Proposal to solve the global economic crisis

We are facing a global economic and financial crisis. People are scared to spend. They want to save money, in case they lose their job and need the money to spend at that time. 

The reduction in consumption is causing the economy to slow down badly. Businesses are hurt. They are not able to get encough sales to pay their expenses. They have to close down and retrench their employees. This will lead to a downward spiral.

The collapse of the value of property and other assets cause people to feel poor. They also cut down their spendings. 

Actually, the people still own the same houses and assets. They now believe that these assets are worth little, when one year ago, they thought that the assets are worth two or three times more. 

All this is just a matter of the mind. It is also called confidence. If we can get people to believe that they are rich, that their assets are worth more than they can fetch today, we can revive the global economy. 

Read this proposal.

Tackling the credit crunch

Many small businesses find it difficult to get credit from the banks. Here is my proposed solution.

Local transport within a town

Is there a need to create a local transport service (using light bus or private cars) to serve a town? Give your views in this survey.

Here are the survey results.

Handling injury claims

Dear Mr. Tan

Mark Lim, Executive Director of GIA has posted a comment to my views about motor insurance claims. I thank Mr. Lim's for his comments.

I think that Mr. Lim as not understood the part of my comments regarding personal injury claims. The increase in personal injury claims is not because of fraud by lawyers, doctors, workshops and members of the public working together. I never said or implied this.

I do not know why Mr. Lim is suggesting that I should make a police report. I put the increase down to injured parties being better informed of their legal rights. Even if the injury was a minor one, the injured party has the right to seek legal recourse. So, in the example given by me, there was nothing wrong in the conduct of the workshop owner referring the injured motorist and his wife to a lawyer to claim for damages. There is no criminal misconduct.

In the past some insurers have screamed fraud at some of the soft tissue injury claims, but a further anlysis and examination by their own appointed specialists revealed nothing untoward and the injured parties were awarded damages by the courts.

In this respect, I agree with Senior Counsel Michael Hwang (in his letter in the ST Forum) that if there was nothing the lawyers and doctors would not be able to make out something and the courts would not have agreed.

We need to think out of the box regarding the escalating personal injury claims. For example, when I was heading the Claims Department in NTUC Income, we had a unit that took the pro-active approach in handling personal injury claims. Injured parties were offered fair compensation even before they submit their claims. We also give them a list of running down firms which were not in the NTUC Income's legal panel for them to check on the fairness of our offers. In taking this approach, we saved on legal costs which can add 50% to 100% to the final payout amounts on those cases that we closed successfully..

If insurers cannot handled the personal injury cover profitably, maybe this portion should be handed over to the State like in New Zealand, (where the State handles and the claims are paid out on a no fault basis.)

I have just received an affirmation last week (24/3/2009) from Mr. Tan Kin Lian, that "[w]hile you were in Income, we must have made more than $40 million in profits over the few years that you headed the department." So I do know what I am talking about!"

Freddy Neo
Former general manager, NTUC Income

Housing crisis in USA

FIRST POSTED IN MARCH 2008 (1 YEAR BACK)

Some analysts said that the subprime problem and credit crunch is caused by the fall in the housing prices in USA. If this problem is not solved, the financial system will continue to be under great risk.

What can be done to solve the housing crisis in USA? Some measures being proposed include the following:

a) Government to take over the mortgages
b) Help for borrowers to repay their debts
c) Incentives to encourage new buyers of houses

What is the solution? Singapore faced a similar crisis between 1996 to 2003, when the property market dropped by 30% for private and HDB properties. An effective measure was introduced by MAS, which stablilised the market and led to a recovery in 2007.

What is this measure? Perhaps a similar measure can be introduced in USA ?

HERE IS THE ANSWER:

The MAS allowed a borrower to refinance a mortgage loan with the CPF savings taking lower priority. The lender does not have to worry that the property price has fallen below the purchase price leading to negative equity, as the CPF savings is exposed first. This allows the lender to take a long term view and give time for the housing price to recover (which happened subsequently).

Individual legal action in Subordinate Court

I am discussing with a lawyer to take up individual legal action in the subordinate court against a financial institution for mis-selling of the minibond or credit linked note. The claim can be for an amount up to $250,000. The legal fees and cost, including payment to the defendent's lawyer, will be capped not exceeding $10,000. 

As this is an individual action, the claim can move quickly as it does not involve a class action. If you are keen to consider this option, please provide your particulars in this survey. 

We will arrange a meeting to explain the approach and consequences. You can consider this approach, if your investment is between $100,000 to $250,000. 

Survey: Work from home

Are you ready to work from home?  Survey.

Here are the survey results.

Restructuring of the bonus

Dear Mr. Tan
NTUC said that the restructuring of the bonus allowed them to maintain the bonus last year. What does this mean? How does the restructuring help the policyholders get a better return?

REPLY
I do not understand their statement. I suggest that you attend the annual general meeting of NTUC Income and ask the chairman to explain this statement. 

Here is my guess. As Income has reduced the bonus sharply last year, perhaps there is no need for them to make a further reduction.  But, I suspect that the special bonus will be cut this time, quite drastically.

But, for the older series which was not affected  last year, I read that the bonus will be restructured this year, i.e. the bonus will be cut as well. 

Generally, it is fair for bonus to be reduced in a bad year, provided that the reduction is done fairly. I did not like the approach taken in the bonus restructuring, as it is difficult to maintain transparency and fairness. Some policies were cut, and others were not. Some were cut more than others. I also do not like the high expenses that were incurred and paid out of the insurance fund.

This is why I decided to terminate two of my policies where the bonus were cut, even though I had to suffer a penalty. I am now considering to terminate my remaining life insurance policies.  

Bad working experience with a global bank

Hi Mr Tan
I joined an insurance company recently and left within a year. The way the head of the life division managed was totally unacceptable to me. Due to the financial crisis, they reduced the headcount by half. I took the retrenchment package and left.

It was a very bad experience to work with this global bank but realised that the dark side of the truth. I am not surprised why the world financial system came to a sudden breakdown. Many so-called highcaliber management were only keen to spend, take fat bonus and use creative was to present result and figures. They cover up the losses and shown the revenue figures. To me, the bubble should have been burst long ago.

ERP

ERP shift congestion to other roads. Read here.

Intelligence Quiz

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Survey: Ministers in the Prime Minister's Office

Are we having too many ministers in the Prime Minister's Office, including senior ministers? Survey.

Here are the survey results.

Ministers in PM Office
Lee Hsien Loong
Goh Chok Tong
Lee Kuan Yew
S Jayakumar
Lim Boon Heng
Lim Swee Say
Lim Hwee Hua

Thought for the week - Anger

Contributed by Ho Cheow Seng

Thoughts for the Week

 

"He who is not angry when there is just cause for anger is immoral. Why? Because anger looks to the good of justice. And if you can live amid injustice without anger, you are immoral as well as unjust." Aquinas

 

=
"I don't know a more irreligious attitude, one more utterly bankrupt of any human content, than one which permits children to be destroyed."-- Daniel Berrigan

 

=
"I have the audacity to believe that peoples everywhere can have: three meals a day for their bodies, - education and culture for their minds - and dignity, equality and freedom for their spirits" Dr. Martin Luther King, Jr.

 

Cheating and the rule of law

Here is the definition of cheating in the criminal code of Singapore.

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

A Singapore lawyer told me that the attorney general will only prosecute cheating when it is in the public interest. So, if a citizen is cheated and lodge a complaint, the attorney general may not take up the case.

My friend told me that in America, the attorney general will look out for cheating cases and prosecute the culprits. They do not wait for a complaint to be lodged.

It seems that the system is different between Singapore and America. I am not sure what is meant by "the rule of law", when the law is only enforced at the discretion of the authority.

MAS consultation paper: Unlisted investment products

Read the proposals contained in this consultation paper. 

Here is an explanation by a law firm.

