Tuesday, September 30, 2008

Understating Risk, Overstating Benefits

Blood on the street / Maximum Pessimism???
There was blood everywhere round the world. The Financial markets are flushed with a sea of red. There is so much fear and uncertainty that the market becomes psychologically driven. There was also a lot of frustration and unhappiness on all the mis-sellings of certain Financial Products such as Pinnacle Notes, Lehman Minibonds, etc that made the banks CEOs rich.

Baron Rothschild is credited with the expression "The time to buy is when there's blood in the streets." The late John Templeton was known for his philosophy of investing at "the point of maximum pessimism." And the famous money manager Peter Lynch has written that "In many ways, the key organ for investing is the stomach, not the brain."

It is easy to say that when things are going well, but when we are in this environment full of fear and uncertainly and with the US Law makers just rejected their $700B bailout plan. its certainly very hard to convince anyone on the idea of accumulating funds now.

My advice for my clients will be to stay invested if you are still in it. It is too difficult to try time economic and market cycles, and that it is much wiser to follow a disciplined investment process. Its a hurricane out there, if you jump now, you have a higher chance of getting drown.

If you have spare cash, its a good time to accumulate in a gradual manner. We do not know if its the bottom but we believe that its somewhere near the low and the market will comes back alive when most of us are still pessimistic and hoping the market go down further.


Understating Risk , Overstating Benefits
One of my client called me and complained about how her RM convinced her 2 months ago into buying Foreign Exchange Fixed Deposits currently at a loss of 6% and the DBS High Note 5, which is currently pending pricing valuation. She is actually a very low risk investor who always look for the highest Fixed Deposit or Endowment funds. She went into these investment purely because the RMs understated the risk involved.

RM turning into Currency Traders?
Over a short 2 months period, she was told to switch among different currencies ranging from Euros, Aussie and NZD. She felt stressed with all these currency movement and wish to redeem her deposit. It was only then she discovered that she had lost 6% in just 2 months. As the deposited amount is quite substantial, 6% means a lot to her.

How I feel about this?
I'm certainly not an expert in currencies but I'm surprised that the RMs in the banks are. They are able to tell when to trade currencies for their clients. To me, forex is for professionals and real savvy investors and certainly not for anyone on the street. I'm not sure what qualifications and experiences these RMs have, that they are able to recommend and switch currencies for their clients.

She is currently holding on to the New Zealand Dollar. What is your current view of this currency?

Monday, September 29, 2008

NTUC Income - Hard to claim???

A panicky client who called in the early morning
I was still in my dreamland when I received a call at 8am last Wednesday (24th Sep). My client asked me why NTUC Income dropped client unreasonably. I was very blur and don't know what she is trying to tell me. She told me to read the Straits Times page B1 and call her back. I thought something serious happened in NTUC Income like the AIG saga and rushed to 7-11 to buy the Straits Times.

It was a report about a Car Insurance case which has nothing to do with this client who had purchased an Incomeshield plan. I read the report, called her back to explain about the motor insurance case and reassured her that it will not affect her incomeshield. She told me that she regretted taking up the Incomeshield plan from me and wish to change insurer. I don't know whether if shes already poisoned with the thoughts that NTUC don't pay claims by someone else and prompted her to terminate her existing plan.

My topic today is why some people have the impression that NTUC Income is a poor paymaster when it comes to claims.

1) Poison fed by advisers from NTUC Income competitors
* Its common to hear advisers from companies telling their clients not to buy from NTUC Income because NTUC Income don't pay claims.
* They like to use 3 articles
a) The report by Straits Times, think its May07 that says that NTUC Income is the slowest in settling Incomeshield Claims.
b) The report by Straits Times that says that NTUC Income stop paying PTD claims because the person is able to sign cheque for his family business.
c) The letter sent out by NTUC Income in 2002 and 2003, declaring a cut in bonuses
* I'm not going to argue on each cases but what I want to say is that NTUC Income is actually quite fast in settling claims unless inadeqate info is given at point of claims where delay is expected.
* I had helped my clients with many many claims ranging from Medical, Accident, Travel, Critical Illnesses and even Death. Most of the claims were settled without a hitch.

