Sample financial plans

Here are the sample financial plans for:

Age 25
Age 35
Age 60

The reflect the financial situation of people at various stages of their life. You can view the financial plans to understand the approach and request for a projection for your own situation in this website, http://projects.easyapps.sg/life21d/Planning.aspx

Even those who approach retirement need a financial strategy on how to invest their retirement savings to get a good yield. The sample projections show the importance of:

• Adjusting the capital sum and monthly income at retirement for the effect of inflation
• Getting a yield at least 2% higher than inflation
• Avoid buying the bad financial products that gives a low yield or have high risks.

Tan Kin Lian

Unethical practice by insurance agents

Hi
I recently came across a practice by some agents which i find rather uncomfortable. But there is nothing much I can do about it so I hope you can raise some awareness about this so as to prevent more people from falling victim.

The scenario is as follow: Agent/financial advisor went back to all his/her existing/orphan clients with an regular ILP plan and told them about a new plan which is a similar ILP(change in version/name) and advise them that they can get more coverage with the same regular premium. client took up the plan without realising that the first ILP will be going into non forfieture.

After 2 years, the client can terminate his first ILP and get back a sum of money.
This is very unethical as the client as the client could have avoid unnecessary charges by maintaining the initial plan instead of getting the new ILP.
Agent/FA gets away with the commsion, production as non forfieture is not considered as replacement for some Insurance company.

I guess you have better resources to educate the client or to engage the relavent department to put a stop to this. Hope to clear the bad name of insurance.

REPLY
It is very sad that insurance agents are acting unethically and the insurance company and the regulator are not taking action to stop the abuse. This type of case is quite rampant. It is easy to catch the financial adviser who engage in this abuse, if the regulator is willing to take the trouble.

Big professional liability risk

Financial advisers are not aware that they face a big professional liability risk. They are selling large life insurance policies to high net worth individuals, without explaining  the distribution cost (more than $100,000) or the effect of deduction (more than $500,000).

When the customer learns about these huge charges at a later date, they are likely to engage a lawyer to sue the financial advisers for negligence. It will be easy for the lawyer to prove that the financial adviser had failed to give proper advice, or worse still, had deliberately withheld relevant information or misled the customer. The damages could be large and the legal fees will add to the damage. One strong argument is that the financial adviser had breached the code of ethics and professionalism.

The financial adviser will not be able to hide behind the excuse that "they are disclosed in the benefit illustration". It is the duty of the financial adviser to explain these key points to the customer, so that the customer can make an informed decision. The failure  to provide the proper explanation will be taken against the financial adviser - who has a fiduciary duty. The insurance company can get away by saying, "we rely on the financial adviser to give proper advice to the client" but it will be difficulty for the financial adviser to escape the liability.

It is likely that some lawyers may take the case for the consumer on a special understanding, similar to a contingency fee arrangement. When this type of arrangement is made, it is likely that many cases will be taken up. Financial advisers should be careful about their role, or they can be easily bankrupted by a few of these legal suits. The days of lax supervision and non-accountability may be over.


Tan Kin Lian

Unfair conversion rate

Dear Mr. Tan,
I am a customer of a bank and responded to their RMB timed deposit promotion, which pays an interest slightly above norm. The bank converted my existing savings in SGD into RMB at their "internal exchange rate" at 36 pips above market rate and did not get my prior approval to the conversion or provided any documentation of the transaction. Is this transaction fair to the consumer and is this valid?

REPLY
It is not fair for the bank to convert your money at their exchange rate without getting your agreement to the rate. Here are the steps that you can take:

1. You can write a letter of complaint to the CEO of the bank giving your account of what has happened and why you felt that you were not fairly treated, i.e. if you were told about the conversion rate, you would not have placed the deposit. You can ask them to reduce the spread from 36 pips to say 10 pips or whatever you consider to be a fair rate.

2. If you do not get a satisfactory reply, you can lodge a complaint with FIDREC. See www.fidrec.com.sg for the process. You can also pay $50 to FISCA (www.fisca.sg) for someone to help you to write the complaint.

3. You can also consider writing a letter to the newspaper.

Single Premium Heritage Plan

Dear Mr Tan
I will like to ask you on your opinion on Single Premium Heritage plan from Manulife Financial. Please advise if it a good plan for investment.

REPLY
I find the policy to be quite complicated and not easy for me to understand. My advice to you is never to buy a policy that you do not understand, especially when you are putting in a large single premium.

It is the job of the agent to explain the policy to you. As the agent can earn a big commission by selling the policy to you, you should be wary that the agent may not tell you the full picture, so you should not invest your money until you are completely satisfied and has verified the details.

I saw that the distribution cost (i.e money taken from you) is more than $100,000 and the effect of deduction could be more than $1 million. Are you sure you want to give away so much money?