There is a focus on corporate social responsibility. This focus is to encourage corporates to recognize that they have to go beyond making profits for their shareholders and to take care of other stakeholders, such as their workers, customer, community and the environment.
Many corporates proudly embrace this concept, but pay only lip service to it. To be truly a responsible corporate citizen, they have to create a proper balance in the sharing of the profit among the various stakeholders.
The most important task is to provide goods and services at fair prices to their customers. They should not make excessive profits at the expense of their customers, by offering goods of inferior quality or provide misleading information about the value of the goods. They have to be honest.
The corporations have to provide fair wages to their workers. It is possible to use the market forces to suppress the wages and increase profits for their shareholders, but that would be against the concept of social responsibility. It is understandable for a corporation to reduce its wages, if this is necessary for the corporation to survive in a competitive market or where there is a drop in demand. However, if the corporation is able to make big profit, it should give a fair share to the workers.
A part of the profits should be set aside for the community and the environment.
The shareholders are entitled to the residual profits but there must be benchmarks on what is a reasonable rate of return. The corporation should not go beyond this reasonable rate, if it is done at the expense of the other stakeholders.
The concept of corporate social responsibility requires these benchmarks to be established. It will lead to a fairer society and ensure its long term sustainability.
Tan Kin Lian
Wednesday, September 30, 2009
Scam involving Australian property
A lawyer told me about this scam involving Australian property. A developer marketed the property in Singapore through a Singapore property agent. The property carried a rental guarantee which was provided by another company, having a similar name to the developer, but with no funds to back the guarantee.
On completion, the invetors did not get the guaranteed rental. The company that provided the guarantee declared insolvency.
The Australian banks that provided the 70% loan to the Singapore investors took over the property at a discount of 30%. The Singapore investors lost the 30% that they invested.
The Singapore investors went to see the property agent, who said they were only marketing the property to earn a commission, and was not responsible for the loss.
Lesson: Never invest in overseas properties, even with rental guarantee. The risk is too high.
On completion, the invetors did not get the guaranteed rental. The company that provided the guarantee declared insolvency.
The Australian banks that provided the 70% loan to the Singapore investors took over the property at a discount of 30%. The Singapore investors lost the 30% that they invested.
The Singapore investors went to see the property agent, who said they were only marketing the property to earn a commission, and was not responsible for the loss.
Lesson: Never invest in overseas properties, even with rental guarantee. The risk is too high.
Slot in cash card to enter and leave car park
Do you know why you still have to suffer the inconvenience and have to slot in your cash card to enter and leave some car parks in Singapore? Here is the likely reason.
Lower return expected in the future
QUOTE
Sept. 30 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”
UNQUOTE
If total return on equity is 5% p.a., the return on a diversified fund will be lower, say 3% p.a. If the financial product gives a reduction in yield of 2%, the net return will only be 1%.
With low return, it is important for the financial product to have lower reduction in yield, i.e. lower the marketing and other charges.
Sept. 30 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”
UNQUOTE
If total return on equity is 5% p.a., the return on a diversified fund will be lower, say 3% p.a. If the financial product gives a reduction in yield of 2%, the net return will only be 1%.
With low return, it is important for the financial product to have lower reduction in yield, i.e. lower the marketing and other charges.
High upfront charge
A consumer asked my views about a product introduced by an insurance company.
He showed me a benefit illustration:
a) A large single premium is paid into the account.
b) The sum insured is about 7 times of the single premium
c) The cash value on the first year is 73% of the single premium. The upfront charge is 27% of the single premium.
d) At the end of 20 years, there is a guaranteed cash value based on the guaranteed crediting rate of 3% and maximum charges) amounting to 79% of the single premium.
e) There are two other illustrations, which are not guaranteed, that shows a cash value that is higher than the single premium invested.
MY ANALYSIS
a) The charges are TOO HIGH. If the single premium is $100,000, a sum of $27,000 is taken away from your investment to allow for commission and profit.
b) It is unlikely, in my view, for the payout to meet the non-guaranteed illustration, as they are based on optimistic assumptions on future earnings
c) The consumer can invest the single premium separately and pay the on a term insurance out of the interest earned.
a) A large single premium is paid into the account.
b) The sum insured is about 7 times of the single premium
c) The cash value on the first year is 73% of the single premium. The upfront charge is 27% of the single premium.
d) At the end of 20 years, there is a guaranteed cash value based on the guaranteed crediting rate of 3% and maximum charges) amounting to 79% of the single premium.
e) There are two other illustrations, which are not guaranteed, that shows a cash value that is higher than the single premium invested.
MY ANALYSIS
a) The charges are TOO HIGH. If the single premium is $100,000, a sum of $27,000 is taken away from your investment to allow for commission and profit.
b) It is unlikely, in my view, for the payout to meet the non-guaranteed illustration, as they are based on optimistic assumptions on future earnings
c) The consumer can invest the single premium separately and pay the on a term insurance out of the interest earned.
Tuesday, September 29, 2009
Financial innovation that are useful to consumers
Here are some financial innovations that are useful to consumers, as stated by Robert Shiller.
Get a Free Car Insurance Quote Online From Any Auto Insurance Company
You should be able to get a free car insurance quote online from any auto insurance company with a website, and most of them do these days. There was a time when you had to pay for a quotation, but not now. In fact if any company tries to charge you for an online quote, don't bother dealing with them.What should you be looking for in a free auto insurance quote? A low price obviously, but that
Free market (8) - Access to credit
Banks provide credit to businesses. They charge an interest rate comprising of the cost of funds (i.e. the interest that they pay to deposits) and the credit spread (i.e. the additional fee to cover the risk of default by the borrowers, expenses and profit).
In a competitive environment, the credit spread narrows and banks make a modest profit. Under volatile market conditions, the credit spread can increase sharply as the banks take advantage to increase their profit margins.
Some banks take advantage of the market volatility to recall loans and increase the interest sharply. The borrower has no recourse, but to pay the high interest rate, as this is a commercial term.
The banking industry is able to make huge profit at the expense of the business and consumer sectors. Some lawmakers have described the practice as predatory or usurious.
During an economic crisis, the Government has to step in and guarantee the credit for small businesses, as the banks are not prepared to take the risk. Some people refer to this practice as "lend you an umbrella during the sunny days and take it back when it rains".
Is there a better way to provide credit for businesses, rather than rely on the banking industry, especially if the banks do not have a social conscience and exploit the situation to make huge profits?
In my view, there should be a state owned development bank that is willing to offer financing on fair terms to the essential sectors of the economy, i.e. those that meet the needs of the population for their day to day living. These loans are for small businesses to buy the tools, equipments and stocks to run small businesses to provide goods and services for the population.
It is also possible to have large numbers of community or cooperative banks to provide the lending to the small businesses. These banks can draw their funds from the state owned development banks on fixed terms.
This type of structure ensures that there is healthy competition among the large number of banks. The lending should be restricted to the cost of running a business, and not for speculation in properties, including commercial properties.
If businesses have access to credit on fair terms and are not subject to exploitation by the banks or by speculative forces, they can provide their goods and services at fair prices, stablilise the cost of living and increase their economic efficiency.
A large source of economic instability and crisis in past years is due to speculation in property and cost of credit, and in exploitation by the owners of these resources. It is better for these two key sectors to be controlled (and still reflect the market) but to remove the exploitation of the market.
Tan Kin Lian
Tan Kin Lian
In a competitive environment, the credit spread narrows and banks make a modest profit. Under volatile market conditions, the credit spread can increase sharply as the banks take advantage to increase their profit margins.
Some banks take advantage of the market volatility to recall loans and increase the interest sharply. The borrower has no recourse, but to pay the high interest rate, as this is a commercial term.
The banking industry is able to make huge profit at the expense of the business and consumer sectors. Some lawmakers have described the practice as predatory or usurious.
During an economic crisis, the Government has to step in and guarantee the credit for small businesses, as the banks are not prepared to take the risk. Some people refer to this practice as "lend you an umbrella during the sunny days and take it back when it rains".
Is there a better way to provide credit for businesses, rather than rely on the banking industry, especially if the banks do not have a social conscience and exploit the situation to make huge profits?
In my view, there should be a state owned development bank that is willing to offer financing on fair terms to the essential sectors of the economy, i.e. those that meet the needs of the population for their day to day living. These loans are for small businesses to buy the tools, equipments and stocks to run small businesses to provide goods and services for the population.
It is also possible to have large numbers of community or cooperative banks to provide the lending to the small businesses. These banks can draw their funds from the state owned development banks on fixed terms.
This type of structure ensures that there is healthy competition among the large number of banks. The lending should be restricted to the cost of running a business, and not for speculation in properties, including commercial properties.
If businesses have access to credit on fair terms and are not subject to exploitation by the banks or by speculative forces, they can provide their goods and services at fair prices, stablilise the cost of living and increase their economic efficiency.
A large source of economic instability and crisis in past years is due to speculation in property and cost of credit, and in exploitation by the owners of these resources. It is better for these two key sectors to be controlled (and still reflect the market) but to remove the exploitation of the market.
Tan Kin Lian
Tan Kin Lian
Protect the interest of first time home buyers
Read this letter in the Straits Times Forum. I agree with the views expressed by many young people, that HDB flats should be sold at controlled, affordable prices, and not be subject to speculation in the market. Here is another example of the bad "free market".
Old ezLink cards cannot be used from 1 Oct 2009
The old ezLink cards cannot be used from 1 October 2009. This affects over 3 million cards. There was so little publicity about the deadline to convert to the new card that many people were caught unaware. What will happen to the balance in these cards? Read my views here.
Law professors lobby for consumer protection agency
There is a need for consumers to be protected against bad business practices and complex products that are designed to take unfair advantage of consumers. Even the law professors agree with this view. Read this report.
Financial innovation
Hi KL,
Robert Shiller wrote a column in the Financial Times (27 Sep 2009) with the above title.
The main thrust is that the source of this crisis lies in imperfect financial architecture, rather than over-complexity of products. We should recognise that increased complexity offers potential rewards as well as risks. Complexity is only problematic when used to obfuscate and deceive. Regulators beginning to actively discourage complexity are headed in wrong direction. Innovation in financial sector has to be upheld to improve our lives, the same as innovation in any other sectors. Thus regulators need to be given a stronger mandate and more qualified manpower to encourage innovation.
The conclusion is to use this crisis to promote innovation-enhancing financial regulation, not to let this be eclipsed by superficially popular issues.
Shiller's arguments appear sound to me. Innovation is the lifeblood of capitalism, driving productivity growth, and should be actively encouraged under proper regulation.
I am thinking perhaps it would help if you state your stand on this, so that people will not read you wrongly, or to quote you out of context. Are you in principle opposed to financial innovation (leading to increased complexity)? Or fundamentally it is the crooked salesforce to blame who exploited the complex products? Or we should point at the regulators? If regulation is perfect, there is no way a seller can cheat, and buyers are informed of all associated risks & rewards, do you think complex products are alright?
In your writings, you have recommended easy-to-understand products to men on the street - low cost with fair distribution of rewards. Your well-meaning intention is very clear, no doubt about this. Less clear is the driving principle: because you think financial innovation is bad, or you think the ethics of banks is very questionable, or you think the regulators will never catch up with the industry players' tricks etc. This is important because the proposed remedy will be different. If innovation is bad, we will ask regulators to ban/minimise creativity; if innovation is helpful but consumers are often poorly informed, we should push for better communication by sellers while retaining innovative drive; if regulators are themselves behind the curve and not equipped with necessary skills, we need to incentivise more talents to join them.
Hope to see a response. Thanks for your time!
YZ
There is a proper place for financial innovation, to keep up with the times and changing needs of society. For example, we have to innovate to provide a better system of financing health care. We need a better system to allow people to pay their mortgage installments in an environment of irregular employment.
It is better for the innovation has to be carried out as a joint effort by the industry, consumers and the regulators.
We will need a consumer protection agency that has the power to safeguard the interest of consumers. This function used to be performed by regulators, but they have neglected this function in recent years under the misguided strategy of "leave it to the market". This role has to be reinstated. America is addressing this issue now.
Tan Kin Lian
Robert Shiller wrote a column in the Financial Times (27 Sep 2009) with the above title.
The main thrust is that the source of this crisis lies in imperfect financial architecture, rather than over-complexity of products. We should recognise that increased complexity offers potential rewards as well as risks. Complexity is only problematic when used to obfuscate and deceive. Regulators beginning to actively discourage complexity are headed in wrong direction. Innovation in financial sector has to be upheld to improve our lives, the same as innovation in any other sectors. Thus regulators need to be given a stronger mandate and more qualified manpower to encourage innovation.
The conclusion is to use this crisis to promote innovation-enhancing financial regulation, not to let this be eclipsed by superficially popular issues.
Shiller's arguments appear sound to me. Innovation is the lifeblood of capitalism, driving productivity growth, and should be actively encouraged under proper regulation.
I am thinking perhaps it would help if you state your stand on this, so that people will not read you wrongly, or to quote you out of context. Are you in principle opposed to financial innovation (leading to increased complexity)? Or fundamentally it is the crooked salesforce to blame who exploited the complex products? Or we should point at the regulators? If regulation is perfect, there is no way a seller can cheat, and buyers are informed of all associated risks & rewards, do you think complex products are alright?
In your writings, you have recommended easy-to-understand products to men on the street - low cost with fair distribution of rewards. Your well-meaning intention is very clear, no doubt about this. Less clear is the driving principle: because you think financial innovation is bad, or you think the ethics of banks is very questionable, or you think the regulators will never catch up with the industry players' tricks etc. This is important because the proposed remedy will be different. If innovation is bad, we will ask regulators to ban/minimise creativity; if innovation is helpful but consumers are often poorly informed, we should push for better communication by sellers while retaining innovative drive; if regulators are themselves behind the curve and not equipped with necessary skills, we need to incentivise more talents to join them.
Hope to see a response. Thanks for your time!
YZ
MY REPLY
I am against complex products that are designed to "cheat" the consumers and marketed under the name of "financial innovation". The main culprits are the financial engineers who design these products, although the people who sell these products have to share the blame for being greedy to earn the attractive commission. The regulators also failed in the duty by allowing these products to be sold.
There is a proper place for financial innovation, to keep up with the times and changing needs of society. For example, we have to innovate to provide a better system of financing health care. We need a better system to allow people to pay their mortgage installments in an environment of irregular employment.
It is better for the innovation has to be carried out as a joint effort by the industry, consumers and the regulators.
