the promoter promised you an attractive return. The early investors received that return. They were excited and put in more money. They encouraged their friends to join in the investment. The promoter was able to use the money received later to pay off the attractive return to the earlier investors. As long as more money came in, compared to the payouts, the promoter was able to continue to operate the sheme. During this time, the promoter was also able to siphon off the surplus into their pockets. When the ponzi scheme collapsed, all the remaining investors lost all of their money.
In terms of size, nothing beats the ponzi scheme operated by Bernie Madoff in USA, as described in this story.
There are many ponzi schemes now being operated in Singapore today. The mode of operation is the same. The story could be the fantastic growth of land plots, wine, industrical chemicals or other products. Heard them?
In a ponzi scheme, the promoter promised you an attractive return. The early investors received that return. They were excited and put in more money. They encouraged their friends to join in the investment. The promoter was able to use the money received later to pay off the attractive return to the earlier investors. As long as more money came in, compared to the payouts, the promoter was able to continue to operate the sheme. During this time, the promoter was also able to siphon off the surplus into their pockets. When the ponzi scheme collapsed, all the remaining investors lost all of their money.
In terms of size, nothing beats the ponzi scheme operated by Bernie Madoff in USA, as described in this story.
There are many ponzi schemes now being operated in Singapore today. The mode of operation is the same. The story could be the fantastic growth of land plots, wine, industrical chemicals or other products. Heard them?
Retirement savings
Read this article,
My view.
It seems that the average amount that most people need for retirement in the USA is $1 million. I suppose that this include the value of the house. A similar amount will be needed in Singapore, i.e. $500,000 as value of house and $500,000 cash for retirement. At 4% yield (hopefully), $500,000 will produce $20,000 a year or $1,600 a month. This is similar to what most people comments in an earlier article in my blog.
However, if I am mistaken and most people expect $1 million cash on top of a fully paid house, then they are looking at monthly expenses of $3,200.
My view.
It seems that the average amount that most people need for retirement in the USA is $1 million. I suppose that this include the value of the house. A similar amount will be needed in Singapore, i.e. $500,000 as value of house and $500,000 cash for retirement. At 4% yield (hopefully), $500,000 will produce $20,000 a year or $1,600 a month. This is similar to what most people comments in an earlier article in my blog.
However, if I am mistaken and most people expect $1 million cash on top of a fully paid house, then they are looking at monthly expenses of $3,200.
Tuesday, April 13, 2010
Confidence in leaders
Dear Mr. Tan,
I fully agree with an article on your blog (The future of our country). I have very little confidence in the next generation of leaders. All of them have never contested in a fair and open election, thanks to the grossly unleveled playing field (eg. GRC, ruling party's use of the entire govt machinery against the opposition party cadres, heavily biased and tightly controlled mainstream media).
How can they claim to represent the people if they are not elected by the people? This explains why they don't have any clue what the people feel/think. They just enact policies according to their liking. They think they know best. They don't have the decency to apologise when they are wrong.
This sad state of affairs worries me. I now seriously wonder if I should get PR status in say Australia. Having a team of "strawberry" leaders, who make policies out of an ivory yower, steering this country scares me like hell.
I fully agree with an article on your blog (The future of our country). I have very little confidence in the next generation of leaders. All of them have never contested in a fair and open election, thanks to the grossly unleveled playing field (eg. GRC, ruling party's use of the entire govt machinery against the opposition party cadres, heavily biased and tightly controlled mainstream media).
How can they claim to represent the people if they are not elected by the people? This explains why they don't have any clue what the people feel/think. They just enact policies according to their liking. They think they know best. They don't have the decency to apologise when they are wrong.
This sad state of affairs worries me. I now seriously wonder if I should get PR status in say Australia. Having a team of "strawberry" leaders, who make policies out of an ivory yower, steering this country scares me like hell.
Financial Planning for a young person
Hi Mr Tan,
I am an avid follower of your blog. I like your advice, usually neutral and conservative which suit me.
I would like to ask for some advice from you about purchasing of my first life and health insurance. I recently decided to buy insurance from a friend. He didn't approach me rather it was me who approach him.
I am a 24 year old male. I am healthy I guess without much problem. I want to buy insurance from protecting my family from financial catastrophe. I have do some reading about insurance but I think its still not enough for me to evaluate any insurance plan well. After going through my financial, my friend/agent came back to me with 3 plans, one is term insurance, one is saving type insurance, the last is investment linked. (Details of three plans provided)
My question is, am I paying too much premium? Am I covering too much? The CPF portion seems to be taking quite a lot of money away?
REPLY
I suggest that you buy my book, Practical Guide on Financial Planning, to read about the fundamentals of financial planning. It also explains why you should not buy any whole life or investment linked policy - as the distribution cost is too high.
You can buy the book here:
www.easysearch.sg/ishop
You should buy term insurance. The best type is from Aviva (SAF) or NTUC (SAFRA insurance). You can get a comparision of the cost here.
http://www.easysearch.sg/Admin/File.aspx?id=19
I am an avid follower of your blog. I like your advice, usually neutral and conservative which suit me.
I would like to ask for some advice from you about purchasing of my first life and health insurance. I recently decided to buy insurance from a friend. He didn't approach me rather it was me who approach him.
I am a 24 year old male. I am healthy I guess without much problem. I want to buy insurance from protecting my family from financial catastrophe. I have do some reading about insurance but I think its still not enough for me to evaluate any insurance plan well. After going through my financial, my friend/agent came back to me with 3 plans, one is term insurance, one is saving type insurance, the last is investment linked. (Details of three plans provided)
My question is, am I paying too much premium? Am I covering too much? The CPF portion seems to be taking quite a lot of money away?
REPLY
I suggest that you buy my book, Practical Guide on Financial Planning, to read about the fundamentals of financial planning. It also explains why you should not buy any whole life or investment linked policy - as the distribution cost is too high.
You can buy the book here:
www.easysearch.sg/ishop
You should buy term insurance. The best type is from Aviva (SAF) or NTUC (SAFRA insurance). You can get a comparision of the cost here.
http://www.easysearch.sg/Admin/File.aspx?id=19
Asian economies urged to raise interest rate
Asia’s developing nations are recovering strongly from the global financial crisis, but should now start raising interest rates and adopt more flexible exchange rate policies, the Asian Development Bank said in a major report Tuesday.
http://www.nytimes.com/2010/04/14/business/global/14asiaecon.html
My comment:
When interest rate is raised, you can expect property and stock markets to correct from their current level, which is a bubble caused by low interest rate.
http://www.nytimes.com/2010/04/14/business/global/14asiaecon.html
My comment:
When interest rate is raised, you can expect property and stock markets to correct from their current level, which is a bubble caused by low interest rate.
Survey - expenses of a retired couple
How much does a retired couple have to spend each month to live in Singapore? Give your views in this survey.
I estimate that the expenses for a retired couple with a home for an adequate lifestyle is $1,200 a month and the bare minimum is $800. What do you think?
I estimate that the expenses for a retired couple with a home for an adequate lifestyle is $1,200 a month and the bare minimum is $800. What do you think?
Defamation and fear
Singaporeans are so afraid to express any opinion, as they fear that any negative opinion about any person or organisation can be considered as defamtory. What a shameful state of affairs. How has the country got into this state?
Tan Kin Lian
Tan Kin Lian
The future for our country
A met a nurse at a wake. I said that the current government had done a lot of good for the people and the country during the first 30 years after independence. During the next 15 years, the policies have been bad for the people, as they led to high cost of living, stagnant wages and wide disparity of income. The government leaders are not working for the welfare of the people and appear to be looking after the intrest of big business and their own interest.
Most people have been quite unfair in judging the "poor quality" of the opposition politicians, as their main source of information is the mainstream media.
I know many of these politicians personally and appreciate their personal sacrifices in being willing to take a stand against the ruling party. Many of them are quite well educated and decent people, quite moderate in their thinking and feel strongly for Singapore. Some people think that they only appear at election time. This is not true. They do spend time on the ground work, but are not reported in the media. We must remember that they have to make a living and have to face difficulty in the business or at work.
She was surprised at my frankness. She started to express her own feelings of doubt about the future of our country and the direction that it is heading. She lamented that many Singaporeans are not able to think about what is good for the country and are afraid to think differently from what has been told to them in the media.
Tan Kin Lian
Most people have been quite unfair in judging the "poor quality" of the opposition politicians, as their main source of information is the mainstream media.