I conveyed the views contained in this paper to the CASE forum on 28 March 2009.Publish Post

Survey: motor insurance claims

Give your views on how to prevent sharp increase in motor insurance premiums. Survey.

Here are the survey results.

Survey: News and information

How do you get news and information? Survey.

Here are the survey results.

Bank adamant despite advice

Letter to the Straits Times.

Sale of toxic products

A pharmaceutical company has discovered a new drug that is a seemed to be effective in curing certain types of cancer. According to an internal document, the drug used certain ingredients that may be harmful to people. Due to the rush to bring the new product to the market and to make big profits, the company was not able to complete the tests to identify and remove the harmful effects.

They were able to find two countries where the health regulators were willing to allow the drug to be sold to the public with a warning, "The new drug may, in some situation, be harmful for consumption".

The manufacturer advertised the positive aspects of the drug and many people bought it. Those who read the warning were told not to worry about it, as it was not likely to happen. After a few months, many people die from the drug, which turned out to be more toxic than expected.

The families were told that the patients should have paid attention to the warning. They had taken their own risk with their eyes open.

Language, literature and culture

I have studied science and mathematics for most of my life and have excelled in them. They are good for the world of business.

In recent years, I have learned to realize about the special quality of language, literature and culture. The language of any people is developed through the collective efforts of the best people in that culture, namely the writers, poets, and philosophers. The values of a people is embedded in their language. They  have to work together in harmony, so that their thoughts can be explained and understood in the language.

It is the talented people that are able to write the lyrics and musics to their popular songs. I learned some of these songs to appreciate the culture of the people in other nations.

Recently, I met a 80 year old professor who was able to recite the entire famous poem by William Wordsworth, "Daffodils".  He learned it more than 60 years ago, in school and in remained with him throughout his life.

I believe that the learning of language, literature and culture will build a better people. I hope that our schools will re-look at the syllabus and build a more considerate and thinking people.

Tan Kin Lian

Proposal - Financial services safety board

There is discussion in USA about passing legislation to create a financial services safety board. It is similar to my proposal for certain experts to certify financial products to be safe and fair to consumers.

http://www.newsday.com/business/ny-usfina056058126mar05,0,23991.story

http://finance.yahoo.com/print/expert/article/moneyhappy/121849

A sense of fairness

Americans are outraged at the bonuses being paid to the top executives of AIG's financial products. Here are people who took big bets, lost and felt that they should be retained with fat bonuses to clean up the mess. The public felt that this is so unfair.

There was another past incidents were the Americans were outraged. President's Clinton's plane, Air Force One, was delayed in taking off, as the President was having his hair cut. The barber has to complete the job, get off the plane, before it could take off. This caused a delay in the departure of many flights. The public was outraged. They felt that it was inconsiderate of President Clinton to cause so much inconvenience to other people.

Our leaders in the corporate world and in government has to learn to respect the ordinary people, and be considerate to them. They should display a sense of humility and fairness. They cannot act arrogantly and regard the ordinary people as "lesser mortals".

ST Online: Don't break CPF piggy bank, but...

Editor
Straits Times

I REFER to the Ministry of Manpower's response last Saturday to readers' calls for earlier Central Provident Fund (CPF) withdrawal.

The response that it is not a good idea as breaking the piggy bank would lead to temptation to draw more and more from the CPF does not address the main point raised by readers.

What they ask for is not to break the piggy bank. But for members who already have funds above the Minimum Sum, why can't the CPF Board release the excess funds to those who are now struggling to live?

Why hold on to excess funds and make them wait till they reach 55, when they and their families are struggling now?

With the pain and stress these individuals and their families are going through, will they even make it to 80?

Tun Ah Heng

MAS consultation paper - sale of unlisted investment products

I suggest that the product issuer should be required to disclose the charges that they are taking away from the investment product for their distribution cost, expenses and profit margin. Under the current regime, this informtion is not required to be disclosed.

The disclosure should be done at two levels:

a) the prospectus should specify the maximum charges that can be taken away from the investment for the various items of expenses.

b) an annual report should be presented to show the accounts of the fund.

Unit trusts have to disclose the charges and to render an annual statement of the fund. These requirements are more important in the case of the unlisted investment products.

I am not sure if this point has been adequately addressed in the new regulatory requirements that is being proposed in the consultation paper. I hope that someone can check this point and inform me.

Buying bonds

Read this article.

CASE forum on MAS consultation paper

CASE will be organising a public forum to gather feedback in response to the latest guidelines put up by the Monetary Authority of Singapore (MAS).

The proposals were formulated based on MAS' review of the sale and marketing of unlisted investment products after the current global financial crisis led to the failure of several structured notes in Singapore. The public is invited to comment on the proposals to strengthen the regulation of the sale and marketing of unlisted financial investment products. CASE will then channel the responses to MAS.

Details for the forum are as follows:

Date: Saturday, 28 March 2009
Time: 10am - 12pm
Venue: NTUC Business Centre, Level 8, Theatre Room 801
1 Marina Boulevard, Singapore 018989

The forum will include a presentation on the paper and a Q & A discussion with a panel. Refreshments will also be provided.

For more information, please refer to the MAS website here and the consultation paper released here.

Interested parties are requested to RSVP to rsvp@case.org.sg or fax to 6467 9055 by 27 March 2009.

Lim Si Hui Jean (Ms.)

A better way to regulate housing agent

26 March 2009

Editor
Forum Page
Straits Times

A better way to regulate housing agent

Senior Minister of State Lim Hwee Hua reported in Parliament that the Government is reviewing ways to strengthen the regulatory framework for housing agents. This is in response to complaints about malpractices by housing agents.

The measures being considered are:
1. raise professional standard of agents
2. quality and training requirements
3. dispute resolution framework
4. enforcement framework

This is similar to the regulatory framework used for the sale of life insurance and investment products. It has failed to deal with the problem of the mis-selling of credit linked notes and other financial products that are bad for consumers.

This approach relies on the principle of the free market - provide information for consumers to make their decision. The crux of the problem - the information is provided by the seller, who makes a bigger profit or commission by mis-informing the consumer. There is a serious conflict of interest.

If this approach is adopted, the regulator has to look after the interest of the consumers, and to take appropriate action against "cheating". Cheating is a crime - and include making an unfair profit by misleading the other party.

In my view, a better alternative is to have a strong regulator to set the rules for the market. An example is the regulation on the sale of medicine and food products. These products are tested to be safe and suitable for consumption. The regulator can carry out the test or engage independent experts to do the work. But the regulator take the responsibility to put the stamp on the product.

I prefer a system where the regulator licenses the agents and sets the professional standards of ethics and conduct. If the agents fail to meet the standard, they should be removed. This is similar to the licensing of doctors, lawyers and other professionals.

The regulator has the option to outsource the actual assessment to a professional or self-regulatory body, but this body should have the "teeth" and backing of the regulator. I wish to say that stronger regulation actually benefits the majority of ethical agents and create a better market for all parties.

I hope that the Government will consider the above suggestions.

Tan Kin Lian

Einstein Intelligence Quiz

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TKL Intelligence Quiz

Try the intelligence quiz at this website. It is based on the famous quiz purportedly created by Albert Einstein. It is free for the initial period. Contests will be organised later, when sponsors are found.

The book is now available at all the airport outlets and major bookstores islandwide, including: Borders, Kino, Harris, Times News Link, MPH, Times, The Commercial Press & selected Popular outlets.

Price: $7.90

Earth Hour on Sat 28 March 8.30 pm

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EARTH HOUR: 28th March, 8.30pm - Sign Up. Switch Off. Make A Difference.

Big increase for motor insurance claims - the reasons

The General Insurance Association, representing the insurance companies, have introduced a Motor Claim Framework in May 2008, with the aim of controlling the inflated claims. It did not work and has, in fact, resulted in more claims being submitted to the insurance companies. Here are the reasons.