We will need a consumer protection agency that has the power to safeguard the interest of consumers. This function used to be performed by regulators, but they have neglected this function in recent years under the misguided strategy of "leave it to the market". This role has to be reinstated. America is addressing this issue now.
Tan Kin Lian
Health care system in Germany
Here is an excellent health care system, that is much better than America or Singapore. Look to Europe for good examples, e.g. Germany or Switzerland.
RED Portal (15) - Rental Rates
If you are a owner of a condominium, how much should you offer your unit for rental? The RED portal has a tab called Info. It shows the range of rental rates for various condominium projects.
If your condominium is not listed, you can look at the benchmark price (BMP) for sale. Most condominiums are rented at between 0.25% to 0.4% of the BMP price. For example, if the BMP price is $1000, the rental rate should be between $2.50 to $4.
As a guide, you can take 0.33% (4% pa) of the value of the property. If the sale value is $1 million, you can rent it for $3,300 per month.
If you wish to list you unit for rental, click on the Offer tab (for your housing project and give your details. Our staff will contact you.
www.easysearch.sg (Real Estate Data)
If your condominium is not listed, you can look at the benchmark price (BMP) for sale. Most condominiums are rented at between 0.25% to 0.4% of the BMP price. For example, if the BMP price is $1000, the rental rate should be between $2.50 to $4.
As a guide, you can take 0.33% (4% pa) of the value of the property. If the sale value is $1 million, you can rent it for $3,300 per month.
If you wish to list you unit for rental, click on the Offer tab (for your housing project and give your details. Our staff will contact you.
www.easysearch.sg (Real Estate Data)
ProTrader - Financial Trading Game
Monday, September 28, 2009
Impact of a reduction in yield
If you save $500 a month over 35 years, your total savings is $210,000. If you earn 5% per annum during this period, you should get $569,000. Unfortunately, you will not get this full sum, as the financial institution will take away a portion of your gain to pay for their various charges, such as marketing, fund management, administration and profits.
Most high cost products can reduce you yield by as much as 2%, giving you a net yield of 3%. This 2% yield may appear small, but over a 35 year period, it could take away 34% of the accumulated amount, giving you a net amount of $373,000. You are left with a net gain of only $163,000. The amount taken away from you, representing the reduction of 34% is $196,000. In other words, you are left with less than half of the total gain.
It is important that you find a product where the reduction in yield is as little as possible.
If you invest directly in shares, you will not suffer any reduction in yield, but you will need to monitor the shares and make sure that you collect the dividends and rights issues. You may also suffer a big loss, if the particular business performed badly.
To avoid this risk, it is better to invest in a unit trust where the investments are professionally managed and and you enjoy diversification. However, the charges for most unit trust is 1% per annum, which is rather high. The fund manager will tell you that he can add value by picking the good stocks that will perform better than the market, but studies have shown that most fund managers are not able to generate this value.
You can invest in an exchange traded fund, which is benchmark against the stocks comprised in the market index. An example is the Statestreet Trakker fund, commonly known as the STI ETF. The management fee is 0.3% per annum. This is a low charge, compared to unit trust.
Read this table to see the impact of a reduction in yield on a monthly savings plan over a number of years.
Most high cost products can reduce you yield by as much as 2%, giving you a net yield of 3%. This 2% yield may appear small, but over a 35 year period, it could take away 34% of the accumulated amount, giving you a net amount of $373,000. You are left with a net gain of only $163,000. The amount taken away from you, representing the reduction of 34% is $196,000. In other words, you are left with less than half of the total gain.
It is important that you find a product where the reduction in yield is as little as possible.
If you invest directly in shares, you will not suffer any reduction in yield, but you will need to monitor the shares and make sure that you collect the dividends and rights issues. You may also suffer a big loss, if the particular business performed badly.
To avoid this risk, it is better to invest in a unit trust where the investments are professionally managed and and you enjoy diversification. However, the charges for most unit trust is 1% per annum, which is rather high. The fund manager will tell you that he can add value by picking the good stocks that will perform better than the market, but studies have shown that most fund managers are not able to generate this value.
You can invest in an exchange traded fund, which is benchmark against the stocks comprised in the market index. An example is the Statestreet Trakker fund, commonly known as the STI ETF. The management fee is 0.3% per annum. This is a low charge, compared to unit trust.
Read this table to see the impact of a reduction in yield on a monthly savings plan over a number of years.
Tan Kin Lian
Taking a housing loan
Here are some tips on taking a housing loan. Do not borrow to the limit. Have some margin to allow for future increase in interest rate. Have some spare savings in case you lose your current job. Ask your bank to give you a special term to defer repayment for up to 12 months in the event of loss of employment.
Using bicycle for the last mile
Here are my suggestions for a bicycle service to bring people from their homes to the MRT station and back.
Accumulation of Savings
This table shows the accumulated amount of savings at various rates of interest, and the reduction caused by the charges taken away from your savings by the financial product.
For example, if you save $500 a month and earned 5% per annum for 35 years, you will get an accumulated amount of $569.018. If the financial product takes away 2% per annum (which is quite common) to give a net return of 3%, you will get an accumulated amount of $373,656, or a reduction of 34%.
A good financial product will take away a reduction of 0.5% leaving you a net yield of 4.5% and an accumulated sum of $510,894 or 37% higher than $373,656. An example is an exchange traded fund (ETF) or a low cost unit trust.
Choose a financial product that takes away not more than 1% of your yield. Avoid financial products, including most life insurance policies, that takes away more than 2% of your yield, leaving you with a poor return.
When you buy a life insurance policy, you get a benefit illustration. Look at the figure shown as "reduction in yield". You will find the reduction to be more than 2%. If you do not know where to find it, ask the insurance agent to tell you (it is the duty of the agent to explain this infromation to you).
If you have already bought a whole life, endowment or investment-linked policy, or a variation of these plans, you can ask the insurance company to send you the benefit illustration again and tell you about the reduction in yield.
A survey carried out in my blog indicated that 80% of people who bought a life insurance policy were not told about the distribution cost (which causes a large portion of the reduction in yield) and, after learning about it, almost all of them felt that the distribution cost is too high. They felt that the agent should have told them about it.
The remaining 20% who were told about the distribution cost could have bought a single premium policy where the distribution cost is quite small and is likely to be explained by the agent.
Tan Kin Lian
Note: This new chapter will be added to my book on Financial Planning: Practical Steps
For example, if you save $500 a month and earned 5% per annum for 35 years, you will get an accumulated amount of $569.018. If the financial product takes away 2% per annum (which is quite common) to give a net return of 3%, you will get an accumulated amount of $373,656, or a reduction of 34%.
A good financial product will take away a reduction of 0.5% leaving you a net yield of 4.5% and an accumulated sum of $510,894 or 37% higher than $373,656. An example is an exchange traded fund (ETF) or a low cost unit trust.
Choose a financial product that takes away not more than 1% of your yield. Avoid financial products, including most life insurance policies, that takes away more than 2% of your yield, leaving you with a poor return.
When you buy a life insurance policy, you get a benefit illustration. Look at the figure shown as "reduction in yield". You will find the reduction to be more than 2%. If you do not know where to find it, ask the insurance agent to tell you (it is the duty of the agent to explain this infromation to you).
If you have already bought a whole life, endowment or investment-linked policy, or a variation of these plans, you can ask the insurance company to send you the benefit illustration again and tell you about the reduction in yield.
A survey carried out in my blog indicated that 80% of people who bought a life insurance policy were not told about the distribution cost (which causes a large portion of the reduction in yield) and, after learning about it, almost all of them felt that the distribution cost is too high. They felt that the agent should have told them about it.
The remaining 20% who were told about the distribution cost could have bought a single premium policy where the distribution cost is quite small and is likely to be explained by the agent.
Tan Kin Lian
Note: This new chapter will be added to my book on Financial Planning: Practical Steps
Taxation and social services
Each society needs to provide some social services to its people, such as infrastructure, education, health care, law and order and safety. The cost of these services have to be paid through taxation.
A fair method of taxation is a flat amount to be paid by all residents or households. As each person or household benefits more or less equally from the social services, they should contribute equally.
Unfortunately, in a society where there is a large disparity of earnings, there are many people who do not earn enough to pay for the cost of living. They will not be able to contribute towards the taxation.
A better method is to impose higher taxes on the high income earners. As they earn much more than the median wage, they are able to carry a larger share of the social cost.
Some people argued that a high tax rate will chase away the high income earners to other countries. This may apply to certain businesses that are globally mobile. There are many businesses that depend on the domestic market of a country. The high incomes have to be earned in the country and cannot be moved away.
In my view, a maximum tax rate of 30 percent of earnings is fair, as it would still leave 70 percent in the pockets of the high income earners.
There are debates on what has to be provided by the state and what should be provided by the private sector. In my view, the basic needs that should be provided by the state up to a standard that is necessary and cost effective. Those with higher incomes can opt to pay for a higher standard of service in the private sector, such as private schools or health care.
If the state does not provide for the basic needs, many people will have to buy these basic needs from the private sector and pay a much higher price, due to predatory practices and a high profit margin.
This has already happened in the financial sector which pays a low rate of interest on the savings and sells bad investment products that cause the investors to lose their savings. In the health care sector, some people have to pay higher fees to private doctors, without getting better outcomes.
It is better for the essential social services to be provided by the state on a cost effective basis, and for the cost to be shared fairly among the tax-payers. The higher income earners should be asked to contribute a larger share.
Tan Kin Lian
A fair method of taxation is a flat amount to be paid by all residents or households. As each person or household benefits more or less equally from the social services, they should contribute equally.
Unfortunately, in a society where there is a large disparity of earnings, there are many people who do not earn enough to pay for the cost of living. They will not be able to contribute towards the taxation.
A better method is to impose higher taxes on the high income earners. As they earn much more than the median wage, they are able to carry a larger share of the social cost.
Some people argued that a high tax rate will chase away the high income earners to other countries. This may apply to certain businesses that are globally mobile. There are many businesses that depend on the domestic market of a country. The high incomes have to be earned in the country and cannot be moved away.
In my view, a maximum tax rate of 30 percent of earnings is fair, as it would still leave 70 percent in the pockets of the high income earners.
There are debates on what has to be provided by the state and what should be provided by the private sector. In my view, the basic needs that should be provided by the state up to a standard that is necessary and cost effective. Those with higher incomes can opt to pay for a higher standard of service in the private sector, such as private schools or health care.
If the state does not provide for the basic needs, many people will have to buy these basic needs from the private sector and pay a much higher price, due to predatory practices and a high profit margin.
This has already happened in the financial sector which pays a low rate of interest on the savings and sells bad investment products that cause the investors to lose their savings. In the health care sector, some people have to pay higher fees to private doctors, without getting better outcomes.
It is better for the essential social services to be provided by the state on a cost effective basis, and for the cost to be shared fairly among the tax-payers. The higher income earners should be asked to contribute a larger share.
Tan Kin Lian
Free market (7) - Lower fixed cost
Many small business find it difficult to survive. They have to pay high rental and credit to run their business. These high cost have to be passed to their customers in the form of higher prices.
As business premises and credit are under the control of a few people, they are able to increase the rental and interest rate on loans. They make excessive profit and cause a heavy burden on the small business and the consumers.
These high costs can be controlled by the government through legislative measures, e.g. to set caps on rental rates or the cost of capital, or to provide alternative sources of supply through the public sector.
Many years ago, HDB provide shops at affordable prices. It allows the shop keepers to offer their goods and services at lower prices and make a reasonable profit. If they overcharge and make a larger profit, another business will be set up to provide an alternative at a lower price.
This is competition at its best, in bringing the prices down to a reasonable level, based on the cost of doing business plus a fair margin of profit.
In America, the anti-trust law is designed to ensure that there is fair competition and that any business is not allowed to grow so large that they can dominate the market and have unfair pricing power.
We also need controls to ensure that property owners and bankers do not take an excessive share of the value chain, at the expense of the customers, workers and the small business owners. It is desirable for these business costs to be controlled, to promote a healthy competitive market.
Tan Kin Lian
As business premises and credit are under the control of a few people, they are able to increase the rental and interest rate on loans. They make excessive profit and cause a heavy burden on the small business and the consumers.
These high costs can be controlled by the government through legislative measures, e.g. to set caps on rental rates or the cost of capital, or to provide alternative sources of supply through the public sector.
Many years ago, HDB provide shops at affordable prices. It allows the shop keepers to offer their goods and services at lower prices and make a reasonable profit. If they overcharge and make a larger profit, another business will be set up to provide an alternative at a lower price.
This is competition at its best, in bringing the prices down to a reasonable level, based on the cost of doing business plus a fair margin of profit.
In America, the anti-trust law is designed to ensure that there is fair competition and that any business is not allowed to grow so large that they can dominate the market and have unfair pricing power.
We also need controls to ensure that property owners and bankers do not take an excessive share of the value chain, at the expense of the customers, workers and the small business owners. It is desirable for these business costs to be controlled, to promote a healthy competitive market.
Tan Kin Lian
Australia court allows claims against Lehman
* Australia court opens door to Lehman claims
* Town council to pursue claims for subprime losses
* Ruling is not an international precedent - IMF Ltd
Read this article.
* Town council to pursue claims for subprime losses
* Ruling is not an international precedent - IMF Ltd
Read this article.
Sunday, September 27, 2009
RED Portal (14) - Transacted Prices
I visited a new launch. The prices that are now being marketed are 30% above the transacted prices shown in the RED portal for the same project.
Although the prices in the portal are shown with a transacted date in June, the actual transactions were done about 3 months earlier, when the sale option was signed. So, the prices have moved by 30% or more, within the past 6 months. I decided that the current prices are too high. I will wait for another opportunity.
I will try to look for another source to capture the latest transacted prices, based on the sales options, and put them into the RED portal.
Lesson: do your research before visiting a new project launch. Visit the RED portal: www.easysearch.sg (Real Estate Data)
Although the prices in the portal are shown with a transacted date in June, the actual transactions were done about 3 months earlier, when the sale option was signed. So, the prices have moved by 30% or more, within the past 6 months. I decided that the current prices are too high. I will wait for another opportunity.
I will try to look for another source to capture the latest transacted prices, based on the sales options, and put them into the RED portal.
Lesson: do your research before visiting a new project launch. Visit the RED portal: www.easysearch.sg (Real Estate Data)
Elevated covered walkways
I suggest a network of elevated covered walkways to link the MRT station and bus interchange to various parts of the town. This will encourage brisk walking. Read this.
Attracting business into Singapore with lower taxes
Some people argued that low taxes are needed to attract people into Singapore to create wealth and provide employment for the people.
Do not be fooled by this argument. Let us look at the facts.