2) The Motor Insurance Virus
* NTUC Income is a composite insurer and they have a major market share in their motor insurance business.
* Motor claims are notoriously high with exaggerated payout. Considerable time are required for investigation and can take a long time to settle.
* Some journalist do not project an accurate picture in their newspaper report. Clients usually only remember such negative reports and never see the reply from the management to hear the other side of the story.
* Most major insurers such as Prudential, GE and Manulife don't have this problem.

3) Their Core Customers who lack understanding
* NTUC Income, as a cooperatives aims to help the lower income group to ensure that the under privelege group of clients get some insurance cover. This group of clients are normally not highly educated and do not fully appreciate the type of cover they had got for themselves.
* For example, they purchased a Critical Illnesses Term plan and demand the company to pay for their hospital bill thinking that its a H&S plan.
* So when claims cannot be paid out, words spread fast in the coffeeshops.

Perhaps, someone may give me more reasons why NTUC Income is always the target for people to point fingers at. I also like to highlight that its always better if there is an adviser to help you with claims matter because they are able to assist you to contact the right person when there is any delay.

Saturday, September 27, 2008

My Birthday Wishes

It was my birthday 2 days ago. I tried my best to give myself a full day break and avoid work of any kind. Though I made sure I don't touch my computer, my phone still rang several times and many queries via sms. I am simply married to my computer and addicted to work. I felt so uneasy for not checking email for just 1 day.

Birthday certainly don't looks as exciting as before because its just another reminder that I'm getting old. I'm happy to receive a few birthday sms from good friends. I'm also happy that my wife also took a day off from her busy schedule to accompany me. She accompanied me to Ktv to sing. She accompanied me to eat my favourite Ben and Jerry Strawberry Cheesecake ice-cream and she treated me to Hanabi for a Japanese Buffet Dinner. Of course, I also received my birthday gifts from her.

I'm not a successful, intelligent, rich or good looking guy and I felt very blessed that she had chosen me as her life partner. I worked very hard because I want her to feel secured that I'm capable to support a family. She had encouraged my career move out of NTUC Income after I was rejected twice for a Unit Manager Position in the company. It was rather depressing period because I was not even granted an interview for the position and was reject flat via email that they are looking for someone with good sales record.

I think that their rejection is a blessing in disguise because I'm a happier person in my new company. I'm spending more time analysing portfolios and financial planning rather than doing roadshows, door-knocking and telemarketings which I used to do in the past. I discovered that my strength lies in Advisory and not in Sales.

I have 2 birthday wishes this year. To achieve income stablity in my work and to have a baby in the year of Ox. I'm confident that these will be granted with God's blessings.

Tuesday, September 23, 2008

The 6 Steps Financial Planning Approach

Financial Planning is not a rocket science or something very complicated. Many people thought they know everything about their finance but when the pieces are not properly glued together, they somehow will still be confused.

Our responsibility as Financial Planners are to help glue all these pieces together by encouraging them to go through the process of Financial Planning. Once the blue-print are drawn and foundation laid out, they will have a structured plan towards their financial goals. They will no longer think that Financial Planning is only about how much they spend on insurance monthly and Financial Planners as someone who are just trying to sell them an insurance plan.

Financial Planning can be a tedious process for both the client and the planner and hence resulting in many "Financial Planners" choosing not to plan for their clients. 20% of their time is probably introducing a quick concepts and 80% of the time are on how to close the deal. (All in 1 day!!!)

The interesting part is that they are able to derive a recommended insurance coverage without understanding their existing insurance, net worth and cashflow. They are able to derive the amount to save solely based on client's declared budget without understanding their short, mid and long term goals and how the budget are derived.

Today, I like to share the standard 6-steps Financial Planning approach. Though I may not be able to express better than a textbook written by professors or academics, I'll try my best to explain in my own words which I feel its easier to understand.

1) Establishing and Define Client-Planner Relationship
* The planner and Client have to be properly introduced to each other. The planner can take this chance to show his personal and company profile.
* Both of them have to set certain expectations for each other in the Financial Planning Process. * The fees structure and complain mechanism are also be explained.

2) Fact Finding and Goal Setting
* This is the tedious part for the client where he/she will be asked a lot of questions with regards to his Goals, Financial Data, Income/Expenses, Existing Insurance and Investment portfolios, Risk profiling, etc.
* The skill of the Financial Planner is crucial in asking the right questions and understanding the clients Financial needs
* Its more of a process of data collection of both qualitative or quantitative.

