I just witnessed a road accident

Quite a number of off-topic postings from me recently. But a road accident that I just witnessed 2 hours ago left me with deep reflections about myself.

I was waiting for the bus after meeting a client at 6:30pm at Bedok Reservoir. Out of sudden, I heard a loud "screech" of a mini van around 20 metres away from me. When I turned my head, I saw an Malay Lady around 40 yrs old lying on the right lane of the road, bleeding from mouth and head. She was unconscious.

A lot of people rushed forward and stood around the lady, some making phone calls, squat around the lady, some just looking. I was tempted to go forward because I have some basic first aid knowledge and I might be able to help in some ways.

At that critical moment, I was still trying to imagine what I can do if I'm right in front of the casualty. I don't feel confident to do it right, I was worried that I will make things worse. But I realised that everyone was panic and simply don't know what to do.
Two of them even tried to move her away. I was screaming in my heart, "NO. NO." "Don't move her?"

I was hoping that someone will step out and do things like checking if the blood is choking her, if she has heart-beat, is breathing or if she have any broken bones that deters CPR, etc. I knew what are some of the things that they can do, but I still din step out to lead the situation. I'm still hoping that someone else will come out and do things right. Fortunately, after around 2 minutes, a young gentleman in his early 20s stepped out and do the things that I was thinking in my heart.

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Few things lingers in my mind after the incident.
1) I simply lack confidence about myself. I knew I can do something, but I din because I fear doing it wrongly. I took too long to think. 2 minutes can mean a life saved.
2) I need a situation whereby leadership is forced upon me, else I may not dare to lead. I don't dare to stick my head out from the crowd and give commands.
3) If we try to analyse and make sure that we can do it before we do it, it will be too late. A life might already be lost.
4) I presumed that most people are more knowledgeable than me and know what to do. Maybe yes, but when they panicked, they forgot what can be done. I was quite a distance away, I am more clear minded than them.
5) Life is unpredictable. I do not know if the lady survived. If she din, the last thing she can remember is that "She is crossing the road"

* I don't feel good after the incident because I felt that I had failed to do something for that lady.
* I told myself that if I'm faced with such situation again, I must try to do something... I must not wait till that very last minute to make the decision to help or not to help.
* This may happen to you. You may like to ponder on my points.

I failed my exam... : (

Just checked from CFA institute Website. I failed my CFA Level 1.

I belongs to the top 10% of all failed candidates.

i.e. I nearly passed.

This exam. Only 35% of all candidates passed.

So sad. I got to spend so much time study again and going through this type of uncertainties of failing again.

My books got to come out from my cabinets again... Now new job, where got so much time to study... Haizzz...

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I had decided not to take the exam this December due to my new job. I got to focus on my career and stablise my income. How I wish I have the money and time to read and learn again. No choice, I have no money and no time... Got to wait till next June. (written on 2nd Aug 08)

Personality + Multiple Intelligence Test

I considered myself to be a bit "Bo Liao" sometimes. Got nothing better to do in the middle of the night. Not willing to sleep until 3am everyday.

Just did something meaningless again instead of spending the precious time completing my Financial Plans. 20 minutes used in completing the personality + Multiple Intelligence Test.

If you are as "Bo Liao" as me, you can try? I still find it interesting though guilty of the time wasted.

What is a Life Participating Fund?

I received a letter from one of the big insurance company, which I have a Life policy, with regards to their 2008 bonus declaration. I am disappointed to see that bonuses had not increase despite the equities bull run since 2004. I am not too optismistic in the next few years if the global economy do not do perform and when the effect of the industry-wide recent change in tax treatment of participating policies is felt.

Well. I'm not going to discuss on the Participating Funds returns today, I just like to share with you guys what exactly is a "Life Participating Fund".

1) What is a Life Participating Fund?
It is the premium collected from all Participating Policies from an Insurance company. These collected premium are pooled together and invested into a varieties of assets ranging from Equities, Bonds, Properties, Cash, etc

2) What is main aim and objective of such Fund?
It aims to get a stablised long term returns for those with Participating Policies(Whole Life, Endowments, etc) after netting off expenses and other benefits to such policyholders.

