I was surprised to find that consumers have to read a 117 page prospectus on the DBS preference shares. I recall that, one or two years ago, MAS had a requirement for financial products to be described in a product highlight sheet. Is this requirement already implemented? Can someone working in MAS or the financial sector enlighten me?
Answer
I spoke to a MAS official. She told me that the requirement of a Product Highlight Sheet has been accepted by MAS but has not been implemented yet. Still, it would be nice for DBS to provide this PHS, rather than give a lengthy prospectus to the retail public.
Thursday, November 11, 2010
Preference shares - perpetual and redeemable
Dear Mr. Tan,
The DBS preference shares are perpetual (i.e. have no expiry date), but are callable (redeemable) by the bank in 2020. Does it mean that DBS will return the capital investment to the investors in 2020?
REPLY
The perpetual nature allows DBS to keep the money forever and to pay the dividend at the specified rate.If DBS is in trouble, they may not pay the dividend (you have to check on this point).If DBS goes bankrupt, you may lose all of the invested sum (but this risk is very small). A preference shareholder has a higher risk that a bond holder but lower risk than DBS sharehholders.
The DBS preference shares are perpetual (i.e. have no expiry date), but are callable (redeemable) by the bank in 2020. Does it mean that DBS will return the capital investment to the investors in 2020?
REPLY
The perpetual nature allows DBS to keep the money forever and to pay the dividend at the specified rate.If DBS is in trouble, they may not pay the dividend (you have to check on this point).If DBS goes bankrupt, you may lose all of the invested sum (but this risk is very small). A preference shareholder has a higher risk that a bond holder but lower risk than DBS sharehholders.
DBS has the option to redeem the preference shares in 2020 and pay back the shareholders. They will do so, if they find that the interest rate is low and they can refinance the preference shares at lower cost. However, if interest rate goes up high, they are likely to keep the preference shares beyond 2020.
The preference shareholder can sell the shares at any time through the stockmarket, at the prevailing market price. The price will increase above par, if the market interest rate has dropped. the price will decrease if the market interest rate increases.
I have asked a financial expert to make a brief analysis and post the details in the FISCA website (www.fisca.sg). It will be available to FISCA members after login.
Medishield for a pensioner
Dear Mr Tan
Can you advise if there is a need for a pensioner to purchase Medishield. As a pensioner, the medical scheme covers 85% of the medical charges. I am worried that it may come a time that I may not be able to pay the 15% medical charges if the amounts are very large.
REPLY
Frankly, I don't see why the bill should be so large. If the cost of treatment is really expensive, you can opt for B2 ward where the cost is capped. The 15% can be paid from Medisave savings. In fact, if you have a Shield plan, it is complicated (with deductible and co-payment) that it may not cover your 15% co-payment. So, you may be paying money for nothing.
Can you advise if there is a need for a pensioner to purchase Medishield. As a pensioner, the medical scheme covers 85% of the medical charges. I am worried that it may come a time that I may not be able to pay the 15% medical charges if the amounts are very large.
REPLY
Frankly, I don't see why the bill should be so large. If the cost of treatment is really expensive, you can opt for B2 ward where the cost is capped. The 15% can be paid from Medisave savings. In fact, if you have a Shield plan, it is complicated (with deductible and co-payment) that it may not cover your 15% co-payment. So, you may be paying money for nothing.
DBS Preference Shares
Hi Mr Tan,
However the prospectus is a 117 page long document, and it is not easy to understand. Buried inside this huge document is a section on risks, but the language is extremely difficult to understand. If DBS is targeting retail customers, the risks associated with this investment should be clearly articulated. It seems that DBS has yet to learn its lesson from the Lehman saga.
I have seen a lot of ads recently on the issuance of DBS Preference Shares with a dividend rate of 4.7% (emphasised in huge fonts). I wanted to find out more and read up its prospectus on
However the prospectus is a 117 page long document, and it is not easy to understand. Buried inside this huge document is a section on risks, but the language is extremely difficult to understand. If DBS is targeting retail customers, the risks associated with this investment should be clearly articulated. It seems that DBS has yet to learn its lesson from the Lehman saga.
REPLY
I have ased a financial expert to make an analysis of this preference shares. The analysis will be available to posted in the members' section of the FISCA website and will be available only to members after login. Go to www.fisca.sgBut agents exert powerful sway over buyer's choice
Published in the Straits Times
SENIOR Minister Goh Chok Tong's observations about keeping life insurance coverage affordable
focused on the conventional practice of recommending whole life or savings plans instead of term insurance ('Keep insurance affordable: SM Goh'; Oct 23).