I know many of these politicians personally and appreciate their personal sacrifices in being willing to take a stand against the ruling party. Many of them are quite well educated and decent people, quite moderate in their thinking and feel strongly for Singapore. Some people think that they only appear at election time. This is not true. They do spend time on the ground work, but are not reported in the media. We must remember that they have to make a living and have to face difficulty in the business or at work.
She was surprised at my frankness. She started to express her own feelings of doubt about the future of our country and the direction that it is heading. She lamented that many Singaporeans are not able to think about what is good for the country and are afraid to think differently from what has been told to them in the media.
Tan Kin Lian
Monday, April 12, 2010
Gold investment scheme
Hi Mr. Tan,
Recently there is this gold investment scheme by 2 companies called X Gold and Gold label. They claim that it is a pretty low risk investment with 9% guranteed return after 6 mths which will mean a return of 18% annually. What is your opinion on this? Is it too good to be true?
REPLY
Of course it is too good to be true. Never invest in promises that you do not understand.
Many investors were offered a return of 12.5% after 6 months on a land banking product and on an industrial chemical product. When the investment matured, they did not get back their principal or the interest. The promoter of the product gave all kinds of excuses - citing the financial crisis. It is easy for you to hand over your money, but difficult to get it back.
There is a chapter in my book, Practical Guide on Financial Planning, about unregulated products that should be avoided. You can buy the book ($12) here.
Recently there is this gold investment scheme by 2 companies called X Gold and Gold label. They claim that it is a pretty low risk investment with 9% guranteed return after 6 mths which will mean a return of 18% annually. What is your opinion on this? Is it too good to be true?
REPLY
Of course it is too good to be true. Never invest in promises that you do not understand.
Many investors were offered a return of 12.5% after 6 months on a land banking product and on an industrial chemical product. When the investment matured, they did not get back their principal or the interest. The promoter of the product gave all kinds of excuses - citing the financial crisis. It is easy for you to hand over your money, but difficult to get it back.
There is a chapter in my book, Practical Guide on Financial Planning, about unregulated products that should be avoided. You can buy the book ($12) here.
Who shot the lion?
80 year old man : My 28 year old wife is pregnant, your opinion Doctor?
Doctor : Let me tell you a story. A hunter in a hurry grabs an umbrella instead of the gun. He moves into the jungle, sees a lion, lifts the umbrella, pulls the handle and BANG... The lion drops dead!
Old man : That's impossible; someone else must have shot the lion.
Doctor : MY POINT EXACTLY!
Doctor : Let me tell you a story. A hunter in a hurry grabs an umbrella instead of the gun. He moves into the jungle, sees a lion, lifts the umbrella, pulls the handle and BANG... The lion drops dead!
Old man : That's impossible; someone else must have shot the lion.
Doctor : MY POINT EXACTLY!
Anonymous comments in websites
Some websites may required commenters to give their identity. Read this article.
My view.
This is a good move as it makes the commenters more truthful and accountable.
My view.
This is a good move as it makes the commenters more truthful and accountable.
HK: BOC staff charged over Lehman sales
Two employees of the Bank of China were charged by the Hong Kong police over the sale of financial products related to Lehman Brothers, the bank said, while a third staff member had been arrested and released on bail.
Bank of China said in a statement Sunday that the staffers had been charged under a securities law that prohibits fraudulent or reckless misrepresentation for the purpose of inducing financial transactions.
http://dealbook.blogs.nytimes.com/2010/04/12/two-boc-staffers-charged-over-lehman-sales/
Bank of China said in a statement Sunday that the staffers had been charged under a securities law that prohibits fraudulent or reckless misrepresentation for the purpose of inducing financial transactions.
http://dealbook.blogs.nytimes.com/2010/04/12/two-boc-staffers-charged-over-lehman-sales/
Liberal arts education
There are two letters in the Straits Times on the need for a liberal arts education in Singapore. One writer said that it helps people to think out of the box and to have the confidence to be different.
I agree with the observations. I found that, in general, most Singaporeans are not willing to think for themselves. They like to have instructions given to them in detail and will follow them specifically to the letter.
We need people who are more flexible, more independent in their thinking and more willing to take the responsibility to decide.
Tan Kin Lian
Links to letters in Straits Times Forum
http://www.straitstimes.com/STForum/Story/STIStory_513369.html
I agree with the observations. I found that, in general, most Singaporeans are not willing to think for themselves. They like to have instructions given to them in detail and will follow them specifically to the letter.
We need people who are more flexible, more independent in their thinking and more willing to take the responsibility to decide.
Tan Kin Lian
Links to letters in Straits Times Forum
http://www.straitstimes.com/STForum/Story/STIStory_513369.html
Licenced moneylenders
There are a few letters in the Straits Times Forum about the high interest rate charged by licenced money lenders. The writers argued that the public needs to be protected against these unconscionable interest rate, that the free market does not work and desperate borrowers will accept the money on any terms. One writer is the president of Credit Counselling of Singapore, a non-profit body that helps borrowers to manage their debt.
This is another example of the failure of the market to give fair treatment of consumers. There are countless other examples. I hope that the Government realise this weakness and start to regulate the market more actively.
Tan Kin Lian
Links to the letters in the Straits Times Forum
http://www.straitstimes.com/STForum/Story/STIStory_513364.html
http://www.straitstimes.com/STForum/Story/STIStory_513366.html
This is another example of the failure of the market to give fair treatment of consumers. There are countless other examples. I hope that the Government realise this weakness and start to regulate the market more actively.
Tan Kin Lian
Links to the letters in the Straits Times Forum
http://www.straitstimes.com/STForum/Story/STIStory_513364.html
http://www.straitstimes.com/STForum/Story/STIStory_513366.html
Escalating property prices
The root cause is the low interest rate. It gave the impression that the high property prices are still affordable. At an interest rate of 2% on a property of $500,000 payable over 30 years, the monthly installment looks affordable at $1,966 a month. If interest rate increases to 5%, which is a more realistic level, the monthly installment increases by 31% to $2,581. Many people cannot afford this type of increase on a tight budget. But, it will come. Low interest rate cannot continue forever.
Look at it from another angle. The property prices should have been 30% lower, to be realistic based on the affordability of the population. During a period of low interest rate, the property developers increase the price and their marketing approach was to convince the buyer that it is affordable. It took a while for the buyers to buy into this thinking. The foreign buyers enter into the picture and started to move the property market.
This is followed by the speculators who see the chance to make a big profit. They buy the properties at the prevailing prices and expect to make a big profit by flipping over the properties on resale. Their demand pushes up the price. More people jump into the fray. This is called the "greed" factor.
The next batch of buyers are from the genuine end users who buy the prices at inflated value because they were afraid that they would increase further and be out of their financial reach. They jumped in and accept the high prices. This is called the "fear" factor. This is how the low interest rate could increase the property prices by 30%.
The next level of increase comes from stretching the repayment period from the prudent level of 20 years to a more risky level of 30 years. It accounts for another 23% of increase. So, it is possible for the property prices to be 60% higher than the affordable level. The high property prices mean that most households are spending too much of their money on their homes, leaving less money for other types of spending and for their retirement.
Are high property prices sustainable? Just look at what happened to Japan 20 years ago. The crash of the property market put the economy in the doldrums for 20 years. Look at what is happening in America and UK today. They will suffer the same fate. Do you think that Singapore will be any diffferent?
Tan Kin Lian
Look at it from another angle. The property prices should have been 30% lower, to be realistic based on the affordability of the population. During a period of low interest rate, the property developers increase the price and their marketing approach was to convince the buyer that it is affordable. It took a while for the buyers to buy into this thinking. The foreign buyers enter into the picture and started to move the property market.
This is followed by the speculators who see the chance to make a big profit. They buy the properties at the prevailing prices and expect to make a big profit by flipping over the properties on resale. Their demand pushes up the price. More people jump into the fray. This is called the "greed" factor.
The next batch of buyers are from the genuine end users who buy the prices at inflated value because they were afraid that they would increase further and be out of their financial reach. They jumped in and accept the high prices. This is called the "fear" factor. This is how the low interest rate could increase the property prices by 30%.
The next level of increase comes from stretching the repayment period from the prudent level of 20 years to a more risky level of 30 years. It accounts for another 23% of increase. So, it is possible for the property prices to be 60% higher than the affordable level. The high property prices mean that most households are spending too much of their money on their homes, leaving less money for other types of spending and for their retirement.