1. In the past, insurers encourage private settlements if the damage was small, i.e estimated repair cost less than $1,000. This was so that motorist can continue to enjoy their NCD. Under MCF, all accidents have to be reported to the insurers and claims will as a matter of course, be made. We all know that when insurers are involved, the workshops jack up the repair cost. From a repair of a few hundred dollars, the price is now a few thousand dollars.

2. The assumption is that the appointed workshops help the insurers to control the repair cost. This is not true because they in fact are out to make a good profit from the insurers. They put up high estimates. And some of them bribe motor surveyors to overlook many items which may be overpriced or which repairs/replacements may not be necessary. The trick is to overblow their repair estimates for the appointed surveyor to go through the motion of cutting a few items. This give the appearance that the surveyor has done his job. The going rate, I understand is for workshops to pay $100 per case to surveyors to gloss through the repair estimates. That is why the tender system is still the best to get around this.

3. Workshop owners work with lawyers and educate motorists on their legal rights with respect to personal injury claims. In the past, small injuries or soft tissue injuries may be overlooked. Now workshops refer them to lawyers to claim. I know of a person who was involved in an accident two years ago when a taxi collided into the rear of his car. He and his wife suffered slight pain in the neck. The workshop owner told them to claim for the injury and referred them to a lawyer to assist. That is why personal injury claims (especially for soft tissue injuries) have increased in recent years. I think most of these claims are genuine. In the past, they did not surface because people did not think of seeing a doctor and claiming if the injury was not serious.

Freddy Neo
(Mr. Freddy Neo was previously the general manager for general insurance in NTUC Income. )

Urban Public Transport

Read my views here.

NTUC is less pro-society now

Hi Kin Lian,
Are you aware of how NTUC Insurance has evolved since you left?

I entered the industry (as an independent advisor) the same year you left NTUC in 2007. I'm a newbie here. But it does not prevent me from observing (with a sigh), that NTUC, the company you led for a long time, has changed since you left - from an organisation that prides itself for being pro-society to a somewhat changed "organism".

NTUC used to be tolerant towards people whose health are not in "tip-top" conditions. I attribute it to its role of being a pro-society co-operative, putting more emphasis in social goodness rather than profit/loss (that's what the guys there always say). It's a humane organisation.

Of course, ultimately bottomline counts. But now, for unknown reasons, the same organisation is suddenly turning its back on the people it's supposed to serve. So much so that it has tightened its procedures so drastically, resulting in people being rendered uninsurable for slight ailments, ie, not in tip-top conditions. It wants to have a sure-win situation?

That's why I say its a systemic problem. Because if this toughness continues, many Singaporeans, especially the older folks, will be without insurance/ medical coverages. Imagine how huge an issue it can be, in an era of aging population, increasing medical expenses etc. I can't comment whether it's due to a change in management philosophy. But for any person who cares (& I think you might), I would say that this is a Mini-bond in the making. Some time, some how, things will blow up. And it can be quite disasterous.

REPLY
I suggest that you write to the secretary general of NTUC, Mr. Lim Swee Say. I hope that he will respond to your feedback.

Survey: How will you vote in the General Election (1)?

The hot topic now is the next general election, which may be held in 2009. How will you vote? Give your views in this survey.

Please pass the word around to your friends and invite them to give their views in this survey. I like to have many people to participate, so that the results can be more representative of the population.

UPDATE

Here are the survey results based on 206 replies. The results are quite close to the results based on 149 replies. This shows that the results are not affected by the size of the sample, provided that the initial sample is quite large (say 50 replies)

How Can I Find Affordable Life Insurance For High Risk Individuals?

Read this article.

Tutoring, temp work can pay off

Advice to graduates looking for a full time job during a global recession. Read this article. Go to this portal.

MAS Consultation Paper - Toxic Investment Products

Under the consultation paper, the issuers are required to provide more clearer information about complex financial products. But, the question is, will this approach prevent the sale of toxic products?

The credit linked notes, which were allowed to be sold, were toxic because they carry 5 to 8 times the risk of ordinary bonds. The issuer was able to package these toxic products and offer a low rate of return to the unsuspecting investors.

It will be difficult for the ordinary people to understand the risk of these products. They have to rely on the adviser. If the adviser is not aware of the risk, then the chance of mis-selling is high.

There is already an existing requirement for the issuer to provide relevant information about the product that is registered for sale to the public. If the authority is not willing to enforce this requirement under the existing regulation, will the "better disclosure standard" prevent a similar problem from recurring several years into the future?

A better solution is to have independent experts to certify the risk of the product. This independent experts must be appointed by the approving body and not by the product issuer.
If the independent experts cannot certify the products to be fairly designed and described, the authority should not allowed the product to be sold.

This is similar to the certification of drugs. If the drugs is not tested to be safe and effective, it is not allowed to be sold to the public.

I hope that MAS will consider this point. I shall be submitting this suggestion in reply to the consultation paper.

MAS Consultatation paper - simple insurance products

To MAS

This consultation paper is for regulation on investment products. I suggest that the regulation should make clear that life insurance products that provide only insurance protection (and do not have any saving or investment return) do not require to have any adviser. 

This will allow life insurance products, such as term insurance, accident insurance and medical insurance, can be marketed without the involvement of a financial adviser. This will reduce the cost of distributing the simple insurance products. 

It also avoids the conflict of interest, where unethical advisers may influence the consumer to buy an unsuitable product that pays a bigger commission to the adviser.

Tan Kin Lian

Survey: Politician Ratings

Who will you vote in the next general election? Survey.

Here are the preliminary survey results, based on 49, 112 and 178 replies. The latest rating has a more balanced distribution by age group.

Disclaimer. The people who participate in this survey do not reflect the population at large. This survey attracts a larger proportion of people who are unhappy with the Government.

It is more important to look at the relative ranking of the politicians in the PAP and the alternative parties.

AUD, NZD on way of recovery

The AUD and NZD dropped by about 30% a few months ago. It stayed at that level for a few months. They are now starting to recover. I saw that NZD had increased 10% during the past week .The AUD has recovered by 5%. Perhaps, the previous drop was too sharp and it is now reaching its fair level. But interest rate in AUD and NZD are now quite modest (compared to the high rates previously).

Proposal to solve the global crisis

Here is my proposal to solve the global crisis. I hope that the US government will be considering an approach along a similar line. The strategy is to stabilise housing prices at replacement cost, less depreciation.

Buying a new HDB Flat

A Singaporean who worked in China for nearly 10 years. While in China, be bought a private property. He sold it on returning back to Singapore, after completing his contract.

He is barred from buying a new HDB flat due to the following condition. I find this condition to be unfair to him. I advised him to consult his Member of Parliament.

Ownership / Interest in Property
You, your spouse, any occupiers listed in the Application Form or their spouses must not own or dispose any other flat, house, building or land* or have an estate or interest at any time within 30 months before the date of application, or between the date of the application and the date of taking possession of the new flat.

* includes but is not limited to HUDC flats (whether privatized or not), properties acquired by gift, properties inherited as beneficiaries under a will or as a result of the Intestate Succession Act, private properties, commercial properties and industrial properties, as well as properties owned / acquired / disposed through nominees regardless of whether any of these properties are located in Singapore or overseas.

Save money with a basic Medishield plan

Hi Mr. Tan,
I find that the premium for private Shield has become more expensive at the older ages.  My father is 76 years old and my mother is 69 years old. Shall I continue to insure them under Incomeshield M Plans, or switch back to Basic MediShield? If there is a need, we can visit a private hospital and pay out of our savings.

REPLY
If your parents find the premium for private Shield to be too expensive, it is better to switch back to Basic Medishield. They can go to subsidised wards in Government hospitals, rather than private hospitals. You can switch back to basic Medishield at anytime, even after gae 70.

Read this FAQ.

Fraud alert - insurance claim

Dear Kin Lian,

I like to report to our motor insurer about a suspicious accident with this vehicle on 19 Mar 09; (detail provided). The driver; man aged 50 something.

I notice from my right side mirror, he approached very close towards my right side and appears to deliberately hit my right rear side and bumper.

