Hi Sir
I'm a student currently studying in college. I am keen on going overseas to the UK to read law after my A levels but I have qualms about the cost.
I understand that the fees would cost about S$100 000. But with the cost of living considered, the amount would probably triple to S$300 000. I was hoping you could shed some light on bank loans or other possible avenues that would allow me to realize this ambition. Hope to hear from you soon.
REPLY
I usually advise people not to incur big debts, even for education. I did not go to university and can still do well in my career. If not, I am happy to have a more modest career.
Friday, September 26, 2008
Difficulty in Travel Insurance Claim
Dear Mr Tan,
Recently my parents bought travel insurance from a big local firm to cover themselves for a tour to China. Unfortunately, during the tour, my father contracted food poisoning and had to be warded in the hospital there. The doctor told him that he is not fit to continue with the tour and my mum to accompany him home immediately to seek treatment.
The tour agent there told him that his air tickets from his tour package are 'fixed' dates and hence cannot be change and were told to buy new air tickets for his flight home. He called long distance to the insurance company helpline and was told to ask the tour agent to pay first.
Coming back home, he was able to claim the balance of his tour package but his claim for his air ticket was rejected. The insurance company exercised a clause that state that the ticket bought after the insurance policy is in effect cannot be claimed.
My point here is that we bought travel insurance for such contingencies. Secondly, does that mean that travel insurance only cover when the situation is really dire such as in a SOS case and not in cases whereby the claimant is not fit to continue to travel and told to come home on his own?
REPLY
I believe that you are entitled to claim for the cost of the airfare, as it is caused by the medical emergency. It comes under the cost of evacuation, which I supposed is covered under the policy.
I suggest that you ask for the claimto be rejected in writing. You can lodge a complaint with FiDREC (www.fidrec.org.sg).
I find the practice of this insurance company to be deplorable. They like to find reason to reqject a legitimate claim, instead of treating the policyholder fairly.
Recently my parents bought travel insurance from a big local firm to cover themselves for a tour to China. Unfortunately, during the tour, my father contracted food poisoning and had to be warded in the hospital there. The doctor told him that he is not fit to continue with the tour and my mum to accompany him home immediately to seek treatment.
The tour agent there told him that his air tickets from his tour package are 'fixed' dates and hence cannot be change and were told to buy new air tickets for his flight home. He called long distance to the insurance company helpline and was told to ask the tour agent to pay first.
Coming back home, he was able to claim the balance of his tour package but his claim for his air ticket was rejected. The insurance company exercised a clause that state that the ticket bought after the insurance policy is in effect cannot be claimed.
My point here is that we bought travel insurance for such contingencies. Secondly, does that mean that travel insurance only cover when the situation is really dire such as in a SOS case and not in cases whereby the claimant is not fit to continue to travel and told to come home on his own?
REPLY
I believe that you are entitled to claim for the cost of the airfare, as it is caused by the medical emergency. It comes under the cost of evacuation, which I supposed is covered under the policy.
I suggest that you ask for the claimto be rejected in writing. You can lodge a complaint with FiDREC (www.fidrec.org.sg).
I find the practice of this insurance company to be deplorable. They like to find reason to reqject a legitimate claim, instead of treating the policyholder fairly.
Mis-representation in High Notes 2
Hi Mr. Tan,
Much has been discussed among distraught investors about how to seek redress from the FIs which sold them the structured notes that are now in troubled water. Among other things, I think it is important for us to provide evidence of misrepresentation of the FIs when we lodge our complaints.
Going through the pricing statement of High Notes 2, the following points may be deemed misrepresentation and I would like to share my views here with those who are interested:
1. The ghost credit default clause - I call it “ghost” because this clause is not visible anywhere in the pricing statement and it suddenly jumps up from nowhere when the RMs called to informed us that another 2 defaults in the basket of securities would constitute a credit event.
According to the pricing statement, risk factors highlighted therein are:
Liquidity risk, market risk, FX risk and credit risks which includes the 8 reference entities (with a first-to-default clause), the arranger/issuer and Constellation which is described as a special-purpose vehicle collateralized with a basket of AA- rated bonds and securities. Constellation is the counterparty which entered into various derivative contracts with the arranger under the structure of High Notes 2. This description of Constellation gives investors the impression that High Notes 2 is secured with a basket of good rated securities through Constellation.
Nowhere in the pricing statement can one find anything that says the default of 5 entities in the basket will trigger a credit event. All the while many investors were given the impression that High Notes 2 is adequately secured by a basket of diversified AA rated bonds, believing that even a few defaults in the basket of securities would not seriously impact on the value of the investment.
