Someone passed a cynical comment that the comments on land banking in this blog is "no action, talk only". This person posted anonymously and did not indicate whether he is a land banking investor or cynic or just a nuisance. If he is willing to come forward and propose some concrete action, I would be happy to post his offer.
Someone suggested that a rally be held in Hong Lim Park about land banking. Another person suggested to protest against the lavish spending at the annual general meeting of NTUC Income. Can the people who make these suggestions offer to arrange the rally or attendance?
On a positive note, a few investors in land banking are now in contact with each other and discussing some form of collective action, including visiting the office of the land banking company together to ask for re-payment of their investment. However, some investors still think that they will have a better chance to be re-paid if they give the land banking company more time to sell their land.
Tan Kin Lian
Wednesday, March 31, 2010
Painful experience of land banking investor
This message has been edited by Tan Kin Lian. Other investors who wish to join this action to visit the office of X collectively can send an e-mail to kinlian@gmail.com.
Hi
I wish to share my experience. X (land banking company) is not interested or motivated in repaying the investors. Their main focus currently is to hold more road shows to attract more new and unsuspecting investors so as to further line their own pockets.
In my case, I have personally went down to CAD a couple of times and also seen my MP twice to try to recover my money since August last year. However, till today I am still at a loss as to when I could ever recover my money from X.
I also went down to X's office many times to recover my money but they kept giving excuses and use all sorts of ways and excuses to delay payment. I have also called up X 'hundreds of times' but they simply either refused to take my calls or give excuses that their directors are out of town (their directors are basically out of town 365 days in a year).
Personally I think that the best way to get my money is to constantly 'harass' X for payment personally at their office. In fact, that could be the only way to get our money back unless CAD decides to take action against X.
However, X would not be bothered with our 'harassment' if we go to their office individually. Therefore I suggest that if we are serious in getting our money back, maybe we could gather more investors like ourselves and together pay X a visit to settle payment dued to us once and for all. We need to really force X to pay us back our hard-earned money before it is too late.
Hi
I wish to share my experience. X (land banking company) is not interested or motivated in repaying the investors. Their main focus currently is to hold more road shows to attract more new and unsuspecting investors so as to further line their own pockets.
In my case, I have personally went down to CAD a couple of times and also seen my MP twice to try to recover my money since August last year. However, till today I am still at a loss as to when I could ever recover my money from X.
I also went down to X's office many times to recover my money but they kept giving excuses and use all sorts of ways and excuses to delay payment. I have also called up X 'hundreds of times' but they simply either refused to take my calls or give excuses that their directors are out of town (their directors are basically out of town 365 days in a year).
Personally I think that the best way to get my money is to constantly 'harass' X for payment personally at their office. In fact, that could be the only way to get our money back unless CAD decides to take action against X.
However, X would not be bothered with our 'harassment' if we go to their office individually. Therefore I suggest that if we are serious in getting our money back, maybe we could gather more investors like ourselves and together pay X a visit to settle payment dued to us once and for all. We need to really force X to pay us back our hard-earned money before it is too late.
UK - action taken against land banking companies
Comment: surely it is time for the Singapore authorities to act against similar shady practices in Singapore?
http://www.creditman.biz/uk/members/news-view.asp?newsviewID=11496
....were all involved in operating an unscrupulous land investment business. The companies falsely claimed to provide the best land and property in the UK with future development potential and the capacity to deliver maximum returns to investors including selling land they had no right to.
The grounds for winding up the companies were that they made misleading and unfounded statements in marketing the plots of land to the public; sold land on two sites (Worplesdon and Thorndon) that they had no right to sell and that over a third of company receipts were found to have gone to those involved in the running the business, namely.....
In ordering the companies into liquidation Registrar said: “This is a very serious case where considerable amounts of money have been obtained from members of the public. I am satisfied that the evidence, based on a very full report, substantiates all of the allegations. The evidence shows diversion of funds and the intermingling of funds by the companies that can’t be unravelled. I am satisfied that Mr .... and Mr ..... have demonstrated complete lack of co-operation and that this is very obviously a case where winding up orders should be made.”
The investigation also found that the companies had failed to keep proper accounting records; had failed to comply with Companies Act requirements; failed to co-operate fully with the investigation and operated with a serious lack of transparency as to who controlled the companies and with a lack of clarity regarding the structure and roles of the companies.
http://www.creditman.biz/uk/members/news-view.asp?newsviewID=11496
....were all involved in operating an unscrupulous land investment business. The companies falsely claimed to provide the best land and property in the UK with future development potential and the capacity to deliver maximum returns to investors including selling land they had no right to.
The grounds for winding up the companies were that they made misleading and unfounded statements in marketing the plots of land to the public; sold land on two sites (Worplesdon and Thorndon) that they had no right to sell and that over a third of company receipts were found to have gone to those involved in the running the business, namely.....
In ordering the companies into liquidation Registrar said: “This is a very serious case where considerable amounts of money have been obtained from members of the public. I am satisfied that the evidence, based on a very full report, substantiates all of the allegations. The evidence shows diversion of funds and the intermingling of funds by the companies that can’t be unravelled. I am satisfied that Mr .... and Mr ..... have demonstrated complete lack of co-operation and that this is very obviously a case where winding up orders should be made.”
The investigation also found that the companies had failed to keep proper accounting records; had failed to comply with Companies Act requirements; failed to co-operate fully with the investigation and operated with a serious lack of transparency as to who controlled the companies and with a lack of clarity regarding the structure and roles of the companies.
Coping with a critical illness
When a person meets with a critical illness, there are two financial losses:
- medical expenses to treat the critical illness
- loss of earnings
The medical expenses have to be managed in a sensible manner. I know of a few people that spent a lot of money on treating the critical illness, usually at private hospitals and specialists. In many cases, the large sum that was spent did not make any difference. If the illness was serious, the patient died.
I also know of other people who survived cancer or heart surgery. Those who were treated in a restructured hospital did not spend a lot of money as they benefited from the government subsidy. They were also covered by catastrophic insurance (i.e. MediShield or private Shield).
The best way to handle the loss of income is through personal savings that can be drawn down in an emergency. You do not need to depend on critical illness insurance to give a lump sum payment. If you put all your money in a critical illness policy, you may find your claim to be rejected for some technical reason, at a time when you need the money most. It is better to invest the savings on your own and be free of this uncertainty.
The proportion of people that suffered from a critical illness during the working life is estimated to be less than 10%. More than 90% will retire without suffering from a critical illness.
Tip: Spend less than 2% of your earnings on insurance against death or critical illness. Invest the rest of your savings in a low cost investment fund.
Read my book on "Practical Guide on Financial Planning". Spend $12 and save a lot of money (say $12,000) on wasted premiums.
Tan Kin Lian
- medical expenses to treat the critical illness
- loss of earnings
The medical expenses have to be managed in a sensible manner. I know of a few people that spent a lot of money on treating the critical illness, usually at private hospitals and specialists. In many cases, the large sum that was spent did not make any difference. If the illness was serious, the patient died.
I also know of other people who survived cancer or heart surgery. Those who were treated in a restructured hospital did not spend a lot of money as they benefited from the government subsidy. They were also covered by catastrophic insurance (i.e. MediShield or private Shield).
The best way to handle the loss of income is through personal savings that can be drawn down in an emergency. You do not need to depend on critical illness insurance to give a lump sum payment. If you put all your money in a critical illness policy, you may find your claim to be rejected for some technical reason, at a time when you need the money most. It is better to invest the savings on your own and be free of this uncertainty.
The proportion of people that suffered from a critical illness during the working life is estimated to be less than 10%. More than 90% will retire without suffering from a critical illness.
Tip: Spend less than 2% of your earnings on insurance against death or critical illness. Invest the rest of your savings in a low cost investment fund.
Read my book on "Practical Guide on Financial Planning". Spend $12 and save a lot of money (say $12,000) on wasted premiums.
Tan Kin Lian
Personal risk management
We need to accumulate savings and invest them wisely to get an adequate return that is higher than inflation. Most people invest too much of their savings in a life insurance policy that locks them up for 20 years or longer, is inflexible and gives a poor return. When they need cash for emergencies, they have to borrow on credit cards or on their own policy and pay a high interest rate.
Most insurance agents frighten them about the risk of premature death or critical illness (which is less than 10% during their working life) but did not tell them about the risk of insufficient savings for retirement or future emergencies (which represents more than 90% chance of occurrence).
The solution is to buy a low cost term assurance (covering death and critical illness) or personal accident policy (with less than 2% of your earnings) and invest the rest of your savings in a low cost investment fund. If the insurance cover is not available at a low price, it is more important to take care of the 90% risk and have adequate savings for the future.
What are your views about this approach to personal risk management? Share your personal experience.
Tan Kin Lian
Most insurance agents frighten them about the risk of premature death or critical illness (which is less than 10% during their working life) but did not tell them about the risk of insufficient savings for retirement or future emergencies (which represents more than 90% chance of occurrence).
The solution is to buy a low cost term assurance (covering death and critical illness) or personal accident policy (with less than 2% of your earnings) and invest the rest of your savings in a low cost investment fund. If the insurance cover is not available at a low price, it is more important to take care of the 90% risk and have adequate savings for the future.
What are your views about this approach to personal risk management? Share your personal experience.
Tan Kin Lian
Public transport in Singapore
What percentage of people in Singapore uses public transport to go to work? I guess that it must be 80%, but I wonder if the proportion is lower? Can someone help to do some research?
Tuesday, March 30, 2010
Stop running around; insurance is just a click away
In various aspects of one’s life, insurance is more of a legal necessity rather than an option. And in today’s day and age, very few have the time and patience to go through various options available in the market. Even if one is aware of these options, there might be a shortage of time to get involved in loads of paperwork required to get oneself a good deal. Enter Campbell Solberg Associates (CSA).
This independent insurance agency has been in business since 1940s. Being in this business, one can easily term it as a seasoned veteran of the insurance business. Insurance options for individuals and business houses are available at Campbell Solberg Associates. And the variety of insurance options available at Campbell Solberg Associates is amazing. Right from more traditional insurance options like home insurance and jewelry insurance to new options catering to latest demands like flood insurance coverage, umbrella insurance policies and car theft insurance.
At Campbell Solberg Associates one does not need to go through the offers of various insurance companies. Campbell Solberg Associates does all the running around for its customers and gets them quotes and offers which specifically cater to their needs and requirements. For example, if one is interested in disability insurance, one just needs to fill a fairly simple online form at www.campbellsolberg.com. All the options pertaining to disability insurance offers within your state will be in front of you in no time. Needless to say, Campbell Solberg will be with you in every step of the way to assist you choosing the right option for you. This saves you a lot of time and still helps you get the best from the insurance market.
Campbell Solberg Associates is well aware that while choosing an independent insurance agency, one does look for a compassionate partner who can be trusted and deals with absolute transparency. The whole process at Campbell Solberg is based on the same sentiment where finding best solutions for problems faced by customers and clients is paramount importance.
To facilitate better understanding of insurance processes, Campbell Solberg website contains loads of information on car theft insurance, various umbrella insurance policies and new insurance options such as flood insurance coverage.
All thanks to Campbellsolberg, now opting for the best insurance in any sphere is just a click away. One can be assured to find the best insurance solutions without running around town.
For more information independent insurance agency, flood insurance coverage and car theft insurance visit http://campbellsolberg.com/
This independent insurance agency has been in business since 1940s. Being in this business, one can easily term it as a seasoned veteran of the insurance business. Insurance options for individuals and business houses are available at Campbell Solberg Associates. And the variety of insurance options available at Campbell Solberg Associates is amazing. Right from more traditional insurance options like home insurance and jewelry insurance to new options catering to latest demands like flood insurance coverage, umbrella insurance policies and car theft insurance.