The two sectors that created the most wealth and employment in Singapore were the banking and property sectors. These sectors generated huge profits and employed large numbers of people in marketing, sales and the back offices.
They created false wealth by generating a huge bubble in asset prices. Many people thought that they were wealthier when the bubble grew and the prices of their assets inflated. Unfortunately, high property price is really a burden that has to be paid over a lifetime and is a major contributor to the high cost of living in Singapore. The burden is higher for the future generations.
The bubble has now burst and caused the global economic crisis. Singapore has its share of the pain.
There is no point in attracting business into Singapore, through lower taxes, if the outcome is to create false wealth and to leave a heavy burden on future generations.
Tan Kin Lian
Do not be fooled by this argument. Let us look at the facts.
The two sectors that created the most wealth and employment in Singapore were the banking and property sectors. These sectors generated huge profits and employed large numbers of people in marketing, sales and the back offices.
They created false wealth by generating a huge bubble in asset prices. Many people thought that they were wealthier when the bubble grew and the prices of their assets inflated. Unfortunately, high property price is really a burden that has to be paid over a lifetime and is a major contributor to the high cost of living in Singapore. The burden is higher for the future generations.
The bubble has now burst and caused the global economic crisis. Singapore has its share of the pain.
There is no point in attracting business into Singapore, through lower taxes, if the outcome is to create false wealth and to leave a heavy burden on future generations.
Tan Kin Lian
Free market (6) - Opportunity to work
With advances in science and technology, it is possible for the goods and services needed by all the people to be produced with less hours of work and higher productivity.
If the required quantum of work is shared fairly among all those who are willing to work, it will be possible for each person to work lesser hours that they do now.
In a competitive environment, some people will work longer hours to ensure that their jobs are secure. This will cause other people to be unemployed.
The business owners can pay lower wages when there there is a limited supply of work and an over-supply of workers looking for work. With lower wages, they can make a larger profit.
This is a short sighted approach. If people have lower wages or are unemployed, they will have less money to spend on other things. This will further reduce the demand and contract the economy.
A better system is to have the work fairly distributed among the available workers, so that everyone will be employed and can enjoy a fair wage. They will have money to consume other services, such as leisure and entertainment. This will create demand for the production of other goods and services.
A healthy economy depends on the ability of people to get employment at fair wages. It requires legislation on the maximum working hours (so that the work is fairly distributed among the workers) and a minimum wage, so that all workers will earn enough to meet the cost of living and be able to have additional money for savings or to be spent on leisure.
Tan Kin Lian
If the required quantum of work is shared fairly among all those who are willing to work, it will be possible for each person to work lesser hours that they do now.
In a competitive environment, some people will work longer hours to ensure that their jobs are secure. This will cause other people to be unemployed.
The business owners can pay lower wages when there there is a limited supply of work and an over-supply of workers looking for work. With lower wages, they can make a larger profit.
This is a short sighted approach. If people have lower wages or are unemployed, they will have less money to spend on other things. This will further reduce the demand and contract the economy.
A better system is to have the work fairly distributed among the available workers, so that everyone will be employed and can enjoy a fair wage. They will have money to consume other services, such as leisure and entertainment. This will create demand for the production of other goods and services.
A healthy economy depends on the ability of people to get employment at fair wages. It requires legislation on the maximum working hours (so that the work is fairly distributed among the workers) and a minimum wage, so that all workers will earn enough to meet the cost of living and be able to have additional money for savings or to be spent on leisure.
Tan Kin Lian
Saturday, September 26, 2009
Fair distribution of work
In most countries, there is legislation to ensure a fair distribution of work and rate of pay. The legislation can cover the following:
a) Number of hours worked in a week
b) Minimum wage
Take a country with a work week of (say) 40 hours and a real unemployment rate that is close to 10 percent. The official unemployment rate is usually lower, as many unemployed people are not captured in the statistics.
The unemployment rate can be reduced by legislating a work week of 36 hours. This will require employers to employ 10% more workers and give work opportunity to the unemployed workers.
To keep business cost at a competitive level, the wages of employed people working 36 hours a week should be 10% lower than before (when they work 40 hours a week).
It is difficult to cut the monthly salary of workers. But, if they are on an hourly rate, the adjustment is automatic. To create a flexible work environment, we need to change to hourly rate of pay.
Some employers will find it necessary to get their employees to work longer than the legislated work week. This can be allowed, but the employer should be required to pay a tax on the wages paid for the additional hours. This will give the incentive for the employer to employ other people, rather than ask the existing employees to work longer hours.
If the opportunity to work is fairly distributed to more people, we will have a better society. Most people can find work and get a wage that is sufficient to meet their cost of living. They will have more free time, due to the shorter work week. The free time can be converted into leisure activities and hobbies, and create opportunities for other supporting businesses to be developed. Some people can use their leisure time to do part time work and earn a supplementary income. This will create higher economic growth and a better quality of life.
Tan Kin Lian
a) Number of hours worked in a week
b) Minimum wage
Take a country with a work week of (say) 40 hours and a real unemployment rate that is close to 10 percent. The official unemployment rate is usually lower, as many unemployed people are not captured in the statistics.
The unemployment rate can be reduced by legislating a work week of 36 hours. This will require employers to employ 10% more workers and give work opportunity to the unemployed workers.
To keep business cost at a competitive level, the wages of employed people working 36 hours a week should be 10% lower than before (when they work 40 hours a week).
It is difficult to cut the monthly salary of workers. But, if they are on an hourly rate, the adjustment is automatic. To create a flexible work environment, we need to change to hourly rate of pay.
Some employers will find it necessary to get their employees to work longer than the legislated work week. This can be allowed, but the employer should be required to pay a tax on the wages paid for the additional hours. This will give the incentive for the employer to employ other people, rather than ask the existing employees to work longer hours.
If the opportunity to work is fairly distributed to more people, we will have a better society. Most people can find work and get a wage that is sufficient to meet their cost of living. They will have more free time, due to the shorter work week. The free time can be converted into leisure activities and hobbies, and create opportunities for other supporting businesses to be developed. Some people can use their leisure time to do part time work and earn a supplementary income. This will create higher economic growth and a better quality of life.
Tan Kin Lian
Rate of pay
We are used to thinking of monthly salary. This is a legacy of the old world, where most people expect to work full time (i.e. 8 hours a day) and for a lifetime career.
In today's environment, we should think about flexible work. It is more appropriate to think about an hourly rate. This allows people to work on certain days (and for varying hours in a day (according to their personal schedule). It is especially suitable for students or adults pursuing further study.
The place of work can also be made flexible. Many people now find it convenient to work from their home. The hourly rate of pay can be converted into a project for a fixed payment. The time taken to complete a project can be estimated, and the hourly rate of pay can be applied to get the project fee.
I am creating a new job portal, and have decided to use the hourly rate as the basis of searching for a job. I use a conversion rate of 160 for hourly rate to monthly salary. For example, an hourly rate of $10 is the same as a monthly salary of $1,600.
In today's environment, we should think about flexible work. It is more appropriate to think about an hourly rate. This allows people to work on certain days (and for varying hours in a day (according to their personal schedule). It is especially suitable for students or adults pursuing further study.
The place of work can also be made flexible. Many people now find it convenient to work from their home. The hourly rate of pay can be converted into a project for a fixed payment. The time taken to complete a project can be estimated, and the hourly rate of pay can be applied to get the project fee.
I am creating a new job portal, and have decided to use the hourly rate as the basis of searching for a job. I use a conversion rate of 160 for hourly rate to monthly salary. For example, an hourly rate of $10 is the same as a monthly salary of $1,600.
FISCA Assistance to consumers
If you need assistance from a FISCA volunteer on a financial product, you can register with www.fisca.sg. The scope of the assistance is set out in this document.
Free market (5) - Cooperation, not competition
We are used to a competitive environment. All suppliers compete hard against each other to get business and expand their market share. Sometimes, the competition is so intense that they try to put their competitors out of business.
It is possible to work in a cooperative environment. Each business serves different groups of customers. They may charge the same price for the service, or it may be differentiated to some extent. Some customers do not mind paying a higher price to get better service or to be served more quickly.
In a market place, there can be several stalls selling similar products. In many places, the stall holders cooperate with each other. If one stall is not able to provide the goods needed by a customer, they will get the goods from a nearby stall and sell it to the customer. Maybe, the two stalls will share the profit margin. This is cooperation.
If we extend the concept of cooperation to neighboring countries, we will get more goodwill and friendship between the people of the countries, as they will benefit together. If one country feels that another country is taking a larger share of the profit, there will be dislike and distrust.
Under a cooperative environment, all parties will survive and progress together. Any opportunity is shared fairly among all the parties. It creates goodwill and friendship. Even if some business fail, they will not blame it on their competitors but on their inability to attract the customers.
We need the educate people on the principles for a cooperative environment.
Tan Kin Lian
It is possible to work in a cooperative environment. Each business serves different groups of customers. They may charge the same price for the service, or it may be differentiated to some extent. Some customers do not mind paying a higher price to get better service or to be served more quickly.
In a market place, there can be several stalls selling similar products. In many places, the stall holders cooperate with each other. If one stall is not able to provide the goods needed by a customer, they will get the goods from a nearby stall and sell it to the customer. Maybe, the two stalls will share the profit margin. This is cooperation.
If we extend the concept of cooperation to neighboring countries, we will get more goodwill and friendship between the people of the countries, as they will benefit together. If one country feels that another country is taking a larger share of the profit, there will be dislike and distrust.
Under a cooperative environment, all parties will survive and progress together. Any opportunity is shared fairly among all the parties. It creates goodwill and friendship. Even if some business fail, they will not blame it on their competitors but on their inability to attract the customers.
We need the educate people on the principles for a cooperative environment.
Tan Kin Lian
Friday, September 25, 2009
RED Portal (Real Estate Data)
I invite you to visit this property website,
www.easysearch.sg (Real Estate Data)
It contains useful information for buyers,seller and tenants of condominium properties.
Read the Guide for information on how to use the website.
Please give your feedback on this website in this survey.
Misleading ad for single premium policy
COMMENT POSTED IN MY BLOG (Edited by me)
I just picked up a brochure with big words Single Premium Policy, from a certain company in Ang Mo Kio Hub. I was shocked.
This company has taken advantage of the generally positive sentiment about simple single insurance products. It emphasized in its brochure, an unguaranteed payout of "4.1% p.a." - but if you read the fine print, you "may" get the 4.1% only if you put the money for a total of 30 years.
The brochure cites an example: if you put 65,700 when you are 35 years old (duh.. which 35 year old has so much spare cash), then after 10 years you get a guaranteed return of $76,900. I calculated that this is a miserable return of 1.5% p.a. (the company didnt do this calculation for you. They prefer to mislead and emphasize heavily the non guaranteed figure of 4.1%). I think that 1.5% guarantee is a bit too low for a 10 year simple SPP.
The brochure explained that "up to 4.1% return" can be obtained! But to get the 4.1%, the first 10 year end non guaranteed bonus must firstly be realised (which may not happen), AND secondly, you must let the policy roll on another 20 years, and you get the money back in drips and draps over 20 years. Do note: a lump sum payback is prohibited. You have to put most of the Single premium in that company for 30 years to get 4.1% pa. Who in his right mind would part with $65,700 for 30 years in any company.
I think that companies should not use non-guaranteed figures as a carrot to hook the customers. This is not fair to the consumer! When drawing up illustration, they should use realistic figures.
I have bought SPPs many times before, but the issuers don't normally advertise the non-guaranteed return. In my view, a simple 5 year SPP is acceptable, not the complicated products that give a bad name to the industry.
REX
I just picked up a brochure with big words Single Premium Policy, from a certain company in Ang Mo Kio Hub. I was shocked.
This company has taken advantage of the generally positive sentiment about simple single insurance products. It emphasized in its brochure, an unguaranteed payout of "4.1% p.a." - but if you read the fine print, you "may" get the 4.1% only if you put the money for a total of 30 years.
The brochure cites an example: if you put 65,700 when you are 35 years old (duh.. which 35 year old has so much spare cash), then after 10 years you get a guaranteed return of $76,900. I calculated that this is a miserable return of 1.5% p.a. (the company didnt do this calculation for you. They prefer to mislead and emphasize heavily the non guaranteed figure of 4.1%). I think that 1.5% guarantee is a bit too low for a 10 year simple SPP.
The brochure explained that "up to 4.1% return" can be obtained! But to get the 4.1%, the first 10 year end non guaranteed bonus must firstly be realised (which may not happen), AND secondly, you must let the policy roll on another 20 years, and you get the money back in drips and draps over 20 years. Do note: a lump sum payback is prohibited. You have to put most of the Single premium in that company for 30 years to get 4.1% pa. Who in his right mind would part with $65,700 for 30 years in any company.
I think that companies should not use non-guaranteed figures as a carrot to hook the customers. This is not fair to the consumer! When drawing up illustration, they should use realistic figures.
I have bought SPPs many times before, but the issuers don't normally advertise the non-guaranteed return. In my view, a simple 5 year SPP is acceptable, not the complicated products that give a bad name to the industry.
REX
Free market (4) Access to information
For a market to work fairly, the buyers and sellers must have access to relevant and reliable information. If one party has more information than another party, the first party will have an advantage. In some cases, this advantage is acceptable, but in other cases, it would be considered as unfair.
In the stock market, it would be unfair for the people with insider information to be allowed to trade with other people without the same information. Regulations are made to prevent insider trading. Those who break the regulations could be prosecuted as a criminal offence.
In property transactions, the price agreed between the buyer and seller depends on the access to information about the property. Usually, the seller has more information about the property, such as the condition of the property and the existence of any legal liability. It is the duty of the seller to disclose the information to the buyer.
Both parties should also have access to information about the price of recent transactions of similar properties. This allows them to make the reliable assessment of the current market price, so that the agreed price is fair to both parties. If one party has more information, that party will be able to trade at an advantage over the other party.
Sometimes, the party with the information can withhold or mis-represent the information to the other party to get a better price. That is unfair and is taking advantage of the other party.
Where information is not available, the customer may have to rely on the advice of the property agents, who are expected to be more familiar with the market. Unethical agents may take advantage of their customers and give unreliable or dishonest advice. Some may have a conflict of interest, and fail in their duty of giving the best advice to their client.
To prevent unfair trading and unethical conduct of agents, it is best that information should be made easily available to all. For example, for property transactions, it is best for the prices of recent transactions involving similar properties should be made accessible to all parties in a convenient and clear way.
For trading in stocks, the buy and sell prices and recent transactions should be available to all parties to make their price decision.