3) What returns can we expect from such Fund?
The fund are generally conservative in the portfolio of assets they invest. I estimate that 60% are invested into Bonds and Cash. With such asset combination, the returns should falls between 4%-5% p.a. After netting off, distribution cost, your policy returns should be around 1% to 2% lower.

4) What bonuses are declared from such Fund?
The insurance company will declare bonuses yearly which will be added into your policies as a result of profits earned from the fund. 2 type of bonuses are declared.
a) Reversionary Bonuses (Annual Bonuses)
* These are bonuses which are added annually to your policy. The reversionary bonus is, in effect, an addition to the sum assured under your policy.
b) Terminal Bonuses
* These are bonues that are added only when you surrender your policy, when your policy matures or when you make a claim

5) Will bonuses be reduced when global economy is bad?
* Insurers avoid large fluctuations in the bonus declared from year to year by smoothing bonuses over time. This means that profits may be held back in years when the performance of the fund has been good so that they pay them when conditions are less favourable.
* However, if the economy remain bad for prolonged period, the insurance company may very likely reduce the bonuses payout.

6) How are bonuses declared?
* At each year-end, the appointed actuary will conduct a detailed analysis on the performance of the fund and make recommendations on:
a) the amount of bonuses to be allocated, and
b) the amount to be set aside for the future bonuses.
* The bonuses that are declared will be approved by the board of directors of the insurer.

7) Must Insurers give good bonuses when economy is booming?
* There are noises in the industry, led by some well known industry players, insisting that Insurance companies are not fair in bonus distribution.
* I think I'm not in the position to comment on that but I do believe in smoothing of returns and that market is competitive and fairly efficient.
* The directors may decide not to give good bonuses, but when people get to know about it, the insurers may lose their competitiveness over time.

8) Are Participating Fund Returns important?
* In my opinion. YES. This is another area an FA is able to value-add and compared Life Participating Funds returns of different insurance companies.
* If that company project their policy returns based on 5.25% Life Participating Fund returns but they did not achieve it even over the good years, we have every reason to doubt their capabilities to give bonus as projected in their benefit illustration?

Effective Financial Presentation using Powerpoint

I recently read the July08 Toastmaster magazine and an article on "Giving Effective Financial Presentations with Powerpoint" attracted me. I like to share with you what I had learnt. Perhaps you can use one or two points if there is a need.

1) The story in your presentation

* Know what story you are trying to get across and skip anything that distract from that story.

* It may be a story of a new company with promising growth or a story about meeting market challenges, etc

* Tell your story with Simplicity and Clarity

2) Limit the amount of Infomation on each slide

* Do not show a slide with more than 4-6 columns and 6-8 rows

* Audiences cannot read or retain complex information from slides

* Detailed financial reports can be given as separate handouts to audiences for them to refer

3) Use Charts Effectively

* Charts can explain a thousand words and audience will be focused on it

* Pie charts can show how an investment allocations are changing

* Bar charts can compare and line charts can show trends, etc

4) Use a readable font and font size

* Tahoma, Verdana or Goudy are good to use for screen viewing

* Keep it simple. Avoid using Blocky fonts, Wordarts and animations. It can make your presentation amateurish.

* Font size of probably 32 and above are recommended

5) Use appropriate slide transitions

* Some transitions like wagon wheels and venetian blinds can be distracting

* Use just 1 simple transition like a left-to-right wipe and stick to it

6) Choose high contrast background and colours

* Black or dark blue background with white or light yellow text are classic

* White background with a dark text is okay too.

* For the former, you may need to dim the lights for audience and for the latter, you can present in a brighter room.

* Darker rooms can make a person fall asleep

7) Use of blank or black screen between illustrated points

* If you want the audience to focus back onto you, introduce a black screen

* Audience will not be distracted by the next slide or keep staring on the previous slide

8) Check for unintended colour combination or symbols

* Unless you are presenting for a doll company, don't use colour like pink or being too colourful.

* Can use symbols in the slide to attract attention into important areas. Eg, a hexagon "STOP" symbol in the centre of the screen.

9) Provide useful handouts

* 2 to 4 slides per page is ok

* More detailed information that cannot be projected can be given out to audiences as reference

10) Get to the point

* Remember that your audiences are busy and intelligent. Make your point and know when to quit and let them read the handouts themselves.