At Campbell Solberg Associates one does not need to go through the offers of various insurance companies. Campbell Solberg Associates does all the running around for its customers and gets them quotes and offers which specifically cater to their needs and requirements. For example, if one is interested in disability insurance, one just needs to fill a fairly simple online form at www.campbellsolberg.com. All the options pertaining to disability insurance offers within your state will be in front of you in no time. Needless to say, Campbell Solberg will be with you in every step of the way to assist you choosing the right option for you. This saves you a lot of time and still helps you get the best from the insurance market.
Campbell Solberg Associates is well aware that while choosing an independent insurance agency, one does look for a compassionate partner who can be trusted and deals with absolute transparency. The whole process at Campbell Solberg is based on the same sentiment where finding best solutions for problems faced by customers and clients is paramount importance.
To facilitate better understanding of insurance processes, Campbell Solberg website contains loads of information on car theft insurance, various umbrella insurance policies and new insurance options such as flood insurance coverage.
All thanks to Campbellsolberg, now opting for the best insurance in any sphere is just a click away. One can be assured to find the best insurance solutions without running around town.
For more information independent insurance agency, flood insurance coverage and car theft insurance visit http://campbellsolberg.com/
Old fashion investment advice
Jack Bogle has been giving the same advice for 50 years. Read this article.
His advice, in short: Invest consistently and for the long haul in a widely diversified portfolio of stocks and bonds. Pay attention to taxes and costs. But leave your investments alone.
His advice, in short: Invest consistently and for the long haul in a widely diversified portfolio of stocks and bonds. Pay attention to taxes and costs. But leave your investments alone.
Day trading is a bad idea
Read this article. This includes day trading in the stock broker's office.
UK - Bank staff mis-selling to be scrutinized under government plans
By Victoria Bischoff 25 March 2010
Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets will be reformed, under plans revealed in the budget this week.
The government has said it will set up a ‘working group’ to consider how staff targets and incentives might lead to poor outcomes for consumers and employees.
This is building on the Retail Financial Services Forum’s remit to make financial services work better for consumers.
The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor in time for the Pre-Budget Report.
Unite Union has welcomed this investigation into bank sales culture, describing it as a ‘victory’ for staff in banks across the UK.
Rob MacGregor, Unite national officer said: ‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector.’
‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.
Consumer champion Which? recently sent out mystery consumers to 37 branches of banks and building societies, and found just four gave consumers good advice to consumers investing a lump sum. Meanwhile, the remaining 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.
Which? chief executive, Peter Vicary-Smith, said: ‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products’.
A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.
Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets will be reformed, under plans revealed in the budget this week.
The government has said it will set up a ‘working group’ to consider how staff targets and incentives might lead to poor outcomes for consumers and employees.
This is building on the Retail Financial Services Forum’s remit to make financial services work better for consumers.
The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor in time for the Pre-Budget Report.
Unite Union has welcomed this investigation into bank sales culture, describing it as a ‘victory’ for staff in banks across the UK.
Rob MacGregor, Unite national officer said: ‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector.’
‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.
Consumer champion Which? recently sent out mystery consumers to 37 branches of banks and building societies, and found just four gave consumers good advice to consumers investing a lump sum. Meanwhile, the remaining 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.
Which? chief executive, Peter Vicary-Smith, said: ‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products’.
A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.
Estate duty in US on non-residents
Dear Mr TanREPLYI'm a keen follower of your blog and appreciate your efforts in educating the public on financial planning.I attended a will writing talk recently and was informed that the US estate tax on assets such as stocks bought in the NYSE can be as high as 55%! I have invested quite a bit in the ETFs listed on the NYSE and needless to say, I was quite stunned to hear about that. I did some research about this and it seems there is an exemption provided the total value of assets owned is less than US$60,000 based on fair market value.I have asked my broker about this, but they claimed that there won't be any estate duties on US stocks. But this doesn't seem to be the case based on what is stated on these 2 sites:http://www.irs.gov/businesses/small/international/article/0, ,id=156329,00.html (official word from the Internal Revenue Service) http://www.ifa-sg.com/abolishment-estate-duty/ (opinion from a local Independent Financial Advisor) If this estate tax does apply to Singaporeans owning US stocks, you might want to blog about this to inform the public as I believe there are quite a number of people who own them but are not aware of the tax.
I am not familiar with estate duty in US on non-resident. I shall post your email in my blog and see if there is some response from the experts.
Practical Guide on Financial Planning
Nearly 1,000 copies of the book has been sold during the past few weeks. All my stock in the office has run out. I have to retrieve some stock from FISCA, while waiting for the re-print. They are still available at most bookstores.
The response to this book has been better than expected. Most people sent me their feedback that they find the book to be easy to read and useful.
Order here.
The response to this book has been better than expected. Most people sent me their feedback that they find the book to be easy to read and useful.
Order here.
Customer service at call center
Here is a simple way for any call center to improve its customer service.
If the call center staff meets with a problem that they cannot answer (which represents about 10% of incoming calls), they should record the nature of the problem and the contact of the customer. This call should be passed to a specialist to call back the customer.
This method will improve customer service significantly. It will also improve life for the staff handling the incoming calls.
Tan Kin Lian
If the call center staff meets with a problem that they cannot answer (which represents about 10% of incoming calls), they should record the nature of the problem and the contact of the customer. This call should be passed to a specialist to call back the customer.
This method will improve customer service significantly. It will also improve life for the staff handling the incoming calls.
Tan Kin Lian
Educate the public and decision makers
The postings in my blog are intended to educate the public and the decision makers on various issues involving financial, social and economic matters affecting the future of our country, including productivity, quality of service and treatment of the public.
I believe that the decision makers are monitoring this blog and that my postings, together with the comments, will be read by them. (For example, where I have made factual errors, these have been politely corrected in my blog from knowledgeable people - posting anonymously). I have also forwarded some of these postings to the relevant decision makers. The mainstream media also took up some of these points and contacted me for more information.
Some cynical people asked, "what is the point of making complaints in this blog?" Their cynical attitude is wrong - this is not a place for complaints, but is a place for positive contribution to educate the public and decision makers and improve the quality of life in Singapore.
There are many things that are not moving in the right direction in Singapore, as the decision makers are out of touch with the reality. I hope that this blog will help to bring these points to their attention.
For example, I have posted articles about how other countries approach their issues, especially where their approach is different from Singapore. I hope that this will allow the public and decision makers to consider the merits of the different approaches.
Tan Kin Lian
I believe that the decision makers are monitoring this blog and that my postings, together with the comments, will be read by them. (For example, where I have made factual errors, these have been politely corrected in my blog from knowledgeable people - posting anonymously). I have also forwarded some of these postings to the relevant decision makers. The mainstream media also took up some of these points and contacted me for more information.
Some cynical people asked, "what is the point of making complaints in this blog?" Their cynical attitude is wrong - this is not a place for complaints, but is a place for positive contribution to educate the public and decision makers and improve the quality of life in Singapore.
There are many things that are not moving in the right direction in Singapore, as the decision makers are out of touch with the reality. I hope that this blog will help to bring these points to their attention.
For example, I have posted articles about how other countries approach their issues, especially where their approach is different from Singapore. I hope that this will allow the public and decision makers to consider the merits of the different approaches.
Tan Kin Lian
Australian Associated Press Financial News Wire: Lehman's victims seek damages following High Court decision
LEHMAN MELBOURNE, March 30 AAP - Local councils and other investors who suffered losses of over $600 million from Lehman Brothers Australia Ltd's liquidation can still seek damages following a decision by the High Court of Australia.
The High Court on Tuesday dismissed two appeals against a judgment of the Federal Court of Australia which found that a deed of company arrangement approved by Lehman Australia's creditors on June 12, 2009, was void and of no effect.
Reasons for the decision will be delivered at a later date, the Court said in a statement.
The decision against Lehman Brothers Asia Holdings and Lehman Brothers Holdings Inc means investors in Lehman Australia and other companies in the Lehman Group can commence litigation to recover hundreds of millions of dollars in losses.
The investors, including about 90 local councils, are owed over $600 million in investments that went bad following Lehman Brothers' collapse in New York in September 2008 under debts of $613 billion.
Lehman's collapse was the the biggest US bankruptcy in history, and subsidiaries around the world followed suit as their source of funding disappeared during the credit crisis of September 2008.
Listed litigation funder IMF (Australia) Ltd on Tuesday said claims made by 70 of its clients against Lehman Australia now would proceed following the High Court's decision.
The decision confirms that the deed is ineffective and Lehman Australia will remain in liquidation, IMF said in a statement.
The deed was proposed in early 2009 by Lehman Brothers Asia Holdings, Lehman Australia's single biggest creditor, which itself went into liquidation. The deed was recommended by Lehman's administrators, Stephen Parbery and Neil Singleton of liquidation firm PPB.
Wingecarribee council and others had begun legal action against the investment bank, arguing Lehman Australia engaged in misleading and deceptive conduct.
Wingecarribee council crystallised its losses of $4 million by selling its soured investment products.
At the time, Mr Singleton told AAP that the deed should bring litigation to an end.
"The benefit of that is it enables us to pay the employees and general creditors in full, early, and it provides a very reasonable return to the contingent creditors (the former investors including councils and charities)," he said on May 28, 2009.
But several creditors of Lehman Australia later later brought proceedings before the Federal Court claiming they were not bound by the deed and that it would extinguish their rights to sue other companies in the Lehman Group.
On September 25, 2009, the Federal Court found that the deed was void and of no effect, before ordering that Lehman Australia be wound up by the Court.
Lehman Asia and Lehman Brothers Holdings Inc then appealed the decision in the High Court.
The High Court on Tuesday dismissed two appeals against a judgment of the Federal Court of Australia which found that a deed of company arrangement approved by Lehman Australia's creditors on June 12, 2009, was void and of no effect.
Reasons for the decision will be delivered at a later date, the Court said in a statement.
The decision against Lehman Brothers Asia Holdings and Lehman Brothers Holdings Inc means investors in Lehman Australia and other companies in the Lehman Group can commence litigation to recover hundreds of millions of dollars in losses.
The investors, including about 90 local councils, are owed over $600 million in investments that went bad following Lehman Brothers' collapse in New York in September 2008 under debts of $613 billion.
Lehman's collapse was the the biggest US bankruptcy in history, and subsidiaries around the world followed suit as their source of funding disappeared during the credit crisis of September 2008.
Listed litigation funder IMF (Australia) Ltd on Tuesday said claims made by 70 of its clients against Lehman Australia now would proceed following the High Court's decision.
The decision confirms that the deed is ineffective and Lehman Australia will remain in liquidation, IMF said in a statement.
The deed was proposed in early 2009 by Lehman Brothers Asia Holdings, Lehman Australia's single biggest creditor, which itself went into liquidation. The deed was recommended by Lehman's administrators, Stephen Parbery and Neil Singleton of liquidation firm PPB.
Wingecarribee council and others had begun legal action against the investment bank, arguing Lehman Australia engaged in misleading and deceptive conduct.
Wingecarribee council crystallised its losses of $4 million by selling its soured investment products.
At the time, Mr Singleton told AAP that the deed should bring litigation to an end.
"The benefit of that is it enables us to pay the employees and general creditors in full, early, and it provides a very reasonable return to the contingent creditors (the former investors including councils and charities)," he said on May 28, 2009.
But several creditors of Lehman Australia later later brought proceedings before the Federal Court claiming they were not bound by the deed and that it would extinguish their rights to sue other companies in the Lehman Group.
On September 25, 2009, the Federal Court found that the deed was void and of no effect, before ordering that Lehman Australia be wound up by the Court.
Lehman Asia and Lehman Brothers Holdings Inc then appealed the decision in the High Court.