When a client relies on the advice of a professional, such as a doctor or lawyer, there has to be a code of ethics for the professional to look after the interest of the client, rather than to apply their expert knowledge to take advantage of the client and over-charge for the professional service or to make a hidden profit on a transaction.
In the stock market, it would be unfair for the people with insider information to be allowed to trade with other people without the same information. Regulations are made to prevent insider trading. Those who break the regulations could be prosecuted as a criminal offence.
In property transactions, the price agreed between the buyer and seller depends on the access to information about the property. Usually, the seller has more information about the property, such as the condition of the property and the existence of any legal liability. It is the duty of the seller to disclose the information to the buyer.
Both parties should also have access to information about the price of recent transactions of similar properties. This allows them to make the reliable assessment of the current market price, so that the agreed price is fair to both parties. If one party has more information, that party will be able to trade at an advantage over the other party.
Sometimes, the party with the information can withhold or mis-represent the information to the other party to get a better price. That is unfair and is taking advantage of the other party.
Where information is not available, the customer may have to rely on the advice of the property agents, who are expected to be more familiar with the market. Unethical agents may take advantage of their customers and give unreliable or dishonest advice. Some may have a conflict of interest, and fail in their duty of giving the best advice to their client.
To prevent unfair trading and unethical conduct of agents, it is best that information should be made easily available to all. For example, for property transactions, it is best for the prices of recent transactions involving similar properties should be made accessible to all parties in a convenient and clear way.
For trading in stocks, the buy and sell prices and recent transactions should be available to all parties to make their price decision.
When a client relies on the advice of a professional, such as a doctor or lawyer, there has to be a code of ethics for the professional to look after the interest of the client, rather than to apply their expert knowledge to take advantage of the client and over-charge for the professional service or to make a hidden profit on a transaction.
It is important for consumers to have access to independent advice, where there is the possibility that the professional may have a conflict of interest.
Tan Kin Lian
Tan Kin Lian
Hong Kong investor gets help from the Consumer Council
This investor sues Citibank with help from the Legal Action Fund of the Consumer Council of Hong Kong. I hope that Singapore can offer the same service to our people.
25 Sep 2009
Citibank has become the first financial institution to be taken to court by the Consumer Council over the Lehman minibonds saga.
And the case of nurse Chan Mei-ying may open the way for an avalanche: the council is readying more than 100 other cases with potential for court action.
Chan, backed by the watchdog's legal action fund, is suing Citibank on the grounds it misrepresented the nature and risk of a financial product. She claims to have lost HK$500,000 on her investment.
In the writ filed with the District Court, Chan claims bank staff told her the product was "very similar to a fixed deposit," with a yearly interest of about 4 percent. She says she was also told any potential loss would be less than HK$100,000 even if the stock market fell by half.
A Citibank manager filled out a risk profile in 2008 on her behalf. She was classified as an "active and experienced investor" with "aggressive" investment objectives and risk tolerance.
A spokesman for the Consumer Council said it is processing 120 other cases involving Lehman products that may end up in court.
Investors in 20 cases have decided not to pursue litigation.
According to the writ issued to the Citibank Taikoo Place branch, Chan became a customer in 1998, and about a year later a Virginia Yee Chung-nga became her relationship manager. Chan became a CitiGold client in 2004, and two or three years later an Elina Lau became her CitiGold relationship manager. Chan claimed she considered Yee and Lau as her investment advisers, and both recommended investments from time to time.
In 2007, Chan said, Lau described her as a "low" to "moderate" investor in a risk assessment. But Chan claimed she was not given a copy of the document. In January last year, Lau told Chan that the term on her fixed deposit of HK$400,000 had expired and invited her to discuss her investment plan.
Chan said she met Lau the same afternoon and was persuaded to subscribe to a Lehman equity-linked note. Chan invested HK$500,000 in the paper.
Chan claimed she was not told of a high risk or the potential interest rate of the product, which could be as much as 31 percent. But she was told she would have "lost a good opportunity" if she did not subscribe before the deadline. On September 15 last year, Chan said she was shocked to discover the huge loss when Lau called to say the note was negative in value owing to the collapse of Lehman Brothers.
Chan accuses the bank of a breach of duty and is claiming damages, interest and costs.
25 Sep 2009
Citibank has become the first financial institution to be taken to court by the Consumer Council over the Lehman minibonds saga.
And the case of nurse Chan Mei-ying may open the way for an avalanche: the council is readying more than 100 other cases with potential for court action.
Chan, backed by the watchdog's legal action fund, is suing Citibank on the grounds it misrepresented the nature and risk of a financial product. She claims to have lost HK$500,000 on her investment.
In the writ filed with the District Court, Chan claims bank staff told her the product was "very similar to a fixed deposit," with a yearly interest of about 4 percent. She says she was also told any potential loss would be less than HK$100,000 even if the stock market fell by half.
A Citibank manager filled out a risk profile in 2008 on her behalf. She was classified as an "active and experienced investor" with "aggressive" investment objectives and risk tolerance.
A spokesman for the Consumer Council said it is processing 120 other cases involving Lehman products that may end up in court.
Investors in 20 cases have decided not to pursue litigation.
According to the writ issued to the Citibank Taikoo Place branch, Chan became a customer in 1998, and about a year later a Virginia Yee Chung-nga became her relationship manager. Chan became a CitiGold client in 2004, and two or three years later an Elina Lau became her CitiGold relationship manager. Chan claimed she considered Yee and Lau as her investment advisers, and both recommended investments from time to time.
In 2007, Chan said, Lau described her as a "low" to "moderate" investor in a risk assessment. But Chan claimed she was not given a copy of the document. In January last year, Lau told Chan that the term on her fixed deposit of HK$400,000 had expired and invited her to discuss her investment plan.
Chan said she met Lau the same afternoon and was persuaded to subscribe to a Lehman equity-linked note. Chan invested HK$500,000 in the paper.
Chan claimed she was not told of a high risk or the potential interest rate of the product, which could be as much as 31 percent. But she was told she would have "lost a good opportunity" if she did not subscribe before the deadline. On September 15 last year, Chan said she was shocked to discover the huge loss when Lau called to say the note was negative in value owing to the collapse of Lehman Brothers.
Chan accuses the bank of a breach of duty and is claiming damages, interest and costs.
Risk of signing blank forms
Dear Mr. Tan
A few year ago, while working in another country, I bought an investment savings insurance plan on the recommendation of a representative from a Singapore bank. I learned later about the severe misrepresentations and undisclosed terms and conditions. The terms and conditions of the policy were never supplied to me, despite repeated writing to the bank for almost 15 months.
The representative took signatures from me and my wife on blank forms and assured us that he would send copies of the duly completed on his return to Singapore. But it never happened despite several written reminders to them.
The representative also fabricated the facts in the Financial Need Anlaysis form which included Risk analysis done for me. The said form was never discussed with me nor filled in by me. The representative’s office just emailed me the last page of such form and asked me to sign at the indicated place and return by fax the same. I did what was asked.
The receipt of fax was duly acknowledged by the bank. On the fax cover sheet, I mentioned that I was sending the last page of the form signed in blank as advised by them. It was also mentioned that my risk profile was a conservative investor and the purpose was to get a higher return compared to a time deposit.
Recently, after a lot of chasing, the bank has sent a copy of the form filled in by the representative. To my utter surprise, the information on the forms were all fabricated by the representative and he completely ignored my instructions on the fax cover sheet. He has shown me in the form as a Growth investor who can take higher risks with the money.
Based on such fabrication of a material document, the Bank is denying its liability of any kind for my investment loss.
A few year ago, while working in another country, I bought an investment savings insurance plan on the recommendation of a representative from a Singapore bank. I learned later about the severe misrepresentations and undisclosed terms and conditions. The terms and conditions of the policy were never supplied to me, despite repeated writing to the bank for almost 15 months.
The representative took signatures from me and my wife on blank forms and assured us that he would send copies of the duly completed on his return to Singapore. But it never happened despite several written reminders to them.
The representative also fabricated the facts in the Financial Need Anlaysis form which included Risk analysis done for me. The said form was never discussed with me nor filled in by me. The representative’s office just emailed me the last page of such form and asked me to sign at the indicated place and return by fax the same. I did what was asked.
The receipt of fax was duly acknowledged by the bank. On the fax cover sheet, I mentioned that I was sending the last page of the form signed in blank as advised by them. It was also mentioned that my risk profile was a conservative investor and the purpose was to get a higher return compared to a time deposit.
Recently, after a lot of chasing, the bank has sent a copy of the form filled in by the representative. To my utter surprise, the information on the forms were all fabricated by the representative and he completely ignored my instructions on the fax cover sheet. He has shown me in the form as a Growth investor who can take higher risks with the money.
Based on such fabrication of a material document, the Bank is denying its liability of any kind for my investment loss.
Lesson: Never sign a blank form. Never trust a sales person who may act unethically.
RED Portal (13) - Popular Places
Under Search, you can click on "Popular Places". Enter the name of your place, e.g. Raffles Girls Primary School". You will see all housing projects within 1 km of this place. You will also see a map of these projects. You can visually see the distance of each project to the popular place.
www.easysearch.sg (Real Estate Data)
Control over reckless bankers
QUOTE:
“We cannot tolerate the same old boom-and-bust economy of the past,” Obama said after the talks. “Never again should we let the schemes of a reckless few put the world’s financial system and our people’s well-being at risk.”
Obama at G20, Pittsburg
“We cannot tolerate the same old boom-and-bust economy of the past,” Obama said after the talks. “Never again should we let the schemes of a reckless few put the world’s financial system and our people’s well-being at risk.”
Obama at G20, Pittsburg
People in charge really don't care
QUOTE
Most of the commuters would take this type of poor service as part of life in Singapore. There is no point in making a complaint. The people in charge, in SBS Transit or Land Transport Authority would not care. They might give some hollow apology or nice words, but they really don't care.Thursday, September 24, 2009
Survey: New HDB flats
Should new HDB flat be sold at the market price (less a subsidy) or at cost of land, building plus a small margin? Give your views.
Free market (3) - A fair price
A free market is supposed to increase efficiency and to bring down the cost of products through competition. It requires the price to be fairly determined, so as to benefit the buyers and also make a profit for the seller.
To following conditions are necessary to get a fair price:
a) the product is standard
b) the quality can be measured
c) all parties have information about the market prices of these products
The price may differ according to the difference in cost. For example, an expensive shop can charge a higher price for a product, due to higher rent and greater convenience to the buyer. The buyer has the choice of paying more for the convenience and ambience.
The convenience store, which is opened 24 hours a day, has to charge a higher price compared to the supermarket for the same product. Customers are willing to pay the higher price charged at the convenience store.
It is possible for the seller to charge an inflated price, that is unfair to the buyer, under the following situations:
a) the buyer does not get the relevant information about the product
b) the seller gives misleading information about the product
c) the seller applies pressure selling methods
If the seller "cheats" the customer, the seller will get a bad reputation and will not get future business from the customer. However, there are many other customers that the seller can "cheat" and the seller finds that it is more profitable to "cheat" customers, unless these are treated as criminal offences. If it is quite common for people to "cheat" other people under the guise of "buyer beware", the society will become dishonest and people will learn to distrust other people.
It is better to encourage a society that is more honest and ethical.
Tan Kin Lian
To following conditions are necessary to get a fair price:
a) the product is standard
b) the quality can be measured
c) all parties have information about the market prices of these products
The price may differ according to the difference in cost. For example, an expensive shop can charge a higher price for a product, due to higher rent and greater convenience to the buyer. The buyer has the choice of paying more for the convenience and ambience.
The convenience store, which is opened 24 hours a day, has to charge a higher price compared to the supermarket for the same product. Customers are willing to pay the higher price charged at the convenience store.
It is possible for the seller to charge an inflated price, that is unfair to the buyer, under the following situations:
a) the buyer does not get the relevant information about the product
b) the seller gives misleading information about the product
c) the seller applies pressure selling methods
If the seller "cheats" the customer, the seller will get a bad reputation and will not get future business from the customer. However, there are many other customers that the seller can "cheat" and the seller finds that it is more profitable to "cheat" customers, unless these are treated as criminal offences. If it is quite common for people to "cheat" other people under the guise of "buyer beware", the society will become dishonest and people will learn to distrust other people.
It is better to encourage a society that is more honest and ethical.
Tan Kin Lian
Lost trust in insurance companies and bank
Dear Mr Tan,
When I started work, I was introduced to an insurance agent. The insurance agent told me that I should buy a life insurance – one that can protect me and my family financially if anything should happen to me and if nothing happens, it served as a forced saving with good returns.
I was concerned about the non-guarantee return portion and was assured that in the history of the company; they have NEVER reduced the non-guarantee portion. It was divided into guaranteed and non-guaranteed portion to meet MAS guideline. I asked several insurance companies to quote me the same type of policy with the same coverage and bought one with the highest monetary return.
Throughout the years that followed, I started accumulating insurance policies for my husband, my children and myself from different insurance companies. At one time, I was paying $1,000 per month for my whole family’s insurance policies. I told myself that I am saving for my future, my children education, my retirement.
In 2003, I started receiving numerous letters from my insurance companies announcing that they would adjust the non-guaranteed returns. Some insurance companies even adjust their returns (downwards) every 6 months. The amount I thought I could accumulate for my retirement was substantially reduced by 30% to 40%. I had NEVER once default my monthly payment but the insurance companies did not fulfill what was promised to me at the point of sales. I was disheartened and felt cheated.
I told myself to hold on until the ‘break-even’ point. But within 3 years, the break-even point for most if not all my policies were pushed from the 12th year to the 15th year then to the 18th year.
I decided to terminate ALL my insurance policies for my family to cut my losses. By doing so, I lost more than 60% of what I had paid for those policies. I took back $20,000 and lost more than $30,000 for those policies that have not reach the 'break-even' point.
The insurance companies ask my reason for termination. When I told them about the reduced return, they told me that insurance was for protection and not for returns (saving). I had to remind them that returns (saving) was my consideration for taking the policies.
Later, I was persuaded into purchasing Mini Bond by the relationship manager of a major bank, who claimed that it was a high return and safe product. I bought the product. When Lehman Brothers collapse in 2008, I lost all the money. I was once again dubbed and conned, now by the bank!
I have learned my lesson. I do not trust anyone - insurance company or bank. I have lost my family and my life saving for being too trustful. I am so traumatised by all these that I now keep all my cash at home; as I will never know which bank will go bankrupt next. I just hope, from the start someone had told me not to buy insurance policies with saving element which was mentioned in Mr. Tan’s book.
