Get full facts about the financial product

You should get full facts about the financial product before you invest in it. If there are any points that are unclear, you should ask the product seller. If you still do not understand the product, do not invest in it.

Always ask for the relevant facts to be put in writing. Do not take the verbal representations given by the seller. The seller may mislead you and later claimed that you had misunderstood the representations.

Always refer to the printed materials. If any important point is not covered in the printed materials, or is not explained in a transparent manner, you should be suspicious about the financial product. Most importantly, you should ask about the charges and commission earned by the product seller.

In the past, you could trust financial products to be transparent and fair as they were properly regulated. The standard of regulation and consumer protection has deteriorated in recent years, so you have to be careful and to do your own due diligence. 

If you are not clear about the financial product, DO NOT INVEST IN IT. Do not ask somebody else (e.g. TKL) to explain the product to you. 

--
Tan Kin Lian
www.tankinlian.blogspot.com

The Fed's regulatory errors

What were the mistakes made by the Fed in regulating the banks? Are there lessons for other central banks?

Observations about Hong Kong

Here are some observations about Hong Kong and lessons for Singapore.

Stress at FIDREC hearngs

Dear Mr Tan,

Thanks for your kind assistance and I managed to get back some compensation from the FI finally.

Nevertheless, for most of the victims like myself who had gone thru the hearings, we have to transfer our "Bonds" to the FIs and not entitled to anymore residual value. I questioned the fairness of this system, as the residual value may end up be higher than the compensation ? (so far I know all compensations are below 50%) We are not given any other options. If we do not accept the award, we have to engaged our own lawyer to fight with the giants. Many want to end this nightmare after more than a year and are forced to accept this "compensation".

Unlike HK, FIs will still refund the victims and not gain anything if the residual values are higher than the 60%-70% that had already been compensated.

In addition, I understand many cases are still pending at Fidrec, due to disputes between the IFAs & FIs. The MAS/ Fidrec has yet to settle whom should be liable for this saga, and the victims have to decide by themselves whom they want to go against .... again, is this FAIR ? If one choose to go against 2 parties, they were told to pay 2 times and have to go through 2 hearings (that means 2 times the stress!) Furthermore, Minibonds have to wait till the residual values are confirmed before able to proceed hearings with IFAs and FIs. Currently, only those bought directly with the Banks are allowed to proceed with the hearings. (Not sure why ?)

Recently, Fidrec has tried to conduct mediation with some IFAs, these are all wasting of time, as results is "we are only introducers". Yet, many are forced to attend, else, may not be able to proceed with the hearings.

I wonder why we victims have to shoulder all these stress ? We are just laymen and do not know what are the hidden "agreements" between these business partners. After more than a year, MAS/ Fidrec has to be firmed with the directions and make clear whom should we go after, rather than leave everything to the victims.

I really feel sad for the whole financial system here in Singapore .............. how to become a Financial Hub with this kind of unfair system in place ?

Many Pinnacle Notes are going bust soon ... would advice other victims to be strong, since no one able to help us.

  JL

Avoid ETF with steep fees

Some ETF have steep fees and should be avoided. Read this article. When investing in ETF, make sure that the annual fees is less than 0.5%. The STI ETF has annual fee of 0.3% only.

Need for savings and liquidity

It is important for each person to have savings and liquidity. I have suggested that each person should set aside 50% of current earnings (inclusive of CPF) for housing and the future. As CPF takes about 35% (including employer's contribution), the personal savings should be 15%. Younger people living with their parents can save a larger proportion (say upt o 30%) if they do not have to repay any study loan or contribute towards their family expenses.

It is also important for the savings to be liquid. They can be kept in a bank account to earn interest of 1% or less.  This allows the savings to be withdraw without any penalty, to meet expected cash needs, such as medical bills, down payments or temporary unemployment.

For longer term investments, the savings should be invested in financial products that have low front end charges. For example, they can be invested in stocks and bonds traded on the Singapore Exchange, where the transaction cost is 0.3% of the invested sum. They can also be invested in a diversified exchange traded fund, where the annual fee is also 0.3%. As these products typically earn a yield of 4% to 6%, the upfront charge can be recovered within one year.

You should avoid investing in financial products, including life insurance products, where the front-end charge can take away up to two years of your savings. As you need liquidity, you cannot afford to incur such a large penalty. As you have the choice of SGX products with a front end charge of only 0.3%, why pay up to 200%?

If you need life insurance cover, buy a term insurance and pay the cost of insurance. It is small. Do not worry about getting this money back. Treat it as an expense.

Make sure that your savings earn an attractive rate of return. Invest in products that have a low transaction charge (say 0.3%) and a low annual fee (say 0.3% per annum) to enjoy professional management and diversification. Make sure that you have liquidity and do not have to pay a high penalty when you need to withdraw your savings for the unexpected expenses.

Tan Kin Lian

Auto Insurance-Selecting The Right One

Automobile insurance is a term given to an insurance policy that covers and abides to seize the risk of financial loss due to an accident involving you and your vehicle. Your Auto insurance company pays most of the cost used in the repair and replacement of the damages. After buying a car the most important thing you need to do is to get your vehicle insured, not because the law forces you to do it but because it benefits you in the future. Generally people avoid spending money on buying an auto insurance policy and instead buy a simple auto insurance policy which at the time of need proves to be useless and makes them spend much more. So it is important that you choose your auto insurance very carefully.

If you search the internet you would find that there are a large number of auto insurance companies in the market, so to start with you must evaluate the automobile insurance quotes that they offer. Every company has a number of policies depending on the cover they offer and so they have different automobile insurance quotes. You must select one according to your needs and future prospects as well. While selecting an automobile insurance policy you can always take the help of state insurance department that maintains a list of all the auto insurance companies in the state and their rates. You must also have a look at the feedback and complaints about the company in the matters of providing cover.

While purchasing a new auto insurance policy you must remember to cancel the older one as you would not want to pay for two. You can also seek advice from your friends regarding the auto insurance they are using. You must remember to read the auto insurance policy carefully before buying.

Your safety is totally in your hands. Drive safely!