Western Australia Business News: Councils win Lehman court case
Councils and charities involved in the collapse of Lehman Brothers Australia have had a win in the High Court today.
Litigation funder IMF (Australia) said the High Court dismissed an appeal against a Federal Court judgement that found the deed of company arrangement approved by creditors of Lehman Bros Australia was void and of no effect.
"It was argued by the Councils seeking to have the DOCA set aside that the DOCA was unfair and particularly prejudicial to the interests of those creditors with damages claims against Lehman Australia, principally being the local councils, charities and other investors in collateralised debt obligations marketed by Lehman Australia," IMF said.
"In particular, the councils argued that the DOCA could not contain terms which required creditors to release claims against other Lehman Group companies."
The High Court win now paves the way for the councils and charities, as clients of IMF to proceed action against Lehman Australia and other companies within the group.
The City of Melville was one council which used to be advised by Lehman and had paid more than $20 million for a portfolio of CDOs.
Litigation funder IMF (Australia) said the High Court dismissed an appeal against a Federal Court judgement that found the deed of company arrangement approved by creditors of Lehman Bros Australia was void and of no effect.
"It was argued by the Councils seeking to have the DOCA set aside that the DOCA was unfair and particularly prejudicial to the interests of those creditors with damages claims against Lehman Australia, principally being the local councils, charities and other investors in collateralised debt obligations marketed by Lehman Australia," IMF said.
"In particular, the councils argued that the DOCA could not contain terms which required creditors to release claims against other Lehman Group companies."
The High Court win now paves the way for the councils and charities, as clients of IMF to proceed action against Lehman Australia and other companies within the group.
The City of Melville was one council which used to be advised by Lehman and had paid more than $20 million for a portfolio of CDOs.
Stability and choice
This political situation in Tunisia is described to me by my host in Tunisia. The current government in Tunisia has been in power for many years and has produced stability and economic progress. The government has strong links to most of the organisations in the country, that it is difficult for other political parties to compete with the ruling party. The people are not unhappy with the current situation but they would prefer to have more freedom and choice. There is much similarity with the situation in Singapore.
Tan Kin Lian
Tan Kin Lian
Monday, March 29, 2010
Improve online service
I wish to quote this real life example for government agencies to improve their online service. Although this case involves the CPF board, the same type of situation occurs with other big organisations.
I wanted to top up the special account for my wife. I had to go through the spider-web of the CPF board. I finally managed to submit an online application.
I did not receive any news for 1 week. I did not know if anyone is responding to my application and how I would be informed. I sent a follow up enquiry. I managed to get an approval a few days later. I send the top up amount by cheque to CPF board.
I received a communication that my cheque was received after the expiry of the approval. They gave me only 5 days to respond. I had to submit a new application.
Surely the CPF board knows that it would take a few days for a person to prepare and mail the cheque and for their big organisation to open the letter? Five days is far too short. Even if the approval has expired, there has been no change to the application, and there is no need to ask the member to submit a new application - which is a lot of hassle to go through their spider web.
Perhaps the CPF board is not aware that their members have many other things to attend to, and that the cannot spend a lot of time to meet their bureaucratic and unreasonable process.
I find the CPF board to be quite helpful and responsive on many matters, so this is an exception. Furthermore, this type of inconsiderate approach is quite applicable in many large organisations (and is not confined only to CPF). We need a process in Singapore for the people who designs websites and online applications to be more responsive to feedback and to make things simple for the public.
Tan Kin Lian
I wanted to top up the special account for my wife. I had to go through the spider-web of the CPF board. I finally managed to submit an online application.
I did not receive any news for 1 week. I did not know if anyone is responding to my application and how I would be informed. I sent a follow up enquiry. I managed to get an approval a few days later. I send the top up amount by cheque to CPF board.
I received a communication that my cheque was received after the expiry of the approval. They gave me only 5 days to respond. I had to submit a new application.
Surely the CPF board knows that it would take a few days for a person to prepare and mail the cheque and for their big organisation to open the letter? Five days is far too short. Even if the approval has expired, there has been no change to the application, and there is no need to ask the member to submit a new application - which is a lot of hassle to go through their spider web.
Perhaps the CPF board is not aware that their members have many other things to attend to, and that the cannot spend a lot of time to meet their bureaucratic and unreasonable process.
I find the CPF board to be quite helpful and responsive on many matters, so this is an exception. Furthermore, this type of inconsiderate approach is quite applicable in many large organisations (and is not confined only to CPF). We need a process in Singapore for the people who designs websites and online applications to be more responsive to feedback and to make things simple for the public.
Tan Kin Lian
Customer service at call center
I had difficulty to access the Internet. I called Starhub. The hotline staff transferred me to a technical expert. I was left holding on to the line for 5 minutes waiting for the technical expert to receive the call. As I was using my mobile phone, it was quite costly to be holding on. I gave up.
The call center staff should ask for my mobile phone and get the technical expert to call me. This is only fair to the customer. But most call centers have a policy not to call the customer. This policy should be changed.
The call center staff should ask for my mobile phone and get the technical expert to call me. This is only fair to the customer. But most call centers have a policy not to call the customer. This policy should be changed.
Low yield for a 5 year investment
Dear Mr. Tan,
My mother is thinking of buying a 5 years insurance plan with a single premium of $10,000. She is still in good health and the reason she's buying is to get safe returns that are higher than the bank interest. I've attached the
benefit illustrations and hope you can give your view on this.
REPLY
The non-guaranteed yield varies from 1.55% to 2.8% p.a. for 5 years. It is rather low for an investment that is locked up for 5 years. However, I am not able to suggest any better investment. Let me post this in my blog and see if someone else has better suggstion.
My mother is thinking of buying a 5 years insurance plan with a single premium of $10,000. She is still in good health and the reason she's buying is to get safe returns that are higher than the bank interest. I've attached the
benefit illustrations and hope you can give your view on this.
REPLY
The non-guaranteed yield varies from 1.55% to 2.8% p.a. for 5 years. It is rather low for an investment that is locked up for 5 years. However, I am not able to suggest any better investment. Let me post this in my blog and see if someone else has better suggstion.
Sunday, March 28, 2010
Insurance for taxis
Hi Mr Tan
What are your views about the taxi driver who discharge his insurance company from paying a third party claim for damage to their car? It is not fair to the third party who have to sue the taxi driver to recover the repair cost of $2,000. The offer of $300 by the taxi driver is ridiculously low.
REPLY
Currently, it is compulsory for a car owner to have insurance for third party injury, but not damage. In granting the licence to the taxi company, the Land Transport Authority should make it mandatory for the taxi to have insurance for third party damage as well.
The cost of insuring a car is about $1,000. The cost of insuring a taxi should be about $3,000 a year. This will add $10 a day to the cost of renting a taxi. I think that the taxi company should be required to buy the insurance and add this to the cost of the rental. The taxi should not be inadequately insured for property damage.
What are your views about the taxi driver who discharge his insurance company from paying a third party claim for damage to their car? It is not fair to the third party who have to sue the taxi driver to recover the repair cost of $2,000. The offer of $300 by the taxi driver is ridiculously low.
REPLY
Currently, it is compulsory for a car owner to have insurance for third party injury, but not damage. In granting the licence to the taxi company, the Land Transport Authority should make it mandatory for the taxi to have insurance for third party damage as well.
The cost of insuring a car is about $1,000. The cost of insuring a taxi should be about $3,000 a year. This will add $10 a day to the cost of renting a taxi. I think that the taxi company should be required to buy the insurance and add this to the cost of the rental. The taxi should not be inadequately insured for property damage.
Saturday, March 27, 2010
Life insurance in Asia
Extracted from Economist magazine:
http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=15772822&subjectID=348960&fsrc=nwl
Stephan Binder of McKinsey, a consultancy, thinks that people should be insured for 10-12 times their annual income. By this measure, Asians (and, for that matter, everybody else) are woefully underinsured. What’s more, social-security entitlements in the region are paltry compared with other rich countries. So annuity schemes are a natural supplement for retirement income. Japan, the greyest of the Asian countries, is already seeing the effects of demographic change. The dankai generation—which refers to the 8m people born between 1947 and 1949—spent 14.5 trillion yen ($125 billion) on insurance with individual annuities in 2006. And that was before most of them had retired.
Another avenue for growth is in health-care plans, which are undersupplied. In the Japanese market, over half of new policies cover medical costs such as cancer. Other Asian countries are sure to follow as the savvy pre-retirement generation—who no longer believe that their families will care for them, and do not think government schemes will suffice—start to think about their future. Joseph Ngai of McKinsey reckons that rich Asia could see 11-12% growth in insurance premiums
http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=15772822&subjectID=348960&fsrc=nwl
Stephan Binder of McKinsey, a consultancy, thinks that people should be insured for 10-12 times their annual income. By this measure, Asians (and, for that matter, everybody else) are woefully underinsured. What’s more, social-security entitlements in the region are paltry compared with other rich countries. So annuity schemes are a natural supplement for retirement income. Japan, the greyest of the Asian countries, is already seeing the effects of demographic change. The dankai generation—which refers to the 8m people born between 1947 and 1949—spent 14.5 trillion yen ($125 billion) on insurance with individual annuities in 2006. And that was before most of them had retired.
Another avenue for growth is in health-care plans, which are undersupplied. In the Japanese market, over half of new policies cover medical costs such as cancer. Other Asian countries are sure to follow as the savvy pre-retirement generation—who no longer believe that their families will care for them, and do not think government schemes will suffice—start to think about their future. Joseph Ngai of McKinsey reckons that rich Asia could see 11-12% growth in insurance premiums
Insurance loophole? Cabby refuses to pay up for car accident
http://motoring.asiaone.com/print/Motoring/Drivers/Story/A1Story20100325-206694.html
Cabby refuses to pay up for car accident and discharges insurance firm from payment but he is only willing to pay $300 out of a $2,000 bill.
Cabby refuses to pay up for car accident and discharges insurance firm from payment but he is only willing to pay $300 out of a $2,000 bill.
Invest your savings in a low cost investment fund
Hi Mr Tan,
I have read your article on not buying Critical illness insurance. Recently my insurance agent has been advising me to embark on a 15 year limited Critical illness Insurance of coverage 100K, premium of 4.6k per year. I will be paying only for 15 yr, but the coverage will still continue. The return is 131.5k (total premium paid is 70.3K) after 30 yrs should I surrender then.
I have told my agent that Medishield or private shield should be enough to cover should a critical illness strike, this is what he said:
1) Shield covers hospitalization but does not cover all kind of medications as well as recuperative treatments, for eg.TCM, hospice care, medical equipment, and all miscellenous charges. For eg, it does not cover shots of Herceptin which cost $4k per shot to kill cancer cell. This shot need to be administer 17 times, once every 3 weeks to tackle breasts cancer.
2) Many long term illnesses like heart attack, stroke, paralysis, brain diseases total permanent disability and cancers require long term medication and aftercare. These if not hospitalised will never be taken care by Shield plans.
3) Shield requires co-insurance. Co-insurance can be a huge amount. For eg, chemotherapy is charged on a package by doctors depending on different conditions. On avg, it comes in 8, 12, 16,24 cycles which avg cost around $25,000 -$60,000 over a 2-3 month period. A min 10% co-insurance will be at least $2500 to $6000 every 3 months. If chemo treatments consistently needed, they can come up to more than 32K -50K per year just on co-insurance and misc expenses.
I would really like to have your comments on this.
REPLY
If you invest $4,600 for 15 years in a low cost investment fund and is able to earn 5% p.a. the accumulated sum at the end of 15 years is $104,000 and at end of 30 years is $216,000. The chance of making a critical illness claim in 30 years is likely to be less than 10% and this is likely to occur towards the end of this period (when you get older). For these people, the accumulated sum may be more than the payout under the critical illness policy.