When I started work, I was introduced to an insurance agent. The insurance agent told me that I should buy a life insurance – one that can protect me and my family financially if anything should happen to me and if nothing happens, it served as a forced saving with good returns.
I was concerned about the non-guarantee return portion and was assured that in the history of the company; they have NEVER reduced the non-guarantee portion. It was divided into guaranteed and non-guaranteed portion to meet MAS guideline. I asked several insurance companies to quote me the same type of policy with the same coverage and bought one with the highest monetary return.
Throughout the years that followed, I started accumulating insurance policies for my husband, my children and myself from different insurance companies. At one time, I was paying $1,000 per month for my whole family’s insurance policies. I told myself that I am saving for my future, my children education, my retirement.
In 2003, I started receiving numerous letters from my insurance companies announcing that they would adjust the non-guaranteed returns. Some insurance companies even adjust their returns (downwards) every 6 months. The amount I thought I could accumulate for my retirement was substantially reduced by 30% to 40%. I had NEVER once default my monthly payment but the insurance companies did not fulfill what was promised to me at the point of sales. I was disheartened and felt cheated.
I told myself to hold on until the ‘break-even’ point. But within 3 years, the break-even point for most if not all my policies were pushed from the 12th year to the 15th year then to the 18th year.
I decided to terminate ALL my insurance policies for my family to cut my losses. By doing so, I lost more than 60% of what I had paid for those policies. I took back $20,000 and lost more than $30,000 for those policies that have not reach the 'break-even' point.
The insurance companies ask my reason for termination. When I told them about the reduced return, they told me that insurance was for protection and not for returns (saving). I had to remind them that returns (saving) was my consideration for taking the policies.
Later, I was persuaded into purchasing Mini Bond by the relationship manager of a major bank, who claimed that it was a high return and safe product. I bought the product. When Lehman Brothers collapse in 2008, I lost all the money. I was once again dubbed and conned, now by the bank!
I have learned my lesson. I do not trust anyone - insurance company or bank. I have lost my family and my life saving for being too trustful. I am so traumatised by all these that I now keep all my cash at home; as I will never know which bank will go bankrupt next. I just hope, from the start someone had told me not to buy insurance policies with saving element which was mentioned in Mr. Tan’s book.
Unfair treatment of consumers
I receive many requests for advice on insurance and investment products every week. I learned about the terms of these products from the facts and perspective presented by the consumers.
I am shocked at how the consumers are being badly treated and advised. In many cases, they were given promises that turned out to be unjustified.
Although some of the poor outcome could be due to the economic climate, a significant part is due to unfair dealings, e.g. large charges taken away from the consumer, inadequate distribution of bonus, misleading advice, predatory product design, and other bad practices.
How long can the regulators keep their head in the sand?
Tan Kin Lian
I am shocked at how the consumers are being badly treated and advised. In many cases, they were given promises that turned out to be unjustified.
Although some of the poor outcome could be due to the economic climate, a significant part is due to unfair dealings, e.g. large charges taken away from the consumer, inadequate distribution of bonus, misleading advice, predatory product design, and other bad practices.
How long can the regulators keep their head in the sand?
Tan Kin Lian
As a first step, I advise consumers to join FISCA (www.fisca.sg) The fee is only $36. Join now and build a strong FISCA to educate and help consumers. Do not wait until you are "cheated", as it will too late.
Survey: HDB Resale Flat
Were you recently involved in the sale or purchase of a HDB resale flat. How was your experience? Do you have any suggestion to have a better system? Reduce the cost of transaction? Give your views here.
RED Portal (12) - Rent your property
If you are the owner of a rented property, you will find the RED portal to be useful. You can view the details of your particular condo or housing project. You can use the benchmark price of the property to get an indication of the rental rate. If the recently transacted price has increased, it is likely that the rental rate will increase correspondingly. (We will be posting a report by URA showing the average rental rates for various condos).
You can click on the "Offer" tab to provide details of your property that is available for rental. You should offer the property a few months before the expiry of the current lease. The RED Property Agency staff will contact you to verify the details and approve the offer for listing.
Two owners have expressed interest to rent and sell their property.
www.easysearch.sg (Real Estate Data)
You can click on the "Offer" tab to provide details of your property that is available for rental. You should offer the property a few months before the expiry of the current lease. The RED Property Agency staff will contact you to verify the details and approve the offer for listing.
Two owners have expressed interest to rent and sell their property.
www.easysearch.sg (Real Estate Data)
Banks' usury practices
Some of the large banks have adopted usurious overdraft policies aimed at catching debit card users unaware and wringing as much money out of them as possible. Read this report.
Financial regulation in UK
The top financial regulator takes on the banks. Lord Adair Turner ask if banks are too big for the role that they play and take away too much profit from the economy? Read this report.
Wednesday, September 23, 2009
Make Medishield available without underwriting during window period
Printed in Straits Times Online Forum on 22 September 2009
I congratulate the Ministry of Health for their success in getting 84 percent of the population covered under Medishield. Getting the remaining 16 percent to be covered will be a challenge, especially if some of the uninsured find it difficult to meet the underwriting requirements or are rejected due to pre-existing conditions.
Medishield is a national scheme. It should operate on different principles from commercial insurance, where the insurers cherry pick to select the healthy lives. It should be made available to all, preferably without underwriting.
In my earlier letter, I suggested that a window period be given to all existing uninsured to join Medishield without underwriting. Those who join during this window period will have their existing illnesses excluded or partially covered for a period of two years and fully covered afterwards.
I did not suggest that this they be allowed to join the scheme at any future date on these special terms. I agree with the Ministry that people should join when they are young and healthy, and not wait for a serious illness to develop before they join the scheme. The proposed window period will make it attractive for the uninsured to join Medishield now and not wait longer.
I hope to clarify my suggestion and that the Ministry will consider it.
Tan Kin Lian
I congratulate the Ministry of Health for their success in getting 84 percent of the population covered under Medishield. Getting the remaining 16 percent to be covered will be a challenge, especially if some of the uninsured find it difficult to meet the underwriting requirements or are rejected due to pre-existing conditions.
Medishield is a national scheme. It should operate on different principles from commercial insurance, where the insurers cherry pick to select the healthy lives. It should be made available to all, preferably without underwriting.
In my earlier letter, I suggested that a window period be given to all existing uninsured to join Medishield without underwriting. Those who join during this window period will have their existing illnesses excluded or partially covered for a period of two years and fully covered afterwards.
I did not suggest that this they be allowed to join the scheme at any future date on these special terms. I agree with the Ministry that people should join when they are young and healthy, and not wait for a serious illness to develop before they join the scheme. The proposed window period will make it attractive for the uninsured to join Medishield now and not wait longer.
I hope to clarify my suggestion and that the Ministry will consider it.
Tan Kin Lian
RED Portal (12) - Concourse Skyline
I wanted to see the Concourse Skyline in Beach Road. I was told that it has an excellent view of the sea.
I went to the RED website and search for this project. I viewed the recent transactions, including the latest in June. They were useful in giving me a good picture of the current transacted prices for various floors and the trend during the past months. I was plesantly surprised that the price psf is quite reasonable, compared to similar projects.
This will help me to negotiate a good price with the developer or the marketing agent. At least, it gives me an independent source of information, to make sure that the marketing agent is telling me the truth.
www.easysearch.sg (Real Estate Data)
I went to the RED website and search for this project. I viewed the recent transactions, including the latest in June. They were useful in giving me a good picture of the current transacted prices for various floors and the trend during the past months. I was plesantly surprised that the price psf is quite reasonable, compared to similar projects.
This will help me to negotiate a good price with the developer or the marketing agent. At least, it gives me an independent source of information, to make sure that the marketing agent is telling me the truth.
www.easysearch.sg (Real Estate Data)
Free market (2) - a regulated market
Some people think that a free market should be unregulated and that deregulation will lead to innovation.
This is partly true but largely false. An unregulated market can lead to exploitation and cheating. The people with the information and financial resources can take advantage of the consumers and make excessive profit.
A good example of a regulated, free market is the stock exchange. The regulator knows that it is easy for the retail investors to be taken exploited by by people who can manipulate the stock prices. The regulator writes and enforces regulations to ensure that the market is fair, and that information is readily available to all participants. Insider trading, manipulation of prices, release of false information and other unfair practices are disallowed. Those guilty can even go to jail.
Medical services used to be self-regulated. The medical profession sets guidelines on the prices to be charged for various common procedures and services. They are published and made know to consumers. They set the benchmark for fair prices and protect the consumer. When the guidelines were abolished by the Competition Commission, it was actually a step backward. Instead of helping consumers, this change actually caused more problems for consumers.
The regulator allows taxi companies to set their fares, calling charges, peak hour surcharge and other charges. This is supposed to allow free competition, but it is confusing to the public. The commuter does not know what is the fare, as it depends on the taxi company. If the commuter is at a taxi stand and an expensive taxi comes along, it is difficult for the commuter to reject that taxi, without causing unpleasantness.
A better approach is for the regulator to set the standard rates for the basic taxi service (which applies to taxis picking commuters along the road or at taxi stands. Premium services can be made available to commuters who call a taxi on their special hotline, as the commuter know and accept the charges for that premium service.
We need a regulated market to be fair to all parties and to improve efficiency. We can promote competition by giving choice to consumers (e.g. to choose the doctor) and for service providers to decide if they wish to provide the service at the regulated rates. In the stock exchange, an investor has the choice of buying or selling a specific stock. This is how competition can work in a free market to give better outcome and fair prices.
Tan Kin Lian
This is partly true but largely false. An unregulated market can lead to exploitation and cheating. The people with the information and financial resources can take advantage of the consumers and make excessive profit.
A good example of a regulated, free market is the stock exchange. The regulator knows that it is easy for the retail investors to be taken exploited by by people who can manipulate the stock prices. The regulator writes and enforces regulations to ensure that the market is fair, and that information is readily available to all participants. Insider trading, manipulation of prices, release of false information and other unfair practices are disallowed. Those guilty can even go to jail.
Medical services used to be self-regulated. The medical profession sets guidelines on the prices to be charged for various common procedures and services. They are published and made know to consumers. They set the benchmark for fair prices and protect the consumer. When the guidelines were abolished by the Competition Commission, it was actually a step backward. Instead of helping consumers, this change actually caused more problems for consumers.
The regulator allows taxi companies to set their fares, calling charges, peak hour surcharge and other charges. This is supposed to allow free competition, but it is confusing to the public. The commuter does not know what is the fare, as it depends on the taxi company. If the commuter is at a taxi stand and an expensive taxi comes along, it is difficult for the commuter to reject that taxi, without causing unpleasantness.
A better approach is for the regulator to set the standard rates for the basic taxi service (which applies to taxis picking commuters along the road or at taxi stands. Premium services can be made available to commuters who call a taxi on their special hotline, as the commuter know and accept the charges for that premium service.
We need a regulated market to be fair to all parties and to improve efficiency. We can promote competition by giving choice to consumers (e.g. to choose the doctor) and for service providers to decide if they wish to provide the service at the regulated rates. In the stock exchange, an investor has the choice of buying or selling a specific stock. This is how competition can work in a free market to give better outcome and fair prices.
Tan Kin Lian
Free Market (1)
I will be writing a few articles about the free market.
Some of the topics are:
- regulated or unregulated
- fair pricing
- access to information
- cooperation, not competition
- opportunity to work
- reduced fixed cost
- access to credit
- corporate social responsibility
- consumer protection
- customer satisfaction
Please suggest other topics and views.
Some of the topics are:
- regulated or unregulated
- fair pricing
- access to information
- cooperation, not competition
- opportunity to work
- reduced fixed cost
- access to credit
- corporate social responsibility
- consumer protection
- customer satisfaction
Please suggest other topics and views.
A bad culture in Singapore
This letter printed in the Straits Times showed that the investment seminar was well attended and that food was amply provided before the start of the seminar and during lunch. I wonder if the participants had to pay for the seminar. I checked the SIAS website and found that it was offered free.
I am saddened that Singapore has now developed into a society where people have to be enticed to attend functions by offering free meals and goodie bags. This approach is adopted for a few decades in community events. It develops a bad culture among our people - to expect things for free, and to pay for them indirectly by "being cheated".
I am saddened that Singapore has now developed into a society where people have to be enticed to attend functions by offering free meals and goodie bags. This approach is adopted for a few decades in community events. It develops a bad culture among our people - to expect things for free, and to pay for them indirectly by "being cheated".
Worrying lesson from Japan
The headlines of a news report said, "GDP up, exports up" but the sub-headline says "Jobless increases, wages depressed".
I am afraid that this will be the situation in many countries around the world, including America and Singapore. It is the consequence of the "globalisation" model, weak protection of workers and consumers, and the wide disparity of income. This is why Singapore, Hong Kong and America have the largest ratio of billionaires to population.
Even Japan, which is more socialist in its governance, is suffering indirectly from globalisation. This is why wages continues to fall, and many people continue to be unemployed.
How can the world be more prosperous, if wealth is not shared fairly and justly? How many people should go into poverty and debt, to create more billionaires for a few?
I am afraid that this will be the situation in many countries around the world, including America and Singapore. It is the consequence of the "globalisation" model, weak protection of workers and consumers, and the wide disparity of income. This is why Singapore, Hong Kong and America have the largest ratio of billionaires to population.
Even Japan, which is more socialist in its governance, is suffering indirectly from globalisation. This is why wages continues to fall, and many people continue to be unemployed.
How can the world be more prosperous, if wealth is not shared fairly and justly? How many people should go into poverty and debt, to create more billionaires for a few?
Slow recovery of global economy
Many analysts have commented that the global economy is still not "out of the woods". Unemployment continues to be high. The current euphoria in the stock market is due to the injection of government funds to prop up the economy.
America faces this situation now. I think that our government leaders are also hinting that Singapore faces a similar situation.
America faces this situation now. I think that our government leaders are also hinting that Singapore faces a similar situation.
Express bus in Singapore
Read my views about operating express buses to connect the different towns in Singapore and offer effective competition to the MRT.
Use "funny language" to confuse the policyholder
In April, a policyholder was advised by the agent to "lock in" his investment linked policy and wait for a higher price to "lock out" his policy. He was assured that he would not be adversely affected by this transaction. He trusted the agent and took the advice to "lock in" his policy, although he was not clear about this concept.
Later, he discovered that "lock in" meant that he sold his investments to prevent further loss, if the market falls further. Instead of protecting against further losses, he missed the rally in the market and lost a lot of money due to this bad advice.