3) Financial Analysis and Evaluation
* This is the most tedious part for the planner where he/she have to crunch all the data and systematically analyse them.
* The planner is able to check the client's current financial health by seeing his cash-flow pattern and financial ratios
* The planner also have to detect clients's potential short and long-term financial problems.

4) Developing and Presenting the Financial plan
* The proper Financial Plan should contains the following elements:
a) Net Worth statement - Understanding your balance sheet
b) Budget and Cashflow management
c) Risk Management and Insurance Planning
d) Assets and Liabilities management
e) Investment Planning
f) Retirement Planning
g) Tax Planning (Limited scale)
h) Estate Planning (Limited scale)
* There is a proper analysis system for each of the above element and the essense must be properly presented to the client in order for him/her to link these elements together.
* An initial recommendation can be convened to the client at this stage.

5) Implementation
* On agreement of the recommended action plan, the planner shall draw a proposal based on an analysis of the most suitable plan whether its insurance or investment from all the providers. An ethical planner will ensure that the client get the best value out from these plans.
* Other professionals such as Lawyers or Tax Accountants might be needed at this stage especially when more complicating tax or estate issues are involved.
* Time-line are set on when and how the implementation shall take place

6) Monitor and Review
* There should be a tracking mechanism to monitor if client are on track to his/her financial goals and a paper trail to record changes along the way.
* On certain occasions such as additional to family and marriage, a full review of the financial plan might be necessary.

Financial Planning can be a tedious process but its definitely worthwhile for both the planner and client to ensure the planner recommended the right plan and the client get the best value.

Saturday, September 20, 2008

Problem of Low EQ and Salemanship

I had written so much serious stuffs lately and just feel like writing something lighter before I head back north to Malaysia again tomorrow morning.

I usually am not able to express myself very well or talk to my clients as if we are good friends. I always try to find something to talk especially when a long silent broke between me and my client. Sometimes, I rather that I'd not open my mouth in the first place because I always say the wrong thing once I open my mouth. I like to share a few of my recent experience with you to how you show lousy my salesmanship and EQ are.

(All these incidents happened within September 08)

Apple, Orange and Dog
* I was at my client's place as we were discussing on the type of plans suitable for her 6 yrs old son.
* In the midst of our discussion, my client went to her room to look for something that I requested.
* I was left with her son in the Living room and tried talking to him. I pointed an apple on the table and asked him if he knows how to spell. He shook his head. I pointed at the orange and asked him the same question. He shook his head again. I asked him if he knows how to spell a "Dog". He said "D..A..G" with a long pause between each alphabet.
* When her mum came back to the Living Room, I asked my client, "Did your son learn spelling? He don't seems to know how to spell an apple and a Dog."
* My client don't looks happy and replied, "My son may know many things that you don't know. His Chinese is probably better than yours."
* Stunned for a moment. I knew I had spoke something wrong...

You are a real Hypocrite
* I had arranged to meet this client at 8:30pm at his home that day. He was still not home when I reached his door and his 60 yrs old mother invited me to the house.
* I started chatting with his mum and she kept complaining that my client always like to play computer games and not serious with his work. I somehow nodded my head and agreed with her that we should be serious in our work. blar blar blar...
* When my client came back, the topic on computer games came out from his mum again. I naturally told her that computer games sometimes can help relieve some stress after a hard day of work. Its actually okay to play a bit a of games... blar blar blar...
* My client's mum got so angry. She said, "Adrian, you looks honest to me. I don't expect you to talk like a hypocrite and a 2 headed snake. What did you tell me just now?"
* My heart nearly jumped out. I knew I had spoke something wrong again...

Always forget that its Fasting Month
2 incidents on this.
* One of my muslim client came to my office in the afternoon. I conveniently went to the pantry and bring a cup of water for him and put it right in front of him.
* He looked at me and asked, "Adrian, are you trying to tempt me?"

* On the other occasion, I met this client at a fast-food joint in the afternoon. I conveniently asked again, "Can I get you a drink?"
* She replied,"I'll like to. Maybe I don't looks like a Malay to you."
* Oops. I know I said something wrong again..... (How blur I am always...)