The chance of surviving 30 years without a claim is more than 90%. For these people, they will get the projected sum of $131,000 and lose $75,000 (compared to $216,000). Both figures are not guaranteed.
The people who benefit from a critical illness policy are those who contracted it within the first 15 years, and the chance is small. I would prefer to take this chance than to have a 90% chance of losing out on one third of the accumulated savings.
It is better to buy a rider to cover critical illness for 15 years (and you can get it from a policy under SAFRA, for example) and invest your savings in a low cost investment fund., If this cover is not available at a low cost, it is better to take the risk of not having a criticial illness cover.
I have read your article on not buying Critical illness insurance. Recently my insurance agent has been advising me to embark on a 15 year limited Critical illness Insurance of coverage 100K, premium of 4.6k per year. I will be paying only for 15 yr, but the coverage will still continue. The return is 131.5k (total premium paid is 70.3K) after 30 yrs should I surrender then.
I have told my agent that Medishield or private shield should be enough to cover should a critical illness strike, this is what he said:
1) Shield covers hospitalization but does not cover all kind of medications as well as recuperative treatments, for eg.TCM, hospice care, medical equipment, and all miscellenous charges. For eg, it does not cover shots of Herceptin which cost $4k per shot to kill cancer cell. This shot need to be administer 17 times, once every 3 weeks to tackle breasts cancer.
2) Many long term illnesses like heart attack, stroke, paralysis, brain diseases total permanent disability and cancers require long term medication and aftercare. These if not hospitalised will never be taken care by Shield plans.
3) Shield requires co-insurance. Co-insurance can be a huge amount. For eg, chemotherapy is charged on a package by doctors depending on different conditions. On avg, it comes in 8, 12, 16,24 cycles which avg cost around $25,000 -$60,000 over a 2-3 month period. A min 10% co-insurance will be at least $2500 to $6000 every 3 months. If chemo treatments consistently needed, they can come up to more than 32K -50K per year just on co-insurance and misc expenses.
I would really like to have your comments on this.
REPLY
If you invest $4,600 for 15 years in a low cost investment fund and is able to earn 5% p.a. the accumulated sum at the end of 15 years is $104,000 and at end of 30 years is $216,000. The chance of making a critical illness claim in 30 years is likely to be less than 10% and this is likely to occur towards the end of this period (when you get older). For these people, the accumulated sum may be more than the payout under the critical illness policy.
The chance of surviving 30 years without a claim is more than 90%. For these people, they will get the projected sum of $131,000 and lose $75,000 (compared to $216,000). Both figures are not guaranteed.
The people who benefit from a critical illness policy are those who contracted it within the first 15 years, and the chance is small. I would prefer to take this chance than to have a 90% chance of losing out on one third of the accumulated savings.
It is better to buy a rider to cover critical illness for 15 years (and you can get it from a policy under SAFRA, for example) and invest your savings in a low cost investment fund., If this cover is not available at a low cost, it is better to take the risk of not having a criticial illness cover.
Avoid complex financial product
Dear Mr. Tan,
I purchased a Secure Retirement Plus (SRP) plan last year. This is a variable aunity which buys into one of the insurer's unit trust and offers lock-in of the unit trust value every 5 years (up to 85 years old). I have the option to top up my deposit within 1 year. This is a rather complex scheme, with 50% "virtual" bonus after 10 years, and 'virtual' lock-in of the account value of the unit trsut every 5 years.
'Virtual' means that the insurer is committed to honour the payout based on the 'virtual' account amount, but if client wishes to close the account, he/she will get back only the actual value of the unit trust. It sounded like a good deal since the downside risk is the survivability of the insurance company itself (which I think is finanically sound) and the upside is growth of value of the unit trust that the funds is invested in, thereby indirectly assure that the payout grows with inflation (inflation likely to flollow market growth).
I have the following question.
1) Is this SRP annunity better than the annuity offered by other insurance companies?
2) I wish to invest 40% of my retirement fund in this scheme (remaining money in unit trust, stocks and cash) Is this a good proportion?
3) Does MAS mandate that insurance company in Singapore must maintain a certain amount of capital to honor the annuity payout?
REPLY
I avoid complex financial products that are designed with features that are not clear to the consumer. This allows the product issuer to interpret the features to its advantage, and take a large share of the investment gains from the consumer. The product that you described falls in this category.
If you wish to invest in a variable annuity, you should just buy into the STI ETF and make a monthly withdrawal to meet your needs. If you withdrawal is modest, relative to the amount that you have invested, it is likely to last for your lifetime, and leave some balance remaining for your children. You will get the average market return, which is likely to be around 6% per annum. I am not sure how much you can get from this complex product after deducting the charges.
I purchased a Secure Retirement Plus (SRP) plan last year. This is a variable aunity which buys into one of the insurer's unit trust and offers lock-in of the unit trust value every 5 years (up to 85 years old). I have the option to top up my deposit within 1 year. This is a rather complex scheme, with 50% "virtual" bonus after 10 years, and 'virtual' lock-in of the account value of the unit trsut every 5 years.
'Virtual' means that the insurer is committed to honour the payout based on the 'virtual' account amount, but if client wishes to close the account, he/she will get back only the actual value of the unit trust. It sounded like a good deal since the downside risk is the survivability of the insurance company itself (which I think is finanically sound) and the upside is growth of value of the unit trust that the funds is invested in, thereby indirectly assure that the payout grows with inflation (inflation likely to flollow market growth).
I have the following question.
1) Is this SRP annunity better than the annuity offered by other insurance companies?
2) I wish to invest 40% of my retirement fund in this scheme (remaining money in unit trust, stocks and cash) Is this a good proportion?
3) Does MAS mandate that insurance company in Singapore must maintain a certain amount of capital to honor the annuity payout?
REPLY
I avoid complex financial products that are designed with features that are not clear to the consumer. This allows the product issuer to interpret the features to its advantage, and take a large share of the investment gains from the consumer. The product that you described falls in this category.
If you wish to invest in a variable annuity, you should just buy into the STI ETF and make a monthly withdrawal to meet your needs. If you withdrawal is modest, relative to the amount that you have invested, it is likely to last for your lifetime, and leave some balance remaining for your children. You will get the average market return, which is likely to be around 6% per annum. I am not sure how much you can get from this complex product after deducting the charges.
Friday, March 26, 2010
Expensive Telephone Charges
I received this SMS: Welcome to Tunisia. To call Singapore, dial +65phone no. Voice @$5/min. SMS S$0.60/sms. Data S$20/MB.
Wow! I called home using Skype! But if I make a mistake and accept an incoming call on my mobile phone, I have to pay this high charge. This is how business make profits - catch the unwary customer!
Wow! I called home using Skype! But if I make a mistake and accept an incoming call on my mobile phone, I have to pay this high charge. This is how business make profits - catch the unwary customer!
Bank staff mis-selling to be scrutinized under government plans
http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=390355&re=8921&ea=138574
Bank staff mis-selling to be scrutinized under government plans
By Victoria Bischoff 25 March 2010
Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets will be reformed, under plans revealed in the budget this week.
The government has said it will set up a ‘working group’ to consider how staff targets and incentives might lead to poor outcomes for consumers and employees.
This is building on the Retail Financial Services Forum’s remit to make financial services work better for consumers. The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor in time for the Pre-Budget Report.
Unite Union has welcomed this investigation into bank sales culture, describing it as a ‘victory’ for staff in banks across the UK.
Rob MacGregor, Unite national officer said: ‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector.’
‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.
Consumer champion Which? recently sent out mystery consumers to 37 branches of banks and building societies, and found just four gave consumers good advice to consumers investing a lump sum. Meanwhile, the remaining 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.
Which? chief executive, Peter Vicary-Smith, said: ‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products’.
A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.
Bank staff mis-selling to be scrutinized under government plans
By Victoria Bischoff 25 March 2010
Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets will be reformed, under plans revealed in the budget this week.
The government has said it will set up a ‘working group’ to consider how staff targets and incentives might lead to poor outcomes for consumers and employees.
This is building on the Retail Financial Services Forum’s remit to make financial services work better for consumers. The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor in time for the Pre-Budget Report.
Unite Union has welcomed this investigation into bank sales culture, describing it as a ‘victory’ for staff in banks across the UK.
Rob MacGregor, Unite national officer said: ‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector.’
‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.
Consumer champion Which? recently sent out mystery consumers to 37 branches of banks and building societies, and found just four gave consumers good advice to consumers investing a lump sum. Meanwhile, the remaining 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.
Which? chief executive, Peter Vicary-Smith, said: ‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products’.
A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.
UK ban on commission to take effect from 2013
http://www.citywire.co.uk/personal/-/blogs/money-blog/content.aspx?ID=390639&re=8931&ea=138574
Is it right to ban financial advisers from taking commission?
By Tony Bonsignore 26 March 2010
The Financial Services Authority today finally banned financial advisers from taking commission on investment products such as ISAs, pensions, life insurance and the like
The move has been on the cards for a couple of years, and follows a major regulatory review of the sector. But still it is likely to come as a shock to those old-school advisers who pick up a tasty commission for every product they flog.
Certain voices within the advice industry have long argued that forcing consumers to pay upfront will deter them from seeking financial advice together. Others, meanwhile, argue that the FSA has no business intervening in the market in this way.
Other observers, though, note the way ‘independent’ advisers are swayed in their recommendations by the amount of commission they earn, both in the products they pick and the providers they choose.
They also remember a wave of outrageous mis-selling scandals within the sector, from personal pensions to endowments in the 80s and 90s to precipice bonds and split capital investment trusts in the noughties.
Commission-based advisers cannot but help but be biased, they say, and for that reason they should be banned.
The regulator obviously agrees.
From the end of 2012, firms will have to be upfront about how much they charge for their services, and no longer hide the cost of their advice behind the cost of a product, an FSA statement said
‘In addition, firms will not be able to accept commission in return for recommending specific products. Consumers will know what they are buying upfront, how much it will cost them and also have the peace of mind that it was recommended to suit their needs.‘
Firms offering independent advice will now have to demonstrate their recommendations are based on ‘a comprehensive and unbiased analysis of the market and that any product selection is made in their clients’ best interests,’ it added.
As for those who are unable or unwilling to pay for financial advice, the cost of the advice can be bundled with the product; however it must be clear exactly how much is being charged for advice.
‘It is vital that consumers know not only the cost of financial advice, but also its value,’ Sheila Nicoll of the FSA says.
‘There is a need to reconnect the adviser and client, where one pays for the services of another, and without the distraction of commission. Only then can consumers have real confidence and trust in the advice they are receiving.’
So what do you think, then, has the FSA made the right decision? Will it boost demand for financial advice or reduce it? Does commission have any place in modern retail financial services? And will it stop the next mis-selling scandal?
Is it right to ban financial advisers from taking commission?
By Tony Bonsignore 26 March 2010
The Financial Services Authority today finally banned financial advisers from taking commission on investment products such as ISAs, pensions, life insurance and the like
The move has been on the cards for a couple of years, and follows a major regulatory review of the sector. But still it is likely to come as a shock to those old-school advisers who pick up a tasty commission for every product they flog.
Certain voices within the advice industry have long argued that forcing consumers to pay upfront will deter them from seeking financial advice together. Others, meanwhile, argue that the FSA has no business intervening in the market in this way.
Other observers, though, note the way ‘independent’ advisers are swayed in their recommendations by the amount of commission they earn, both in the products they pick and the providers they choose.
They also remember a wave of outrageous mis-selling scandals within the sector, from personal pensions to endowments in the 80s and 90s to precipice bonds and split capital investment trusts in the noughties.
Commission-based advisers cannot but help but be biased, they say, and for that reason they should be banned.