Why did the agent use "funny language" to confuse the policyholder? Why not advise the policyholder in direct language, i.e. sell the investments to avoid further losses from a falling market?
If the policyholder sells the investments and buy them back later, will the agent earn commission on the new purchase? I do not know the practice of this company and the terms on which the units are sold and bought back. Is this another form of twisting?
I wonder if the agent was giving bad advice, or have an ulterior motive in getting the client to churn the investment? I am very sad that some agents take advantage of policyholders to earn more commission.
Later, he discovered that "lock in" meant that he sold his investments to prevent further loss, if the market falls further. Instead of protecting against further losses, he missed the rally in the market and lost a lot of money due to this bad advice.
Why did the agent use "funny language" to confuse the policyholder? Why not advise the policyholder in direct language, i.e. sell the investments to avoid further losses from a falling market?
If the policyholder sells the investments and buy them back later, will the agent earn commission on the new purchase? I do not know the practice of this company and the terms on which the units are sold and bought back. Is this another form of twisting?
I wonder if the agent was giving bad advice, or have an ulterior motive in getting the client to churn the investment? I am very sad that some agents take advantage of policyholders to earn more commission.
Billionaires
The following table shows the ratio of billionaires to population. HK has the highest ratio followed by USA. They tend to reflect nations with the widest disparity of income. I wonder where Singapore stands?
Country Billionaires Population Ratio
USA 269 303 m 0.88
Japan 29 127 m 0.23
Germany 28 82 m 0.34
Hong Kong 14 10 m 1.40
UK 12 60 m 0.20
Singapore ? 5 m ?
President Obama's speech to the United Nations
As I hear President Obama speak to the United Nations, I wonder - how much is he referring to Singapore? We will know, when he comes to Singapore in November for the APEC meeting.
Whistle blower of a rating agency
Here is an ex-employee who blew the whistle on a rating agency. Read this story.
Emphasis on Growth is misguided
It is important to have some other measures on the quality of life. Read this report.
Long wait for a bus
It took me 1 hour to reach home from my office, although the distance is only 2 km. This is Singapore. Sigh!
RED Portal (11) - Compass Height
Compass Height in Sengkang has a high amenity index of 85. Here are the amenities within 1 km of this condo. Wow, they got nearly everything!
www.easysearch.sg (Real Estate Data)
www.easysearch.sg (Real Estate Data)
Type Name km
MRT Sengkang (ne16) 0.07
Bus Interchange Sengkang Bus Interchange 0.07
Shopping Compass Point 0.13
Library Sengkang Community Library 0.13
Comm Centre Sengkang Community Club (cc) 0.26
Comm Centre Anchorvale Community Centre (cc) 0.37
School (P) Compassvale Primary School 0.45
School (P) Seng Kang Primary School 0.47
School (P) Nan Chiau Primary School 0.58
School (S) Nan Chiau High School 0.59
School (S) Seng Kang Secondary School 0.69
Comm Centre Rivervale Community Centre (cc) 0.69
School (S) Compassvale Secondary School 0.70
School (S) Chij St. Joseph's Convent 0.72
Library Punggol East Comm Children's Library 0.82
Shopping Rivervale Mall 0.90
School (P) North Spring Primary School 0.91
School (P) Rivervale Primary School 0.93
Self insurance for health
Here is a story of a knowledgeable person who choose to self-insure the cost of medical treatments. By paying himself, he learns how to find out about the right price for medical treatment and where to get the treatment.
RED Portal (10) - Top BMP, AMX, Popular Places
The RED Portal now has the following Search options:
Top BMP - display the highest 20 benchmark prices, showing the most expensive projects in Singapore
Top AMX - display the top 20 amenity index, showing the projects with the best nearby amenities (i.e. MRT, shopping, schools)
Popular places - shows all projects within 1 km of a selected place, e.g. school or shopping mall
The top BMP and AMX will be changed later to show 100 projects.
www.easysearch.sg (Real Estate Data)
Top BMP - display the highest 20 benchmark prices, showing the most expensive projects in Singapore
Top AMX - display the top 20 amenity index, showing the projects with the best nearby amenities (i.e. MRT, shopping, schools)
Popular places - shows all projects within 1 km of a selected place, e.g. school or shopping mall
The top BMP and AMX will be changed later to show 100 projects.
www.easysearch.sg (Real Estate Data)
Unfair reduction in bonus
A policyholder found that the bonus on his maturing policy had been cut by 40% compared to the original projection issued on the point of sale. The reason given by the insurance company was that the bonus was cut due to several economic crisis during the past years. The policyholder argued that one company - who had gone through the same crises- did not cut the bonus, but his the insurer rejected his argument.
The policyholder asked my views on the fairness of the bonus cut and if there is any point in lodging a complaint with FIDREC.
I encourage him to lodge this complaint with FIDREC. A large part of the bonus cut is probably due to the cut in terminal bonus. This cut might have been necessary earlier during this year, when the stock market dropped sharply. However, the stock market had recovered by 60% (from its lowest point) during the past six months. It is only fair that the cut should be partially restored. I hope that FIDREC will consider this point in its adjudication.
Tan Kin Lian
The policyholder asked my views on the fairness of the bonus cut and if there is any point in lodging a complaint with FIDREC.
I encourage him to lodge this complaint with FIDREC. A large part of the bonus cut is probably due to the cut in terminal bonus. This cut might have been necessary earlier during this year, when the stock market dropped sharply. However, the stock market had recovered by 60% (from its lowest point) during the past six months. It is only fair that the cut should be partially restored. I hope that FIDREC will consider this point in its adjudication.
Tan Kin Lian
Highest life expectancy
The top 10 countries with the highest life expectancy are:
Andorra 83.5
San Marino 8.16
Japan 81.2
Singapore 80.7
Australia, Switzerland, Sweden 80.4
Hong Kong 80.2
Canada, Iceland 80.1
Singapore ranked 4th in the world, just behind Japan.Andorra and San Marino are quite small countries.
This has implications on CPF Life. People are living longer. They need a life annuity to pay them an income for a lifetime.
Andorra 83.5
San Marino 8.16
Japan 81.2
Singapore 80.7
Australia, Switzerland, Sweden 80.4
Hong Kong 80.2
Canada, Iceland 80.1
Singapore ranked 4th in the world, just behind Japan.Andorra and San Marino are quite small countries.
This has implications on CPF Life. People are living longer. They need a life annuity to pay them an income for a lifetime.
Tuesday, September 22, 2009
Difficult and costly to get a taxi
It was difficult and costly for me to get a taxi this morning, during an unexpected emergency. Many people faced the same difficulty. Read here.
RED Portal (9)
There were 240 unique visitors to the RED website on 22 September 2009 (according to the 4th day of the site meter). The visitors are picking up. I have received two requests to list a property for sale and rental, but this will only be ready in October.
Several enhancements to the website will be introduced soon. It will make the website easy to search and provide useful information for owners, buyers and tenants.
The BMP (benchmark price) and AMX (amenity index)are getting to be quite good and useful. They give a good indication to the consumer and arm the consumer of the relevant factors to consider in deciding on their property transactions.
Property agents will also find the RED website to be a valuable source to provide useful information for their clients. They can convince the client better by showing the information from the RED website.
Tan Kin Lian
Several enhancements to the website will be introduced soon. It will make the website easy to search and provide useful information for owners, buyers and tenants.
The BMP (benchmark price) and AMX (amenity index)are getting to be quite good and useful. They give a good indication to the consumer and arm the consumer of the relevant factors to consider in deciding on their property transactions.
Property agents will also find the RED website to be a valuable source to provide useful information for their clients. They can convince the client better by showing the information from the RED website.
Tan Kin Lian
Invest in stocks for the long term
In a chapter in my financial planning book, I quoted an important statistic that investing in the component shares of the Straits Times index over the past 15 or 20 years (up to 2006) produced an average yield of 9.2% per annum. This is a good yield.
However, this result could be due to factors that may not recur in the future, e.g. the stock market was under-priced at the start of the period, over-priced at the end of the period or the economy went through high growth during this period (and may see slower growth in the future).
To offset these factors, we can apply a discount of 30% on the total appreciation. Suppose, the stock market was 30% higher at the start or 30% lower at the end of the period, the yield would have reduced from 9.2% to 6.6%. This is still attractive.
For the next 10 years or more, I use an average yield of 5% per annum. This is quite conservative, and reflect a low interest, low inflation environment.
Many investors are afraid of the risk of investing in stocks as the price can be quite volatile. In my view, it is better to take the risk as stocks provide a better yield compared to other asset classes. The investor should diversify the risk by investing in a low cost indexed fund (such as the exchange traded fund or ETF) and by invseting for 10 years or longer (to average out the good and bad years).
An example of a good ETF is the StateStreets Traker Fund, which is traded in SGX. The investor pays a transaction fee of 0.3% to the stockbroker and an annual fund management fee of 0.3% to the fund manager. The bulk of the underlying return on the ETF goes to the investor.
Thee are other ETF that are invested in other asset classes. Learn about them. But, if you are not sure, choose the StateStreets Tracker Fund (or other similar funds) that mirror the Straits Times Index, as it reflects the Singapore stock market.
Tan Kin Lian
However, this result could be due to factors that may not recur in the future, e.g. the stock market was under-priced at the start of the period, over-priced at the end of the period or the economy went through high growth during this period (and may see slower growth in the future).
To offset these factors, we can apply a discount of 30% on the total appreciation. Suppose, the stock market was 30% higher at the start or 30% lower at the end of the period, the yield would have reduced from 9.2% to 6.6%. This is still attractive.
For the next 10 years or more, I use an average yield of 5% per annum. This is quite conservative, and reflect a low interest, low inflation environment.
Many investors are afraid of the risk of investing in stocks as the price can be quite volatile. In my view, it is better to take the risk as stocks provide a better yield compared to other asset classes. The investor should diversify the risk by investing in a low cost indexed fund (such as the exchange traded fund or ETF) and by invseting for 10 years or longer (to average out the good and bad years).
An example of a good ETF is the StateStreets Traker Fund, which is traded in SGX. The investor pays a transaction fee of 0.3% to the stockbroker and an annual fund management fee of 0.3% to the fund manager. The bulk of the underlying return on the ETF goes to the investor.
Thee are other ETF that are invested in other asset classes. Learn about them. But, if you are not sure, choose the StateStreets Tracker Fund (or other similar funds) that mirror the Straits Times Index, as it reflects the Singapore stock market.
Tan Kin Lian
Work close to home
Here are some suggestions to make it possible for employees to work close to home and reduce the commuting time and cost.
14 day free look period for insurance
If you have just bought an insurance policy, you are given 14 days of free look. You can cancel your policy during this period and get a full refund (subject to any price movement in an investment-linked policy). Most importantly, if you were not aware about the high upfront charges or was over-paying a high premium (compared to similar products sold by other companies), you can ask for a refund.
If you need assistance from FISCA on reviewing of this matter, go to www.fisca.sg. There is an administrative fee of $50, but you can save a few thousand dollars in fees charged on your insurance policy (that you might be unaware of).
If you need assistance from FISCA on reviewing of this matter, go to www.fisca.sg. There is an administrative fee of $50, but you can save a few thousand dollars in fees charged on your insurance policy (that you might be unaware of).
Animal Farm - a production by SMU students
I wrote an article entitled "Is Animal Farm relevant to Singapore"? The SMU students will be staging a play in October. I like to encourage you to attend this play and support the students. (NB: they planned the play before the publication of my article)
Directed by Gene Sha Rudyn
Organised by SMU Stageit
Supported by SMU Office of Student Life
Synopsis of the play:
Manor Farm, one of the top notch farms in the land, is run by a Man named Jones. Lead by the Pigs – Snowball, Napoleon and Squealer – the Animals throw Jones off the farm, rename it Animal Farm and take over its running on their terms. Their independence is affirmed when, under the heroic leadership of Snowball, they quell Jones’ attempt at reacquiring Animal Farm by force. Not able to see eye to eye, Napoleon ousts Snowball to claim the seat of rule of Animal Farm for itself and its cronies, including its child Minimus. Meanwhile, the Lower Animals – Boxer, the horse; Clover, its workmate; and Benjamin, the donkey – have to be content with working the farm daily; deprived of milk and enticed only by the occasional slice of red apple; their faith in a better future coaxed by the spiritual prophecies of Moses, the raven.
What does the future hold in store for the Lower Animals – the less privileged, less educated, and less well-born? What is the light of hope for them when absolute power absolutely corrupts?
Details:
10 and 11 Oct 2009 (Saturday & Sunday)
8pm
Victoria Theatre
Ticket prices:
Early Bird Special
$26 - Adults
$18 - Students, NSF
(Oct 1st onwards)
$28 - Adults
$20 - Students, NSF
Buy your tickets now through SISTIC website, www.sistic.com.sg, SISTIC hotline: (65) 6348 5555 and at all SISTIC Authorised Agents.
Organised by SMU Stageit
Supported by SMU Office of Student Life
Synopsis of the play:
Manor Farm, one of the top notch farms in the land, is run by a Man named Jones. Lead by the Pigs – Snowball, Napoleon and Squealer – the Animals throw Jones off the farm, rename it Animal Farm and take over its running on their terms. Their independence is affirmed when, under the heroic leadership of Snowball, they quell Jones’ attempt at reacquiring Animal Farm by force. Not able to see eye to eye, Napoleon ousts Snowball to claim the seat of rule of Animal Farm for itself and its cronies, including its child Minimus. Meanwhile, the Lower Animals – Boxer, the horse; Clover, its workmate; and Benjamin, the donkey – have to be content with working the farm daily; deprived of milk and enticed only by the occasional slice of red apple; their faith in a better future coaxed by the spiritual prophecies of Moses, the raven.
What does the future hold in store for the Lower Animals – the less privileged, less educated, and less well-born? What is the light of hope for them when absolute power absolutely corrupts?
Details:
10 and 11 Oct 2009 (Saturday & Sunday)
8pm
Victoria Theatre
Ticket prices:
Early Bird Special
$26 - Adults
$18 - Students, NSF
(Oct 1st onwards)
$28 - Adults
$20 - Students, NSF
Buy your tickets now through SISTIC website, www.sistic.com.sg, SISTIC hotline: (65) 6348 5555 and at all SISTIC Authorised Agents.
Monday, September 21, 2009
FISCA - assistance to consumers
A few consumers have approached FISCA for assistance to write a complaint to FIDREC and to review their insurance policies. The volunteers have been assigned to provide the assistance. As the volunteers are carrying out this activity for the first time, they will also be learning from this experience. After a few cases, they will be more familiar and expert.