What investment returns can you expect?

One of my client asked me recently what type of returns should he expect if he is to invest in Equities and Bonds over long term. I told him it will depends on what type of equities and bonds he is investing? Global, Country Specific, Emerging Markets, etc all comes with different risk and potential yields.

Of course, he don't seems convinced because he have still have no idea what returns he can expect. I decided to show him an example based on the MSCI returns over 30 years and the US market over some 80 years. "On average", I told him, " Maybe around 7% - 8% p.a for equities and 3% - 4% for bonds". However, with some country or regional specific allocations, you may expect more as you are taking higher risk. This number is arguable as some will insist that it should be 10% to 12% p.a for equities.

One of the article I used to show him is a research done by Vanguard Investments on the Historical Real Annual U.S market returns. I think that its a good guide and I always use to show my clients.

Let me give you some figures from this research

Historical Real Annual Returns
* Long term - 1802 to 2005 ==> Stock - 6.8% / Bonds - 3.5%
* Major Subperiod
a) 1802 to 1870 ==> Stock - 7.0% / Bonds - 4.8%
b) 1871 to 1925 ==> Stock - 6.6% / Bonds - 3.7%
c) 1926 to 2005 ==> Stock - 6.7% / Bonds - 2.3%

I also used a table with the number of years showing the S&P 500 Index Annual Returns from 1926 to 2005
-35% & below = 1
-35% to -30% = 1
-30% to -25% = 1
-25% to -20% = 2
-20% to -15% = 0
-15% to -10% = 5
-10% to -5% = 8
-5% to 0% = 5
0% to 5% = 4
5% to 10% = 7
10% to 15% = 7
15% to 20% = 8
20% to 25% = 9
25% to 30% = 4
30% to 35% = 9
35% to 40% = 4
40% to 45% = 2
45% to 50% = 1
50% to 55% = 2

From the above, there are 23 negative years and 57 positive years out of the 80 years. Well, there are turbulence in the financial market, but history proves that there are more than 7 positive returns years out of every 10 years.

In conclusion, back to the above question, What investment returns can you expect? Sorry that I still cannot give you an answer because it really depends what exactly you are investing before I can give you a guage.

Protecting your income against Disability

What is a Disability Income Insurance Plan?

* A disability Income insurance plan is meant to cover loss of income in the event of any illness or accident when the insured is unable to perform his/her material duties for a continuous period defined by the insurer.(Generally 60, 90 or 180 days)

* The insured will receive a monthly payout if he/she becomes totally disabled or will get a partial benefit if is able to work but at a reduced capacity that leads to a reduction of pre-disability income. The partial benefit depends on the formula used by the insurer.

My research findings

* Only 2-3% of Singaporeans are covered with a Disability Income Insurance

* Singaporeans are grossly under-insured in this area of Disability Income Protection. LIA survey shows that average monthly household expenditure is around $3,400/mth.

* 3-4% of Singaporeans before retirement age are currently disabled and unemployed

* 1 in 3 workers are estimated to be disabled for a period of 90 days or more before they reaches 65 yrs old.

* The average disability absence is 2.5 years.

* 1 in 7 workers are estimated that they shall be disabled for over 5 years before they reach 65 yrs old.

PTD Vs DI

Pls do not be confused between Permanent Total Disability(PTD) and Disability Income(DI) Insurance.

* The definition of Permanent and Total Disability is like totally not able to work at all for any remuneration or profit or if the person lost 2 limbs by complete severance above wrist or ankle or if the person lost 2 eyes.

* As for Disability Income Insurance, it uses an "Own Occupational" and "Suited by Training" definition to make a claim.

Time to Educate Singaporeans

The premium is not as high as some people thought it to be. I think its high time that insurers educate Singaporeans on the importance of this issue as they are generally unaware about this type of insurance.

We will be audited by MAS...

I was just informed that our group was selected for a routine audit by MAS. They may drop by our office anytime from next week onwards. We were told to dig out our policyholders files and meeting logs. We will be checked if we had recommended the right plans for our clients according to their needs over the years.

Everyone in the office are busy preparing for the audit. Our last audit was in 2003 and hence is a tedious work for us.