I got down checking and finding that his vehicle already had a bad pre-existing damage on his front lefts side that supposes to collide with me (it is a deep dent and paintwork scratches) but my car was only slightly scrapped. I confronted him and he drives off after a verbal exchange.

I was suspicious because I have been in front of him all the time and keeping on a straight path within my lane. And also my vehicle slightly damaged but he and his female passenger kept blaming me for cutting into his path.

He probably attempt to induce fraudulent insurance claim for his existing damage. To protect other motorist; any similar accident claim involving this vehicle should be carefully investigated.

REPLY
I suggest that you lodge a report with the Police. It is their duty to investigate such matters.

Financial planning for newborn

Hi Mr. Tan,
I'm doing some financial/insurance planning for my newborn. I plan to purchase a Vivolife Policy (Sum Assured: $50K), with monthly premium of $86 payable over 10 years. And another term insurance (Sum Assumed: $100K), with monthly premium of $12. Is it recommended to do so?

In addition, to start a saving plan to accumulate his education fund in 20 years time. I would need some advise on which is the better option below;

Option 1: Monthly premium of $100 into Investment-Linked Product or Endowment Plan (PayMyUni under Income) ?

Option 2: Initial sum of $5K for Investment-Linked Product, with yearly top-up of $1K. Btw, which is the product worth investing in?

Option 3: Lump sum of $10K into SAIL (Income Policy), with projected return of $24K in 20 years.

REPLY
I am not familiar with the Vivolife product, but I understand that it has high charges (to pay commission to the agent) and gives a poor return to the policyholder. You can search my blog for comments from people who are familiar with this product.

Read this FAQ about saving for your child's education.

Worse than being retrenched

Dear Mr. Tan, 

I was forced out by my ex-company(a listed local company) recently, without any form of compensation. I had been there for X years and the reason they gave was that the company has not planned for such exercise and even they do, they do not give it to ‘non-performing’ employee like me. While I did not agree to my ex-supervisor’s appraisal rating on me, I had no choice but to resign on my own or else my company will dismiss me!

Mr. Tan, do u think I have ground to approach MOM for help in seeking some form of remuneration package from my ex-company?

REPLY

I suggest that you talk to Ministry of Manpower and get their advice. You can also talk to your Member of Parliament. 

Goldman made billions shorting AIG

Read this article.

SCMP:New bank rules should better protect customers

Asymmetric information is not an elegant phrase, but it is a useful economic concept by which to analyse situations that involve conflicts of interest - and whether, and how, they need to be regulated. A salesman who tries to promote a product is asymmetrically disadvantaged because he does not know - and can only guess - the size of your wallet. It is not so with banks, which have privileged access to clients' financial information and have often exploited it to sell risky financial products. The Lehman Brothers minibond fiasco has exposed that danger and become a catalyst for regulatory change. Hopefully, better supervision of banking activities, which will come into force this year, will bring more protection for clients and their financial information.

The banks have fought hard to resist changes, arguing at one point that knowledge of clients' finances enables banks to tailor services to their needs. Leaving aside this obviously self-serving argument, regulators around the world have been having the upper hand as a result of the global financial turmoil - and Hong Kong is no different. Instances of apparent mis-selling of Lehman minibonds have helped generate intense pressure on banks to adopt new regulations.

The new rules require banks to separate traditional banking services, such as deposit-taking and making loans, from retail securities and investment services. One of the most irritating and unfair bank practices in recent years has been allowing counter tellers to look at clients' bank books during ordinary transactions and then promote dodgy investment or insurance products. Under the new rules, they can no longer do so. Furthermore, one bank department cannot share clients' information with another to promote sales without their express consent. Recordings of investment transactions will be made and retained for at least seven years. In cases involving the sale of risky products, a third staff member needs to review the transaction. It is not clear what amounts to high-risk investments these days when the share prices of some US banking and insurance giants are behaving like penny stocks. Even the shares of locally beloved HSBC have plunged to lows most investors found scarcely imaginable.

The new rules will not ban all instances of cross-selling. That would not be desirable, because banks offer mostly legitimate investment products. But they should offer better protection to customers.

Singapore Equity Investments

Dear Mr Tan Kin Lian,

We are a team of independently opinionated Singaporean retail equity investors in Singapore and our website is at www.sgdividends.blogspot.com. We would hope that you will allow our link to be placed on the bottom right corner of your blog with the other external links you have.

About us
Basically, the objective of our blog is to create investment awareness and set Singaporeans to think more about their investments.

We try to be different and state our own opinions instead of relying on what the crowd says or what analysts reports says. We do not recommend stocks, but instead, show data and fact derived from Reuters, SGX website or company financial reports/ announcement and present to our readers and hopefully, they can form their own judgement.

Hope to hear from you =)
Stephen Lim
SGDividends

US Treasuries - the next bubble?

It is not safe to invest in US Treasuries. When inflation returns, this investment will also drop in value. It may be safer to invest in stocks now. Read this article.

Creating jobs in a global crisis

I heard on CNBC TV that the banks are still not lending money. They take a lot of money from the Fed at low interest rate and invest the money in US Treasuries and other safe assets to make the spread. Meanwhile, businesses cannot survive due to lack of credit. More people will lose their jobs. 

There is no point in giving money to the banks or to businesses. They cannot survive, if there is no demand for their products. People are scared to spend, so they have to save their money to prepare for the bad times. The global economy will collapse, if things continue to spiral downwards. Fear will fear on itself.

The same condition will apply in Singapore. It is important for the Government to recognise the failure of the current system, and to implement a new approach. The Government can create many new social services jobs to keep people occupied and do some useful work in the following areas:

a)  Take care of the elderly people

b)  Take care of babies

c)  Provide local transport

d)  Provide tuition

These jobs can be at $6 per hour or at an specified rate (sufficient to balance supply and demand). 70% of the cost can be paid by the Government (subject to a maximum of $600 per month for each worker) and 30% can be paid by the user.

For example, an eldercarer can make a house visit at $30 per visit. Each nurse can make 3 visits a day to earn $90. The government pays $21 per visit (subject to a cap of $600 a  month for each carer). The user pays $9 a visit.  The carer can visit clients near their home, to reduce the travelling cost.

A person can provide local transport for $1.00. The user pays $0.30 with $0,70 paid by the Government. If the operator takes 100 passengers a day to earn $100 a day and incurs expenses of $60, there is a net income of $40.

The Government expenditure will keep people employed at a modest income level, and offer a service to improve the lives of people.  As the income is quite low, there will be a temporary measure. When the economy recovers, these people will find other higher paying jobs and the supply for this service will dininish. If there is still a demand for this service, the Government subsidy can be reduced to achieve a better balance of supply and demand.

I hope that this type of innnovative approach will be adopted in some countries or in Singapore.

Surrender a Living policy

I have decided to surrender my Living policy which was taken 17 years ago.  I paid an annual premium of $2,102. The cash value after 17 years is $44,893 giving a yield of about 2.5%.

If I keep the policy for another five years, the estimated cash value increases to $62,417, giving a yield of 3.9% for the next 5 years, based on the projected bonus for the next 5 years.  I have decided not to take the risk of a further reduction in bonus, which will reduce the yield below 3.9%. 

By surrendering the policy, I can invest the money in other investments. As the share prices are quite low, there is a good chance of earning a better high rate of return from other investments.

The calculation is based on this FAQ.

Pinnacle Action Group: Class Action in U.S. Courts being considered

Dear all

A top US law firm is interested to actively pursue on behalf of all Pinnacle investors a class action in US courts. It will be on a contingency fee basis - "no win, no pay" and all investors will be automatically included, unless they opt-out, after the class action is filed with US Courts. It will be an action similar to the one being done for Hong Kong Minibonds investors.

However, under US law such a class-action can only be initiated if there are at least one or more lead plaintiffs who fit the following criteria:
(a) US citizens who bought one or more of series of the Pinnacle Notes;
(b) Spore citizens with bank accounts kept in a US Bank who bought one or more series of the Pinnacle Notes;
(c) Spore citizens who own homes in the US who bought one or more of the Notes.