Friday, September 19, 2008

Its Payback Time

It was about a year ago when I still wondering why the Finance Sector needs so many people and so many people still earns so much money. I have a few friends working in some investment banks and I was quite envious seeing them earning over $10k/month with 6-8 months bonus. They always meet in lavish locations for dinner and broke my wallet. I decided to avoid them because frankly, I don't have money to enjoy life like them and I felt inferior because I was then an Insurance adviser earning a fraction of their. I just couldn't figure out where the money comes from?

With the type of Crisis that we see in the Financial Sector, I got my answers. Its the creativity of the Financial Institutions and greed of the people by packaging new financial products and sell around the world. Each time each financial package was sold, there are huge commissions and brokerage earned. So much money was poured all over these fund managers and bankers and now its finally payback time. No matter what happens, they had already earned the all the money they need.


Anyway, just like to add more into my previous posts,

I wrote something about it in March and I didn't expect things to turn out this way at that time.

The Americans buy houses like nobody business. The banks for fear of losing market share, reduces their requirements to get businesses and don't care whether these people can pay or not. They package these loans into CDO(Collateral Debt Obligations) and resell to other financial institutions. As CDOs are backed by Mortgages, these institutions just buy over without knowing that these banks take in almost anyone for the loan and default risk actually is so high. Holder of CDOs further reduce their risk by transacting Credit Default Swap (CDS)

CDS is a private contract between two parties in which the buyer of protection agrees to pay premiums to a seller of protection over a set period of time. In return, the seller of protection agrees to pay the buyer an amount of loss created by a "credit event" related to an underlying credit asset (loan or bond) - the most common events are bankruptcy, restructuring or default.

If AIG start to default on all these CDS, there will be another round of bloodshed.

The Federal Reserve have a tough job reassuring investors to prevent a disaster. Its like a fire in a cinema, when everyone tries to run for the exit, a disaster will bound to happens. Just imagine that every investor tries to cash out from their investment now.

What a mess and everyone is wondering when the bottom will be.

Wednesday, September 17, 2008

The Timeline to collapse of Lehman Brothers

Just to show that people expect things to be bad but never thought to be that bad...

22nd Aug 07
Announces plans to shutter its subprime mortgage business, eliminating 1,200 jobs.

20th Sep 07
Chief Financial Officer Chris O'Meara steps down to head global risk management division. Erin Callan, head of the investment banking practice for hedge funds, succeeds him.

13th Dec 07
Reports fiscal fourth-quarter profit of $870 million and full-year earnings of $4.2 billion.

17th Jan 08
Lehman says it will stop originating mortgages through wholesale channels amid continued weakness in the housing and real estate markets.

16th Mar 08
The federal government and JPMorgan Chase & Co. bail out Bear Stearns Cos. Analysts question whether other investment banks might also collapse.

17th Mar 08
Reports suggest Southeast Asian bank DBS Group Holdings Ltd. instructed its traders to cease working with Lehman, though those instructions were later rescinded.

18th Mar 08
Lehman announces it earned $489 million during its fiscal first quarter.

1st Apr 08
Company raises $4 billion in capital.

15th Apr 08
Speaking at the investment bank's annual shareholder meeting, Chairman and Chief Executive Richard Fuld tells investors that the worst of the credit crisis is behind Wall Street, but that the environment "will remain challenging."

16th May 08
Lehman announces it is cutting 1,400 jobs, or about 5 percent of its work force.

9th Jun 08
Company estimates it lost about $3 billion for the second quarter and that it is raising $6 billion in fresh capital.

12th Jun 08
Removes Callan as CFO and Joseph Gregory as chief operating officer. Herbert McDade replaced Gregory, while Ian Lowitt replaced Callan.

29th Aug 08
The New York Times reports Lehman is preparing to cut 1,500 jobs.

2nd Sep 08
Reports indicate state-owned Korea Development Bank was considering buying a 25 percent stake in Lehman.

8th Sep 08
Shares of Lehman plunge 52 percent amid worries the investment bank was struggling to find new investors and raise capital. Reports say the talks with KDB have ended.

10th Sep 08
Lehman says it lost $3.9 billion during its fiscal third quarter and plans a number of moves to shore up its balance sheet. The announcement, coming a day after Lehman shares lost 45 percent, is an attempt to assuage market worries. Fuld says the firm will consider all "strategic alternatives."