Are high property prices sustainable? Just look at what happened to Japan 20 years ago. The crash of the property market put the economy in the doldrums for 20 years. Look at what is happening in America and UK today. They will suffer the same fate. Do you think that Singapore will be any diffferent?
Tan Kin Lian
Sunday, April 11, 2010
Avoid all land banking products
Dear Mr Tan,
I really hope to get a reply from you as I respect your experience in many areas.
There is a Singapore company called X and they sells plots of land in UK. We are genuine investor and like to have your advice if you heard about them and whether there is any issue on reputation or scam which we should be aware of. There will be risk as we understand but it is a scam, we should be to think carefully.
REPLY
You should avoid all land banking schemes It is not worth the risk. You cannot make a judgement of their reputation or rely on it.
There is a chapter in my book, Practical Guide on Financial Planning, that deal with unregulated products such as land banking and other get rick quick schemes. You can buy the book ($12) here.
I really hope to get a reply from you as I respect your experience in many areas.
There is a Singapore company called X and they sells plots of land in UK. We are genuine investor and like to have your advice if you heard about them and whether there is any issue on reputation or scam which we should be aware of. There will be risk as we understand but it is a scam, we should be to think carefully.
REPLY
You should avoid all land banking schemes It is not worth the risk. You cannot make a judgement of their reputation or rely on it.
There is a chapter in my book, Practical Guide on Financial Planning, that deal with unregulated products such as land banking and other get rick quick schemes. You can buy the book ($12) here.
Role of Parliament
The role of Parlimanent is to act as a check on the Government. Read this article.
Bad advice on switching
Hi Mr. Tan,
I visited your blog and enjoy reading it. I need your advice on the following. Currently, I have (details of 4 policies provided)
Recently my new agent does an analysis and advise me that I required a life-policy. The agent suggested me to terminate the investment policy and get a life policy. The agent informed me that the premium paid till date is around $X and the surrender value is $Y (slightly more than $X). The agent cited that part of the investment profit are paid for the administration charge and others benefit like Death Cover, TPD and CCP.
I'm reluctant because I do not intend to terminate the investment policy but instead thinking of reducing the coverage amount so that the investment policy is indeed an investment policy not anything else. Please advise.
REPLY
It is bad to terminate an existing policy and buy a new policy. Do not buy a life policy that has high upfront charge. If you need additional cover, just buy a term insurance policy, e.g. available from Aviva (e.g. SAF scheme). If you need less cover, you can reduce the sum insured on the investment policy.
Get the benefit illustration from the agent (for the new policy) and show to me. I will tell you if the agent has given proper advice to you.
You can read my book, Practical Guide on Financial Planning. There is a chapter on how to deal with existing insurance policy, and a warning to avoid switching to a new policy.
The book is available here for $12, www.easysearch.sg/ishop
I visited your blog and enjoy reading it. I need your advice on the following. Currently, I have (details of 4 policies provided)
Recently my new agent does an analysis and advise me that I required a life-policy. The agent suggested me to terminate the investment policy and get a life policy. The agent informed me that the premium paid till date is around $X and the surrender value is $Y (slightly more than $X). The agent cited that part of the investment profit are paid for the administration charge and others benefit like Death Cover, TPD and CCP.
I'm reluctant because I do not intend to terminate the investment policy but instead thinking of reducing the coverage amount so that the investment policy is indeed an investment policy not anything else. Please advise.
REPLY
It is bad to terminate an existing policy and buy a new policy. Do not buy a life policy that has high upfront charge. If you need additional cover, just buy a term insurance policy, e.g. available from Aviva (e.g. SAF scheme). If you need less cover, you can reduce the sum insured on the investment policy.
Get the benefit illustration from the agent (for the new policy) and show to me. I will tell you if the agent has given proper advice to you.
You can read my book, Practical Guide on Financial Planning. There is a chapter on how to deal with existing insurance policy, and a warning to avoid switching to a new policy.
The book is available here for $12, www.easysearch.sg/ishop
Saturday, April 10, 2010
Mobile apps developer
I wish to look for mobile apps developer to take projects under the following platforms - Apple, Android, Windows, Nokia. If you are interested, send message to kinlian@gmail.com.
High earnings of new CEO
Someone told me that the annual report of a listed insurance company showed that its recently recruited CEO earned $2.6 million in 2009. This remuneration was twice of the remuneration of the previous CEO who headed the company for 10 years. The insurance company had cut its policyholders' bonus two years ago due to market conditions and had still not restored the bonus cut.
He asked, "Mr. Tan, is this fair to the policyholders? Why is the company allowed to increase its management salaries by so much, while policyholders are still suffering the bonus cut?" He also pointed out that the previous CEO was a Singaporean and that the new CEO was a foreigner.
He asked, "Mr. Tan, is this fair to the policyholders? Why is the company allowed to increase its management salaries by so much, while policyholders are still suffering the bonus cut?" He also pointed out that the previous CEO was a Singaporean and that the new CEO was a foreigner.
Friday, April 09, 2010
Investment in land banking in Canada
Dear Sir,
My family and I bought some land in Canada 7 years ago and have yet to see our profits actualised. Is this investment a scam? We haven't tried asking for our money back but reading about the same company being raided in Malaysia makes me think it may be one.
REPLY
It is difficult for the investors to get back their money from land banking projects. Many investors have waited a long time, and have now given up hope of getting back their money.
My family and I bought some land in Canada 7 years ago and have yet to see our profits actualised. Is this investment a scam? We haven't tried asking for our money back but reading about the same company being raided in Malaysia makes me think it may be one.
REPLY
It is difficult for the investors to get back their money from land banking projects. Many investors have waited a long time, and have now given up hope of getting back their money.
Law on found items
The Police told me that I am not allowed to keep found items and that these items have to be reported to a neighborhood police station. The officer asked, "Did I consult a lawyer about my Lost & Found portal?"
I am not aware that there is a law regarding the return of found items to the Police. The Police officer was not able to point out the law to me anyway. If the Police does not know, how do you expect the citizens to know about such a law?
I searched the Internet to look for the existence of such a law in Singapore. I could not find any mention of it. I know that there is a law against theft of property. If somone finds a property that could be traced to the owner, e.g. car, computer, mobile phone, and keeps the property or sells it away, the finder could be guilty of stealing the property. In that case, it is better for the finder to report the found item and hand it over to the Police to be kept in its centralised store.
But the Police should make it clear to the public that they can report a lost item to be traced. The Police needs an efficient matching system. Perhaps they can use my portal or create one of their own.
There is the concept of "finders keepers". I believe that if an item is lost and it is not possible for the finder to trace the owner, the finder is entitled to keep the item. However, if the owner comes back one day to claim the item, and assuming that the owner is able to prove ownership, then the item has to be returned to the owner.
Tan Kin Lian
I am not aware that there is a law regarding the return of found items to the Police. The Police officer was not able to point out the law to me anyway. If the Police does not know, how do you expect the citizens to know about such a law?
I searched the Internet to look for the existence of such a law in Singapore. I could not find any mention of it. I know that there is a law against theft of property. If somone finds a property that could be traced to the owner, e.g. car, computer, mobile phone, and keeps the property or sells it away, the finder could be guilty of stealing the property. In that case, it is better for the finder to report the found item and hand it over to the Police to be kept in its centralised store.
But the Police should make it clear to the public that they can report a lost item to be traced. The Police needs an efficient matching system. Perhaps they can use my portal or create one of their own.
There is the concept of "finders keepers". I believe that if an item is lost and it is not possible for the finder to trace the owner, the finder is entitled to keep the item. However, if the owner comes back one day to claim the item, and assuming that the owner is able to prove ownership, then the item has to be returned to the owner.
Tan Kin Lian
Monitor my blog
Someone asked me, "How did the Police learn about my Lost and Found portal?". I suspect that they are instructed to monitor my blog to look for seditious or defamatory statements.
Various categories of public housing
Our HDB flats have become expensive and is now a burden for many young people to start their first home.
To solve this problem, I have suggested that a new category of HDB housing be offered based on cost of the flat. This could bring down the price by 30% to 50%. The resale value of this new category will be based on the cost of a new flat (which will increase with inflation) less depreciation of the flat.
I believe that it is possible to have the various categories of HDB flats to co-exist side by side. Right now, we have HDB and executive apartments. What is wrong with a third category, with different conditions?
Some people may choose to pay more for the "market based" HDB flats. Other people may prefer to pay less for the "cost plus" HDB flats. Give them a choice. From my survey, the demand for "cost plus" flat is likely to be higher than "market based". It does not matter how the final choice will turn out. It is good to offer the choice.