If you fit into any of the 3 criteria mentioned in the above paragraph, please contact us with your name; tel. no.; email and other details such as Pinnacle series no . that you bought, etc. We will forward the information to the US law firm, which for confidentiality reasons cannot be revealed at this early stage. When the US law firm in turn contacts you in the matter of the proposed class action to be pursued in US courts, you will know who they are.

This 'US style' class action, by the way, is separate from the proposed class action we are planning for all Pinnacle investors under Spore law and pursued in Spore courts. In the Spore case, we will be making an official announcement when we have finalized the details. It could take another 2-3 months more to do that since there are many details to iron out. But don't be discouraged, we are not going to allow this matter to simply evaporate and will work vigorously to pursue justice and compensation.

Best regards
Pinnacle Action Group

Email:- pinnacle.action.group@gmail.com 

Meet the man whose big idea felled Wall Street

Read this article.

Motor insurance premiums

Many motorists will have to pay higher insurance premiums this year. What can be done about it?

Read my articles:
Puncturing motor insurance claims.
New Motor Insurance measures - will it work?

If you are not happy with the increase in premiums, you should lodge a protest with your member of parliament or with the consumer association of Singapore.

The best places to be laid off

Read this article about countries with generous unemployment benefits and its impact (if any) on the work ethic.

Buddhist monks say Twitter can lead to happiness

Read this article.

Creating service jobs in Singapore

Global demand has dropped significantly. Singapore will have to suffer a drop in production and  exports for many months while global demand remains weak. Many more jobs will be lost. The Government's strategy of helping businesses to reduce cost may not help to save jobs in this environment.

I hope that the Government will look into other ways to create jobs and keep people occupied at a modest wage level. They only need to keep people usefully engaged until the recovery of the global economy. 

In France, the Government pays a large part of the cost of nannies to look after babies. The parent pays only a small portion. The nannies will look after the babies in the nannies' homes. The parents can afford to send the baby to the nanny, as their share of the cost is low. This helps to keep many nannies to be usefully employed.

I suggest the following ways to create temporary jobs in Singapore:

1)  The Government can pay a large part of the cost of engaging nannies to look after babies. The parents can pay only a small part (say 20%) of the cost. The nannies can be asked to meet certain standards of care.

2)  There is a need for tuition to help the students from poor families. The tuitors can be trained quickly to meet the educational standards.  A large part of the cost of these tutors can be paid by the Government, so that the cost to the students is kept low.

These two ideas can keep many people to be usefully employed until the recovery of the global economy. The wages can be kept low. When the economy recovers, they can find higher paying jobs in the private sector.

Tan Kin Lian

Business Week: Innovation - Singapore is No. 1, well ahead of USA

Read this article.

Thought for the day: challenge and controversy

"The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenge and controversy.":

 

Rev. Dr. Martin Luther King, Jr. (1929-1968), US civil rights leader

Shin Min Interview - General Election

Here are my replies in an interview with Jo Sum of Shin Min News.

 

Survey: Rating of Government ministries (Singapore)

How do you rate the work of the various ministries in Singapore? 

Survey.

Here are the survey results.

Motor insurance - regulator can play a part

14 March 2009

Editor
Forum Page
Straits Times

I refer to the letters by Raganathan Vivek “Why should we pay for insurer’s laxity” and Sia Chong Yew “It’s high time motor insurers put their house in order”.

I agree with the views of these writers. Motor insurers should be more active in combating inflated claims instead of passing the higher cost to consumers through premium increases.

During the 30 years that I headed NTUC Income, my colleagues paid special attention to deal with the inflated claims. We were able to keep the premiums at a more affordable level. We considered it to be our duty to the consumers and be profitable at the same time.

I wish to point out that, apart from the motor insurers, the regulatory authority can play a part as well. Most inflated claims are made by third parties claiming for the repair cost, injury and medical expenses. These claims are lodged with the insurance company a long time after the accident, making it difficult for the claim adjustor to assess the actual and fair amounts of compensation.

To make matters worse, the claims are lodged through lawyers, which increased the total claim payments by an estimated 30%.

This matter can be resolved by a simpler regulatory change. Make it compulsory for a third party to lodge the third party claim with the insurance company within 24 hours of the accident. The insurance company should be given the opportunity to inspect the vehicle and settle the claim directly and promptly. The third party should engage a lawyer only in the event of a dispute on liability.

This practice is adopted in many countries, either as a regulator requirement or as a market practice. It is surprising that Singapore continues to have many third party claims settled in an inefficient and expensive manner through the legal system.

I hope that the relevant authority, i.e. the Monetary Authority of Singapore or the Land Transport Authority, will make the necessary change to the regulation to address this problem. This will reduce the inflated claims by several hundred millions of dollars and lower the cost of motor insurance to consumers.

Tan Kin Lian

Motor Insurance premiums set to rise

Last week, it was reported that the motor insurers lost more than $200 million in 2008 and that the insurance premiums are set to rise significantly in 2009.

Last May, the General Insurance Association of Singapore announced bold measures to tackle this matter. They involved measures that could cause much inconvenience to motorists, but the Association promised that these measures would arrest the problem. 

Today Paper asked me to write an article on this matter last May. It is published in the paper. I was sceptical about the masures. Perhaps, someone can asked the Assocation to comment on the failure of their measures?

Tan Kin Lian

Bird Nest Stadium in Beijing

The Beijing National Stadium, more commonly described as the Bird Nest, cost USD 423 million to build.

Someone commented that the stadium was not used after the Beijing Olympics. Is this wasteful?

What could China do with the same money?
1. Invest in US Treasuries to earn interest at 4%?
2. Build houses for the people in China to live in?
3. Give the money to third world countries as aid?

I believe that the money is well spent, as it builds the infrastructure that can be used for the next 30 years. It also gave jobs for the workers who are involved in the construction. If not, these workers might be idle.

Of course, the workers can be used to build houses for the people to live in, but this is already catered by the private sector. I believe that it is the duty of the Government to build the long term infrastructure of the country.

Life insurance quotation gives misleading information

A policyholder bought a 21 year anticipated endowment policy with an annual payment of $14,500. The quotation clearly stated that a sumof $20,000 is paid every 3 years and the payment on maturity is $80,000 plus RB/SB of $264,800 giving a total payout of $344,800.  There was no explanation about the RB/SB and that it is not guaranteed. The policyholder was misled by the agent into believing that the payment is guaranteed.

The policy is now approaching the maturity date. The policyholder is now told that the actual maturity payout is only $232,400, comprising of $80,000 plus RB/SB of 152,400 (i.e. decrease of $102,400) from the quotation. The policyholder was shocked to see this amount of reduction.

I advised the policyholder to file a complaint to FIDREC and, if not resolved, to take a legal case.

MY VIEW: 

Now I know why this insurance company was so successful in its sales over the past years. The agents were able to sell large policies by providing misleading quotations to the customers. Most of these customers are not well educated and trusted the verbal explanation of the agents. When they learned the truth years later, it was too late. 

The root cause of this problem is the excessive commission paid to the agent and the poor supervision of the insurance company on the conduct of their agents. I hope that this unhealthy practice is properly addressed.

Low cash value on termination

Dear Sir,
I have a PRUCASH policy that started in 2002. The annual premium is $3934. The coverage is very low at $50,000 because it is meant to be an endowment plan. The annual cashback is $2500.

I've only recently educated myself through your website and other sources on how insurance and savings should really work and realised how big a mistake I made when I bought that policy.
The cash value now is about $16000, whereas my premiums paid to date is about $27000.
If I surrender my policy now, I'll "lose" around $9000.

What is my best course of action?Should I continue with the policy and take out the cashback yearly to invest in a low-cost ETF? Or should I terminate the policy and invest in an ETF with the entire sum? The difference in yields required for me to make up that $9000 loss seems to be quite huge.