This practice is evident in a finding published by the Life Insurance Association of Singapore, which stated that Singaporeans are under-insured by 67 per cent, or by as much as $329,223 based on average household expenses; when term insurance is, by contrast, far more affordable.
One aspect of Mr Tan Kin Lian's comments on Wednesday ('Two key factors insurance buyers don't know') describes the inherent conflict of interest between a fatter commission and the consumer's immediate protection needs.
Usually, if a proper financial needs analysis is done prior to making the sale, a buyer's required insurance protection may well amount to hundreds of thousands of dollars. Instead, what usually happens in an insurance sale is that the recommended products, while meeting the buyer's budget constraints, do not satisfy his protection needs.
In fact, private bankers or insurance agents who sell savings plans with embedded insurance protection often use the savings elements to attract and keep consumers to a long-term commitment of their budget, thereby depriving them of a future budget for protection needs and giving them the impression that insurance protection is costly.
If responsible advisers recommend term insurance, consumers can easily meet coverage needs without resorting to high-premium, low-coverage products like whole-life or endowments.
Last Friday's reply by Mr Jeffrey Tan, president of the Insurance and Financial Practitioners Association of Singapore ('Choice of insurance plan hinges on affordability, buyer's needs'), omitted an agent's powerful influence on the client's choice.
There are three ways to better police recommendations:
* Agents should be trained to offer needs-based advice rather than just product advice.
* Conduct compliance checks on an agent's recommendations to meet protection needs; and
* Check whether a client who picks a savings plan over protection needs has been given a booklet which tells him about the benefits of term insurance within the free-look period, so he can reconsider his choice.
Brendan Yong
http://www.straitstimes.com/STForum/Story/STIStory_602320.html
SENIOR Minister Goh Chok Tong's observations about keeping life insurance coverage affordable
focused on the conventional practice of recommending whole life or savings plans instead of term insurance ('Keep insurance affordable: SM Goh'; Oct 23).
This practice is evident in a finding published by the Life Insurance Association of Singapore, which stated that Singaporeans are under-insured by 67 per cent, or by as much as $329,223 based on average household expenses; when term insurance is, by contrast, far more affordable.
One aspect of Mr Tan Kin Lian's comments on Wednesday ('Two key factors insurance buyers don't know') describes the inherent conflict of interest between a fatter commission and the consumer's immediate protection needs.
Usually, if a proper financial needs analysis is done prior to making the sale, a buyer's required insurance protection may well amount to hundreds of thousands of dollars. Instead, what usually happens in an insurance sale is that the recommended products, while meeting the buyer's budget constraints, do not satisfy his protection needs.
In fact, private bankers or insurance agents who sell savings plans with embedded insurance protection often use the savings elements to attract and keep consumers to a long-term commitment of their budget, thereby depriving them of a future budget for protection needs and giving them the impression that insurance protection is costly.
If responsible advisers recommend term insurance, consumers can easily meet coverage needs without resorting to high-premium, low-coverage products like whole-life or endowments.
Last Friday's reply by Mr Jeffrey Tan, president of the Insurance and Financial Practitioners Association of Singapore ('Choice of insurance plan hinges on affordability, buyer's needs'), omitted an agent's powerful influence on the client's choice.
There are three ways to better police recommendations:
* Agents should be trained to offer needs-based advice rather than just product advice.
* Conduct compliance checks on an agent's recommendations to meet protection needs; and
* Check whether a client who picks a savings plan over protection needs has been given a booklet which tells him about the benefits of term insurance within the free-look period, so he can reconsider his choice.
Brendan Yong
http://www.straitstimes.com/STForum/Story/STIStory_602320.html
Gideon Lee: Buyers, not agents, decide the products they want...
Published in Straits Times
I AM curious about Mr Tan Kin Lian's ardent advocacy of term insurance
over whole-life and investment-linked plans
('Two key factors insurance buyers don't know'; Wednesday) in his reply
to Insurance and Financial Practitioners Association of Singapore president
Jeffrey Tan's letter
('Choice of insurance plan hinges on affordability, buyer's needs'; last Friday).
When Mr Tan Kin Lian was the chief executive officer of NTUC Income for 20 years,
he endorsed the sale of thousands of whole-life and endowment policies
and investment-linked plans (ILP).
He isn't quite right when he states that agents prefer selling whole-life plans
instead of term insurance because they can earn significantly more commission.
Policies are usually sold and bought based on a client's budget limit
rather than the sum assured.
An agent earns the same commission for a term plan
that charges a monthly premium of $200 a month
as he does for a whole-life policy or ILP with the same premium.