Tan Kin Lian
To solve this problem, I have suggested that a new category of HDB housing be offered based on cost of the flat. This could bring down the price by 30% to 50%. The resale value of this new category will be based on the cost of a new flat (which will increase with inflation) less depreciation of the flat.
I believe that it is possible to have the various categories of HDB flats to co-exist side by side. Right now, we have HDB and executive apartments. What is wrong with a third category, with different conditions?
Some people may choose to pay more for the "market based" HDB flats. Other people may prefer to pay less for the "cost plus" HDB flats. Give them a choice. From my survey, the demand for "cost plus" flat is likely to be higher than "market based". It does not matter how the final choice will turn out. It is good to offer the choice.
Tan Kin Lian
Thursday, April 08, 2010
Video: How to solve the Shape Quiz
Lesson from Mao
Someone told this story to me. Mao Tse Tung was admired and loved by the people of China for his contributions to building the nation during the first three decades of his leadership. During the last decade, he lost the respect of the people due to many mistakes that were made in his attempt to perpetuate his power, which worsen the living conditions for the people.
Treat people equally
DPM Teo Chee Hean is quoted to have said, "A company that does not discriminate against any particular age group or gender will naturally have access to a large pool of potential hires".
I agree with this concept of non-discrimination and ask that it be applied to all aspects of Singapore life. We should treat people equally in respect of the following (just a few examples):
- school fees
- medical fees at government facilities
- income tax relief for children
- contribution to CPF
We are so used to being differentiated according to our residential status, employment status, educational level, education level of our mother, year of birth and other factors that it becomes part of our daily lives. It is not only unfair to those in the wrong groups - it also makes life complicated in Singapore.
Tan Kin Lian
I agree with this concept of non-discrimination and ask that it be applied to all aspects of Singapore life. We should treat people equally in respect of the following (just a few examples):
- school fees
- medical fees at government facilities
- income tax relief for children
- contribution to CPF
We are so used to being differentiated according to our residential status, employment status, educational level, education level of our mother, year of birth and other factors that it becomes part of our daily lives. It is not only unfair to those in the wrong groups - it also makes life complicated in Singapore.
Tan Kin Lian
Political implication
The GPC Chairman for Transport said that increased (COE) premium could be seen as a "cost of living" issue for current and future car owners. He said that any price increase, from COE to HDB prices, will have a "political implication".
I have heard the term "political implication" used many times by politicians from the ruling party over the past years. It is a necessary vocabulary to show their understanding of the ideology of our great leader.
There is another way to make decisions that is not based on "political implications". It is based on what is right and wrong, what is good and bad. It is right and good to take care of the welfare of the people, to maintain an affordable cost of living and to a comfortable and secure life to the people. It is not necessary to do them based on "political implications".
Tan Kin Lian
I have heard the term "political implication" used many times by politicians from the ruling party over the past years. It is a necessary vocabulary to show their understanding of the ideology of our great leader.
There is another way to make decisions that is not based on "political implications". It is based on what is right and wrong, what is good and bad. It is right and good to take care of the welfare of the people, to maintain an affordable cost of living and to a comfortable and secure life to the people. It is not necessary to do them based on "political implications".
Tan Kin Lian
Big rats and fat cats
How is this relevant to Singapore? What is the role of government? Read this article by Dr. Wong Wee Nam.
Quote
Role of Government
The poor will only get a fair share of the economic pie through a just re-distribution of income. The only way to re-distribute income is through public policies and laws. Unfortunately the problem is that most of the people who are in the position to influence, initiate or implement the changes are members of the tiny apex who have the largest share of the national income. Unless one is very altruistic, who would want to come out with an equitable system especially when it means affecting one’s self-interest? It is natural for anyone in this position to believe completely the virtue of Adam Smith’s “invisible hand”.
Big businesses and corporations love to wave the flag of globalisation, free market and competitiveness. This is because the wages of the workers can always be kept low by making them compete against foreign workers that can be imported from the part of the world where many people are still hungry. They can easily wring concessions from workers with the threat of relocation. Conversely, no worker can hope to wring concession from the bosses with the threat of resignation or emigration.
The power of big corporations and businesses can also be be seen in Singapore. Thus when companies do not make profit, they can put pressure to cut the workers’ salaries so that they can still be profitable. If the profit is not attractive enough, they can exert pressure to bring down the corporate tax rates.
In the end not only do they pay lower taxes, the tax payers’ money that is used to produce skilled workers, good infrastructure and a safe environment for these companies will be raised through the GST that is paid by everyone.
In a just and equal society, the role of the government should be to act as a regulator to balance the needs of the people and the greed the big businesses. Its job should be to iron out any kinks that may give rise to injustice and conflict and to re-distribute wealth in a fair manner. Its policies should not favour one side or the other. It cannot play such role if it decides to go into business and become a Fat Cat itself.
For a just an equal society, a government must be able to control the greed of the Big Rats and trim the fat of the Fat Cats instead of justifying the necessity of their existence
Quote
Role of Government
The poor will only get a fair share of the economic pie through a just re-distribution of income. The only way to re-distribute income is through public policies and laws. Unfortunately the problem is that most of the people who are in the position to influence, initiate or implement the changes are members of the tiny apex who have the largest share of the national income. Unless one is very altruistic, who would want to come out with an equitable system especially when it means affecting one’s self-interest? It is natural for anyone in this position to believe completely the virtue of Adam Smith’s “invisible hand”.
Big businesses and corporations love to wave the flag of globalisation, free market and competitiveness. This is because the wages of the workers can always be kept low by making them compete against foreign workers that can be imported from the part of the world where many people are still hungry. They can easily wring concessions from workers with the threat of relocation. Conversely, no worker can hope to wring concession from the bosses with the threat of resignation or emigration.
The power of big corporations and businesses can also be be seen in Singapore. Thus when companies do not make profit, they can put pressure to cut the workers’ salaries so that they can still be profitable. If the profit is not attractive enough, they can exert pressure to bring down the corporate tax rates.
In the end not only do they pay lower taxes, the tax payers’ money that is used to produce skilled workers, good infrastructure and a safe environment for these companies will be raised through the GST that is paid by everyone.
In a just and equal society, the role of the government should be to act as a regulator to balance the needs of the people and the greed the big businesses. Its job should be to iron out any kinks that may give rise to injustice and conflict and to re-distribute wealth in a fair manner. Its policies should not favour one side or the other. It cannot play such role if it decides to go into business and become a Fat Cat itself.
For a just an equal society, a government must be able to control the greed of the Big Rats and trim the fat of the Fat Cats instead of justifying the necessity of their existence
Wednesday, April 07, 2010
Make a date with FISCA on 8 May 2010
Make a date with FiSCA on 8 May 2010 from 3pm to 6pm. Talk on "Financial Planning - A Practical Guide"
Note this down in your diary. Put it in your calendar. Register now! It's free to all FiSCA members. Also, a free copy of the Practical Guide on Financial Planning book will be given out to all members who attend the talk.
The public is welcome to join in as well. Public participation fee is $30. For this event only, the public who attends the talk will also get a copy of the Practical Guide on Financial Planning book worth $12.
Note this down in your diary. Put it in your calendar. Register now! It's free to all FiSCA members. Also, a free copy of the Practical Guide on Financial Planning book will be given out to all members who attend the talk.
The public is welcome to join in as well. Public participation fee is $30. For this event only, the public who attends the talk will also get a copy of the Practical Guide on Financial Planning book worth $12.
Group insurance rates
You can view the group insurance rates charged by Aviva for SAF members and dependents here. These rates can be used as a benchmark to compare the rates offered by other insurance companies for term life, critical illness and personal accident insurance.
The rates for term life (payable on death) and personal accident (payable on death or injury by accident) is the same regardless of age.
The rates for critical illness increase sharply after age 45. If you find them to be expensive, you do not need to have this insurance, if you already have sufficient savings by that time. You can draw down on your savings in the event of a critical illness.
Example
Assume that you are 30 years old, earn $3,000 a month and wish to insure for the following:
Term life $200,000 premium $25.60
Critical illness $100,000 premium $10.00
Personal accident $100,000 premium $4.17
Total premium $39.17
The premium is about 1.3% of your earnings. This rate will remain unchanged until you reach age 45. After that, you have to pay a higher premium for critical illness, but you can discontinue it at that time.