The regulator obviously agrees.
From the end of 2012, firms will have to be upfront about how much they charge for their services, and no longer hide the cost of their advice behind the cost of a product, an FSA statement said
‘In addition, firms will not be able to accept commission in return for recommending specific products. Consumers will know what they are buying upfront, how much it will cost them and also have the peace of mind that it was recommended to suit their needs.‘
Firms offering independent advice will now have to demonstrate their recommendations are based on ‘a comprehensive and unbiased analysis of the market and that any product selection is made in their clients’ best interests,’ it added.
As for those who are unable or unwilling to pay for financial advice, the cost of the advice can be bundled with the product; however it must be clear exactly how much is being charged for advice.
‘It is vital that consumers know not only the cost of financial advice, but also its value,’ Sheila Nicoll of the FSA says.
‘There is a need to reconnect the adviser and client, where one pays for the services of another, and without the distraction of commission. Only then can consumers have real confidence and trust in the advice they are receiving.’
So what do you think, then, has the FSA made the right decision? Will it boost demand for financial advice or reduce it? Does commission have any place in modern retail financial services? And will it stop the next mis-selling scandal?
FISCA website
The FISCA website is being updated daily with new articles that are relevant for consumers. You can visit it by clicking on this link or the link on the right panel of this blog.
Many Singaporeans are migrating
Read this article by Seah Chiang Nee.
http://thestar.com.my/columnists/story.asp?file=/2010/3/27/columnists/insightdownsouth/5936468&sec=insightdownsouth
Testimonial to my Financial Planning book
I received a wonderful testimonial from CJ. I like to invite other people who have read my book to give their views here.
Hi,
Just want to say thank you, for sharing your knowledge on your blog. I am married with first baby expected to deliver on june, and i have just read your book I learnt a lot regarding the insurance that i should bought to protect my family, and the correct saving investment method, etc. Hope more people can learn from you, and do not fall into the trap ever again.
CJ
Hi,
Just want to say thank you, for sharing your knowledge on your blog. I am married with first baby expected to deliver on june, and i have just read your book I learnt a lot regarding the insurance that i should bought to protect my family, and the correct saving investment method, etc. Hope more people can learn from you, and do not fall into the trap ever again.
CJ
Thursday, March 25, 2010
Simulation game: Pro-Investor
This simulation game gives you a chance to practice on selecting the right stocks. Read this guide on how to play the simulation game.
ST Online: Premium questions for motor insurers
MR PAUL Chan's Forum Online letter on Wednesday ('More accountability needed from motor insurers')
raises two less known points about the motor insurance industry.
The first.. There is no mandatory insurance required for property damage, including damage to motor vehicles... So it may be timely for the Government to step in and provide the necessary regulation.
It is unfair to consumers who are required to take up third-party injury insurance by law, and are taken advantage of by insurers who build and bundle an expensive insurance product because they know consumers have no choice but to buy it.
Second....motor insurers should factor in and disclose the investment income derived from premiums collected
when justifying premium increases for a better understanding among consumers.
Peter Lo
http://www.straitstimes.com/STForum/Story/STIStory_506672.html
raises two less known points about the motor insurance industry.
The first.. There is no mandatory insurance required for property damage, including damage to motor vehicles... So it may be timely for the Government to step in and provide the necessary regulation.
It is unfair to consumers who are required to take up third-party injury insurance by law, and are taken advantage of by insurers who build and bundle an expensive insurance product because they know consumers have no choice but to buy it.
Second....motor insurers should factor in and disclose the investment income derived from premiums collected
when justifying premium increases for a better understanding among consumers.
Peter Lo
http://www.straitstimes.com/STForum/Story/STIStory_506672.html
Price of HDB flat
Dear Mr Tan,
Will HDB Minister Mah Bow Tan and all other PAP Ministers again defend that this is an exception rather than norm... That PRs are NOT driving public housing prices in Singapore? Today's Asiaone article:
---------
A TAIWANESE couple have paid $650,000 for a four-room flat in Bain Street - smashing Housing Board (HDB) records and reflecting the strength in the red-hot resale market.
The sale price works out to be $736 per sq ft for the 30-year-old flat on the 25th floor of a block at Bras Basah.
That is the highest psf price paid for an HDB property and is on a par with prices of private homes in suburban areas.
----------
Regards,
Concerned but feel hopeless Singapore Citizen
COMMENT BY TAN KIN LIAN
The problem is the use of the "market price" as the benchmark for deciding on the price of new flats. If the price of new flats is based on cost and there is adequate supply to meet demand (and the state has a lot of land and airspace that can be developed) the people will not need to fear and drive up the prices further. It is better to have property based on "cost plus" rather than "market".
Will HDB Minister Mah Bow Tan and all other PAP Ministers again defend that this is an exception rather than norm... That PRs are NOT driving public housing prices in Singapore? Today's Asiaone article:
---------
A TAIWANESE couple have paid $650,000 for a four-room flat in Bain Street - smashing Housing Board (HDB) records and reflecting the strength in the red-hot resale market.
The sale price works out to be $736 per sq ft for the 30-year-old flat on the 25th floor of a block at Bras Basah.
That is the highest psf price paid for an HDB property and is on a par with prices of private homes in suburban areas.
----------
Regards,
Concerned but feel hopeless Singapore Citizen
COMMENT BY TAN KIN LIAN
The problem is the use of the "market price" as the benchmark for deciding on the price of new flats. If the price of new flats is based on cost and there is adequate supply to meet demand (and the state has a lot of land and airspace that can be developed) the people will not need to fear and drive up the prices further. It is better to have property based on "cost plus" rather than "market".
Public administration
The UK Government spends about 50% of the GDP (a proportion higher than the other countries in Europe and the USA) to provide welfare benefits, such as free or highly subsidized health care, education, unemployment and old age pension. This spending is funded by a high rate of taxation. While a certain proportion of the spending is abused by the recipients, this system has been well received by the population who prefer the security that comes from the welfare state.
The USA is in the other extreme among the developed nations. It spends less on the social benefits and collect less tax. However, the public have to pay a large part of their income on health care and education. The total cost to the public may be higher, if the private spending is added to the tax.
Many people considers the welfare state to be wasteful, due to abuses and inefficiency. This is only one side of the situation. The private spending system used in the US also have negative points, as is seen in their health care system. There is high administrative and marketing costs and the abuse of profit-driven enterprises, such as denying coverage to the people in poor health or denying legitimate claims.
It is better for a country to rely less on private spending system. Even the US is making reforms to its system.
However, we do not need to go to the other extreme of the welfare state that is practiced in the UK.
We can implement a form of welfare that is not abused and not wasteful. This approach recognizes the benefit of collective purchase by the state for essential services on behalf of the people. It allows the state to find the most efficient supply, at a determined level of quality, for the majority of the people and still allow the higher income to spend their own money to get a higher quality of service. It requires a public administration that is run by honest and competent people, who have a feel for the public that is being served. Singapore used to have this type of approach in the past. We can go back to this approach.
Tan Kin Lian
The USA is in the other extreme among the developed nations. It spends less on the social benefits and collect less tax. However, the public have to pay a large part of their income on health care and education. The total cost to the public may be higher, if the private spending is added to the tax.
Many people considers the welfare state to be wasteful, due to abuses and inefficiency. This is only one side of the situation. The private spending system used in the US also have negative points, as is seen in their health care system. There is high administrative and marketing costs and the abuse of profit-driven enterprises, such as denying coverage to the people in poor health or denying legitimate claims.
It is better for a country to rely less on private spending system. Even the US is making reforms to its system.
However, we do not need to go to the other extreme of the welfare state that is practiced in the UK.
We can implement a form of welfare that is not abused and not wasteful. This approach recognizes the benefit of collective purchase by the state for essential services on behalf of the people. It allows the state to find the most efficient supply, at a determined level of quality, for the majority of the people and still allow the higher income to spend their own money to get a higher quality of service. It requires a public administration that is run by honest and competent people, who have a feel for the public that is being served. Singapore used to have this type of approach in the past. We can go back to this approach.
Tan Kin Lian
IHT settle defamation claims in Singapore
http://www.nytimes.com/2010/03/25/business/media/25times.html
Singaporean leaders have a history of taking the offensive against news organizations
for language that would be legally protected — or even considered relatively innocuous — in the United States, threatening legal action or restricting the sales of publications
“Nobody in most of the world would bat an eye about” such a piece, said Stuart D. Karle, a former general counsel of The Wall Street Journal, who has handled disputes with Singapore’s leadership but was not involved in this case.
But in that country, he said, there is often “the presumption that there’s a hidden message”
about nepotism or corruption in news coverage, and if that turns into a libel case, a news organization faces
“a near-certainty of losing.”
Singaporean leaders have a history of taking the offensive against news organizations
for language that would be legally protected — or even considered relatively innocuous — in the United States, threatening legal action or restricting the sales of publications
“Nobody in most of the world would bat an eye about” such a piece, said Stuart D. Karle, a former general counsel of The Wall Street Journal, who has handled disputes with Singapore’s leadership but was not involved in this case.
But in that country, he said, there is often “the presumption that there’s a hidden message”
about nepotism or corruption in news coverage, and if that turns into a libel case, a news organization faces
“a near-certainty of losing.”
Why labour mobility may be difficult
At a tripartite dialogue Lim Swee Say cautioned businesses against depressing wages.
He pointed out that workers could and would change employers if their wages fall below the market rate. In reality, however, labour mobility remains a luxury, not a given. For one thing, unskilled and low-skilled elderly workers do not have the bargaining power. Foreign workers constitute another group who can ill afford to walk out on their bosses. Also, the current work permit system allows foreign workers to work only for the employer stated on their work permits.
Labour mobility thus rings hollow in the absence of stronger enforcement measures and reforms to the work permit system.
Ong Yanchun (Ms)
He pointed out that workers could and would change employers if their wages fall below the market rate. In reality, however, labour mobility remains a luxury, not a given. For one thing, unskilled and low-skilled elderly workers do not have the bargaining power. Foreign workers constitute another group who can ill afford to walk out on their bosses. Also, the current work permit system allows foreign workers to work only for the employer stated on their work permits.
Labour mobility thus rings hollow in the absence of stronger enforcement measures and reforms to the work permit system.
Ong Yanchun (Ms)
SCMP:The crisis lesson that the HKMA still hasn't learned
http://www.lbv.org.hk/content/pages/posts/the-crisis-lesson-that-the-hkma-still-hasnt-learned7511.php
This is worrying, because if there is one lesson the HKMA boss really should have learned from the financial crisis, it is that while Hong Kong's supervision of banking system stability is relatively solid, our regulatory protection of bank customers is woefully inadequate, as the Lehman minibond scandal demonstrated.
In fact, the HKMA's over-emphasis on systemic stability proved actively harmful to ordinary bank customers. It was because of concerns over the financial strength of Hong Kong smaller banks' following the dismantling of the interest rate cartel in the late 1990s that the HKMA encouraged them to increase their fee income, for example by selling complex structured products to depositors
This is worrying, because if there is one lesson the HKMA boss really should have learned from the financial crisis, it is that while Hong Kong's supervision of banking system stability is relatively solid, our regulatory protection of bank customers is woefully inadequate, as the Lehman minibond scandal demonstrated.
In fact, the HKMA's over-emphasis on systemic stability proved actively harmful to ordinary bank customers. It was because of concerns over the financial strength of Hong Kong smaller banks' following the dismantling of the interest rate cartel in the late 1990s that the HKMA encouraged them to increase their fee income, for example by selling complex structured products to depositors
Wednesday, March 24, 2010
Facilities at Dubai Airport
At terminal 3 of Dubai International Airport, there is a mobile charging station where travellers can charge their mobile phones and laptop computers. It can accomodate many users. There are also ample seats at this station. There is free wireless connection, although the speed is slow, possibly due to heavy usage. This is useful and thoughtful design.