Convenience of a car
Some people buy a car for its convenience. But what is the downside? Read this blog.
The dubious value of "talent"
The word "talent" has been mis-used in Singapore. Through the influence of our leaders, many people believe that "talent" is needed to create wealth and jobs. It has also been mis-used to justify attracting "foreign talents" to work and be citizens in Singapore on more attractive terms than those given to locals, e.g. exemption from national service.
"Talent" is not a magic wand. Most wealth and jobs are actually created by honest and diligent work and not be "talent". We need well trained and competent people in all types of occupations; they do not need to be described as "talent".
During the past two decades, the highest earnings are taken by "talents" in the financial sector, i.e. the people who were supposed to create wealth through wealth management and innovation in financial products.
We now learn that this is false wealth that was created through taking high risks, excessive leverage and building asset bubbles. It caused the collapse of the global financial system and had to be bailed out by trillions of public funds. Can "talent" be equated to the ability to take big gambles at somebody else's expense?
There are truly some good examples of talented people who build big businesses around the world, e.g. the founders of Microsoft, Google, Apple, AliBaba, Virgin, Nokia. However, most of them build their success through hard work and access to large markets in America, Europe or China. It will be difficult for these businesses to be built from a small market base, like Singapore.
We should not have "talents" to create asset bubbles and cream off the profit, leaving the high cost to be borne by our future generations. Let us avoid using the word "talent" to describe the creators of false wealth.
Tan Kin Lian
"Talent" is not a magic wand. Most wealth and jobs are actually created by honest and diligent work and not be "talent". We need well trained and competent people in all types of occupations; they do not need to be described as "talent".
During the past two decades, the highest earnings are taken by "talents" in the financial sector, i.e. the people who were supposed to create wealth through wealth management and innovation in financial products.
We now learn that this is false wealth that was created through taking high risks, excessive leverage and building asset bubbles. It caused the collapse of the global financial system and had to be bailed out by trillions of public funds. Can "talent" be equated to the ability to take big gambles at somebody else's expense?
There are truly some good examples of talented people who build big businesses around the world, e.g. the founders of Microsoft, Google, Apple, AliBaba, Virgin, Nokia. However, most of them build their success through hard work and access to large markets in America, Europe or China. It will be difficult for these businesses to be built from a small market base, like Singapore.
We should not have "talents" to create asset bubbles and cream off the profit, leaving the high cost to be borne by our future generations. Let us avoid using the word "talent" to describe the creators of false wealth.
Tan Kin Lian
Never buy on the spot
Comment posted in my blog
Creative property consultants work hand in hand with developers to create false impressions. You can see them under different creative names in different forums generating waves to enrich themselves.
Some years back when I was looking for a property this agent with a big Mercedes Benz brought me to see a condo in the east. The way he conducted the sale he has a 95% chance of closing the deal at a high price. He was able to use tactics like high pressure sales to lure the potential buyer capitalising on the average human greed and fear.
Later when I was sitting in his Mercedes, he asked me what I do for a living. I told him I teach advance negotiation techniques to fortune 500 companies executives and he then muttered: "No wonder".
The simple advice to follow is simply this. Do not buy anything on the spot, there is no such thing as no more supply, only no more money. Determine your own price based on value, which you can determine after some basic research.
Do not go beyond your calculated price as agents will use your emotions to jack up the price. Always use the technique of having to consult your spouse to buy time.
Some agents know this and insist that both you and your spouse be present, ever wonder why time shares promotions always want you and your spouse to be present so you have to make a decision on the spot?
Just do not make a decision on the spot. Say you need to consult your father, mother or God, if necessary. Make it a philosophy never to make a spot decision.
Whenever I buy something, the sales agent will always ask for a deposit. I will tell them my philosophy is no deposit. They will then say what if someone comes along and buy the last piece. My answer is always: "Congratulations, I will look for another piece"
Remember, there will never be no supply, this impression is created by agents so they can pressurise you. There is only no money!
Creative property consultants work hand in hand with developers to create false impressions. You can see them under different creative names in different forums generating waves to enrich themselves.
Some years back when I was looking for a property this agent with a big Mercedes Benz brought me to see a condo in the east. The way he conducted the sale he has a 95% chance of closing the deal at a high price. He was able to use tactics like high pressure sales to lure the potential buyer capitalising on the average human greed and fear.
Later when I was sitting in his Mercedes, he asked me what I do for a living. I told him I teach advance negotiation techniques to fortune 500 companies executives and he then muttered: "No wonder".
The simple advice to follow is simply this. Do not buy anything on the spot, there is no such thing as no more supply, only no more money. Determine your own price based on value, which you can determine after some basic research.
Do not go beyond your calculated price as agents will use your emotions to jack up the price. Always use the technique of having to consult your spouse to buy time.
Some agents know this and insist that both you and your spouse be present, ever wonder why time shares promotions always want you and your spouse to be present so you have to make a decision on the spot?
Just do not make a decision on the spot. Say you need to consult your father, mother or God, if necessary. Make it a philosophy never to make a spot decision.
Whenever I buy something, the sales agent will always ask for a deposit. I will tell them my philosophy is no deposit. They will then say what if someone comes along and buy the last piece. My answer is always: "Congratulations, I will look for another piece"
Remember, there will never be no supply, this impression is created by agents so they can pressurise you. There is only no money!
Medishield - MOH misinterpreted my suggestion
This letter was printed in the Strait Times a week ago. In its reply, the Ministry of Health mis-interpreted my suggestion. I have written a further letter to the Straits Times to clarify this matter.
I had asked the Ministry to contact me on my suggestion. They did not. This has caused them to mis-interpret my suggestion. It is quite sad that our civil servants and leaders continue to decide on important matters without seeking clarification or engaging the public.
I had asked the Ministry to contact me on my suggestion. They did not. This has caused them to mis-interpret my suggestion. It is quite sad that our civil servants and leaders continue to decide on important matters without seeking clarification or engaging the public.
Car sharing using electric vehicle
Read this blog about the innovative scheme that is being introduced in Paris.
Sunday, September 20, 2009
Bankers returning to bad old ways
It is quite sad that bankers are returning to the bad old ways - high pay and bonuses, when many people have lost their jobs and are struggling. I hope that the government leaders will be able to put things right. Read this article by Paul Krugman.
Views on Financial Planning book
Mr Tan
Thank you for all the efforts you have put in. As a layman,we sure to learn more about financial planning and investment through your books. All contents should be put in simple form to make a layman like me to keep on reading your books. I looking forward for your oter incompleted chapters. After reading your view in CPF Life, I now more confident to help my parents to take up this plan.
Thank you for all the efforts you have put in. As a layman,we sure to learn more about financial planning and investment through your books. All contents should be put in simple form to make a layman like me to keep on reading your books. I looking forward for your oter incompleted chapters. After reading your view in CPF Life, I now more confident to help my parents to take up this plan.
NOTE
About half the people like the simple format of the book. The other half likes it to be more substantial and in depth. I will be changing the content to be "more in depth". The next version will be quite different from draft 4.
Is the automated vehicle safe?
It should be quite safe. Read my views here. I am visiting France to see the Cycab in operation.
Shape Quiz
What is the origin of the shape quiz? How is it suitable for children, adults and seniors? Find out here: http://www.tankinlian.com/puzzles/shapes.html
Clubs for the jobless in America
I admire the ingenuity of the Americans in creating products to meet the needs of the day. Read about the job clubs here.
Learning from facts, not beliefs
The Straits Times has an article by our Finance Minister Tharman entitled "Learning from facts, not beliefs".
The Minster said that the global crisis is caused by "failure of regulations premised by beliefs that were not supported by facts", in particular the "faith in self-correcting markets". He argued that the government has a duty to intervene to stop asset bubbles from growing to an unsupportable level.
The Minster said that the global crisis is caused by "failure of regulations premised by beliefs that were not supported by facts", in particular the "faith in self-correcting markets". He argued that the government has a duty to intervene to stop asset bubbles from growing to an unsupportable level.
I agree.
There is another big market failure that has not been recognised in the paper - the failure to provide transparent and fair information to consumers. The sellers have more information than the buyers and can mislead the buyers into paying an inflated price that is far more than what the product is worth.
This is the modus operandi of land banking and structured products (e.g. capital guaranteed, linked products, dual currency products, high cost life insurance products) that were created by financial experts for sale on unfair terms to consumers (but generate high profit margin to the issuer). The sale of new property launches at unjustified high prices is also premised on the insufficient information available to consumers.
It is important that the regulation should also focus on providing transparent and fair information to consumers. FISCA will play a role by creating a white list of financial products.
I have build a website at www.easysearch.sg (Real Estate Data) that makes it easy for consumers to get information on properties. I urge consumers to do your research before jumping into making million dollar purchases that will tie you down for a lifetime.
Tan Kin Lian
There is another big market failure that has not been recognised in the paper - the failure to provide transparent and fair information to consumers. The sellers have more information than the buyers and can mislead the buyers into paying an inflated price that is far more than what the product is worth.
This is the modus operandi of land banking and structured products (e.g. capital guaranteed, linked products, dual currency products, high cost life insurance products) that were created by financial experts for sale on unfair terms to consumers (but generate high profit margin to the issuer). The sale of new property launches at unjustified high prices is also premised on the insufficient information available to consumers.
It is important that the regulation should also focus on providing transparent and fair information to consumers. FISCA will play a role by creating a white list of financial products.
I have build a website at www.easysearch.sg (Real Estate Data) that makes it easy for consumers to get information on properties. I urge consumers to do your research before jumping into making million dollar purchases that will tie you down for a lifetime.
Tan Kin Lian
FISCA - Verification of Financial products
FISCA wish to look for volunteers to help consumers to verify the financial products (including insurance policies) that they have bought.
The consumer will be asked to state what they have been informed about the product and the materials that were provided.
The volunteer (who must have the required certificate in insurance or investments) will check through the materials to explain if the verbal representations correspond with the written materials.
The volunteer will also point out if there are other facts (such as high upfront charges) contained in the materials that were not explained to the consumer.
If there was mis-representation or failure to provide satisfaction explanation by the person who sold the product, the volunteer will help the consumer to write a complaint to the relevant body. The admin fee will be $50.
If you are interested to be a volunteer, please write to kinlian@gmail.com.
The consumer will be asked to state what they have been informed about the product and the materials that were provided.
The volunteer (who must have the required certificate in insurance or investments) will check through the materials to explain if the verbal representations correspond with the written materials.
The volunteer will also point out if there are other facts (such as high upfront charges) contained in the materials that were not explained to the consumer.
If there was mis-representation or failure to provide satisfaction explanation by the person who sold the product, the volunteer will help the consumer to write a complaint to the relevant body. The admin fee will be $50.
If you are interested to be a volunteer, please write to kinlian@gmail.com.
Using subsidised wards (B2)
There are two big advantages of using subsidised wards (B2)
a) You get a subsidy of 50% to 65% of the hospital bill
b) As the government is paying a large part of the bill, they will check that the bill is reasonable.
If the patient has to pay 100% of the bill (i.e no subsidy), there is a risk that the hospital may charge more, or give more treatment than necessary. You have to pay 100% of a larger bill.
I estimate that a bill from a private hospital could be 3 times of the subsidised bill, for the same treatment.
Some people said that the doctors treating patients in subsidised wards are under training and not experienced. I do not agree with this comment. It may be true that the doctors are under training, but they do the routine medical checks and are supervised by the experienced doctors.
When it comes to surgery or other major procedures, an experienced specialist will carry out the procedure. There is really no need for the patient to choose his own doctor.
However, if the patient is willing to pay a higher bill to be treated in a private hospitals or A class ward, and enjoy the privilege to choose their own doctor, it is all right. They can also buy insurance for the more expensive treatment, but the cost of the insurance can be three times.
Tan Kin Lian
a) You get a subsidy of 50% to 65% of the hospital bill
b) As the government is paying a large part of the bill, they will check that the bill is reasonable.
If the patient has to pay 100% of the bill (i.e no subsidy), there is a risk that the hospital may charge more, or give more treatment than necessary. You have to pay 100% of a larger bill.
I estimate that a bill from a private hospital could be 3 times of the subsidised bill, for the same treatment.
Some people said that the doctors treating patients in subsidised wards are under training and not experienced. I do not agree with this comment. It may be true that the doctors are under training, but they do the routine medical checks and are supervised by the experienced doctors.
When it comes to surgery or other major procedures, an experienced specialist will carry out the procedure. There is really no need for the patient to choose his own doctor.
However, if the patient is willing to pay a higher bill to be treated in a private hospitals or A class ward, and enjoy the privilege to choose their own doctor, it is all right. They can also buy insurance for the more expensive treatment, but the cost of the insurance can be three times.
Tan Kin Lian
Protecting consumers from scams
Mr. Tan,
Do you expect the government to protect people who are stupid enough to put their money into nothing more than somebody's word? For example, if someone got people to give him $1 million - saying that he would give them 20% return by passing the money on to his anonymous friend involved in some business, and one year on, - the anonymous friend had disappeared?
REPLY
There is nothing that the government can do, if they are not aware about this activity. However, if there is a report of such activity, it is the duty of the government to investigate if the people are crooks that goes about cheating other people with scams.
In the case of land banking, which is really a collective investment scheme, there is a need to regulate these activities, as it has been done in most countries. The regulation will ensure that the money is collected and used for its legitimate purpose and is not misappropriated.
There is also a need to ensure that the managers act honestly in the interest of investors (i.e. fiduciary duty) and pay the appropriate price for the land. They cannot "cheat" the investors by paying an inflated price for the land, especially if they buy from a connected party where there is a conflict of interest.
Where the investment scheme is advertised in the media to the general public, it is necessary for the product to be regulated and approved.
I do not expect the government to protect people from foolish investments or to compensate them for their loss. But the government should at least ensure that crooks are not free to cheat other people without any restraint.
Tan Kin Lian
Do you expect the government to protect people who are stupid enough to put their money into nothing more than somebody's word? For example, if someone got people to give him $1 million - saying that he would give them 20% return by passing the money on to his anonymous friend involved in some business, and one year on, - the anonymous friend had disappeared?
REPLY
There is nothing that the government can do, if they are not aware about this activity. However, if there is a report of such activity, it is the duty of the government to investigate if the people are crooks that goes about cheating other people with scams.
In the case of land banking, which is really a collective investment scheme, there is a need to regulate these activities, as it has been done in most countries. The regulation will ensure that the money is collected and used for its legitimate purpose and is not misappropriated.