The rates for term life (payable on death) and personal accident (payable on death or injury by accident) is the same regardless of age.
The rates for critical illness increase sharply after age 45. If you find them to be expensive, you do not need to have this insurance, if you already have sufficient savings by that time. You can draw down on your savings in the event of a critical illness.
Example
Assume that you are 30 years old, earn $3,000 a month and wish to insure for the following:
Term life $200,000 premium $25.60
Critical illness $100,000 premium $10.00
Personal accident $100,000 premium $4.17
Total premium $39.17
The premium is about 1.3% of your earnings. This rate will remain unchanged until you reach age 45. After that, you have to pay a higher premium for critical illness, but you can discontinue it at that time.
CNBC Interview with Roger Kirby
The US law firm Kirby McInerney will be speaking at a seminar on 13 April about class action in the USA to recover losses due to securities fraud. You can watch an interview with Roger Kirby in this CNBC video.
Investing and the casino
This article is quite frank. It says that investing is like the casino. The lessons from the casino can be applied to investing. I agree.
Lost & Found Service
I have launched the Lost & Found website.
I sent this media release, but the newspapers did not cover it. I have approached several transport companies and educational institutions to tell them about this service and to encourage them to report the lost & found items in this website, to make it easy for the items to be matched. Two of them have responded positively.
The Police called my office to tell me that under the law, I am not allowed to keep the found item. They said that the found item has to be reported to a neighborhood police station and kept in a central store. This works fine for me and save me the hassle. I will post more details about this service in the website.
I hope that my readers can help to promote this website through Facebook and other social media.
Tan Kin Lian
I sent this media release, but the newspapers did not cover it. I have approached several transport companies and educational institutions to tell them about this service and to encourage them to report the lost & found items in this website, to make it easy for the items to be matched. Two of them have responded positively.
The Police called my office to tell me that under the law, I am not allowed to keep the found item. They said that the found item has to be reported to a neighborhood police station and kept in a central store. This works fine for me and save me the hassle. I will post more details about this service in the website.
I hope that my readers can help to promote this website through Facebook and other social media.
Tan Kin Lian
Affordable housing
Read this article in the blog: Diary of a Singapore Mind
My comment:
The problem has reach a stage which is difficult to solve. Housing price is too high. People are unclear about how to treat housing - is it an investment or a cost of living? One party blames the other party.
My preferred approach is to create a new type of housing based on controlled price, i.e. cost plus. This can be adjusted with inflation and reduced by depreciation. Give people a choice whether they wish to treat housing as an investment (i.e. based on the current market pricing) or as a cost of living (i.e. based on the controlled pricing).
My comment:
The problem has reach a stage which is difficult to solve. Housing price is too high. People are unclear about how to treat housing - is it an investment or a cost of living? One party blames the other party.
My preferred approach is to create a new type of housing based on controlled price, i.e. cost plus. This can be adjusted with inflation and reduced by depreciation. Give people a choice whether they wish to treat housing as an investment (i.e. based on the current market pricing) or as a cost of living (i.e. based on the controlled pricing).
Tell a blatant lie
The benefit illustration of a life insurance policy showed the distribution cost to be 7.3% of the total premium paid over 25 years. If the total premium amounted to $100,000, the distribution cost was $7,300. The insurance agent twisted the figures and said that the cost was only $292 a year and amount to 0.3% of the invested sum (i.e. similar to the cost of investing in a exchange traded fund).
This is a blatant lie, as the annual cost of $292 is still 7.3% of the annual investment of $4,000. The agent twisted the figure to confuse the clients.
How many agents adopt this type of dishonest way to sell their high cost life insurance policy? Is this type of blatant lie being taught to the insurance agent by their training managers?
Do you know which agent you can trust, and which agent to avoid? It is important for consumers to be educated and avoid falling into this type of trap. Spend $12 to buy my book, Practical Guide on Financial Planning, and learn a better way to manage your savings and investments through an exchange traded fund. Do not spend $7.300 as distribution cost in a financial product that gives you poor value.
Tan Kin Lian
This is a blatant lie, as the annual cost of $292 is still 7.3% of the annual investment of $4,000. The agent twisted the figure to confuse the clients.
How many agents adopt this type of dishonest way to sell their high cost life insurance policy? Is this type of blatant lie being taught to the insurance agent by their training managers?
Do you know which agent you can trust, and which agent to avoid? It is important for consumers to be educated and avoid falling into this type of trap. Spend $12 to buy my book, Practical Guide on Financial Planning, and learn a better way to manage your savings and investments through an exchange traded fund. Do not spend $7.300 as distribution cost in a financial product that gives you poor value.
Tan Kin Lian
Group insurance from Aviva
Aviva has offered attract group insurance - term, critical illness and personal accident - to their existing policyholders under the SAF scheme and their spouses. I have looked at the premium rates and found them to be quite attractive.
I have recommended to consumers to buy term insurance (including critical illness and personal accident riders) and to invest their savings in a low cost investment fund. The group insurance offered by Aviva under the SAF scheme is suitable and get my endorsement.
If you are not an existing policyholder under the Aviva SAF scheme, you can get similar group insurance under the SAFRA scheme offered by NTUC Income - if you are a SAFRA member (and most Singaporeans are).
For the low cost investments, it is best to invest in the STI ETF managed by State Street (lot size is 1,000 shares or about $2900) or the fund managed by DBS (lot size is 100 shares or about $290). The transaction cost and expense ratios are quite similar in both cases. The DBS fund has the advantage of being in smaller lots. (Note: there is a minimum brokerage of 40% and a higher brokerage rate for smaller transactions, so it is not feasible to invest in 100 shares lot of DBS STI ETF. It is better to invest in the Statestreet 1000 shares lot.)
If you buy term insurance for protection and invest in a low cost investment fund, you will get a much higher return from this investment strategy compared to the high cost life insurance policies that are offered in the market now. This concept is explained in my book, Practical Guide on Financial Planning ($12) available here.
Tan Kin Lian
I have recommended to consumers to buy term insurance (including critical illness and personal accident riders) and to invest their savings in a low cost investment fund. The group insurance offered by Aviva under the SAF scheme is suitable and get my endorsement.
If you are not an existing policyholder under the Aviva SAF scheme, you can get similar group insurance under the SAFRA scheme offered by NTUC Income - if you are a SAFRA member (and most Singaporeans are).
For the low cost investments, it is best to invest in the STI ETF managed by State Street (lot size is 1,000 shares or about $2900) or the fund managed by DBS (lot size is 100 shares or about $290). The transaction cost and expense ratios are quite similar in both cases. The DBS fund has the advantage of being in smaller lots. (Note: there is a minimum brokerage of 40% and a higher brokerage rate for smaller transactions, so it is not feasible to invest in 100 shares lot of DBS STI ETF. It is better to invest in the Statestreet 1000 shares lot.)
If you buy term insurance for protection and invest in a low cost investment fund, you will get a much higher return from this investment strategy compared to the high cost life insurance policies that are offered in the market now. This concept is explained in my book, Practical Guide on Financial Planning ($12) available here.
Tan Kin Lian
Platform fee on Fundsupermart (2)
Some investors are unhappy with the platform fee of 0.5% that is being imposed by Fund Supermart. They have two options of responding:
- move to another platform, e.g. Dollar Dex or POEMS]
- sell their unit trusts
They should consider the second option for the following reasons:
- they probably make a profit from the high stockmarket prices now
- by selling the funds, the fund managers may ask FSM to remove their platform fee.
The underlying unit trusts already pay a share of their annual fee to FSM. It is not fair for FSM to add a new layer of fee.
- move to another platform, e.g. Dollar Dex or POEMS]
- sell their unit trusts
They should consider the second option for the following reasons:
- they probably make a profit from the high stockmarket prices now
- by selling the funds, the fund managers may ask FSM to remove their platform fee.
The underlying unit trusts already pay a share of their annual fee to FSM. It is not fair for FSM to add a new layer of fee.
Deflation
When the Japanese economy busted at the end of the 1980s, it went through a deflation that has lasted nearly 20 years. Some commentators said that the US economy may go through a period of deflation but they are optimistic that the economy is more robust and will recover. I am less optimistic. I think that the underlying weakness of the free market system , which contributed to asset bubbles, may affect the US economy as badly as it had affected the Japan economy.
During a period of economy growth, people are willing to borrow and invest in assets, leading to inflation. During a period of deflation, people are not willing to borrow and invest and the excess capacity will take a long time to be utilized. More people will remain unemployed and this will worsen the deflationary cycle.