REPLY
You should ask the insurance company to explain why you had to lose so much money, if you terminate it now. They owe an explanation to you.

To make a decision on whether to continue or terminate the policy, you should ask for additional information. Please read the relevant document in my website, www.tankinlian.com/faq

Interested in Part Time Work

Dear Sir/Madam:
I’m X, a permanent resident, looking for any part time job (clinic asst, office attendant, call center, packer). A copy of my resume is enclosed for your references. My email address is Y or mobile number Z.

REPLY
Please register in the portal, www.easyapps.sg/ptw

A prospective employer will contact you. As this is just set up, it may take some time before you get a response. Wish you all the best.

To register
Click on Worker Tab, select the postal sector and type of work, click on View (to see other candidates) and then Register.

Flaw in MAS Fast Track Process

Dear Mr. Tan,

I came across this paragraph in the Q&A issued by MAS regarding the Fast-Track process:

"Under the fast tract process, the FI is required to help me prepare a written statement, taking guidance from a checklist of questions (which incorporates inputs from FIDReC. Similarly, the representative/RM who sold me the product is also required to give a written statement, again taking guidance from a checklist (incorporating inputs provided to FIDReC).

To me, this fast tract process seems rather odd and does not make much sense. Here is a situation where I am complaining against the FI, and under this fast tract process, the FI is required to help me prepare a written statement .........

Why should the FI in this instance help me. I would have thought that the FI would try make my statement as weak as possible and at the same time make use of my statement to defend their position against my complaint.

JL

REPLY
I agree with your view. I suggest that you bring this point up with MAS.

Financial Times: Singapore acts on bank secrecy laws

Singapore promised on Friday to relax its strict bank secrecy laws in a sign of the escalating international pressure on tax evasion.

Hong Kong decided to bring its tax transparency up to international standards, and both moves advance the campaign against tax havens.

John Withers, deputy chairman of Step Worldwide, a professional body for wealth advisers, said: “If Singapore is moving in that direction it narrows down the places to which undisclosed money can easily be banked and it puts pressure on Switzerland to follow suit. It is the beginning of the end of bank secrecy.”

The moves came as the US administration endorsed a bill targeting tax havens. Tim Geithner, US Treasury secretary, promised a “much more ambitious effort to deal with offshore tax havens”.

Singapore’s concession is a big shift for a city-state accused of marketing itself as the “ultimate secrecy jurisdiction” by the Organisation for Economic Co-operation and Development at a US Senate hearing in 2007.

Singapore’s finance ministry said it would amend its bank secrecy laws in mid-2009 to take account of the OECD’s standards on exchange of information. “Once the legislative amendments are passed in parliament, Singapore is prepared to negotiate and conclude double taxation agreements that will enable us to provide further assistance for exchange of information.”

It said: “The decision . . . is in keeping with Singapore’s role as a trusted centre for finance and a responsible jurisdiction, with strong and consistent regulatory policies and a firm commitment to the rule of law.”

The promised changes will allow foreign tax authorities to request information about suspected tax evaders, although Singapore said “information fishing” would not be allowed and there would be confidentiality and privacy safeguards, as allowed under OECD rules.

Even so, its announcement will be applauded by other offshore centres that have lost business to Singapore.

Lee Kuan Yew, modern Singapore’s founding father, told bankers the city-state could not escape the pressure being applied to Switzerland. “We must move with the flow,” he said.

Last week, John Tsang, Hong Kong’s financial secretary, announced plans to legislate by mid-year to bring its tax information exchange provisions to international standards. “I believe that the business and professional community generally agrees that Hong Kong should align its arrangements for the exchange of tax information with international standards so that we can enter into such agreements with more economies.”

Singapore and Hong Kong are among 34 secrecy jurisdictions listed in the anti-tax haven bills introduced in the US Congress this week.

Management fee for REIT

Dear Mr. Tan,
I am a unit holder of Frasers Commercial Trust. Currently the pricing of the unit to pay for the management fee is based on average daily market price.The daily market price could be 15% of the net asset value of the unit when market for REIT is very low, and the number of units issued to pay for the management fee per year could be more than 6% of total number of unit, this will cause the dilution of the unit.

I suggest that the trust deed be amended. The pricing could be based on the net asset value of the unit instead of average market price when computing the number of units to be issued for Management Fee.

Mr Tan, I hope you can help us to bring this issue to the relevant authority.

HG

More time needed to respond to MAS consultation paper

Hi Mr Tan
It is encouraging that MAS has submitted a consultation paper on investment in structured products. The review should be studied very carefully and the comments collated and set to MAS.

However, I feel that the April deadline is too short. MAS should give at least 3 months for comments.

I wish to carry out a survey and collate the feedback of the participants. I also feel it would be worthwhile to run a seminar for the public to voice their views.

J

Register for the Part Time Work Portal

29 workers have now regiestered for part time work in this portal. Registration is free. Tell your friends to register. When there are sufficient workers, we will actively approach the employers to offer part time work

Cambodia

I asked a friend in Cambodia. What language did you study in school?

He studied French initially. Around early 1990s, the main langauge of instruction was changed to English. Cambodia decided to join Asean, and follow the other countries which used English for communication.

The standard of English is now quite high in Cambodia, compared to the other countries in Indo China. Most people are able to converse in English.

World's happiest countries

Perhaps, one day, Singapore can become one of the world's happiest countries. Read here.

The 12 happiest countries are:
1. Denmark
2. Switzerland
3. Austria
4. Iceland
5. Bahamas
6. Finnland
7. Sweden
8. Bhutan
9. Brunei
10. Canada
11. Ireland
12. Luxembourg

Here are the ranking of some familiar countries:
17. Malaysia
18. New Zealand
23. USA
35. Germany
41. UK

53. Singapore
62. France
82. China
90. Japan
125. India
167. Russia

Ranking of all countries is shown here.

Loss of SGD 70 trillion in 2008

The world suffered a loss of SGD 70 trillion in 2008. This is the drop in asset values in all the markets around the world. Prior to this drop, the world had assets of probably between $150 to $200 trillion. Is the world really poorer now, compared to 2007? Were the assets destroyed?

The same assets (i.e. businesses, hotels, properties) were still around. They are now partly unutilised, due to the drop in consumer demand, but in terms of physical quality, they are not impaired. In this case, why should they be considered as losing one third to half of their value?

This is a weakness of the free market system that formed the foundation of the economic system that has now collapsed. By depreciating the value of these assets to this extent, the world does not become better. In fact, it becomes worse when the values keep wpiralling downwards. People react to this situation by cutting down on their speding, making matters worse for the wider economy.

To solve this problem, we must give people the confidence to continue spending as before. This will generate demand, which will create employment, help to pay for the mortgage on their homes.

A possible solution: give people access to personal credit (especially if they lose their jobs or suffer a drop in earnings).

SCMP:Investment complaints for SFC

The Monetary Authority has referred to the Securities and Futures Commission seven complaints regarding a licensed bank’s promotion of Lehman Brothers investment products, to decide whether follow-up action is needed. The authority has received 20,345 complaints so far about the Lehman Brothers products and is investigating 4,876 cases.

SCMP:Minibond blame for government

About 60 per cent of respondents to a Civic Party survey said the government had to share responsibility for the minibonds saga. Of 1,000 respondents, 72 per cent said the Monetary Authority and Securities and Futures Commission failed to make full reports of their bank investigations.

WSJ: Sands President Abruptly Resigns

Read this report. This resignation may cause problem with Marina Bay Sands.

Minibond Investors

There are two groups coordinating the Minibond investors:

a) Group 1 (Minibond Victims Group) coordinates the investors who bought from the banks
website

b) Group 2 (Minibond Investors Action Group) cooridnates the investors who bought mainly (but not exclusively) from the brokerages.

Group 2 wish to inform the investors about their website, as follows:
http://www.miagsg.com/

I wish to advise investors to study the approach taken by the two groups and to decide which group suit your interest better.

Gilbert Goh's book: How to survive unemployment

Video of book launch. This is a useful book for people who are retrenched or unemployed.