11th Sep 08
Lehman stock plunged 42 percent as the embattled investment bank tried to locate a suitor before more market value and confidence was lost. The stock is down more than 94 percent for the year.

14th Sep 08
Lehman Brothers, burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed.


Lehman brothers still reported profit in its first quarter before it collapsed. KDB still considered buying over the bank days before its collapsed. The managements still tried to reassure their investors that the Credit Crisis problem is over. Most expect things to be bad but not to the point that it has to file for bankruptcy.

Federal Reserve is trying to stablise the financial market through funds injection to ensure Lehman Brother's operation goes on. Its a ripple effect and will bound to affect financial market globally. Both equities and bonds will get the impact.

AIG is the next problem and more might come. How much more funds can the Federal Reserve inject? They certainly have a limit and cannot be a saviour everytime. Or else the market will expect Fed to help everytime. If too much funds are injected, the dollar will surely weakens and I have no idea how a significantly weaker dollar will impact the global economy.

I am not an investment analyst, I'm not as smart as many people, I do not have any private information to back what I said but its certainly a challenging time. Its a great time to start some investment via dollar-cost averaging. If you are having a lumpsum of money, you can construct a 25E-75B portfolio and invest ~30% of funds first. Sit, wait and observe. Stay partially invested because the market is full of unexpected news. It may creep back even before you realise it.
I have one belief :"The market is not dead. Someday, it will spring back to life"

Tuesday, September 16, 2008

The panic for AIA policyholders

I received at least 5-6 calls from Friends and Policyholders today with regards to their AIA policies and if AIG collapse will affect their policies. One of them sounded very panicky and asked me if he should surrender his policy now as its maturing in 6 months time.

I bet AIA Financial Consultants must be very busy just to answer all their policyholders queries today.

For those who missed the news, you may watch this You-Tube posting below:

The media, the Company and some online forum postings had given so much assurance such as
1) separate insurance fund from AIG,
2) having more than sufficient capital and reserves above the regulatory minimum requirements, to meet obligations to policyholders,
3) sub-prime losses that may be borne by AIG at the group level have no impact on policyholders here,
4) Presence of the Policyholder's Guarantee Fund managed by MAS,
5) MAS assurances, etc
There are just too much rumours spreading that AIG may ask money from AIA, AIA books may not be properly audited, AIA participating fund consists of a lots of AIG shares, etc


In my opinion, its natural for them to panic because its their hard-earned money and many of us are probably not old enough to see such financial crisis before. Anything that concerns money will always be an issue.

Though I believe in the assurances given by AIA and there are curently no cause for alarm, I feel its still good to diversify your insurance policies with at least a few insurers. The one who has only AIA policies in their whole portfolio must be very nervous today.

Million Dollar Round Table (MDRT)

Come to my previous topic on Financial Success = Capabilities?

Please don't misunderstand that I'm trying to say advisers who achieved the MDRTs or COTs are no good or must be mis-selling to acheive such qualifications. I must emphasize that there are good and bad advisers whether they are MDRTs or not.

I fully respect those advisers who catch the right market, do their job professionally, get lots of referrals and achieve their MDRTs. However, there are also some who treat this profession as a full sales job, Sell by misleading concepts, promotions, free gifts, premium discounts, etc. They forget that they are supposed to be consultants or financial advisers. They also forget the important process of proper fact-find and analysis.

What I also observed is that insurance companies glorified MDRT achievers and makes them looks more professional than other advisers by publishing them in newspapers. Many websites and companies also seems to point that a MDRT qualifier is more ethical or professional than someone who are not. Inevitably, the consumers will think that its true and look out for MDRT title from their advisers.

++ Extracted from Ifpas (Insurance and Financial Practitioners Association of Singapore)Website ++

Million Dollar Round Table (MDRT) is The Premier Association of Financial professionals. Founded in 1927, MDRT provides its members with resources to improve their technical knowledge, sales and client service while maintaining a culture of high ethical standards.
If your life insurance agent or financial services advisor is a member of MDRT, be assured that you are working with an accomplished, ethical professional who is considered to be among the best in the world. Round Table membership is an exclusive honor that is achieved only by a small percentage of all life insurance and financial services advisors worldwide.