There is also a need to ensure that the managers act honestly in the interest of investors (i.e. fiduciary duty) and pay the appropriate price for the land. They cannot "cheat" the investors by paying an inflated price for the land, especially if they buy from a connected party where there is a conflict of interest.
Where the investment scheme is advertised in the media to the general public, it is necessary for the product to be regulated and approved.
I do not expect the government to protect people from foolish investments or to compensate them for their loss. But the government should at least ensure that crooks are not free to cheat other people without any restraint.
Tan Kin Lian
Think cooperation and win-win
There is a dispute between Indonesia and Malaysia about the origin of the Pendek dance and batik cloth. Indonesians write to their newspapers to complain about the use of the dance and batik in the Malaysian tourism advertisement. Some Indonesians even search for Malaysians on the roads in Jakarta to abuse them.
This matter has now been taken at top levels of the two governments, in an attempt to solve the dispute over the claim of "ownership".
Malaysia now claim that the laksa, Hainanese chicken rice and chili crab is "owned" by them. This has implication on Singapore, as they are promoted as the cuisine of Singapore.
These disputes are a sign of the times and the weakening of the moral fibre of our society. People have become too selfish and think only of their own interest, and not the welfare of others.
There is no need for neighboring countries to compete for tourists. We can work together to promote several countries at the same time. Tourists going to one country is likely to stay a day or two in a neighboring country. We need to think of "win-win", "cooperation" instead of "competition".
We need a better way to handle disputes, rather than to have the negative aspects broadcast in the media or on the streets.
Tan Kin Lian
This matter has now been taken at top levels of the two governments, in an attempt to solve the dispute over the claim of "ownership".
Malaysia now claim that the laksa, Hainanese chicken rice and chili crab is "owned" by them. This has implication on Singapore, as they are promoted as the cuisine of Singapore.
These disputes are a sign of the times and the weakening of the moral fibre of our society. People have become too selfish and think only of their own interest, and not the welfare of others.
There is no need for neighboring countries to compete for tourists. We can work together to promote several countries at the same time. Tourists going to one country is likely to stay a day or two in a neighboring country. We need to think of "win-win", "cooperation" instead of "competition".
We need a better way to handle disputes, rather than to have the negative aspects broadcast in the media or on the streets.
Tan Kin Lian
YOG Quiz
Singapore will be hosting the 1st YOG (Youth Olympic Games) on 14 to 26 August 2010. Tan Kin Lian & Associates invite you to exercise your creativity by giving a name to any of the shape shown on the attached form. Participation is free. Enjoy the fun. Read the rules shown in the sheet.
It is easy to take part in this game. You only need to identify 1 shape with one country or sport or feature of the game. For example, which shape best represent
America
Canada
China
Japan
Australia
Singapore
Indonesia
or any other country
Which shape best represent
Swimming
Athletics
Cycling
Tennis
Long jump
High jump
Judo
or any other game
Which shape represents the Olympic Flame?
It is easy to take part in this game. You only need to identify 1 shape with one country or sport or feature of the game. For example, which shape best represent
America
Canada
China
Japan
Australia
Singapore
Indonesia
or any other country
Which shape best represent
Swimming
Athletics
Cycling
Tennis
Long jump
High jump
Judo
or any other game
Which shape represents the Olympic Flame?
FISCA volunteers - write complaints to Police.
FISCA wants to help members to write complaints to the Police, if they have been cheated or badly treated by another party, and some law has been infringed. The volunteers should preferably have knowledge of the law and experience in writing complaints to Police. If you wish to volunteer, send an e-mail to kinlian@gmail.com
Saturday, September 19, 2009
Role of public and private sectors
Many governments around the world are short sighted. They want to reduce the cost of the public sector, so they cut down on the number of people employed in the public service, such as teachers, doctors, nurses and policemen. This is ostensibly to reduce the burden on the tax-payers.
If there are insufficient people to provide the public services, relatively to the size of the population, the standard will drop, as these public employers are overworked, overstretched and overstressed. The standard of teaching, health care and public order must surely drop.
There has to be a proper balance. We need an adequate number of people to provide the public service and must be willing to pay the appropriate tax to fund these services.
If the public service is not provided adequately, the people will have to arrange for these services privately. It may be more costly and the standard may be inferior. In some countries, the residents have to engage their own security guards to look after their housing estates. They have to pay more to get private health care and education.
An adequately staffed public service also helps to create employment and put more people into useful occupations. If there is inadequate work in the productive occupations, the excess manpower may be channeled into unproductive work, such as the speculative activities in the financial sector and marketing of investment scams.
There is no need for the public sector to crowd out the private sector. They can co-exist. The public sector can provide for the needs of the lower and middle income groups. The higher income groups can pay more to get private health care, education or other services. They can get personal and better quality attention, but they pay more. The public sector will be around to offer a choice and keep a reasonable limit on the charges of the private sector.
Singapore used to have a good balance between the public and private sector. I hope that we can go back to the good old days.
Tan Kin Lian
If there are insufficient people to provide the public services, relatively to the size of the population, the standard will drop, as these public employers are overworked, overstretched and overstressed. The standard of teaching, health care and public order must surely drop.
There has to be a proper balance. We need an adequate number of people to provide the public service and must be willing to pay the appropriate tax to fund these services.
If the public service is not provided adequately, the people will have to arrange for these services privately. It may be more costly and the standard may be inferior. In some countries, the residents have to engage their own security guards to look after their housing estates. They have to pay more to get private health care and education.
An adequately staffed public service also helps to create employment and put more people into useful occupations. If there is inadequate work in the productive occupations, the excess manpower may be channeled into unproductive work, such as the speculative activities in the financial sector and marketing of investment scams.
There is no need for the public sector to crowd out the private sector. They can co-exist. The public sector can provide for the needs of the lower and middle income groups. The higher income groups can pay more to get private health care, education or other services. They can get personal and better quality attention, but they pay more. The public sector will be around to offer a choice and keep a reasonable limit on the charges of the private sector.
Singapore used to have a good balance between the public and private sector. I hope that we can go back to the good old days.
Tan Kin Lian
RED Portal (8) - Search by sector
Which are the housing projects in sector 59 (Bukit Timah, King Albert Park) with the highest benchmark price (BMP) and the highest amenity index (AMX)?
Go to the RED portal and select sector 59. It displays a table of housing projects in that sector. Click twice on BMP to sort by benchmark price in descending order. You will see the following:
Click twice on AMX and you will see the following:
Click on View to see more details about the housing project. Click on * to see a Price Chart.
Tan Kin Lian
Go to the RED portal and select sector 59. It displays a table of housing projects in that sector. Click twice on BMP to sort by benchmark price in descending order. You will see the following:
Year Units BMP AMX
59 STERLING, THE Condo 232 1025 22
59 1 KING ALBERT Condo 1997 101 816 38
59 CHUN TIN COURT Condo 763 42
59 CAVENDISH PARK Condo 1996 254 745 10
59 PALM RESIDENCE Condo 2005 32 729 15
59 PANDAN VALLEY Condo 1979 623 714 4
Click twice on AMX and you will see the following:
Year Units BMP AMX
9 CHUN TIN COURT Condo 0 0 763 42
59 RAINBOW GARDENS Condo 1985 64 501 39
59 MEADOWLODGE Condo 2005 64 708 39
59 1 KING ALBERT Condo 1997 101 816 38
59 SUN COURT Condo 1985 0 377 38
Click on View to see more details about the housing project. Click on * to see a Price Chart.
Tan Kin Lian
Make traditional policies good for consumers
I wish to address the questions: What is wrong with traditional policies, such as whole life, endowment or critical illness, which have been sold for decades? Can the shortcomings be corrected?
The shortcomings are:
a) High upfront charges - as much as 160% of the annual premium
b) Lack of transparency
c) Fair distribution of bonus
These shortcomings can be overcome by:
a) Reduce upfront charges
b) Adopt the asset share method - improve transparency and ensure fair distribution of bonus.
Using the asset share approach, the insurance company has to give an annual statement to the policyholder showing the premiums paid, the charges taken out of the premium (for mortality risk and expenses) and the interest credited (based on the investment yield earned by the fund) and the asset share. The asset share has to be paid to the policyholder on the termination of the policy.
This transparency will help to reduce the upfront charge (as consumers will never agree to have 160% of their annual premium taken away). The transparency and competition will make the upfront charge to disappear one day (similar to opening a savings account in a bank!)
Some countries (e.g. Malaysia) have already adopted the asset share method and also placed a modest cap on the upfront charge. If a similar approach is adopted in Singapore, I will be happy to recommend the whole life, endowment and critical illness plans as being good for consumers.
tan Kin Lian
The shortcomings are:
a) High upfront charges - as much as 160% of the annual premium
b) Lack of transparency
c) Fair distribution of bonus
These shortcomings can be overcome by:
a) Reduce upfront charges
b) Adopt the asset share method - improve transparency and ensure fair distribution of bonus.
Using the asset share approach, the insurance company has to give an annual statement to the policyholder showing the premiums paid, the charges taken out of the premium (for mortality risk and expenses) and the interest credited (based on the investment yield earned by the fund) and the asset share. The asset share has to be paid to the policyholder on the termination of the policy.
This transparency will help to reduce the upfront charge (as consumers will never agree to have 160% of their annual premium taken away). The transparency and competition will make the upfront charge to disappear one day (similar to opening a savings account in a bank!)
Some countries (e.g. Malaysia) have already adopted the asset share method and also placed a modest cap on the upfront charge. If a similar approach is adopted in Singapore, I will be happy to recommend the whole life, endowment and critical illness plans as being good for consumers.
tan Kin Lian
Arbitrary decisions on health insurance claims
This article contains several letters on arbitrary and illogical decisions taken by health insurance companies on insurance claims. They argue for regulation.
Duration of Term Assurance
As a rule of thumb, the correct duration for a term assurance should be 25 years or up to age 60 (if shorter). If you look at the benchmark premiums shown in this FAQ, you will find that the premium is affordable for a large amount of insurance.
The purpose of term assurance is to provide a capital sum in the event of premature death during the years when your children are still young. After 25 years, your children would have grown up and are likely to be independent. If you make adequate savings during the 25 years, you will have sufficient savings to meet your financial needs after that period. There is no further need for life assurance.
Under a decreasing term insurance, the protection reduces each year over the term. For example, if you insure for $300,000 over 25 years, the protection will reduce by $12,000 a year. Although the protection reduces, it can be compensated by the increased saving that you have put aside each year. Regular saving is an important part of your financial plan. The cost of decreasing term assurance is less than half of the cost of level term assurance for the same duration.
The purpose of term assurance is to provide a capital sum in the event of premature death during the years when your children are still young. After 25 years, your children would have grown up and are likely to be independent. If you make adequate savings during the 25 years, you will have sufficient savings to meet your financial needs after that period. There is no further need for life assurance.
Under a decreasing term insurance, the protection reduces each year over the term. For example, if you insure for $300,000 over 25 years, the protection will reduce by $12,000 a year. Although the protection reduces, it can be compensated by the increased saving that you have put aside each year. Regular saving is an important part of your financial plan. The cost of decreasing term assurance is less than half of the cost of level term assurance for the same duration.
You can buy a term assurance that covers critical illness as well. The cost is about 2 times of a basic term assurance that covers death only, but will be still quite affordable.
You have the choice of paying a level premium for the entire term or to pay a premium that varies according to your age. Both methods are suitable. For most people, a level premium is probably better, as they do not have to worry about whether the higher premium charged each year is at a fair rate.
You have the choice of paying a level premium for the entire term or to pay a premium that varies according to your age. Both methods are suitable. For most people, a level premium is probably better, as they do not have to worry about whether the higher premium charged each year is at a fair rate.
There is no need to buy life assurance for more than 25 years or beyond age 60. The premium will be too high. Some insurance agents recommend term insurance up to age 75, which is unnecessary and costly There is no need to buy life assurance for more than 25 years or beyond age 60. The premium will be too high. Some insurance agents recommend term insurance up to age 75, which is not necessary and too costly (and give higher commission to the agent).
Tan Kin Lian
Financial planning - Practical Steps (draft 4)
CyCab - Driverless Electric Vehicle
I will be visiting a research facility in France that is developing a driverless electric vehicle, called the Cycab. The visit will be in late November. Read more about this vehicle in various blog postings here. Watch an intereseting animated video about this vehicle.
Friday, September 18, 2009
RED Portal (7) - Graph of Price Trends
The RED portal allows you to displace a graph showing the price trend for the last 24 months where there are transactions. Those months without transactions will be skipped, so that actual period could be more than 24 months. It gives you a good idea about the movement in prices.
The information provided in the RED Portal is valuable and is now given FREE. At a later date, there will be some charge to access certain valuable information. Meanwhile, enjoy the FREE information. I hope that you find them useful.
www.easysearch.sg (Real Estate Data).
The information provided in the RED Portal is valuable and is now given FREE. At a later date, there will be some charge to access certain valuable information. Meanwhile, enjoy the FREE information. I hope that you find them useful.
www.easysearch.sg (Real Estate Data).
Experience with Part Time Work Portal
I tried to locate part time workers at the Part Time Work portal, www.easysearch.sg. I was able to get two good candidates for a project work, where they can work from their home.
It was more difficult to get someone to work in the office. Many of the registered people did not reply to my e-mail. Some have found a job already. I am still trying.
The advantage of this service is that it is free to the employer. It is also easy to find a worker that lives close to the place of work. I will be trying the unemployed workers at the older ages, as they are more likely to want my kind of work.
I wish to encourage employers to try this portal. If you wish to get someone to do the preliminary screening, you can click on the tab Agency. We will handle the initial search and screening for you.
I also encourage unemployed people and those looking for short term work to register in the portal. Although it is for Part Time Work, some employers are keen to offer full time work. It is also possible to do project work from your home.
www.easysearch.sg (Part Time Work)
It was more difficult to get someone to work in the office. Many of the registered people did not reply to my e-mail. Some have found a job already. I am still trying.
The advantage of this service is that it is free to the employer. It is also easy to find a worker that lives close to the place of work. I will be trying the unemployed workers at the older ages, as they are more likely to want my kind of work.
I wish to encourage employers to try this portal. If you wish to get someone to do the preliminary screening, you can click on the tab Agency. We will handle the initial search and screening for you.
I also encourage unemployed people and those looking for short term work to register in the portal. Although it is for Part Time Work, some employers are keen to offer full time work. It is also possible to do project work from your home.
www.easysearch.sg (Part Time Work)
Lodge a report with the Police
You can lodge a report to the Police here: http://www.spf.gov.sg/epc/ePCLinks.html. It is a self-lodge report. Once lodged, it is official for investigation to carry out.
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