Most buyers also prefer whole-life and ILP over term insurance
because they do not believe they will ever need to claim on their policy,
especially for critical illnesses, and want to get their premiums back.
Almost every client of mine asks me how he can retrieve his premiums
if nothing happens to him.
Mr Tan Kin Lian inflates the commission an agent earns.
If agents earn as much as he thinks,
recruitment shouldn't be an insurance manager's biggest headache as it is now.
Mr Tan is also wrong
when he states that distribution costs are paid to agents for the advice they give.
Distribution cost, as the name suggests, is commission paid for selling the product
and is not an advisory fee.
An agent is paid according to the amount of money he brings in.
To offer an analogy, a doctor's charge for consultation
is separate from the income he earns through selling medicine in his clinic.
In the agent's case, the consultation is free.
It is not the agent's fault if a customer needs more cover.
Mr Tan Kin Lian's one-policy-fits-all-needs solution
does not help clarify the different insurance requirements of buyers.
Gideon Lee
My comments
I hope that some consumers will write to the Straits Times to show how they have been misled by insurance agents into buying the bad financial product.
I will be writing a reply to the points raised by Gideon Lee.
Parker Duofold Fountain Pen | Parker 51 Fountain Pen
Parker Duofold Fountain Pens
“Duo” was a word which was common in marketing circles of the time and the modern equivalent would be “mega”. It sought to connote the excellence of the Duofold over it’s market competitors and was a big pen in many ways(price wise and size wise at 5.5 inches for the original Senior Duofold)
The Duofold was made from a shiny hard rubber which was followed in 1926 when Parker introduced the Duofold made with an “unbreakable Permanite” which was a type of plastic made by DuPont for Parker.
Churning of Life Insurance Policies
Some life insurance agents 'churn' their client's policies to earn a fat commission again. Does this practice apply to unit trust, where the upfront commission is 3% of the invested amount? Here are my views. Consumers should be aware about this practice and avoid being churned by the agent.
www.tankinlian.com/latest.aspx
www.tankinlian.com/latest.aspx
Online Marketing | Creating Websites For Profit | BusinessAndLegal.ie
This post is the first in a series where I will lay out the simple business plan which earns great money online for me every day (and night), which is stunningly effective and which involves Google and Amazon depositing money directly into my bank account.
Financial Planning Talk - 4 Dec 2010
I am giving a talk on financial planning on Sat 4 Dec from 3 tp 6 pm. Details can be found at http://www.fisca.sg/ (Events). I encourage consumers to attend this talk and learn about the basics of financial planning. This is specially suitable for young people entering the workforce for the first time. By being educated, you will avoid being misled into buying the wrong life insurance policy that will take away a large proportion of your future lifetime savings. The book, Practical Guide on Financial Planning, will be given free to all participants.
Spend 3 hours and $36 ($10 for FISCA members) and avoid making a bad mistake. Parents should encourage their children (who are entering the workforce) to attend this talk.
Tan Kin Lian
Spend 3 hours and $36 ($10 for FISCA members) and avoid making a bad mistake. Parents should encourage their children (who are entering the workforce) to attend this talk.
Tan Kin Lian
Talk to NTU Risk Management Society
I gave a talk to 50 members of the risk management society of NTU. The seminar room was packed. I told the following stories which they found to be fascinating:
Invest in Gold Bars
Dual Currency Deposit
Land Banking
I hope that they remember the stories and learned about the risk of being cheated or exposed to high risk that they were not aware of. I also told them to share these stories with their parents, so that they will not be misled into bad investments.
I encourage my readers to attend the talk on financial planning, and to encourage your friends to attend the talk. Spend 3 hours and $30 and avoid losing $30,000 or more through a bad investment. Invest in your financial education. Encourage your friends to make this investment too!
Tan Kin Lian
Invest in Gold Bars
Dual Currency Deposit
Land Banking
I hope that they remember the stories and learned about the risk of being cheated or exposed to high risk that they were not aware of. I also told them to share these stories with their parents, so that they will not be misled into bad investments.
I encourage my readers to attend the talk on financial planning, and to encourage your friends to attend the talk. Spend 3 hours and $30 and avoid losing $30,000 or more through a bad investment. Invest in your financial education. Encourage your friends to make this investment too!
Tan Kin Lian
Visit to Masdar City
I visited Masdar City, which is near the Abu Dhabi airport to view the development. It is one large construction site. The project has been delayed. I was not able to get an appointment for someone to show me around the site (as I did not make prior arrangement). So, it was quite disappointing. It may take a few more years before this development, which is billed as a city of the future, will be ready.
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