Monday, January 25, 2010
Sunday, January 24, 2010
Social studies - a compulsory subject
The Ministry of Education is making social studies into a compulsory subject. This is helpful in getting our young to be more social responsible and less self-centered (or selfish).
I suggest that a more important step is to reduce the competition in the school to go for the top places and win scholarships. This competition is unhealthy and brings negative consequences. My views are elaborated here.
I believe that a better approach is to educate our young to be literate, numerate, have social skills and character. We can find the leaders after they start work and solve real life problems. This view is shared by many people in this survey.
I suggest that a more important step is to reduce the competition in the school to go for the top places and win scholarships. This competition is unhealthy and brings negative consequences. My views are elaborated here.
I believe that a better approach is to educate our young to be literate, numerate, have social skills and character. We can find the leaders after they start work and solve real life problems. This view is shared by many people in this survey.
Ethical financial consultants
There are ethical consultants and bad consultants in the financial services field. The ethical consultants offer advice and products that are in the best interest of their clients. The bad consultants think of their own benefit and offer products that give bad value to their clients.
The tied consultants can only offer the products that are available to them to be sold. If they work for a financial institution that offer ethical products (i.e. transparent and fairly priced), they can earn a honest living. However, if the financial institution designs products that are meant to deceive or mislead the consumers, the consultants face a dilemma. Do they act ethically, in the interest of their clients, and avoid these products? Alternatively, do they sell these products, as they are "bribed" with attractive commissions?
It depends on the ethical and moral values of each individual consultant. Some are upright, but others are not. In our current market environment, it is more likely to find an bad consultant - but there are good ones around.
Some consumers will trust consultants that they know personally. However, there are many cases of such consultants betraying the trust and taking their friends for a ride. If you are not able to differentiate between an ethical or bad consultant, it is best to avoid them altogether.
Tan Kin Lian
The tied consultants can only offer the products that are available to them to be sold. If they work for a financial institution that offer ethical products (i.e. transparent and fairly priced), they can earn a honest living. However, if the financial institution designs products that are meant to deceive or mislead the consumers, the consultants face a dilemma. Do they act ethically, in the interest of their clients, and avoid these products? Alternatively, do they sell these products, as they are "bribed" with attractive commissions?
It depends on the ethical and moral values of each individual consultant. Some are upright, but others are not. In our current market environment, it is more likely to find an bad consultant - but there are good ones around.
Some consumers will trust consultants that they know personally. However, there are many cases of such consultants betraying the trust and taking their friends for a ride. If you are not able to differentiate between an ethical or bad consultant, it is best to avoid them altogether.
Tan Kin Lian
Saturday, January 23, 2010
Talk at NLB: Financial Planning in Time of Crisis
The talk at Yishun Library was successful. More than 60 people turned up. Due to the limited capacity, I had to carry out two sessions at 3 pm and 4.30 pm. The second session was for those that turned up late and could not be accommodated. Apologies for the inconvenience.
The talk was stimulating and enjoyable. The participants asked a lot of questions, relating to the topics and outside the topics.
FISCA (Financial Services Consumer Association) will be organising more talks in collaboration with National Library Board, to be held in the Head Office in Bras Basah Road and in other community libraries.
Many participants expressed interest in attending a 12 hour course on financial planning (covering 8 topics in more detail). More details will be released later.
The talk was stimulating and enjoyable. The participants asked a lot of questions, relating to the topics and outside the topics.
FISCA (Financial Services Consumer Association) will be organising more talks in collaboration with National Library Board, to be held in the Head Office in Bras Basah Road and in other community libraries.
Many participants expressed interest in attending a 12 hour course on financial planning (covering 8 topics in more detail). More details will be released later.
Successful start to Pro-Investor
Nearly 40 participants have registered to play Pro-Investor during the past 2 days. One participant log in 7 times and played around 30 games. Another participant achieved Level 9 - which is the top level.
I have created a new entry under Guide to share my personal experience about playing this simulation game on stock selection. I have given some tips on how you can find a technique that can reduce your learning curve. You can experiment with variations of this technique to get better results.
Picking the right stocks in the real world environment is a matter of experience and learning. There is no single magic formula that you can use, as the environment keeps changing. What you can learn is the secret of watching the right trends and making the right choices - and hope to be right 60% of the time or better. Pro-Investor aims to give you this chance to learn through experience, and to acquire a lifetime of experience within a few days. I hope that you enjoy this learning experience.
Tan Kin Lian
I have created a new entry under Guide to share my personal experience about playing this simulation game on stock selection. I have given some tips on how you can find a technique that can reduce your learning curve. You can experiment with variations of this technique to get better results.