Earn back the public trust
Business has to change to earn back the public trust. Here is an article from Jeff Kindler, CEO of Pfizer.
At Pfizer, we’ve begun to change.
We know we need to be straight with people...
The stakes are high.
We know we will be measured not by what we say, but by what we do.
If we don’t do what we say we will, then we’ll lose trust even further.
Then we could lose customers or face more legal problems.
This is true for all leaders, whatever industry or public office they’re in.
At Pfizer, we’ve begun to change.
We know we need to be straight with people...
The stakes are high.
We know we will be measured not by what we say, but by what we do.
If we don’t do what we say we will, then we’ll lose trust even further.
Then we could lose customers or face more legal problems.
This is true for all leaders, whatever industry or public office they’re in.
Shape Quiz Mini-pak for training
Video: How to solve Sudoku puzzle
Tuesday, March 23, 2010
Difficulty with Shield claim
Hi Kin Lian,
Trust & integrity from insurance companies are indeed important especially when it comes to claims. I wish to share my experience.
When I had an operation, I made a claim under my private shield insurance cover which came with enhancement including a rider for 100% coverage. These enhancements were purchased at a later stage and came with certain medical condition exclusions but it was stated specifically in the insurance cert that my original shield cover remains in tact and not subject to the exclusions. So whatever the issues arising on the exclusions, the minimum valid claim at least under my original cover would have been $X which was a substantial amount of the total medical bill.
The key point I want to share with you and thru you to others is that initially my claim under my insurance policy for 100% cost was Totally DECLINED on the basis of dispute on the exclusions despite the above said minimum claim entitlement. It was errorneous and yet it took me a few months and a string of correspondences on deaf ears and only after finally a visit to their office to physically point out to them the relevant clauses in the insurance before they humbly and embarrassingly acknowledged to pay the $X claim amount unconditionally and immediately. Because of my perseverance and knowledge of the insurance terms, I prevailed.
But if this is the way insurance companies administer claims and have an apparent built-in resistance to claims (possibly for profit-enhancement reasons), it is very wrong and unethical because there are many insureds out there who are less educated, informed or able to raise these issues and fight for their rights. Why should insureds even have to fight at all for their rightful dues? Shouldn't the company have qualified professionals to process claims independently and objectively according to the T&C of each cover? What form and standard of corporate governance does it have?
As an aside: the good news was that I won on my full claim in due course after almost a year of aggravation because the insurance co. ultimately backed out from the adjudication process. I cannot go into the details of the winning arguments except that one more positive that resulted was that the company was found to be unfair to both charge higher premiums for medical conditions and at the same time impose exclusions on the same medical conditions which amounted to a double whammy, and I got my premium reduced. Something is therefore also unfair with its underwriting process.
I hope you can share your comments in a general manner on the latter as well as the claim process to alert the public and others who are similarly aggrieved.
REPLY
It is wrong for an insurance company to reject a legitimate claim in a careless manner. In some states in America, it is illegal for an insurance company to deny a claim without a valid reason. If they make a mistake or are are malicious, they have be fined by the authority or have to pay damages to the policyholders. This is stated in the text book that I used to teach risk management.
An insurance company has a duty to treat its customers fairly. Rejecting a valid claim is a serious breach of duty and breach of trust. The policyholder should not be put to so much trouble or distress in making a legitimate claim.
Trust & integrity from insurance companies are indeed important especially when it comes to claims. I wish to share my experience.
When I had an operation, I made a claim under my private shield insurance cover which came with enhancement including a rider for 100% coverage. These enhancements were purchased at a later stage and came with certain medical condition exclusions but it was stated specifically in the insurance cert that my original shield cover remains in tact and not subject to the exclusions. So whatever the issues arising on the exclusions, the minimum valid claim at least under my original cover would have been $X which was a substantial amount of the total medical bill.
The key point I want to share with you and thru you to others is that initially my claim under my insurance policy for 100% cost was Totally DECLINED on the basis of dispute on the exclusions despite the above said minimum claim entitlement. It was errorneous and yet it took me a few months and a string of correspondences on deaf ears and only after finally a visit to their office to physically point out to them the relevant clauses in the insurance before they humbly and embarrassingly acknowledged to pay the $X claim amount unconditionally and immediately. Because of my perseverance and knowledge of the insurance terms, I prevailed.
But if this is the way insurance companies administer claims and have an apparent built-in resistance to claims (possibly for profit-enhancement reasons), it is very wrong and unethical because there are many insureds out there who are less educated, informed or able to raise these issues and fight for their rights. Why should insureds even have to fight at all for their rightful dues? Shouldn't the company have qualified professionals to process claims independently and objectively according to the T&C of each cover? What form and standard of corporate governance does it have?
As an aside: the good news was that I won on my full claim in due course after almost a year of aggravation because the insurance co. ultimately backed out from the adjudication process. I cannot go into the details of the winning arguments except that one more positive that resulted was that the company was found to be unfair to both charge higher premiums for medical conditions and at the same time impose exclusions on the same medical conditions which amounted to a double whammy, and I got my premium reduced. Something is therefore also unfair with its underwriting process.
I hope you can share your comments in a general manner on the latter as well as the claim process to alert the public and others who are similarly aggrieved.
REPLY
It is wrong for an insurance company to reject a legitimate claim in a careless manner. In some states in America, it is illegal for an insurance company to deny a claim without a valid reason. If they make a mistake or are are malicious, they have be fined by the authority or have to pay damages to the policyholders. This is stated in the text book that I used to teach risk management.
An insurance company has a duty to treat its customers fairly. Rejecting a valid claim is a serious breach of duty and breach of trust. The policyholder should not be put to so much trouble or distress in making a legitimate claim.
Land banking product - views of two investors
View of investor 1
An investor bought a land banking product said: There is also a similar group of investors - who has hired a corporate investigator in New York - to file a class action suit against X. I received a phone call from New York sometime ago. In Malaysia-KL, X office was raided by the authorities,.investigations still pending. It appears to those who are suspicious - that X is a very cleverly-crafted "legal cheat".
View of investor 2
This investor bought into another land banking product, which carried the name of a reputable legal firm in Singapore. The name of this legal firm gave him the confidence that the product was sound. He learned later that he was cheated, and was not able to take action as the land banking company is based outside Singapore.
An investor bought a land banking product said: There is also a similar group of investors - who has hired a corporate investigator in New York - to file a class action suit against X. I received a phone call from New York sometime ago. In Malaysia-KL, X office was raided by the authorities,.investigations still pending. It appears to those who are suspicious - that X is a very cleverly-crafted "legal cheat".
View of investor 2
This investor bought into another land banking product, which carried the name of a reputable legal firm in Singapore. The name of this legal firm gave him the confidence that the product was sound. He learned later that he was cheated, and was not able to take action as the land banking company is based outside Singapore.
Self education on financial planning
Hi!
I have finished the book (Practical Guide on Financial Planning). It is really a good book for me to plan my future, Do you have any relevant book to recommend me?
REPLY
There is a free e-book available in FISCA website, www.fisca.sg. Ask the webmaster for help, if you cannot locate it. Please recommend my book to your friends.
Toughest Puzzle - Who tells the truth?
This is labelled by www.ft.com as the toughest puzzle of all times. But it is not so difficult after all, as I was able to solve it. Read the comments for my solution.
There are three guardians, A, B and C. Their ames are Knight, Knave and Chaos. Knight always speaks truly, Knave always lies. Chaos tossed a coin this morning to decide whether today he would behave like Knight or like Knave.
Your task is simple: ask three yes-no questions, each of a single guardian, and determine which is Knight, which is Knave, and which is Chaos. There is, alas, a complication: the guardians understand English but will answer in the local language, in which “Da” means yes and “Ja” means no. Or possibly “Ja” means yes and “Da” means no – you cannot remember.
There are three guardians, A, B and C. Their ames are Knight, Knave and Chaos. Knight always speaks truly, Knave always lies. Chaos tossed a coin this morning to decide whether today he would behave like Knight or like Knave.
Your task is simple: ask three yes-no questions, each of a single guardian, and determine which is Knight, which is Knave, and which is Chaos. There is, alas, a complication: the guardians understand English but will answer in the local language, in which “Da” means yes and “Ja” means no. Or possibly “Ja” means yes and “Da” means no – you cannot remember.
Posting comments in my blog
When you post a comment, please sign off with your real name. You can continue to be anonymous, if you have a reason to do so, e.g. afraid of being penalized unfairly. By giving your name, you can strengthen the credibility of your statement, and show that you are willing to stand by it and are not malicious.
Some people criticized this blog for being not objective but are not prepared to give their real name. If they feel this way, there is no need for them to visit this blog. It is meant for other people who find the blog to be educational, fair and useful.
Some people criticized this blog for being not objective but are not prepared to give their real name. If they feel this way, there is no need for them to visit this blog. It is meant for other people who find the blog to be educational, fair and useful.
ST Forum: More accountability needed for motor insurance
Read this letter in the Straits Times:
http://www.straitstimes.com/STForum/OnlineStory/STIStory_505625.html
The premium for the insurance of my motor car went up 20% on this year's renewal, even though I did not make any claim for last year. Many people would have faced the same experience.
http://www.straitstimes.com/STForum/OnlineStory/STIStory_505625.html
The premium for the insurance of my motor car went up 20% on this year's renewal, even though I did not make any claim for last year. Many people would have faced the same experience.
Financial stability of banks
An asset manager offered this interesting perspective. When you put your money in the bank, you do not own the assets of the bank. The bank just give you a fixed deposit certificate or a monthly statement, i.e. just a piece of paper. If the bank gets into financial difficulty, you may lose all of your money. Your protection is up to the amount of the deposit insurance scheme or government guarantee.
During the financial crisis in USA, many large banks were on the verge of collapse. If the government did not step in to bail out the banks, many people would have lost their savings in the failed banks.
He told me that it is safer to invest in shares as the investor directly owns a share of the invested company. A unit trust allows diversification into many companies, with the assets held by the trustee company (and not the fund manager).
My friend, who worked several years in Vietnam, told me that the banks offered high interest rate, but the people were afraid to put their savings in the bank, as they were afraid of bank failure. They invested in other assets, such as life insurance, property and gold. But they avoided the banks.
Singapore banks now enjoy full government guarantee on their deposits, but this guarantee will expire soon. After that, the money will be exposed to the same risk faced by banks elsewhere. Although the local banks have high credit rating, the deposits are still exposed to the underlying risk
People who put their money in the bank should look for a higher interest rate that is much higher than the 0.5% paid by the bank. If not, it is better to invest in a low cost investment fund, and manage the risk through diversification and long term investing.
Tan Kin Lian
During the financial crisis in USA, many large banks were on the verge of collapse. If the government did not step in to bail out the banks, many people would have lost their savings in the failed banks.
He told me that it is safer to invest in shares as the investor directly owns a share of the invested company. A unit trust allows diversification into many companies, with the assets held by the trustee company (and not the fund manager).
My friend, who worked several years in Vietnam, told me that the banks offered high interest rate, but the people were afraid to put their savings in the bank, as they were afraid of bank failure. They invested in other assets, such as life insurance, property and gold. But they avoided the banks.
Singapore banks now enjoy full government guarantee on their deposits, but this guarantee will expire soon. After that, the money will be exposed to the same risk faced by banks elsewhere. Although the local banks have high credit rating, the deposits are still exposed to the underlying risk
People who put their money in the bank should look for a higher interest rate that is much higher than the 0.5% paid by the bank. If not, it is better to invest in a low cost investment fund, and manage the risk through diversification and long term investing.