I have never heard of MAS auditing the advisers before. Though I am confident that our group will pass through this audit because we log and record all our meetings with clients and have 100% fact finding either partial or full of which probably 70% are full planning, but its a lot of filing and paperwork.

However, there is something that I don't understand. Why are we, as individual adviser, being audited and the rest of the industry like tied agencies, banks and exempt FAs seemingly escape this process?

Pls do not misunderstand that I'm saying banks or tied agencies are not doing the correct way. Some FAs may not do it right too. But FAs risk losing their license and career if they do it incorrectly whereas the rest are not. I think this is double standard. MAS should standardise that every adviser is being audited.

The 4 Insurance Schemes using your CPF monies

CPF is a very good scheme for Singaporeans towards savings for their retirement. Some monitor their CPF monies actively, some don't. Some don't even know what are the accounts in their CPF. Today, I just like to highlight the insurance schemes that are embedded in our personal CPF account.

a) Medishield / Private Medical Insurance Scheme
* MediShield is an individual catastrophic medical insurance designed to help Singaporeans pay part of the large hospitalisation bills for treatment of serious illnesses or prolonged hospitalisation at the Class B2/C level.
* Besides citizens, the scheme is also extended to Singapore Permanent Residents (SPR) who are eligible for subsidised medical care in restructured hospitals in Singapore.
* If you had taken another Shield plan from a private insurer, then your Medishield is most likely being integrated.

b) Dependent Protection Scheme
* The DPS is an affordable term insurance scheme that provides insured members and their families with some money to get through the first few years should the insured members become permanently incapacitated or pass away.
* DPS is currently administered by Great Eastern Life and NTUC Income. The scheme is extended to CPF members who are Singapore citizens or Permanent Residents, between age 16 and 60, when they make their first CPF contribution.
* The premium are deducted from your CPF Ordinary Account.

c) Eldershield
* ElderShield was first launched by the Ministry of Health in September 2002 as an affordable severe disability insurance scheme which provides basic financial protection to those who need long term care.
* All Singaporeans and Permanent Residents (PRs) who are CPF members and who reach the age of 40 are automatically covered under ElderShield unless they opt out of the scheme.
* Premiums for ElderShield can be made from CPF members' Medisave Accounts.
* It provides either $300/mth x 60mth or $400/mth x 72mths are paid out in event you cannot perform any of the 3 ADLs (Activities of Daily Living). Your provider is either GE or NTUC Income. You may wish to check out your existing coverage with them.

d) Home Protection Scheme
* The Home Protection Scheme (HPS) is a mortgage reducing insurance which insures CPF members and their families against losing their homes should members become physically/mentally incapacitated or pass away before their housing loans are paid up.
* The scheme is compulsory for those using CPF to pay their mortgage loan. The share of the HPS cover should match the proportion of your monthly housing instalments that you are paying.

Wisdom from Buffett during Berkshire Hathaway's 2008 annual meeting

It is well known that investors from every corner of the globe will want to attend the annual meeting of Berkshire Hathaway. They want to catch a glimpse of Warren Buffett, the investment legend who will share his wisdom with his shareholders. This year is of no different with 31,000 attending the meeting in Ohama, USA on 4th May 08.

I'd read some reports about this AGM and I want to share some of the wisdom that I'd learnt from him.

When asked about the economy. He replied:

"I haven't the faintest idea, We never talk about it, it never comes up in our board meetings or other discussions. We're not in the business of economic forecasting, we don't know how to be in that business."

His point is simple: As an investor, we don't need to predict the economic cycle. Instead, we should focus on evaluating individual businesses. We should look beyond stock prices to analyse whether the underlying business can continue to grow but can pay special attention to whether customers would continue to want a company's goods and services.

Several people claims to heard him privately about his take in the economy.

He believes that, while the odds of a financial panic are much lower, the financial pain has a long time to run. Buffett does not believe recovery is around the corner at all. And he continues to regard most major financial stocks, because of their enormous expousure to subprime loans and derivatives, as impossible to value accurately or confidently.

When asked about how to invest successfully

"You have to have the right temperament. I tell the students who come visit me that if you have more than 120 or 130 I.Q points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. You need a philosophy and the abiity to think independently. It doesn't make any difference what other people think of a stock. What matters is whether you know enough to evaluate the business."