Picking the right stocks in the real world environment is a matter of experience and learning. There is no single magic formula that you can use, as the environment keeps changing. What you can learn is the secret of watching the right trends and making the right choices - and hope to be right 60% of the time or better. Pro-Investor aims to give you this chance to learn through experience, and to acquire a lifetime of experience within a few days. I hope that you enjoy this learning experience.
Tan Kin Lian
Friday, January 22, 2010
Restore trust in participating policies
Participating policies, i.e. endowment or whole life policies, are designed to provide a guaranteed yield at a modest level (say 1% p.a.) and to provide variable reversionary and terminal bonuses that can increase the yield to a higher level. The bonuses are declared each year based on the financial results of the insurance company.
In the past, most life insurance companies were able to give an attractive yield to the policyholders. The insurance company invest the money well with a long term perspective and were able to achieve an attractive return. After taking away a fair proportion to cover their expenses and profits, they distribute most of the surplus to the policyholders with a high rate of bonus.
The insurance company maintains a manageable number of policy series, and distributes the same rate of reversionary or terminal bonuses to all policies in the same series. The policyholders in each series can see that they have been treated equally with other policyholders in the same series.
This practice has changed in recent years. Insurance companies have introduced too many policy series and distributes different rates of bonuses to policyholders in the same series. It is difficult for any policyholder to be sure that they are getting the fair rate of bonus, based on the actual experience of the fund.
To make matters worse, some insurance companies retain too much surplus in the fund, under the purported aim of "smoothing the bonus", or use the surplus to pay for high expenses, resulting in a poor yield to policyholders.
It is the lack of clarity that gives a bad name to participating policies in recent years. Many policyholders find that the projected bonuses made at the inception of the policy had been severely reduced due to "difficult investment climate", but it is not clear if the reduction is due solely to this cause or to other unethical and unfair practices.
To overcome this problem, the insurance company can adopt the "asset share" method to distribute bonus. This method ensures that each policyholder gets its fair asset share on the surrender or maturity of the policy based on the actual experience for that policy. It is quite to adopt this method using modern computer technology.
Some countries make it mandatory for the "asset share" method to be used, to ensure that the policyholders are fairly treated. The regulator in Malaysia took this step many years ago, in their effort to protect the interest of the consumers and to ensure fair practices.
In Singapore, many insurance companies have severely reduced their reversionary and terminal bonuses in recent years, often more than expected. Many consumers have lost trust in the participating policies and the insurance companies that sold these policies.
I hope that the regulator in Singapore will implement the "asset share" method early, to ensure that all policyholders are given a fair return in this volatile situation and that the trust in participating policies can be restored.
Tan Kin Lian
In the past, most life insurance companies were able to give an attractive yield to the policyholders. The insurance company invest the money well with a long term perspective and were able to achieve an attractive return. After taking away a fair proportion to cover their expenses and profits, they distribute most of the surplus to the policyholders with a high rate of bonus.
The insurance company maintains a manageable number of policy series, and distributes the same rate of reversionary or terminal bonuses to all policies in the same series. The policyholders in each series can see that they have been treated equally with other policyholders in the same series.
This practice has changed in recent years. Insurance companies have introduced too many policy series and distributes different rates of bonuses to policyholders in the same series. It is difficult for any policyholder to be sure that they are getting the fair rate of bonus, based on the actual experience of the fund.
To make matters worse, some insurance companies retain too much surplus in the fund, under the purported aim of "smoothing the bonus", or use the surplus to pay for high expenses, resulting in a poor yield to policyholders.
It is the lack of clarity that gives a bad name to participating policies in recent years. Many policyholders find that the projected bonuses made at the inception of the policy had been severely reduced due to "difficult investment climate", but it is not clear if the reduction is due solely to this cause or to other unethical and unfair practices.
To overcome this problem, the insurance company can adopt the "asset share" method to distribute bonus. This method ensures that each policyholder gets its fair asset share on the surrender or maturity of the policy based on the actual experience for that policy. It is quite to adopt this method using modern computer technology.
Some countries make it mandatory for the "asset share" method to be used, to ensure that the policyholders are fairly treated. The regulator in Malaysia took this step many years ago, in their effort to protect the interest of the consumers and to ensure fair practices.
In Singapore, many insurance companies have severely reduced their reversionary and terminal bonuses in recent years, often more than expected. Many consumers have lost trust in the participating policies and the insurance companies that sold these policies.
I hope that the regulator in Singapore will implement the "asset share" method early, to ensure that all policyholders are given a fair return in this volatile situation and that the trust in participating policies can be restored.
Tan Kin Lian
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