It is only after the occurrence of 3 defaults in the security basket are the investors informed by their RMs that it takes only another 2 defaults to have the value of their investment totally wiped out, despite that the other 90 over names in the basket remain intact. This default clause which is not defined in the pricing statement suddenly makes High Notes 2 a highly risky investment. This clause was never explained to investors before by the bank and nobody knows how and where default clause comes from and how the default of 5 parties out of about 100 names can wipe out the entire value of the securities basket? Is this non-disclosure of a critical default clause in the pricing statement tantamount to misrepresentation?
Further, I feel that the bank has not acted to protect the interest of High Notes 2 investors. Knowing that the value of the Notes can be significantly affected by a small number of defaults in the security basket, the bank should have provided the investors with the names in the basket of securities when the sub-prime mortgage problems started last years, and investors should be warned of the danger of possible defaults. This is very important because investors can then monitor the market closely and if necessary cut loss by cashing out from the Notes. But nothing was done, not even when some big names in US and Europe were hit by the toxic sub-prime debts. This is rather disappointing. It was too late when the RMs called us after the occurrence of 3 defaults.
2. “Spread your risk with a basket of bank credits, each rated A- or better by Standard & Poor’s.” - This is a misleading statement given in the bank's marketing material. This marketing material is also printed with glossy paper on the lst page of the pricing statement.
This statement gives investors the impression that the credit risk of High Notes 2 is well diversified among the 8 reference banks. But in actual fact, investors are facing a higher probability of default risk. Because, with the first-to-default clause (which was omitted in this marketing material, probably intentionally) the default of any one reference bank will trigger a credit event. This is different from buying a unit trust where the funds are invested in many companies and if one of them goes bust, the value of the units will not be substantially affected. So the spread of risk as claimed by the bank is not true. I would rather have 1 or 2 reference entities than 8, because with 8 my chances of getting hit are higher. The omission of the first-to-default clause with reference to the 8 reference banks in the marketing material looks very tricky. So is this tantamount to misrepresentation?
3. High Notes 2 only suitable for experienced investors - On page 5 of the pricing statement under the sub-heading "Suitability of the Notes", it is stated that "Structured products such as the Notes issued under the Programme are not suitable for inexperienced investors."
What we know from various sources is that many of such structured products have been sold to old uncles, aunties and retirees who parted with their retirement money believing High Notes 2 to be safe investments that could enhance their nest eggs.
We all know that at the point of sales, a financial profile analysis of the investors will be carried out by the sales staff of the bank. With such precautionary exercise, I wonder how these gullible old folks can still be classified as experienced investors and considered suitable for investing into risky High Notes as some of them can't even read or speak English. I am not saying people who cannot speak or read English must be bad investors, but can they read the details given in the pricing statement and understand the risks? Surely they parted with their money after listening to the sweet talk of the sales staff. Something must be wrong in the sales process. Is there a moral issue here? The relevant authority should look into some bad sales practice in our financial market and take necessary action.
Mr. Tan, I would appreciate it if you could place this message on your blog so that I could share my views with anyone who is interested in this matter. It would be better if some one could provide legal opinion on the abovementioned issues. With more interaction, maybe we can explore some other areas of misrepresentations by the bank.
Best regards,
Wilson Tan
Much has been discussed among distraught investors about how to seek redress from the FIs which sold them the structured notes that are now in troubled water. Among other things, I think it is important for us to provide evidence of misrepresentation of the FIs when we lodge our complaints.
Going through the pricing statement of High Notes 2, the following points may be deemed misrepresentation and I would like to share my views here with those who are interested:
1. The ghost credit default clause - I call it “ghost” because this clause is not visible anywhere in the pricing statement and it suddenly jumps up from nowhere when the RMs called to informed us that another 2 defaults in the basket of securities would constitute a credit event.
According to the pricing statement, risk factors highlighted therein are:
Liquidity risk, market risk, FX risk and credit risks which includes the 8 reference entities (with a first-to-default clause), the arranger/issuer and Constellation which is described as a special-purpose vehicle collateralized with a basket of AA- rated bonds and securities. Constellation is the counterparty which entered into various derivative contracts with the arranger under the structure of High Notes 2. This description of Constellation gives investors the impression that High Notes 2 is secured with a basket of good rated securities through Constellation.
Nowhere in the pricing statement can one find anything that says the default of 5 entities in the basket will trigger a credit event. All the while many investors were given the impression that High Notes 2 is adequately secured by a basket of diversified AA rated bonds, believing that even a few defaults in the basket of securities would not seriously impact on the value of the investment.
It is only after the occurrence of 3 defaults in the security basket are the investors informed by their RMs that it takes only another 2 defaults to have the value of their investment totally wiped out, despite that the other 90 over names in the basket remain intact. This default clause which is not defined in the pricing statement suddenly makes High Notes 2 a highly risky investment. This clause was never explained to investors before by the bank and nobody knows how and where default clause comes from and how the default of 5 parties out of about 100 names can wipe out the entire value of the securities basket? Is this non-disclosure of a critical default clause in the pricing statement tantamount to misrepresentation?