His point is: We need to detach our emotions from other people's behaviour. The key is not to be seduced by crazy ideas, but stick to fundamentals year after year.

When asked on the formulas they used to predict stocks

"Academia doesn't get too interested in us, we are too simple. What would the professors do? A great man of the formulas[they use to analyse securities and market] are dead wrong. They exist purely to give the intellectual class something to do."

His point is: Keep the analysis simple.

About investor and speculator

"Most people emotions work backwards: They get greedy when stock prices go up and fearful when they go down. Instead, if you are a true investor, you should shop for stocks the same way you shop for anything else: Look for sale prices and never regard falling prices as inherently bad news. Instead falling prices create the opportunity to buy even more of something that was already worth owning.

His point is: An investor like Buffett, wants the price of a stock to fall below the value of its underlying businesses so that he can buy even more and hold for as long as possible. A speculator only wants the price of a stock to go up, with no regard for the value of the underlying businesses as all, so he can sell as fast as possible.

To the investor, the market's opinions do not matter. to the speculator, they are the only thing that matters.

His analogy of market downturns

"We don't predict stock prices, all we know is, the lower they go, the more interesting they get. I think it was Agatha Christie, who was married to an archeologist, who said:"I don't mind getting older, because the older I get, the more interested my husband becomes in me."

Advantage of being old

"At an average age of 80, we are growing older at a rate of 1.25%. Its a lot better than those younger than us"

(Above are just some excerpt from various internet articles I read from CNNmoney.com)

3 CPF Changes wef 1st July 08

Just to summarise what are the CPF changes wef 1st July 2008.

1. Min. Sum has increased from $99,600 to $106,000
* Members who set aside the $106,000 cash savings in their Retirement Account will receive a monthly payout of $910 from age 64 for about 20 years.
* The current MS, which applies to members who turn 55 from 1 July 07 to 30 June 08, is $99,600. The corresponding monthly payout is $790

2. New Medisave Minimum Sum increased from $28,500 to $29,500
* Members will have to set aside this amount, or the actual Medisave balance, whichever is lower, in their Medisave Account, when they withdraw their CPF at or after 55 years old.
* The current MMS is $28,500.

3. Medisave Contribution Ceiling increased from $$33,500 to $34,500
* This is the maximum balance each member may have in his Medisave Account.
* Any Medisave contribution in excess of the prevailing MCC will be transferred to the member’s Special Account if he is below age 55.
* If he is above age 55, the Medisave contribution in excess of the prevailing MCC will be transferred to his Retirement Account if he has a Minimum Sum shortfall.
* The current MCC is $33,500.

(Extracted from CPF Board Website)

Expensives Durians in Singapore

I was feeling very down with that Mr Chan's case today because I was obviously being verbally abused by him. I was trying to help him with an appeal but he kept picking bones from my words, with acute sarcasm. He insisted that NTUC Income and I want to cheat him. As I am naturally a soft-spoken person, I end up receiving the other end of the abuse. I thought I was fantastic initially by being able to endure such abuse but as I left the house, I started to get angry with myself.

On my way back to office, I passed by Bugis. I decided to eat their Mao Shan Wang, the best durian to make myself forget all those sarcasm. Since I ate durian today, I shall write about Durian. Talk so much on Mr Chan case again. No wonder people says that I'm a Whiner!!! (I got to admit that I am a whiner)

The actual Durian season is around Late May to Early August though you see durians all year round. But durians during the actual season is still the best. Let me share with you what are the best Durians you can find in Singapore.

Mau Shan Wang (Cat Mountain King)

* Grown in Pahang and East Malacca

* Golden Yellow flesh

* Very smooth texture and no annoying fibres

* Sweet initially but get bitter when you swallow

** Price ~$15/kg

Jin Feng (Golden Phoenix)

* Grown in East Malacca

* Light Creamy and Milky flesh

* Soft and creamy texture and seeds are shrivelled and flat

* More towards sweet but a bit bitter

** Price ~$15/kg

Hei Zhen Zhu (Black Pearl)

* Grown in Johor

* Slightly greyish flesh

* Each piece is small and have a smooth and creamy texture

* More towards Bitter taste

** Price ~$12/kg

Qing Zhu (Green Bamboo)

* Grown mainly in Pahang

* Have a thin layer of skin to its flesh and extremely creamy when the skin break

* Very mild taste, not too sweet or bitter

** Price ~$12/kg

D24

* Grown in Pahang

* Each piece are big and creamy

* Normally used in durian puffs due to its taste, price and amount of flesh in each seed

* Taste bitter

** Price ~$9/kg

XO

* Grown in Johor

* Pale Yellow colour

* Texture are quite soft and runny. The seeds are characterised to be very small.