I feel that MDRTs, COTs or TOTs should not be a yardstick to professionalism. A doctor, Lawyer or Accountant don't need to tell others about such qualifications to show their capabilities. To me, this title seems quite irrelevant in this profession.

I like to emphasize again "There are good and bad advisers regardless they are MDRT or not"

Sunday, September 14, 2008

New SRS Rules from 1st Oct 08

Back to SRS again. Today just want to update you the 4 changes to SRS come 1st Oct 08.

1) Contribution by Employers Allowed
* Previously, Employers cannot contribute to employee's SRS account.
* From 1st Oct, Employers will be able to contribute to their employees' SRS accounts and enjoy tax relief on these contributions made on their behalf.
==> This is to encourage Employers to contribute additional pension fund for their employees using the SRS system.

2) Contribution Age Limit Removed
* Previously, SRS member can contribute to their SRS account until age 62.
* From 1st Oct, they can contribute to their SRS account until the day they initiate the first penalty free withdrawal.
==> This is to encourage SRS member to withdraw their funds later due to longer lifespan of Singaporeans.

3) Flexible Withdrawal Timeframe
* Previously, SRS member must withdraw all their SRS savings by the age of 72
* From 1st Oct, they can still withdraw the SRS savings over 10 years. However the 10 years start from the year they initiate their first penalty free withdrawal.
==> The timeframe to withdraw the funds is still 10 years but at least they don't force you to start the 10 years from age 62.

4) Removal of Employment / Business / Income requirement
* Previously, only those who have employment or business income can contribute to the SRS.
* From 1st Oct, this requirement to prove employment or business income are no longer required.
==> This will remove the requirement to bring your IR8A to the banks for account opening. This will encourage those who have other passive income like Rental or Dividend income to also contribute SRS for the tax relief.

Thursday, September 11, 2008

Does Financial Success of Adviser = Capabilities?

One of my usual past-time is to read Newspaper and Financial magazines. Financial Advisers from different companies are frequently invited to give their views on specific case studies. These article sometimes introduce the adviser before or after their views are posted. Many times, the sales achievement are more emphasized than their qualification and experiences. One particular sales achievement they always emphasize is the MDRT or the COT. They always emphasize this Adviser "XXX" achieved the MDRT XX years consecutively and Life member of the XXX club of the company, etc. When they put qualification, they sometimes actually only holds a AFP or AFC, etc despite they being XX years in the business.

Are Sales acheivement of an adviser so important to a client? Does an MDRT or COT adviser necessarily be better than one with none to shout about? We always see these advisers faces being published by major newspaper and their clients probably see them as more professional than those whose faces are not published.

I was being questioned by a prospect this morning. She wants to vet through my own financial plan including net worth, investment and insurance portfolio before allowing me to even meet her. She might be looking for a financially stable adviser or is looking for an adviser who are able to walk the talk.

I din replied her well and I think I may not have a chance to plan for her after my negative reply. I was quite reluctant to show her my financial plan because my first impression is that she is trying to guage my capabilities by my financial success and why does she think that she can see my financial plan better than I do? I also do not want to show others my financial plan because it is definitely not a model plan that I'll like to show anyone. I'm only few months old in this FA firm. I do term insurance and RSPs more than a typical advisers and anyone want to guess my monthly cash-flow? Will you demand your doctor to see his health report before you go for a health checkup? The emphasis should be the process and not the person.

If your adviser have a net worth of few million, a beautiful constructed investment portfolio of few hundred thousands and an insurance portfolio with several thousands of premiums per month, does it means that he is a better adviser? Maybe Yes? Maybe No? For me, I work for my love of this job and the meaning I found in it. I'm not working towards MDRTs or COTs, etc. I will earn a modest income as time passed and pls don't guage your adviser by their financial success and sales acheivements.

Tuesday, September 9, 2008

SRS Statistics

Introducing SRS (Supplementary Retirement Scheme)
The SRS is a voluntary scheme to complement the CPF to provide for housing, medical and basic living needs after retirement. Participants can contribute up to $11,475/yr into their SRS at their own discretion. The contributions may be used to purchase various investment instruments.