Further, I feel that the bank has not acted to protect the interest of High Notes 2 investors. Knowing that the value of the Notes can be significantly affected by a small number of defaults in the security basket, the bank should have provided the investors with the names in the basket of securities when the sub-prime mortgage problems started last years, and investors should be warned of the danger of possible defaults. This is very important because investors can then monitor the market closely and if necessary cut loss by cashing out from the Notes. But nothing was done, not even when some big names in US and Europe were hit by the toxic sub-prime debts. This is rather disappointing. It was too late when the RMs called us after the occurrence of 3 defaults.
2. “Spread your risk with a basket of bank credits, each rated A- or better by Standard & Poor’s.” - This is a misleading statement given in the bank's marketing material. This marketing material is also printed with glossy paper on the lst page of the pricing statement.
This statement gives investors the impression that the credit risk of High Notes 2 is well diversified among the 8 reference banks. But in actual fact, investors are facing a higher probability of default risk. Because, with the first-to-default clause (which was omitted in this marketing material, probably intentionally) the default of any one reference bank will trigger a credit event. This is different from buying a unit trust where the funds are invested in many companies and if one of them goes bust, the value of the units will not be substantially affected. So the spread of risk as claimed by the bank is not true. I would rather have 1 or 2 reference entities than 8, because with 8 my chances of getting hit are higher. The omission of the first-to-default clause with reference to the 8 reference banks in the marketing material looks very tricky. So is this tantamount to misrepresentation?
3. High Notes 2 only suitable for experienced investors - On page 5 of the pricing statement under the sub-heading "Suitability of the Notes", it is stated that "Structured products such as the Notes issued under the Programme are not suitable for inexperienced investors."
What we know from various sources is that many of such structured products have been sold to old uncles, aunties and retirees who parted with their retirement money believing High Notes 2 to be safe investments that could enhance their nest eggs.
We all know that at the point of sales, a financial profile analysis of the investors will be carried out by the sales staff of the bank. With such precautionary exercise, I wonder how these gullible old folks can still be classified as experienced investors and considered suitable for investing into risky High Notes as some of them can't even read or speak English. I am not saying people who cannot speak or read English must be bad investors, but can they read the details given in the pricing statement and understand the risks? Surely they parted with their money after listening to the sweet talk of the sales staff. Something must be wrong in the sales process. Is there a moral issue here? The relevant authority should look into some bad sales practice in our financial market and take necessary action.
Mr. Tan, I would appreciate it if you could place this message on your blog so that I could share my views with anyone who is interested in this matter. It would be better if some one could provide legal opinion on the abovementioned issues. With more interaction, maybe we can explore some other areas of misrepresentations by the bank.
Best regards,
Wilson Tan
Fair Compensation
Dear Mr. Tan,
What is a fair amount of compensation that the distributing financial institution can offer to the investor? Can we expect them to compensate us fully for our loss of hard earned savings?
REPLY
If this matter goes to Court, either on an action taken by the Government or by the investors, the decision will be made by the judge.
However, the parties may agree to make a settlement on their own, without asking the judge to decide. In that case, each investor should decide on the amount that they are willing to compromise.
If you are offered compensation at 50% of your loss, will you accept? I am sure that the investor will like to have the loss fully compensated, but it is unlikely that the distributing financial institution will agree.
Can you send an email to me at tkl@tankinlian.com. State your name, telephone number, amount invested and the amount that you will accept as a fair compensation (i.e. that you will be willing to fight in court, if you are not offered. Remember, legal expenses can be quite costly).
Do not send email on any other matter to tkl@tankinlian.com as I shall NOT be replying to emails from this account.
What is a fair amount of compensation that the distributing financial institution can offer to the investor? Can we expect them to compensate us fully for our loss of hard earned savings?
REPLY
If this matter goes to Court, either on an action taken by the Government or by the investors, the decision will be made by the judge.
However, the parties may agree to make a settlement on their own, without asking the judge to decide. In that case, each investor should decide on the amount that they are willing to compromise.
If you are offered compensation at 50% of your loss, will you accept? I am sure that the investor will like to have the loss fully compensated, but it is unlikely that the distributing financial institution will agree.
Can you send an email to me at tkl@tankinlian.com. State your name, telephone number, amount invested and the amount that you will accept as a fair compensation (i.e. that you will be willing to fight in court, if you are not offered. Remember, legal expenses can be quite costly).
Do not send email on any other matter to tkl@tankinlian.com as I shall NOT be replying to emails from this account.
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