* Taste Bitter

** Price ~$9/kg

D13

* Grown in Johor

* The exterior of the fruit is small and round compared to other Durians

* Dark Yellow flesh

* The texture is moist and have no fibre

* Taste sweet but seeds a bit big

** Price ~$8/kg

Hong Xia (Red Prawn)

* Slight reddish flesh

* The texture is firm, yet creamy

* Has a bittersweet taste

** Price ~$8/kg

Career as a Financial Planner?

An anonymous guy posted this comment in my blog recently:

++ QTE ++

Adrian, so many comments flooding from all corners.

Not worth it at all. I think there are better jobs and careers to consider rather being in this line, when you do good, you are not appreciated and when you do bad, you are condemn.
And you can't make mistakes. I guess most of the comments coming from all angles seems to suggest that humans are perfect creatures. But infact we are not. Else why are we in this world suffering?

All this jargons used on policies are just exhausive. They are just like all the investments, trying to makes every cent out of you.

++ UNQTE ++

What this guy said is quite true. When you do good, you may not be appreciated. When you do bad, you may be condemned. We cannot make mistake and 1 mistake can ruin our career. The jargons are getting complicating because consumers are getting smarter... We have more to learn and our heads are getting bigger.

Sounds very negative, right? But I see it differently.

This job is not only about just dollar and cents like an 8-5 job and get the salary at the end of the month. This job is about impacting another person's life through Finance or Beyond Finance. There are a lot of meaning when you are able to convince the next person on the need of getting adequate insurance and savings for specific purpose. There are satisfaction when someone trusted you and allow you do a comprehensive financial plan. Some treated you with respect and trusted you like a true friend.

Its not all about sales.
We are actually helping another person making the correct financial decision. All or rather most sales job on earth are about telling people to spend money but we are teling people to save money for their own future.

The experience that fixed my compass
I had delivered a death claim cheque to the deceased wife in a funeral nearly 2 years ago. You can tell from the eyes of the widow that she is grateful to you. This is the only profession that will bring smile to the widow and family during such times. Tears will fall and she will thank you repeated and repeated.
Few will aspires to be a financial planner and my impression about planners are all salesman in the past and I am not very kind to them. I joined initially to get part-time income but my conviction towards this profession became so strong after I experienced that death claim.

But make sure you do the financial plan properly. You must cover the needs of the person adequately. Else you will not like me, feel proud to walk into the funeral to deliver that cheque.

May not be for everyone
This profession is to be respected and not trashed by other as if we are desperate for them. However, do not view this profession as easy money spinner. Its a lot of hard work to do it correctly and may not be as lucrative as some people describes. It may not be for everyone if you are not keen with numbers, not keen to meet different people everyday, don't like servicing others, etc.

I survived the industry till today
I am an introvert and a very lousy speaker since young. Childhood friends will know that I'm very quiet in class and cannot express myself properly. I am a typical student from a neighbourhood school with average intelligence. My parents are not well educated but bring us up the honest and hard way. I had respected them 100% for the love they showered on me.

Today, I, and my siblings had follow our parents in working through the honest and hard way. Thats probably the traits in tbe blood of the "Khiat" family. My sales records are never fantastic and my current income is very modest but of course, with more knowledge and confidence, I believe I can as successful as some planners who did it the honest way too.

Why I'm sharing this suddenly?
I write this today because I met someone who is uncertain about his future, keen in this career and whom I had sensed sincerity in him after nearly 2 hours of interaction. I'm not doing recruitment, but I'm more than willing to share my stories and experience with the next person, who is also keen but uncertain towards this career. I only hope that people will join for the right reason.