SCMP: Former finance chief willing to testify about Lehman fiasco

9 Mar 2009
Former secretary for financial services and the treasury Frederick Ma Si-hang yesterday said he was willing to testify in the Legislative Council about the Lehman Brothers minibonds fiasco, but refused to comment on the proceedings so far. "You all know that I have always been very co-operative with Legco," said Mr Ma, who also served as secretary for commerce and economic development before he resigned for health reasons. "But since I am no longer an official, I do not have access to all the records {hellip} If I go, it will just be me and my brain." His successor, Chan Ka-keung, has told Legco that he did not know what a minibond was until the fiasco. Mr Ma refused to reveal how much he knew about minibonds, saying: "You will have to wait for the Legco hearing."

Tough Job Market

A first time job seeker said, "I am disturbed about threats from ridiculous employers during interviews. They said that this is an employer's market. Frankly, they are out to exploit fresh graduates with unreasonably low pay offers, e.g. $2.200 for 24/7 standby and plenty of unpaid overtime opportunities".

An employer said, "Our graduates are still not adjusting to realities. They still have high expectations".

Many businesses are finding it difficult just to survive. So, they cannot afford to pay high salaries. Even the businesses that are profitable are making lower profits compared to previous years. They are reluctant to pay high salaries.

What are your views? Survey.

Here are the survey results.

Creating jobs

We are now in an economic recession. More workers will be retrenched. There will be a bigger pool or unemployed people and first time job seekers competing for a diminishing number of new jobs. 

We need an innovative way to create new jobs that never existed before. These are jobs that exist in the community, for example, to take care of the environment, to take care of elderly people and children, to improve education, to run errands and to work in small businesses in the nerighbourhood. They will not be full time work, but part time work that is  paid by the hour.

We need a new way to match the people who are willing to do the part time work with the employers who have work to be done. The employer should look for workers that live nearby, so as to reduce travelling time and cost to get to work. This matching has to be done in an efficient and inexpensive way. 

I have created a new portal that will allow the matching to be done. It will be launched soon. Meanwhile, interested workers are invited to register in this portal.

This portal is also targeted at students who wish to have part time work during the school vacations.

The part time worker has to register in the portal and provide a mobile number as the contact. A potential employer will send a SMS to contact the part time worker for a telephone interview.

I hope that the publicly funded organisations will take the initiative to create some of these part time work in the community.

Tan Kin Lian

Debt Advice Tips

Read this article.

Survey: How will you vote in the General Election (2)?

Take part in this survey. 

Here are the survey results based on 219 replies.

Here are the comments given by some respondents. 

Key finding

If the alternative parties are able field credible candidates, 89.9% of the respondents will vote for the alternative parties. 

The main reasons are:

> alternative voices in Parliament 80.2%

> make PAP listen more to the people 72.0%

> more active debate in Parliament 64.3%

> dislike high salaries of ministers 62.3%

> a more just society 48.3%

Reasons give to vote PAP are:

> stablility in Singapore 66.9%

> PAP has been a good government 45.8%

> ensure Singapore's continued prosperity 38.1%

These scores are quite close to the previous scores based on 121 replies.

Survey: Suicide in universities

Participate in this survey.

Here are the survey results (48 replies)

Better than the free market

Many people think that the free market is wonderful. It allows people to work hard, accumulate wealth and improve their standard of living. This is only partly true.

The free market is also a place where the strong exploit the weak and smart, dishonest people  get away by cheating the naive. For example, look at the complicated financial instruments introduced by dishonest people to make hundred of million dollars, which led to many ordinary people being financially destroyed. This is the bad aspect of the free market.

As we rebuild the future, we have to find an alternative to the free market. I like to introduce the concept of the "fair market", which has the positive aspects of the free market, but it inclujdes the restraints to prevent cheating and exploitation. 

The fair market requires the elected leaders to discharge their responsibilility in looking after the interest of the ordinary people. The leaders cannot just sit by and leave matters to be decided by the "free market". These leaders with a clear vision of what is good for society. They have to embody the values of honesty, fairness, public service and courage.

We also need the people to understand that they have to be more self-less, rather than be selfish or self-centered. This is best explained in the following poem by Martin Niemoller.

First they came for the Jews
and I did not speak out because I was not a Jew.
Then they came for the Communists
and I did not speak out because I was not a Communist.
Then they came for the trade unionists
and I did not speak out because I was not a trade unionist.
Then they came for me
and there was no one left to speak out for me.

Tan Kin Lian

Survey: Marina Bay Sands

Here are some information atbout this integrated resort.

What are the its business prospects? Give your views in this survey.

Here are the survey results (49 replies).

Conclusion: The Marina Bay Resort will help the economy in a small way , but not optimistic.

Timing of the General Election

Participate in this survey.

Here are the survey results based on 49 replies.

Money does not attract talent - it merely attracts greed

Read this article.

Avoid the risk of a life insurance policy

To consumers:

When you buy a life insurance policy, you are taking a big risk. You do not know what will be the inflation and mortality rates in the future. In spite of this, you are required to commit a fixed premium payable for many years into the future.

The insurance company does not know the future rates either. So, they have to take a risk. If they guarantee you a favourable rate and the trend goes against them, the insurance company can declare bankruptcy. You will lose a large part of your savings.

If they declare a conservative rate and there is high inflation, you will lose out. The money that you have saved for many years will be paid back to you in depreciated dollars. The insurance company keeps the excess as their exceptional profit.

To overcome this uncertainty, many insurance companies have to operate on a participating fund. The insurance company guarantee a low rate of return on the participating policies, and promises to pay back a large part of the yearly surplus to the policyholder in the form of a non-guaranteed bonus.

This arrangement is fine, provided that the insurance company can be trusted to treat its policyholders fairly in the distribution of the bonuses. But you have to take another risk - can you trust your insurance company to give you a fair rate of return?

In the past, the insurance companies observe a high standard of conduct in the distribution of the surplus.  In recent years, this standard has been eroded. Many insurance companies are now prepared to short change their policyholders in the pursuit of more profit for their shareholders or for their sales growth. For example, they declare a lower rate of return on their old policies and introduce new products that give a better return to boost their sales. This is unfair and at the expense of the old policyholders.

If this happens to you, you have a recourse. There are regulations in Singapore to ensure that the policyholders are fairly treated. If you have bought a participating policy and have been given a poor rate of return, compared to other policyholders who have bought a new series of products, you can lodge a complaint with the regulator, which is the Monetary Authority of Singapore. They will take up the complaint on your behalf and will ask the insurance company to justify its stand.

If you are going to make a long term commitment in a life insurance policy, you should choose an insurance company that can be trusted to act fairly in the interest of its policyholders. There is a lot of uncertainty at this time on which insurance company can be trusted to observe this principle. It is best that you do not put your long term savings in a life insurance policy, as you are subject to the risk of being denied a fair rate of return.

It is better to buy accident or term insurance to cover your risk and to keep your savings in a low cost exchange traded fund. Many of these funds are offered in the market.

You can get more details by reading the FAQs in my website.

Tan Kin Lian

Twisting a policy

Dear Mr Tan,
I was deeply troubled by a 20 year limited premium policy that bought from NTUC Income 2 years ago. I bought the policy for my daughter to provide her with lifetime coverage by paying the policy premium for 20 years.

Recently, NTUC Income no longer accept new policy for the product and was replaced it with a similar limited premium product called Revo Life. My agent said that my existing policy is inferior to the new Revo Life:

1. My existing policy is more costly for the same amount of coverage
2. Revo Life took a much shorter period to breakeven
3. Revo Life provides extra benefit of 3X payments on accident coverage.

Why is the original product more costly with less coverage, where the contract already specified the % of premium that represented the distribution cost in maintaining the policy.

Could this be due to some miscalculation that caused the higher cost in initial policy?

As the consumer has not been notify of this difference, people who purchase the original 20 years limited will continue to pay more for less for the remaining year!