The second world war ended the deflation of the 1930s. We may need a third world war to end this deflation. But it is also possible to find a more peaceful solution - and that requires to restructure the global economic system into a more socialist type, using the Keynesian approach or its modern version.
Tan Kin Lian
During a period of economy growth, people are willing to borrow and invest in assets, leading to inflation. During a period of deflation, people are not willing to borrow and invest and the excess capacity will take a long time to be utilized. More people will remain unemployed and this will worsen the deflationary cycle.
The second world war ended the deflation of the 1930s. We may need a third world war to end this deflation. But it is also possible to find a more peaceful solution - and that requires to restructure the global economic system into a more socialist type, using the Keynesian approach or its modern version.
Tan Kin Lian
Chance for change in Singapore
Read this article by Yoong Siew Wah.
My comment:
I believe that change will be good for Singapore. Several of the old economic and social policies have not been good for the people and need to be changed.
My comment:
I believe that change will be good for Singapore. Several of the old economic and social policies have not been good for the people and need to be changed.
Tuesday, April 06, 2010
More business for taxi drivers
A taxi company boss told me that the business for taxi drivers has picked up significantly since the opening of the Sentosa integrated resort (aka casino). The average earnings of taxi drivers has increased to $2,500 compared to $2,000 previously. Some taxi companies have applied to the Government for work permits for taxi drivers from overseas - due to shortage of locals willing to be taxi drivers. I hope that more unemployed workers will come forward to try driving a taxi.
Employ adequate public officers
We need sufficient people working in the public sector to deliver public services to the people. We need adequate numbers of teachers, nurses, doctors and policemen, in proportion to the population. If the population increases, we have to employ more public officers. In particular, we need more people in the police force to keep law and order, to investigate crime and fraud and to prosecute criminals. If the increase in public officers is in line with the popular, the total cost of public service will still remain at the same share of the national spending.
We should not try to keep down cost by employing insufficient public officers. We need sufficient manpower to maintain the standard of public service. We cannot expect over-worked officers to deliver the expected standard of service.
If we do not provide sufficient employment in the public sector, there will be insufficient jobs in the private sector to absorb the excess manpower. We should not have too many people selling insurance, property and financial products, as they do not add to the real wealth of the country, although they may create false wealth through asset bubbles.
We should also avoid paying high salaries to the top levels of the public sector to match the salaries in the private sector. The private sector salaries are likely to be excessive anyway, and should be moderated in some suitable way, e.g. to impose a high rate of tax on extremely high earnings. If we remove one top earner, we may be able to create jobs for 50 people at the working level.
Let us have a fair balance. We need adequate people in the public sector to provide an adequate level of service while keeping the cost at an acceptable level.
Tan Kin Lian
We should not try to keep down cost by employing insufficient public officers. We need sufficient manpower to maintain the standard of public service. We cannot expect over-worked officers to deliver the expected standard of service.
If we do not provide sufficient employment in the public sector, there will be insufficient jobs in the private sector to absorb the excess manpower. We should not have too many people selling insurance, property and financial products, as they do not add to the real wealth of the country, although they may create false wealth through asset bubbles.
We should also avoid paying high salaries to the top levels of the public sector to match the salaries in the private sector. The private sector salaries are likely to be excessive anyway, and should be moderated in some suitable way, e.g. to impose a high rate of tax on extremely high earnings. If we remove one top earner, we may be able to create jobs for 50 people at the working level.
Let us have a fair balance. We need adequate people in the public sector to provide an adequate level of service while keeping the cost at an acceptable level.
Tan Kin Lian
Quick action could have reduced number of spa victims
http://www.straitstimes.com/STForum/Story/STIStory_510873.html
My comment:
It is important for the Police to investigate a potential fraudulent practice promptly, rather than expect the public to provide evidence. The public do not have the resources and the power to carry out an investigation to produce the evidence.
There are several potentially fraudulent practices, such as land banking and get rick quick schemes. If the Police does not investigate, more people will fall victim to the frauds.
My comment:
It is important for the Police to investigate a potential fraudulent practice promptly, rather than expect the public to provide evidence. The public do not have the resources and the power to carry out an investigation to produce the evidence.
There are several potentially fraudulent practices, such as land banking and get rick quick schemes. If the Police does not investigate, more people will fall victim to the frauds.
Kirby McInerney on CNBC
Dear Best Friends and Business Associates,
Roger Kirby will be appearing on CNBC Asia Squawk Box Wednesday morning at 7:30AM Singapore time. He'll be interviewed from NY, and the anchors will be Martin Soong and Karen Tso. The topics that he will be discussing include:
1) What does your firm do for Asian investors?
1) What does your firm do for Asian investors?
2) What rights to Asian investors have in a US court?
3) What results have Asian investors received/could receive in a US court?
4) Are these cases worth it financially given the time involved in reaching a resolution?
5) Do you expect more cases to be brought?
6) Is fraud on the rise? In what sectors? In what ways?
7) What kind of regulation will prevent the fraud that has been committed?
Teo Guan Hock
Do not trust unrealistic projections
Dear Mr. Tan,
I would like to seek your advice on a policy which I had signed up, which is still within the 14 day free look period.
1) The benefit illustration of my policy showed that the "effect of deduction" drops significantly in the 25th year as compared to the 20th year. Would you know the reason for this?
Reply: I do not trust this type of projection where the effect of deduction drop "magically" after 20 years, i.e. the maturity value increases "magically" on the 25th year. When the time comes, the insurance company will find many excuses to tell you whey they are not able to pay out the "magical" increase. Remember, these figures are not guaranteed.
2) I am a bit confused as to which year I should take to calculate the "effect of deduction". Assuming 5.25% Investment Return, the effect of deduction at the 20th year is 37% while at the 25th year, it is 17%. The difference is vast and if I take the 20th year calculation, the policy is obviously too expensive but if I take the 25th year calculation, the policy appears reasonable. Can you advise which is the correct figure I should use?
Reply: Do not trust the "magical" figure shown on the 25th year.
3) I informed my agent that distribution cost works out to be 7.3% which is quite high in my opinion. However, he informed me that over 25 years, the distribution cost only works out to be 0.3% a year and that if I buy ETF yearly, the transaction costs will work to be around there. Is this argument valid?
Reply: If you invest in ETF, the distribution cost is 0.3% of the total invested sum, compared to 7.3% for the life insurance policy. It is dishonest for the agent to divide the 7.3% by 25 years and say that the cost is the same. The agent is telling you a blatant lie.
4) I informed my agent that I have heard horror stories of policies falling way off projected returns upon maturity. However, he mentioned that in the past, the projections were very high and that now, MAS has regulated the projections to be a very reasonable and definitely acheivable 5.25%. Again, is this true?
Reply: The horror story will happen again in the future, due to the unrealistic projection on the 25th year.
5) I highlighted that saving through ETF or investing in equities may yield more but my agent informed me that it is easier said than done and it takes a lot of discipline to keep investing and monitoring shares and buying the policy would be a disciplined way to save for the future. What do you think of this?
Reply: It is easy to keep investing in ETF. You will have better control of your money. There is no need to monitor the ETF as it is well diversified and invested in 30 large shares.
6) Finally, do you think that this policy is reasonable and I should keep it or is it too expensive and I should terminate it while I still can?
Reply: I would take advantage of the 14 day free look period, and give up the policy for a full refund.
You can buy my book, Practical Guide on Financial Planning here. Spend $12 and save a few thousand dollars. Be educated. Do not be misled by dishonest agents.
I would like to seek your advice on a policy which I had signed up, which is still within the 14 day free look period.
1) The benefit illustration of my policy showed that the "effect of deduction" drops significantly in the 25th year as compared to the 20th year. Would you know the reason for this?
Reply: I do not trust this type of projection where the effect of deduction drop "magically" after 20 years, i.e. the maturity value increases "magically" on the 25th year. When the time comes, the insurance company will find many excuses to tell you whey they are not able to pay out the "magical" increase. Remember, these figures are not guaranteed.
2) I am a bit confused as to which year I should take to calculate the "effect of deduction". Assuming 5.25% Investment Return, the effect of deduction at the 20th year is 37% while at the 25th year, it is 17%. The difference is vast and if I take the 20th year calculation, the policy is obviously too expensive but if I take the 25th year calculation, the policy appears reasonable. Can you advise which is the correct figure I should use?