The scheme is operated by the private sector and was effective since 1st April 2001. The SRS also offers attractive tax benefits. Contributions to SRS are eligible for tax relief where only 50% of the withdrawals from SRS are taxable at retirement. Investment returns are also accumulated tax-free(with the exception of Singapore dividends from which tax is deducted or deductible by the payer company under section 44 of the Income Tax Act).

Growth of SRS
- In Dec'01, there was 11,890 accounts with $157 million in it.
- As of Dec'07, there are 41,334 SRS accounts with $1.44billion.
- Average new accounts per year over 6 years is only about 4,900.

* Seems to me that there are very few people utilising this scheme. Its probably due to lack of understanding of its benefits. The cohort of advisers in Singapore are probably not actively recommending SRS to their clients too.

Of these $1.44billion, these are how the monies are invested.
22% ==> Cash
16% ==> Unit Trust
34% ==> Insurance
6% ==> Fixed Deposit
12% ==> Shares
9% ==> Others

* Looks like most people prefer the lower risk approach with 62% in insurance, cash and fixed deposits. SRS are schemes for long term accumulation, account holders should be better off taking slightly more risk.

Profile of SRS account holders are as follows:
21-35 yrs old ==> 12%
36-45 yrs old ==> 35%
46-55 yrs old ==> 35%
56-61 yrs old ==> 15%
>61 yrs old ==> 3%

* 70% are between 36 to 55. This group is obviously the higher income earners and paying more tax. Hence attracted them into the scheme.

Nationality of SRS account holders
Singaporeans ==> 86%
Singapore PR ==> 12%
Foreigners ==> 2%

* Statistic extracted from Ministry of Finance website...

Friday, September 5, 2008

Young age. Big premium but poor choice.

My colleague came back from an appointment and complained to me. She was utterly disappointed with what the industry are doing to spoilt people finance instead of helping them.
She just completed a review for one of her client who is in her early 20s. The first insurance decision taken by this young lady 2 years ago was:

1) A $300k Life policy with premium nearly $500/mth (Think the payment is until age 65)
2) An Investment Linked Policy with $400/mth. (Not the type with 100% allocation)

Her current cashflow is very tight now because of these 2 policies. The insurance premium is probably taking up 30% of her total salary. She had already incurred most of her expenses as these policies are more than 2 years old now.

* The 1st interesting part is, "She thought everything is well taken care of since she had spent so much money."
* The 2nd interesting part is, "She purchased this package from the direct distribution channel which are suppsed to provides unbias advices."

I like to share my opinion here.

1) The Life policy taken is excessive. The needs for Death/ptd and Income replacement cover gets lower as the person gets older. It will drop to a minimum when they retires. The most important insurance the person need to have at retirement will be a Hospital/Surgical Policy and Long Term Care policy. It will be okay to keep some Critical Illnesses Policy for Alternative Medical needs at old age. $300k is too much for such alternative medical needs. If she surrender the whole policy 40 yrs later, her yield will probably just be around 3%p.a.

2) An ILP policy with $400/mth incurred advisory fees which take away several months of her savings. A direct investment into Unit Trust ensure 100% of the monthly savings goes into investment. She is able to save so much money from these so called "Advisory Fees".

3) Talking about "Advisory Fees" that the lady had paid for the ILP, I strongly believe that she did not receive any advice from anyone in the first place. Why pay such high "Advisory Fee" when that adviser only help to fill up form. Worse still, there will not be any on-going advice given to the client forever.

4) Do not misunderstand that those sitting in the banks or Direct Distribution Channels must be unbias with their advice just because they are salaried based and not commission driven. Sometimes, these advisers are more daring and hungry than agents because they have high quotas to meet and many take this career as a short-term transition. They often job-hop among banks and leave once they make enough money. They don't look long term by doing a goob job.

5) Such group of people always think that their insurance and savings are well taken care of just because of the amount of money they already put in. They avoid seeing a qualified adviser for review.

Thursday, September 4, 2008

Bedok YEC Seminar - 6th Sep 08

Our Bedok Youth Executive Committee(YEC) had organised another Financial Forum this Saturday after our successful seminar held back in February. I should have posted this earlier but had slipped my mind. I hope someone reading my blog today may consider dropping by last minute to benefit from it.

Surf the Financial Wave:
My Formula – Breaking the Millionaire Code by Thomas Mathew

Financial planning is a phrase that has been loosely used today. But what exactly is Financial Planning?