Tan Kin Lian
Monday, March 22, 2010
Culture of trust and fair treatment
I have mentioned the bad practices of insurance companies in this blog. Someone asked me this question a few times, "was the practice different when you were in charge of NTUC Income?"
I can say that the two key differences during my time were:
a) my colleagues were very clear that it was our policy to give fair treatment of policyholders
b) as the CEO, I was willing to receive and respond personally to feedback from policyholders.
I am sure that my colleagues do make mistakes or took decisions that may be unfair to policyholders, but these mistakes are reduced (due to our culture at that time) and the ability for policyholders to access the CEO helps to correct these mistakes. I might have made some mistakes as well, but it was not intentional and not aimed at maximizing profits.
We still have to ensure that the policyholders do not take advantage of our generosity and are not paid claims that they are not entitled to, but we do give the benefit of the doubt to policyholders (unless it is clear that they are abusing our trust).
I believe that all insurance companies should aim to treat their policyholders fairly, regardless of whether they are cooperative, social enterprise or commercial, even as they aim to run a profitable business. They should make an honest and fair profit, and should not make an excessive profit at the expense of the policyholders. They should pay a fair rate of bonus to policyholders on their participating policies. They should design products that charge a fair rate of premium and give a fair yield to the policyholders on their savings.
Tan Kin Lian
I can say that the two key differences during my time were:
a) my colleagues were very clear that it was our policy to give fair treatment of policyholders
b) as the CEO, I was willing to receive and respond personally to feedback from policyholders.
I am sure that my colleagues do make mistakes or took decisions that may be unfair to policyholders, but these mistakes are reduced (due to our culture at that time) and the ability for policyholders to access the CEO helps to correct these mistakes. I might have made some mistakes as well, but it was not intentional and not aimed at maximizing profits.
We still have to ensure that the policyholders do not take advantage of our generosity and are not paid claims that they are not entitled to, but we do give the benefit of the doubt to policyholders (unless it is clear that they are abusing our trust).
I believe that all insurance companies should aim to treat their policyholders fairly, regardless of whether they are cooperative, social enterprise or commercial, even as they aim to run a profitable business. They should make an honest and fair profit, and should not make an excessive profit at the expense of the policyholders. They should pay a fair rate of bonus to policyholders on their participating policies. They should design products that charge a fair rate of premium and give a fair yield to the policyholders on their savings.
Tan Kin Lian
Casino and coasters - a Singapore life
For those who have not yet visitor Resort World Sentosa, watch the photos in this article.
Poor return on a policy with regular payouts
A reader asked my advice on a life insurance policy that was bought a few years ago. It provided a cash payment every 5 years and projected the accumulation of the installments on a non-guaranteed interest rate of 5% per annum.
The benefit illustration showed the following:
a) The distribution cost, which is the amount taken from the savings to pay commission to the agent and other marketing expenses, amounted to $3,467 for the first 6 years, representing about 2 years of the premium. This will continue to increase for each year but at a lower pace. With two years of the savings taken away, the return on the policy is likely to be poor.
b) At the end of 20 years, the projected amount as follows:
guaranteed $40,300
non-guaranteed: $14,881 (assuming the coupons accumulate at 5% p.a.)
total $55,181
c) It is better to be conservative and assume that the coupon will accumulate at 2.5% p.a. and take the non-guaranteed portion at half, i.e. $7,440. The projected amount at the end of 20 years will be $47,740, representing a yield of 1.8% p.a. on the savings. This is a reduction of 3.4% from the projected yield of 5.25%. This reduction is excessive - this policy gives a poor return.
d) If the annual premium of $1,967 is invested to earn 5.25% p.a. the total accumulated savings at the end of 20 years would be $70,292. The projected payout (based on a more conservative estimate) is $47,740, representing a reduction of 32% (which is excessive).
The life insurance policy gives a poor return. But, If it is terminated now, the policyholder will still suffer a large loss. It will be difficult for me to advice whether to continue or terminate the policy at this time, as it depends on the personal circumstances and priorities of the policyholder.
Tan Kin Lian
Avoid all land banking projects
Dear Sir,
This project was brought to my attention and is currently being sold in Singapore as a land banking project in Hawaii financed by a company in Singapore.
My question is, is this project a legal one? I have been told the company selling the land to investors is not governed by the MAS and does not need to meet any of MAS guidelines. Is this possible? Is this project a scam?
I have some URL's below which show information on the project.
REPLY
Read my blog. This type of investments should be avoided. Do not invest in them.
You can ask MAS or the Ministry of Law on whether this company breaks the law. I am not the person who decides on such matters.
Sunday, March 21, 2010
Lavish spending at expense of policyholders
Insiders of two local insurance companies told me that their new management has increased the expenses tremendously compared to the old management - salaries of top executives, advertising, engagement of consultants, etc.
These high expenses are made at the expense of the policyholders, as the bonuses have been cut. They are quite sad that the frugal approach of the old management in looking after the interest of the policyholders, are now being spent away lavishly.
I wonder what the board of directors of these companies are doing in respect of their fiduciary duty? Are they so busy that they do not bother to find out what is going on in the management? I also wonder what the regulator is doing about this type of lavish spending at the expense of the policyholders who have saved frugally for their financial future and are now getting a poor yield?
Tan Kin Lian
These high expenses are made at the expense of the policyholders, as the bonuses have been cut. They are quite sad that the frugal approach of the old management in looking after the interest of the policyholders, are now being spent away lavishly.
I wonder what the board of directors of these companies are doing in respect of their fiduciary duty? Are they so busy that they do not bother to find out what is going on in the management? I also wonder what the regulator is doing about this type of lavish spending at the expense of the policyholders who have saved frugally for their financial future and are now getting a poor yield?
Tan Kin Lian
Shape Quiz - door gift for corporate events
The shape quiz mini-pak is an excellent door gift for a corporate event, such as the staff dinner and dance. It is fun, challenging and develops creativity. Suitable for adults, children and seniors. Watch this video. There is a lower price for a large order. Write to kinlian@gmail.com.
Universal Studio Singapore - videos
Watch these videos to get an introduction to the new theme park in Singapore.
ST Forum - Taxing time with mum's insurer
WHEN we think of insurance,
we tend to visualise a man with a friendly face
holding an umbrella out to us when it starts to rain.
That is the result of successful marketing.
In reality, when the crunch comes,
how many insurance companies can truly claim to be such a 'friend'?
Isn't it more a case of wait until you are drenched
before deciding to hold the umbrella out to you,
by which time the downpour has probably eased off
and you have caught pneumonia?
Take my experience with NTUC Income. I bought..
holding an umbrella out to us when it starts to rain.
That is the result of successful marketing.
In reality, when the crunch comes,
how many insurance companies can truly claim to be such a 'friend'?
Isn't it more a case of wait until you are drenched
before deciding to hold the umbrella out to you,
by which time the downpour has probably eased off
and you have caught pneumonia?
Take my experience with NTUC Income. I bought..
Saturday, March 20, 2010
Survey - land banking
If you have been caught in a land banking product, and you wish to meet other investors in the same situation, give your particulars here.
Guaranteed renewable - for motor insurance?
Some insurance contracts are guaranteed renewable. The insurance company has to renew the policy based on its standard rates. The insurance company cannot refuse to renew the insurance, or to charge a higher rate based on the claim record of the individual person. (However, the insurance company can revised its standard rates based on its claims experience, but the same rate must apply to the whole class of policyholders).
This feature is standard for long term health insurance. It is a standard feature of the Medishield or the private Shield in Singapore. I hope that the guaranteed renewable feature can be extended to motor insurance.
At present a motorists may find that after a large accident claim, their insurance premium may be loaded by 50% to 100%, in addition to losing their no-claim bonus. They have to accept these harsh terms, as no other insurance company may accept them. They may suffer this penalty even if they have many years of accident free record.
At present, no insurance company offers this guaranteed renewable feature, even for motorists with good driving records. If you find an insurance company that does offers this feature in the future, it is better to insure with this insurance company even if the premium rate is 10% higher.
Tan Kin Lian
This feature is standard for long term health insurance. It is a standard feature of the Medishield or the private Shield in Singapore. I hope that the guaranteed renewable feature can be extended to motor insurance.
At present a motorists may find that after a large accident claim, their insurance premium may be loaded by 50% to 100%, in addition to losing their no-claim bonus. They have to accept these harsh terms, as no other insurance company may accept them. They may suffer this penalty even if they have many years of accident free record.
At present, no insurance company offers this guaranteed renewable feature, even for motorists with good driving records. If you find an insurance company that does offers this feature in the future, it is better to insure with this insurance company even if the premium rate is 10% higher.
Tan Kin Lian
Managing personal risks
A working person faces the following risks:
a) premature death
The chance of (a) and (b) occurring during the working life is quite low, perhaps less than 5%. By getting bad advice from insurance agents, they spend too much of their savings to insure against these risk.
Most people (i.e. 95%) are likely to face the risk of (c) and (d). This risk can be best managed through personal savings. The savings should be invested to earn a good rate of return and can be withdrawn without penalty, e.g. through a low cost investment fund. The personal savings can be used to cover cash flow needs during a temporary period of unemployment, without the need to depend on borrowings which incur a high interest burden. If the savings are invested prudently, they will provide an adequate amount for retirement.
Many investment products offer a poor yield of 2% per annum. By investing on their own in a low cost investment fund, they can get a much higher yield, for example, 5% per annum. The difference in yield is taken away in distribution cost and other charges by the financial institution.
Here is the difference in the accumulated amount at the end of 35 years from a monthly saving of $500.
Many people invest their hard earned savings in a life insurance policy to earn a net yield of 2% per annum. If they invest on their own in a low cost investment fund, they may be able to earn a higher yield, which could potentially give them 86% more.
They only need to spend 5% of their savings to buy a low cost decreasing term insurance. If this is taken off $569,000, they will still get a net balance of $540,000, which is still much higher than $306,000. They will accumulate sufficient savings in 20 years - so the insurance becomes less essential.
As an alternative, they can also buy a personal accident insurance for $300,000 at a premium of about $200 a year. Most of the risk of premature death is caused by accident.
Summary: the key priority is to have adequate savings (say 15% to 20% of your earnings, in addition to CPF) and to invest it in a low cost insurance fund to earn an adequate rate of return. Spend not more than 5% of your savings on term or personal accident insurance.
Tan Kin Lian
a) premature death
b) serious illness and disability
c) unemployment
d) insufficient income during retirementThe chance of (a) and (b) occurring during the working life is quite low, perhaps less than 5%. By getting bad advice from insurance agents, they spend too much of their savings to insure against these risk.
Most people (i.e. 95%) are likely to face the risk of (c) and (d). This risk can be best managed through personal savings. The savings should be invested to earn a good rate of return and can be withdrawn without penalty, e.g. through a low cost investment fund. The personal savings can be used to cover cash flow needs during a temporary period of unemployment, without the need to depend on borrowings which incur a high interest burden. If the savings are invested prudently, they will provide an adequate amount for retirement.
Many investment products offer a poor yield of 2% per annum. By investing on their own in a low cost investment fund, they can get a much higher yield, for example, 5% per annum. The difference in yield is taken away in distribution cost and other charges by the financial institution.
Here is the difference in the accumulated amount at the end of 35 years from a monthly saving of $500.
Interest Accumulated %
rate savings
2% $306,000 100%
3% $374,000 122%
4% $460,000 155%
5% $569,000 186%
Many people invest their hard earned savings in a life insurance policy to earn a net yield of 2% per annum. If they invest on their own in a low cost investment fund, they may be able to earn a higher yield, which could potentially give them 86% more.