Reply: Do not trust the "magical" figure shown on the 25th year.
3) I informed my agent that distribution cost works out to be 7.3% which is quite high in my opinion. However, he informed me that over 25 years, the distribution cost only works out to be 0.3% a year and that if I buy ETF yearly, the transaction costs will work to be around there. Is this argument valid?
Reply: If you invest in ETF, the distribution cost is 0.3% of the total invested sum, compared to 7.3% for the life insurance policy. It is dishonest for the agent to divide the 7.3% by 25 years and say that the cost is the same. The agent is telling you a blatant lie.
4) I informed my agent that I have heard horror stories of policies falling way off projected returns upon maturity. However, he mentioned that in the past, the projections were very high and that now, MAS has regulated the projections to be a very reasonable and definitely acheivable 5.25%. Again, is this true?
Reply: The horror story will happen again in the future, due to the unrealistic projection on the 25th year.
5) I highlighted that saving through ETF or investing in equities may yield more but my agent informed me that it is easier said than done and it takes a lot of discipline to keep investing and monitoring shares and buying the policy would be a disciplined way to save for the future. What do you think of this?
Reply: It is easy to keep investing in ETF. You will have better control of your money. There is no need to monitor the ETF as it is well diversified and invested in 30 large shares.
6) Finally, do you think that this policy is reasonable and I should keep it or is it too expensive and I should terminate it while I still can?
Reply: I would take advantage of the 14 day free look period, and give up the policy for a full refund.
You can buy my book, Practical Guide on Financial Planning here. Spend $12 and save a few thousand dollars. Be educated. Do not be misled by dishonest agents.
CNA More quit workforce in their 50s
Read this article in Channel News Asia.
My comment:
I believe that most people want to work to an older age, but they are likely to be retrenched due to restructuring of the company, the desire of the company to increase their profits by employing lower cost workers and the weak protection of workers' rights.
My comment:
I believe that most people want to work to an older age, but they are likely to be retrenched due to restructuring of the company, the desire of the company to increase their profits by employing lower cost workers and the weak protection of workers' rights.
Different management style
Dear Mr Tan,
After serving NTUC for 30 years, I must say that we have lost a caring leader that really look after the welfare and investment of policy holders. With the new comer, all the existing management staff who have followed you for many years have to give way !!! One of the “victim” is a friend of mine and I could not believe the way he has been treated. After spending almost all his life in this career, learning from your style of hard working and not to waste unnecessary money for any expenses related to work, he has to face a new comer after you left. With a promise of two years contract, he was asked to leave only half a year later after he has given his full collaboration to new staff understudy from him !
It appears the new management style of working is totally different from yours and the new policy is no longer “attractive” as before ! It is unfortunate to see such things happened in one of the most modern city in the world.
G
Monday, April 05, 2010
Time to review COE system?
Published in Straits Times on 5 April 2010
The current system of bidding for Certificates of Entitlement has been operating for more than twenty years. When it was first introduced, it was envisaged that the end buyers would be bidding for the certificates.
Over the years, the bidding for these certificates appear to be dominated by the motor dealers who make a large profit on the trading of these certificates, adding to the total cost of ownership of a vehicle. The bidding system also encourages speculation and price volatility due to greed and fear.
One obstacle for the end buyer to bid directly is the high price of the certificate and the lack of financing for this item.
I wish to suggest the following modifications to the system reduce the speculative activity:
- Allow the successful bidder up to of six months to find a suitable vehicle
- Require the successful bidder to pay only 10% at the time of bidding and the remaining 90% on purchase of the vehicle
- Change the bidding cycle to three months (instead of the current one month).
The proposed changes will create a fairer and more transparent market for the certificate of entitlements and remove the unhealthy speculation.
Tan Kin Lian
Dear Mr Tan,
I saw your letter to the ST Forum today. I applaud you that you raised this issue for consumers like me. I was held captive by the COE system. The COE bidding discourages end users to bid due to the high upfront cash layout as deposit. Genuine bidders with limited cash will be left out. We are left at the mercy of the car companies who do not provide transparent cost structure.
Very often, you will not get a good car price if you got for your own COE. LTA insists that COE is transparent but COE is obviously a tool for car company to hide profits. I do not have the history of when COE started, (how many people have? we buy cars at most 5 times in our life time?) e.g. why there is this 'Open Category' where car companies can hold them and trade later, exchanging hands ... There seems to be more happening than we, as consumers, know. This is not transparent and definitely unfair.
S Y Tan
The current system of bidding for Certificates of Entitlement has been operating for more than twenty years. When it was first introduced, it was envisaged that the end buyers would be bidding for the certificates.
Over the years, the bidding for these certificates appear to be dominated by the motor dealers who make a large profit on the trading of these certificates, adding to the total cost of ownership of a vehicle. The bidding system also encourages speculation and price volatility due to greed and fear.
One obstacle for the end buyer to bid directly is the high price of the certificate and the lack of financing for this item.
I wish to suggest the following modifications to the system reduce the speculative activity:
- Allow the successful bidder up to of six months to find a suitable vehicle
- Require the successful bidder to pay only 10% at the time of bidding and the remaining 90% on purchase of the vehicle
- Change the bidding cycle to three months (instead of the current one month).
The proposed changes will create a fairer and more transparent market for the certificate of entitlements and remove the unhealthy speculation.
Tan Kin Lian
Dear Mr Tan,
I saw your letter to the ST Forum today. I applaud you that you raised this issue for consumers like me. I was held captive by the COE system. The COE bidding discourages end users to bid due to the high upfront cash layout as deposit. Genuine bidders with limited cash will be left out. We are left at the mercy of the car companies who do not provide transparent cost structure.
Very often, you will not get a good car price if you got for your own COE. LTA insists that COE is transparent but COE is obviously a tool for car company to hide profits. I do not have the history of when COE started, (how many people have? we buy cars at most 5 times in our life time?) e.g. why there is this 'Open Category' where car companies can hold them and trade later, exchanging hands ... There seems to be more happening than we, as consumers, know. This is not transparent and definitely unfair.
S Y Tan
Role of insurance agents
Insurance agents can play a useful role in marketing insurance to consumers. However, the insurance products must be designed to be fairly priced and to give good value to consumers. The design of the product is the responsibility of the management and the actuary.
Many general insurance products carry a commission rate of 10% to 15% of the premium. This is acceptable, if the premium is based on the risk that is covered by the policy. This rate of commission can be applied to health and term insurance policies.
For savings and investment policies, the commission rate should be much lower, e.g. similar to the chargespayable for the purchase of shares and bonds, e.g. brokerage is 0.3% of the amount invested. It is wrong for the commission and distribution cost to take away one or two years of the savings.
I hope that the life insurance companies and their management and agents change their practice to offer life insurance products that are fair and good for consumers. This will allow insurance agents to hold their heads high that they are serving their clients well.
I like to ask my readers to be fair in making your comments and not to use this blog to "bash" insurance agents. Please state your views objectively.
Tan Kin Lian
Many general insurance products carry a commission rate of 10% to 15% of the premium. This is acceptable, if the premium is based on the risk that is covered by the policy. This rate of commission can be applied to health and term insurance policies.
For savings and investment policies, the commission rate should be much lower, e.g. similar to the chargespayable for the purchase of shares and bonds, e.g. brokerage is 0.3% of the amount invested. It is wrong for the commission and distribution cost to take away one or two years of the savings.
I hope that the life insurance companies and their management and agents change their practice to offer life insurance products that are fair and good for consumers. This will allow insurance agents to hold their heads high that they are serving their clients well.
I like to ask my readers to be fair in making your comments and not to use this blog to "bash" insurance agents. Please state your views objectively.
Tan Kin Lian
Book-keeping scam
A FEW weeks ago, two Republican House members asked Ben Bernanke, the chairman of the Federal Reserve, whether the Fed knew — before Lehman’s bankruptcy examiner revealed it — about the bookkeeping scam at Lehman known as “Repo 105.”
Well, the truth is this: The collapse of Enron back in 2001 revealed that the biggest financial institutions, here and abroad,were busy creating products whose sole purpose was to help companies magically transform their debt into capital or revenue ...
http://www.nytimes.com/2010/04/04/opinion/04koniak.html?pagewanted=all
Well, the truth is this: The collapse of Enron back in 2001 revealed that the biggest financial institutions, here and abroad,were busy creating products whose sole purpose was to help companies magically transform their debt into capital or revenue ...
http://www.nytimes.com/2010/04/04/opinion/04koniak.html?pagewanted=all
High rate of tax
America is discussing how to curb the high salaries of top CEOs.