It means different things to different people. For some, it may mean the designing of a financial plan. To others, it may mean the starting of a savings plan. Yet to others, it may mean the purchase of certain insurance or investment plans.

In its true essence, Financial Planning means much more than just that. In this session, you will get to find out the formula for achieving lifetime financial success.

Seminar Outline

• Understanding the importance & concepts of financial planning
• The strategy of making informed & sound decisions
• Understand the principles of wealth accumulation
• Establishing your Game Plan for Financial Freedom
• 10 Steps to create your financial plan
• How to manage F.L.O.W (Financial Lifestyle Organized Well) in style
• Managing Portfolio & Investment Risks

Join us for this exciting talk that will give you insight into achieving financial success!

Saturday, 6 Sept 2008, 2pm
Victoria Theatre Level 3 Terrace, 9 Empress Place

For registration and enquiries, please call 6442 5317 or email your name, age, IC no and telephone no to ameliabedokyec@gmail.com by 5 Sept 2008.

Speaker's Profile:
THOMAS MATHEW, MBA Financial Services
Thomas Mathew has been in the financial industry for more than 17 years. He has achieved numerous awards for his outstanding achievements, helped few thousand clients in financial planning and is reputed as an icon in the financial industry. Thomas has taught and trained thousands of advisers Asia-wide, conducted in-house training seminars for various insurance companies, banks, schools, public-listed companies, private coachings and many more. Today, Thomas is a highly sought-after speaker in the region and is often invited to speak at conferences and congresses. He has been invited as a guest speaker on various media such as News Radio 93.8FM, CNBC and Money Mind.

Hope to see you guys there....

At least one resolution achieved

I'm dead tired now but I'm glad that I had achieved 1 of my 2008 resolutions...
I think this is the only one 1 resolution I can achieve this year...

** I got a Silver for my IPPT **

Thank God for this...

Wednesday, September 3, 2008

Busy = Good Business?

My mother asked me today, "What business are you doing? Why need to work till midnight so often? You business so good meh?"
A friend also asked me over the phone today, "Wah. Saw your blog recently that you are taking the last train home everyday. Your business must be real good! right?"

Is my business really that good? Busy = Good business? Busy? Yes, I'm very busy. Good business? I can say "Not really". Contradicting? Let me tell you why.

As an FA, we attended lots of training. There are new product launches, fund managers investment updates, providers briefings, Company's trainings, Branch meetings, sub-group sharings, conducting trainings for new advisers, etc. There are sure to have something almost everyday and it can take up 3-4 hours of our time.

As an FA, we adopt the international 6 steps approach in Financial Planning. Client-Planner Introduction, Fact-finding, Plan development, Recommendation, Implemenation and Review. Each client, meet at least 3-4 times before implementation. Not like a roadshow, 1 time close.

As an FA, we do a lot of research. We represent as many as 10 Life Insurance Companies, 20 General Insurance Companies and probably over 30 Fund houses. We are expected by clients to do product and investment comparisons. Comparisons can sometimes take up quite a bit of time. Proper comparison also means proper understanding of each product and we need time to study these products.

As an FA, we have more paperwork. Due to compliances issues, we learn to use more forms than a tied agent. Due to unfamilarity of each forms by different insurers, we sometimes missed out 1 column or 1 form and got rejected by the insurer for resubmission. We have to log down each meeting with clients for future audits. We are required to track our own income and expenses for income tax purpose as well as compliation of training hours for MAS license renewal, etc.

As an FA, we have to work harder in prospecting because insurance company will not help us in generating businesses and do any marketing for us. Most people we prospect will most probably not even hear of our companies before. They may hear about Great Eastern, AIA, but never IPP, Finexis, PIAS, etc


So, is busy = good business? Yes. If each case size is big enough or we are charging large enough fee for each planning.

I'm busier but happier at the same time because deep inside me, I know this is the right platform to give Financial Advice. There are a lot of job satisfaction and I do it with pride.

I tried explaining to my parent about my job and what I do but they live in the era where an agents sell insurance by sweet talk. They know I can't talk well. Thats why they will always tell me to go get a job and a salary...

Footnote: I'm not trying to say that FA are more professional or what because there are also many FA who sell by sweet talk and know nothing about Financial Planning.