Do you think the consumer have the right to ask for some kind of bridging arrangement to the newer policy with minimum loss? I was suggested by the underwriter (through my agent) that I should cancel my policy (with a huge loss of course) and buy the new policy. Do you think this is a fair suggestion?

REPLY
You should ask the agent to present a detailed comparison of the cash value of the old policy and the new policy after 5, 10, 15, 20 years and the premium. You can read the FAQ in my website, www.tankinlian.com/faq

You should also consider this point. By stopping the old policy and taking a new policy, you are suffering the high front end charge again (which can take up more than one year of your savings).

Normally, it is unethical for an agent to advise a client to stop an old policy and take up a new policy, as it is against the interest of the client. This is called "twisting a policy". You can lodge a complaint to NTUC Income against this unethical practice.

It is not correct for an insurance company to introduce a new product that offer a better return compared to an old product. This is unfair to existing customers. It is their duty to ensure that existing customers are given a fair return, through higher bonus, compared to new customers. You can ask NTUC Income's management to give their comment on this point.

You can also raise this matter with the Monetary Authority of Singapore. They will ask NTUC Income to give you an explanation. If you are not satisfied with the reply, you can discuss with MAS.

Insurance and technology

How should a country use technology to deliver insurance to its people efficiently and usefully? This  paper contains some of my ideas.

Be considerate and give way

To motorists in Singapore

When you see the car in front of you signal its intention to change lane, do slow down, give way and let that car move into your lane.  The driver may be unfamiliar with the road and realised, quite late, that the car is in the wrong lane. 

Do not sound the horn loudly and speed up to "chop" your place in the lane. Use your brake, rather than your horn. It does not cost you to be considerate and helpful. It will make life better for everyone in Singapore.

Tan Kin Lian

Performance of the Government

How do you rate the performance of the Government and ministers in running the country and managing the economic crisis? Join this survey.

Here are the preliminary survey results based on 49 and 97 replies.

 

HK: Minibond mom hits bank for $6m

A customer has filed a writ against Citic Ka Wah Bank in the High Court seeking the return of HK$6 million she invested in Lehman minibonds, alleging she had not been informed of the risks involved.

Lau Wai-lan, 45, is suing the bank for misrepresentation, unconscionable conduct and negligent investment advice. She is being assisted by the Democratic Party.
Lau is a single mother of three. She received secondary education but suffered a chronic brain injury in 1994 and has not been able to work since. Her sister, Lau Wai-ping, said Lau has been under immense mental stress since the failure of Lehman Brothers.

She has twice attempted suicide and is now on a regime of tranquilizers.

"We sent a few letters to the bank and the Securities and Futures Commission in October, but we received no assistance. This is our last resort," Lau Wai-ping said.

In 1995, Lau Wai-lan divorced her husband and sold her assets for HK$6.2 million. She put the money in a Bank of China fixed-time deposit and used the interest to support her three children, who are now aged eight, nine and 15.

On January 6, 2006, Lau claimed she was persuaded by a staff member she had known for several years to put HK$3 million into a 4 percent fixed-term deposit account at the Tai Wai branch of the bank.

But two weeks later, Lau broke the deposit to invest in the minibond series 23 HKD fixed- rate callable credit-linked notes due 2011 after being allegedly assured the investment was "low risk" and "safer than a bank deposit with triple A guarantee." Lau was also guaranteed a 5.1 percent interest rate.

On August 16, she transferred another HK$3 million in savings from her Citibank account and invested in minibond series 27.

Lau Wai-ping insisted her sister always reminded staff of her physical status and asked them not to introduce her to high-risk products.

In the writ, Lau maintained she was never told she might not obtain any refund of the principal at the end of the investment period. She was also not informed of any commission or financial interests involved.

The writ said the bank should perform a duty of care towards Lau, as well as provide proper advice and assistance. Lau was also rendered unable to make informed decisions as to what was in her own best interests.

http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=79125&sid=22979423&con_type=1

Legal action on Credit Linked Notes

Several investors had received the rejection letters on their claims for compensation. They have been disappointed at the outcome, after waiting for several months. They felt that they were unfairly treated and are keen to take collective legal action now.

A few legal teams have been organised. Before you decide to join any collective action, you should get answers to the following questions:

1. What are the legal grounds proposed by the lawyer to pursue the claim for compensation?

2. What are the chance of winning based on the strategy proposed by the lawyer? Why and how?

3. What are the terms of engagement of the lawyer? 

Terms of engagement

a)  What is the initial amount payable

b) What are the estimated payments for the various stages of the case?

c)  What are the actual charges to be paid to the lawyers

d) Is there a maximum cap on the legal fees and charges?

e) If the cases are settled earlier, will the participants get a refund of the unused fees?

Before you sign on the letter of appointment and write your cheque, you should attend a briefing to be given by the lawyer where all of the above points have been explained and accepted by you. If you are not sure, you should get the viwes of fellow participants and make your personal judgement.

FIDREC

You still have the option of getting your case adjudicated in FIDREC for a fee of $50. You can ask FIDREC to get the financial institution representative to complete this questionnaire, so that the adjudicator has the full facts on both sides to make an adjudication.

There was no one left to speak for me

Extract from the letter by Lasantha Wikramatunga, assassinated editor of a newspaper in Sri Lanka.

People often ask me why I take such risks and tell me it is a matter of time before I am bumped off. Of course I know that: it is inevitable. But if we do not speak out now, there will be no one left to speak for those who cannot, whether they be ethnic minorities, the disadvantaged or the persecuted. An example that has inspired me throughout my career in journalism has been that of the German theologian, Martin Niemoller. In his youth he was an anti-Semite and an admirer of Hitler. As Nazism took hold in Germany, however, he saw Nazism for what it was: it was not just the Jews Hitler sought to extirpate, it was just about anyone with an alternate point of view. Niemoller spoke out, and for his trouble was incarcerated in the Sachsenhausen and Dachau concentration camps from 1937 to 1945, and very nearly executed. While incarcerated, Niemoller wrote a poem that, from the first time I read it in my teenage years, stuck hauntingly in my mind:

First they came for the Jews
and I did not speak out because I was not a Jew.
Then they came for the Communists
and I did not speak out because I was not a Communist.
Then they came for the trade unionists
and I did not speak out because I was not a trade unionist.
Then they came for me
and there was no one left to speak out for me.

If you remember nothing else, remember this: The Leader is there for you, be you Sinhalese, Tamil, Muslim, low-caste, homosexual, dissident or disabled. Its staff will fight on, unbowed and unafraid, with the courage to which you have become accustomed. Do not take that commitment for granted. Let there be no doubt that whatever sacrifices we journalists make, they are not made for our own glory or enrichment: they are made for you. Whether you deserve their sacrifice is another matter. As for me, God knows I tried.

Dispute Resolution through FIDREC

If you have lodged your complaint to FIDREC, please read the following advisory from MAS. 

You have probably been asked to complete a questionnaire to provide the facts on your complaint. This puts the onus on the investor to justify the claim.

As the complainant, you can ask FIDREC to get the financial institution's representative to complete a questionnaire based on the attached questionnaire. This will provide information for the adjudicator to decide on any possible mis-selling of the product.

I have asked the Consumer Association to suggest to FIDREC that this questionnaire should be used. I have not heard about any decision on this matter. 

As you investor, you can ask FIDREC to get the answers to this questionaire, in the interest of fairness and natural justice. I hope that you find this questionnaire to be useful to support your complaint,

Support needed from noteholders of Pinnacles Series 9 and 10

The Pinnacle Action Group wishes to write to MAS to investigate into the Pinnacle product that was engineered by Morgan Stanley. The group has consolidated some findings in series 9 and 10 and has identified several questions and they wish to get the regulator (MAS) to investigate.

They need the support from noteholders of the Pinnacle Series 9 and 10 to sign electronically on a letter to be sent to MAS. They like to ask the noteholders to write to pinnacle.action.group@gmail.com with their name and email address.