In my view, the best way is to impose tax of 90% on salaries above 50 times of the average national wage. The current average net compensation in America is $40,000. This will mean that the special tax will apply to salary above $2 million. The salary of the President of America is only $400,000.
There is an argument that high tax will drive away the top CEOs. I disagree. The top CEOs have to work in a company that is likely to use the human resources or market of the domicile country. It is not easy for the top CEOs to relocate to another country. For example, the health care companies in America make their profit in that country and cannot be relocated overseas. This also applies to the profits from the other big professions, such as law and accountancy.
The financial services industry may be one that can be relocated overseas. However, the top bankers and financial traders make their profits from excessive speculation and leverage, which is likely to be curbed and is not sustainable anyway.
The wonderful outcomes of a high tax on excessive earnings are:
- prevent the rampant profiteering at the expense of consumers
- can abolish the wasteful and unfair Goods and Services Tax.
There should also be an international agreement among the countries to prevent the use of a tax haven strategy to attract the high income earners to move their profits or earnings into that country. It is almost like cheating other countries of their tax revenue.
Tan Kin Lian
In my view, the best way is to impose tax of 90% on salaries above 50 times of the average national wage. The current average net compensation in America is $40,000. This will mean that the special tax will apply to salary above $2 million. The salary of the President of America is only $400,000.
There is an argument that high tax will drive away the top CEOs. I disagree. The top CEOs have to work in a company that is likely to use the human resources or market of the domicile country. It is not easy for the top CEOs to relocate to another country. For example, the health care companies in America make their profit in that country and cannot be relocated overseas. This also applies to the profits from the other big professions, such as law and accountancy.
The financial services industry may be one that can be relocated overseas. However, the top bankers and financial traders make their profits from excessive speculation and leverage, which is likely to be curbed and is not sustainable anyway.
The wonderful outcomes of a high tax on excessive earnings are:
- prevent the rampant profiteering at the expense of consumers
- can abolish the wasteful and unfair Goods and Services Tax.
There should also be an international agreement among the countries to prevent the use of a tax haven strategy to attract the high income earners to move their profits or earnings into that country. It is almost like cheating other countries of their tax revenue.
Tan Kin Lian
Lost & Found Portal
Have you lost a mobile phone, notebook computer, pet or other item. Report it at the Lost & Found portal. If you have found an item, you can also report it here. Our staff will match the reports and contact the owner and the finder. This service is free. Click here.
Please help to publicise this service through your blog, twitter, facebook and other social media.
Please help to publicise this service through your blog, twitter, facebook and other social media.
Sunday, April 04, 2010
Al Jazeera English TV
Al Jazeera English TV is dropped from SingTel Mio TV from April 1, 2010. Here is a selection of some of their videos
http://dlzj.wordpress.com/2010/04/03/al-jazeera-english-dropped-from-singtel-mio-tv-from-april-1st/
http://dlzj.wordpress.com/2010/04/03/al-jazeera-english-dropped-from-singtel-mio-tv-from-april-1st/
Microsoft .NET developer
I wish to look for developer who is familiar with Microsoft .NET to work on a project or to work at my office. Preference will be given to a person living in or near Ang Mo Kio. If you are interested, send an email with your resume to kinlian@gmail.com.
If you wish to attend a course, there may be a government scheme to give you a training allowance and work for me after completing the training course.
If you wish to attend a course, there may be a government scheme to give you a training allowance and work for me after completing the training course.
Private medical practice
Some of the trends in USA may come to Singapore. Read the views of some doctors here.
Modify the COE system
The COE system for allocating licences for new vehicles has been used for more than 20 years in Singapore. It is a crude system that produces the following negative impacts:
- it encourages speculation on the COE prices and lead to price escalation due to fear of further increases
- the motor dealers take advantage of the system to make speculative profits at the expense of consumers.
Is there a better system? I like to propose the following modification to smoothen price volatility, reduce speculation and allow consumers to bid directly:
- have COE bidding for six months (and not monthly)
- the car owner is allowed six months to buy a car (and the COE will start from the date of purchase)
- the car owner needs to pay a deposit of 10% to make a bid and the balance on receiving the COE
- an owner who sells a new car within one year has to pay a levy (to prevent speculation)
Tan Kin Lian
- it encourages speculation on the COE prices and lead to price escalation due to fear of further increases
- the motor dealers take advantage of the system to make speculative profits at the expense of consumers.
Is there a better system? I like to propose the following modification to smoothen price volatility, reduce speculation and allow consumers to bid directly:
- have COE bidding for six months (and not monthly)
- the car owner is allowed six months to buy a car (and the COE will start from the date of purchase)
- the car owner needs to pay a deposit of 10% to make a bid and the balance on receiving the COE
- an owner who sells a new car within one year has to pay a levy (to prevent speculation)
Tan Kin Lian
Great websites
I wish to look for great websites on the following:
- financial education
- education (popular universities)
- travel (great places to visti)
I will put the links in this page:
http://www.easysearch.sg/Links.aspx
If you know of these websites, please send a link to kinlian@gmail.com or post them as a comment. I will put them as links in my portal.
- financial education
- education (popular universities)
- travel (great places to visti)
I will put the links in this page:
http://www.easysearch.sg/Links.aspx
If you know of these websites, please send a link to kinlian@gmail.com or post them as a comment. I will put them as links in my portal.
Unconscionable remuneration
U.S. health insurance giant WellPoint Inc. revealed Friday that it boosted its chief executive's compensation 51% last year. Chief Executive Angela F. Braly saw her total compensation shoot to $13.1 million, from $8.7 million a year earlier. "It's unconscionable," said Mark Weiss, a Century City podiatrist whose policy will jump 35%.. "How much more does somebody need?"
http://www.latimes.com/features/health/la-fi-wellpoint3-2010apr03,0,3259739.story
Someone complained to me that top executives in life insurance companies in Singapore are getting big salary increases while the bonuses to policyholders are being cut. It is sad that the regulator does not realize that they have a responsibility to protect the welfare of policyholders in getting a fair return on their long term savings.
http://www.latimes.com/features/health/la-fi-wellpoint3-2010apr03,0,3259739.story
Someone complained to me that top executives in life insurance companies in Singapore are getting big salary increases while the bonuses to policyholders are being cut. It is sad that the regulator does not realize that they have a responsibility to protect the welfare of policyholders in getting a fair return on their long term savings.
Electric vehicles for short distance travel
More people are now using bicycles for short trips, e.g. to the MRT station. They have to use pedestrian walkways as there are no separate lanes for bicycles and it is dangerous to cycle on the main roads. Pedestrians have complained about the safety hazard.
Some cyclists have asked for separate lanes to be provided for them. However, this is not an efficient solution. If more people cycle to the MRT station, there will be insufficient parking space for the bicycles and the risk of theft and vandalism. Bicycles are not suitable for rainy days.
A better system is to use small electrically driven vehicles (like a golf cart) on a for time based hiring. The vehicles can be parked in various locations in a town and used by the public (who have to register as members) to move from one station to another. This system requires the initiative of the town council to provide parking spaces and to have separate paths for the vehicles.
Paris is implementing such a system.
Tan Kin Lian
Some cyclists have asked for separate lanes to be provided for them. However, this is not an efficient solution. If more people cycle to the MRT station, there will be insufficient parking space for the bicycles and the risk of theft and vandalism. Bicycles are not suitable for rainy days.
A better system is to use small electrically driven vehicles (like a golf cart) on a for time based hiring. The vehicles can be parked in various locations in a town and used by the public (who have to register as members) to move from one station to another. This system requires the initiative of the town council to provide parking spaces and to have separate paths for the vehicles.
Paris is implementing such a system.
Tan Kin Lian
Investing in Foreign Currency
Some people like to invest in foreign currencies to earn a higher yield. For example, they can earn 3.1% on Australian dollars (1 month deposit) compared to 0.2% on Singapore dollars. However, they have to consider the spread of 1.7% in converting to Australian dollars and back. The higher interest rate is taken away entirely by the spread for short time deposits.
You can reduce the spread to 0.1% by investing in Australian dollars through the forex trading market. For example, if you wish to invest in AUD 50,000 you can buy the same amount in the forex market. Although you have to put in a margin of only 2%, i.e. AUD 1,000, you can keep the remaining 98% of the invested sum in Singapore deposit and enjoy the same investment result.
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