Postings on Land banking

For investors who are caught in land banking investments or have been approached, you can read my postings on this topic by clicking on the label "Land Banking" on the right.

Debt and delusion

This is an interesting book about the collapse of capitalism.

Postings on Benefit Illustration

I have made over 20 postings about the benefit illustration that comes with a life insurance policy. I have collected them together under the label "Benefit Illustration" shown on the right. I urge consumers to follow my tip and understand what to look for in the benefit illustration.

Life insurance - effect of deduction

When an agent tries to sell you a life insurance policy, he (or she) is required to give you a benefit illustration. It is a detailed document comprising of more than 15 pages and contain a lot of confusing information. You only need to look for 1 figure - "effect of deduction" at the end of the 20th year. Calculate this amount as a percentage of the "accumulated premium". If this percentage exceeds 15%, you should avoid the policy. For example, if the effect of deduction is $25,000 and the "value of accumulated premium" is $100,000, the effect of deduction is 25%. As this is higher than 15%, you should NOT buy the insurance plan. In this example, you are paying $10,000 more than is fair to the consumer.

For investment linked plans, you are not given the value of accumulated premium. In this case, you have to add up the "total cash value" with the "effect of deduction" to get the "value of accumulated premium. Take the figures based on 5% projection (as 9% is unrealistically high). If the total ash value is $100,000 and the effect of deduction is $30,000, the "value of accumulated premium is $130,000 and the effect of deduction is 23%, which is too high.

Do not invest in any insurance policy, where too much of the accumulated premium is taken away from you. It is your money, and you deserve a fair rate of return for your years of hard work and savings. Do not give it away. Buy a term insurance for 25 years and invest your savings in a low cost investment fund, such as the STI ETF, Read about this concept in my book, Practical Guide on Financial Planning.

Tan Kin Lian

Need for stronger regulation

I spoke to a professor in a UK university who was previously an actuary working in the insurance industry. He told me about the background of the regulatory environment and the mis-selling over the past decades.

For many years, the authority in the UK regulated the sales process, disclosure of information and expected financial advisers to observe  ethics and professionalism. It did not work. Many agents sold bad products to their customers to earn high commisison. The regulator imposed heavy fines on the financial institutions  but it still did not solve the problem.

The regulator has finally decided to ban the payment of commission to agents. This will take place in the near future.

Singapore followed the UK approach in regulation. But the authority in Singapore did not impose the heavy fines on the institutions for mis-selling. The situation is quite bad in Singapore and many consumers are offered bad products that gave them a poor return on their savings. What will Singapore do, now that they role model (UK) has found their approach to be a failure?

Tan Kin Lian

False hope

I spoke to an investor in a land banking product. He has invested for nearly two years and is still waiting for his  invested sum to be returned to him. He has not even collected the interest payment of 12.5%. He has since lost his job and his money is tied up in this investment. He has been promised a few times that the company is finalising the sale of the land and expects to repay the investment in the near future. It never materialised but he still remained hopeful and naive.

He is reluctant to lodge a complain with the authority or talk to the newspaper as it might cause the company to collapse. He still harboured the hope that his money will be repaid to him in the future. He even hoped that the company would be successful in the sales to new investors, so that they can collect the money to repay him. This is a selfish attitude, which reflects a shameful character of many Singaporeans.

What this investor does not realise is that there is virtually no chance of getting approval to develop the land or for the land being sold at a profit. The company tells a false story to keep the naive investors from taking action to enforce their rights. As time goes by, their chance of recovering their invested money will diminish, and it will soon be too late. Even if the company is able to get new funds, they will not repay the naive and weak investors. They will just cook up another excuse to give false hope.

If you are caught in this situation and you wish to meet other investors in the same situation, give your particulars here.

Trapped in a bad investment

Note: If you are trapped in this type of investment and wish to meet other investors in similar situation, give your details HERE.

A company selling foreign land plots and other products gave a put option to the investor to sell back the product at the end of 6 months with interest at 12.5%. Many investors invested on this product on the basis of the put option. At the end of 6 months, the investor exercise the put option, but the company refused to honor it. They gave many excuses and did not pay back the money as promised. In the meantime, the company continued to sell similar products to many new investors.

The investors were at a loss. Some engaged a lawyer to take legal action, but it is taking a long time, is costly and uncertain. Some complained to the authority, but were told that it is a civil matter for which they have to engage a lawyer. What is the best way for the investor to act now?

Can the authority stand by and do nothing, while more investors are being trapped in this type of investment?

Tan Kin Lian

Singapore's Big Bet is about to Pay Off

Here is an optimistic report about the impact of the two integrated resort on tourism and economic growth for Singapore.