They only need to spend 5% of their savings to buy a low cost decreasing term insurance. If this is taken off $569,000, they will still get a net balance of $540,000, which is still much higher than $306,000. They will accumulate sufficient savings in 20 years - so the insurance becomes less essential.
As an alternative, they can also buy a personal accident insurance for $300,000 at a premium of about $200 a year. Most of the risk of premature death is caused by accident.
Summary: the key priority is to have adequate savings (say 15% to 20% of your earnings, in addition to CPF) and to invest it in a low cost insurance fund to earn an adequate rate of return. Spend not more than 5% of your savings on term or personal accident insurance.
Tan Kin Lian
Workers prefer job security
People are becoming "nesters,"
who prefer to stay in one career or with one employer for their entire career.
...a disconnect
between what such "nesters" want and the growing trends that are shaping the global workforce: an increasing emphasis on flexible staff and short-term employment,
more offshoring and part-time work.
http://www.reuters.com/
Universal Studio Singapore
Many people think that Universal Studio Singapore will fail. They point to the other theme parks that failed, e.g. Har Par Villa, Tang Dynasty City and Asian Village (also in Sentosa). They point to the hot climate, limited land space (due to high cost of land) and the small population base.
I think that USS has a good chance to succeed. Here are the positive factors:
a) It is better to be in a hot climate, rather than a cold climate (i.e. winter). USS only needs to create shade and breeze to make it more comfortable. Technology allows this to happen.
b) The compactness is an advantage, as there is no need to walk far from one ride to the next.
c) The closeness of Sentosa to the city and hotels is also an advantage. The tourist does not have to spend two hours to get to the theme park (which is the travelling time for most theme parks around the world).
The management of USS can turn the disadvantages into advantages, and make USS successful (against the odds).
Tan Kin Lian
I think that USS has a good chance to succeed. Here are the positive factors:
a) It is better to be in a hot climate, rather than a cold climate (i.e. winter). USS only needs to create shade and breeze to make it more comfortable. Technology allows this to happen.
b) The compactness is an advantage, as there is no need to walk far from one ride to the next.
c) The closeness of Sentosa to the city and hotels is also an advantage. The tourist does not have to spend two hours to get to the theme park (which is the travelling time for most theme parks around the world).
The management of USS can turn the disadvantages into advantages, and make USS successful (against the odds).
Tan Kin Lian
A safe environment
Singapore used to be a safe place. But in recent years, the situation has changed. Many people are feeling less safe in Singapore due to the large influx of foreigners and to inadequate policing action. Do you find Singapore to be less safe than before? Give your views here.
Problem with private insurance
Private insurance is aimed at maximizing profits. They will deny or restrict coverage for people who need insurance most. They will increase the premium on renewal on those who had claims. Those who are caught by these practices have no choice, as other insurance companies will not accept them. These points are raised by President Obama in his speech urging reform of the health care system in America. This same challenges apply to motor insurance in Singapore.
Experiences with websites
Please share your experiences with websites of big organisations. Which website is easy to use? Which is terrible?
Friday, March 19, 2010
Overseas orders for my books
I am starting to get overseas orders for my books. I suspect that they are Singaporeans who have migrated or work overseas. They bought the financial planning book, intelligence quiz and the shape quiz mini-pak.
FISCA website
Updated:
"FiSCA's website (Financial Services Consumer Association) has been updated to make it easier for you to find out what's happening in the financial world that relates to you, the consumer. The news, views & reviews section will include updates from writers that will help promote independent financial education. Members can also participate in the discussion to tap on the wisdom and experience of our members and volunteers.
Do pay the website a visit. You can follow FISCA on RSS, or why not just join FiSCA. Here's why you should join FiSCA."
"FiSCA's website (Financial Services Consumer Association) has been updated to make it easier for you to find out what's happening in the financial world that relates to you, the consumer. The news, views & reviews section will include updates from writers that will help promote independent financial education. Members can also participate in the discussion to tap on the wisdom and experience of our members and volunteers.
Do pay the website a visit. You can follow FISCA on RSS, or why not just join FiSCA. Here's why you should join FiSCA."
A responsive call center
The Straits Times published a reply from Singapore Airlines, promising to improve the responsiveness of their call center.
This problem is faced not only by Singapore Airlines but also by many large organisations in Singapore, i.e banks, telephone companies, airlines and government agencies. The key causes of the poor response are:
a) large volume of incoming calss
b) outsourcing of calls to third countries
c) mis-use of technology that frustrates the customers, e.g. automated voice response systems
d) poor method of handling the calls
A good example of a responsive call center is NTUC Income. I called 63 462663 (63 INCOME) a few days ago. The call was answered by a human voice on the 3rd ring. The staff recognized me, as my mobile phone was registered with them. They have a simple verification of caller.
I asked this question, "I have several policies with NTUC Income. Can you check if any of my policies are overdue and not paid?" This question, which required a search of life, general and health insurance policies (kept in different databases), was answered in 1 minute, "All your policies are paid up to date".
NTUC Income achieved the global award (#1) for innovation and customer service 4 years ago, when I was the CEO. It was achieved through the innovative use of low cost technology backed by a practical, common sense approach in providing customer service. I am happy to note that the high standard of customer service of the call center has persisted over the years.
Tan Kin Lian
Note: If you deal with an organisation with a bad call center, ask them to consult me at kinlian@gmail.com.
This problem is faced not only by Singapore Airlines but also by many large organisations in Singapore, i.e banks, telephone companies, airlines and government agencies. The key causes of the poor response are:
a) large volume of incoming calss
b) outsourcing of calls to third countries
c) mis-use of technology that frustrates the customers, e.g. automated voice response systems
d) poor method of handling the calls
A good example of a responsive call center is NTUC Income. I called 63 462663 (63 INCOME) a few days ago. The call was answered by a human voice on the 3rd ring. The staff recognized me, as my mobile phone was registered with them. They have a simple verification of caller.
I asked this question, "I have several policies with NTUC Income. Can you check if any of my policies are overdue and not paid?" This question, which required a search of life, general and health insurance policies (kept in different databases), was answered in 1 minute, "All your policies are paid up to date".
NTUC Income achieved the global award (#1) for innovation and customer service 4 years ago, when I was the CEO. It was achieved through the innovative use of low cost technology backed by a practical, common sense approach in providing customer service. I am happy to note that the high standard of customer service of the call center has persisted over the years.
Tan Kin Lian
Note: If you deal with an organisation with a bad call center, ask them to consult me at kinlian@gmail.com.
Decreasing term assurance for 25 years
Dear Mr. Tan,
My insurance adviser has given two proposals for me to increase my coverage:
a) critical illness protection for 35 years
b) whole life policy with critical illness rider
Which is better for me?
REPLY
For the term insurance policy, ask the adviser to give you the following options:
a) Level term for 25 years and 35 years.
b) Decreasing term (or mortgage protection) for the same period.
You can compare the rates with the benchmark rates quited in my book on financial planning. My benchmark rates are quite high, so you should be able to get a rate lower than the benchmark rate. You have to decide on the term insurance that suits your needs, by looking at the cost and coverage.
In my view, the most suitable is a decreasing term insurance policy for 25 years. I avoid critical illness policy or rider, as they are usually too expensive (i.e. poor value for money).
My insurance adviser has given two proposals for me to increase my coverage:
a) critical illness protection for 35 years
b) whole life policy with critical illness rider
Which is better for me?
REPLY
For the term insurance policy, ask the adviser to give you the following options:
a) Level term for 25 years and 35 years.
b) Decreasing term (or mortgage protection) for the same period.
You can compare the rates with the benchmark rates quited in my book on financial planning. My benchmark rates are quite high, so you should be able to get a rate lower than the benchmark rate. You have to decide on the term insurance that suits your needs, by looking at the cost and coverage.
In my view, the most suitable is a decreasing term insurance policy for 25 years. I avoid critical illness policy or rider, as they are usually too expensive (i.e. poor value for money).
Courtesy of a reply
If someone writes a personal e-mail to me, I will always give a reply. It can be a short reply like "ok" or "thank you" to acknowledge receiving an information that does not require any action (which is quite common).
If someone ask me my advice on a complicated matter, my usual reply is "let me think about it". I will give a more detailed reply in a few days time, unless I overlook it. In many cases, I will answer some of the questions immediately, and answer the rest later.
Some people are fair and considerate to me. They spend time to think about their issue and put it down in clear terms. I will try to help them as best as I can.
Other people are quite inconsiderate. They do not make the effort to write them their issue clearly to me and expect me to spend a lot of time to understand their question and find the answer. I usually give them a short reply, "Sorry, I cannot help you".
A few people send me materials to post in my blog quite regularly. They do not expect a reply from me for each e-mail. But I do send them a reply occasionally to acknowledge that I appreciate their contribution. They can also see my indirect reply, when their contribution appears in my blog.
I want to encourage people to give a reply. It is only courteous.
Tan Kin Lian
If someone ask me my advice on a complicated matter, my usual reply is "let me think about it". I will give a more detailed reply in a few days time, unless I overlook it. In many cases, I will answer some of the questions immediately, and answer the rest later.
Some people are fair and considerate to me. They spend time to think about their issue and put it down in clear terms. I will try to help them as best as I can.
Other people are quite inconsiderate. They do not make the effort to write them their issue clearly to me and expect me to spend a lot of time to understand their question and find the answer. I usually give them a short reply, "Sorry, I cannot help you".
A few people send me materials to post in my blog quite regularly. They do not expect a reply from me for each e-mail. But I do send them a reply occasionally to acknowledge that I appreciate their contribution. They can also see my indirect reply, when their contribution appears in my blog.
I want to encourage people to give a reply. It is only courteous.
Tan Kin Lian
Avoid tele-marketing call
I can recognize a telemarketing call within 10 seconds of receiving the call. My immedate answer is "I am not interested" and I put down the phone immediately. The telemarketer recognize a rejection and do not call back. If the telemarketer calls back (which never happens), I will lodge a complaint for harassment.
If someone wishes to market any product to me, they can send an e-mail to me. I can decide whether to read it or to delete it.
If someone wishes to market any product to me, they can send an e-mail to me. I can decide whether to read it or to delete it.
Suggestion to regulate all types of investments
The Monetary Authority of Singapore publishes an "alert list" in its website that identifies a long list of companies that operates investments that are not regulated by MAS. They even state that this is not an exhaustive list. This approach is not helpful to the general public.
A better approach is for Parliament to legislate the types of investments that should be regulated. I suggest the following definition, "any contract involving a return of money or delivery of future services, where the contract is advertised to the public through the media or a public talk, excluding contracts where the sum involved is less than $500".
For the avoidance of doubts, the following types of contracts required to be regulated (give a list of the types of transactions, including land banking, time sharing and many multi-level types of marketing scheme). The legislation can also identify the types of transactions that do not need to be regulated. The legislation can give the power to MAS to add or remove from the inclusion or exclusion list from time to time, with the right to appeal to the Minister.
I hope that some of our hardworking members of Parliament can bring up this suggestion to Parliament.
Please give your views on this approach and suggestions on the inclusion and exclusion list.
Tan Kin Lian
A better approach is for Parliament to legislate the types of investments that should be regulated. I suggest the following definition, "any contract involving a return of money or delivery of future services, where the contract is advertised to the public through the media or a public talk, excluding contracts where the sum involved is less than $500".
For the avoidance of doubts, the following types of contracts required to be regulated (give a list of the types of transactions, including land banking, time sharing and many multi-level types of marketing scheme). The legislation can also identify the types of transactions that do not need to be regulated. The legislation can give the power to MAS to add or remove from the inclusion or exclusion list from time to time, with the right to appeal to the Minister.
I hope that some of our hardworking members of Parliament can bring up this suggestion to Parliament.
Please give your views on this approach and suggestions on the inclusion and exclusion list.
Tan Kin Lian
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