Sunday, March 29, 2009

Spirit of Professionalism

I received a call from a friend recently. This friend of mine is a financial adviser from a different FA firm. We had met only on a few occasions but through those few meetings, I'm able to sense his sincerity and passion in this advisory field. He is an adviser whom I respect and look up upon.

He called me out of concern to see how I'm doing in my company. He was concerned about me after a blog comment he noticed few months ago about how busy I am and yet how little I'm earning. He felt that I may need help in making this career a viable one and continue serving the public honestly.

During our conversation, he also highlighted to me of a prospect whom I did Financial Planning months ago but did not follow up for recommendation. He informed me that the client was very upset with me for not calling him. He did not elaborate further and informed me that he will follow up from his end.

I recalled that prospect instantly because I remembered vividly that I'd tried to negotiate with an insurance company for his premium loading to be reduced due to his health conditions. He sign up that insurance plan via internet himself and I'm actually not in the picture. I helped him because I hope he can be convinced to get some insurance cover with a lower loading. I also did a financial plan for him on the same day he approached me. During the fact-finding and presentation meetings, I know that he do not believe in fund managers and financial advisers like us in manging his money.

I went on to present his Financial Plan and did not contact him after that because I was not sure how to go on after that meeting. I know his needs but I do not know how to proceed with any relevant plans that can fit his needs due to his multiple health conditions and to proposed any portfolio based on index funds or ETFs. I do not have the confidence on getting my job done and deep inside me, I know that the chance of getting my proposals (Insurance and Investment) through is slim. A lot of time might be needed and I will not get anything back for the time I spent. As more work comes in subsequently, I forgotten about his case.

I was lectured by that friend that being a professional, we should follow up a case until a conclusion is drawn. I have to be outright with this client from the start if I'm not able to help him. I should also look deeper to help him with his other needs such as wealth distribution and family coverage, etc...

What my friend lectured about me is right and I like to apologize to this prospect if he is reading my blog. I was lost initially on what to do and subsequently forgotten about you. As a result, I had exposed you to problems that may relate to your financial plan during that few months. But I also really hope you understand that I'm a human afterall and please do not get too upset with me. I am busy not because my business is super good and don't care about you, its because I do not adopt short-cuts in planning for my clients and I'm still working hard to make a proper living like everyone else.

Thank you my friend and prospects of mine. I'd learnt a new lesson about Spirit of Professionalism...

Thursday, March 26, 2009

The US Financial Stablity Plan

Shares in US enjoyed a breather early this week when US Treasury Secretary Tim Geithner announced his new plan to rid banks of toxic assets. In my opinion, this
Public-Private Investment Program (PPIP) will require the US government to print more money which may result in devaluation of the US currency as well as hyper inflation in years to come. However, they are in desperation to do something or else the whole US economy will collapse earlier than we will like to see. Perhaps I can share a bit, based on my limited knowledge, why this move is better than not doing anything at all.

The need to boost liquidity
Imagine bank A had lend out billions in mortgage loans over the years. In the past 1 year, there was lots of defaults and the bank are not able to collect the cash as expected. The bank have to take-over the houses where the loans defaulted. The bank is now holding on to plenty of assets but no cash. The worst is that there are no market for these assets and nobody know how much these assets are worth?
Notewithstanding that the banks, with their initial expected cashflow, issued bonds and securities which resulted in high level of debts and end up with little money to finance a normal commercial operation in the private sectors. To make things worst, all banks are doubtful of each other and refuse to lend money as usual. They are reluctant to raise that extra capital needed to take advantage of business opportunities and are affecting the whole economy.

Creating market value for toxic assets
As mentioned earlier, the banks are holding on to plenty of such toxic assets and are not able to value them due to lack of buyers. Without government intervention, buyers will forever wait till and see until a market price for these assets are more firm. However, such a day may never comes... The government is now trying to create an interest to the private sector. This interest will help find a market value for these toxic assets.

Making the investment attractive
To make this investment attractive, the government and private investors will both take a 50-50% share in the equity capital. The government capital will come from the Troubled Asset Relief Program (TARP), with the amount expected to be between US$75 and US$100 billion.
There will be a 6-1 leverage ratio for the private investor and the leveraged amount do not comes from their own pocket. In other words, the private sector only stands to lose its capital, not the leveraged portion.

How it works?
a) Assume the purchase price is agreed at $84
b) With 6-1 leverage, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
c) Out of this $12, Treasury would invest $6, with the private investor contributing $6
d) If the price later fell to $60, the private investor will only lose $6 and the taxpayers lose $18.

Can this plan revive the economy?
The plan will start in May. It waits to be seen how spontaneous the market can be created. There is no guarantee that banks will be willing to release their assets at depressed prices when opportunites in the private sectors are not forecoming. The plan will fails if too little interest or sales are made when the whole thing start. However, if the plan is successful, it will generate a lot of cash and liquidity for the banks and the economy may start flowing again.
Well. I really don't know what will happen but I do hope things will start turning around soon. This may solve the short term US credit crisis but not the long term debt crisis that may come next.

Tuesday, March 24, 2009

Greed and Morality at work

The AIG bonus issue is no longer a news. It was widely discussed in coffeeshops locally even though its not our money. AIG, fresh from a US$170 billion bailout pays out $165 millions to largely members of the financial products division thats almost solely responsible for AIG's fate today. In the final quarter of 2008, AIG posted a US$61.7 billion loss, the largest quarterly loss ever recorded in the United States. I enjoyed reading the news because I am interested to see the effect of greed and morality at work. It was greed and recklessness that such contracts was drafted in the first place. Bonuses that can be paid regardless the profitability of the company.

$165 million actually represent just 0.1% of the total bailout funds but the media and internet certainly pay a major role in inciting outrage among the Americans. Anyone of sound mind will agree that these people, especially from the Financial Products Division don't deserve the money at all. However do note that those who accepted the money are not actually wrong too because its simply a loophole in the system of capitalism. The government cannot void a commercial contract as they like.

Obama said,"Under these circumstances, its hard to understand how derivtive traders at AIG warranted any bonuses... How do they justify this outrage to the taxpayers who are keeping the company afloat. If the US government do nothing, their will lose the trust from the people. Its also interesting to watch how the government outwit the system such as imposing a 90% tax.

As of today, some of these executives in AIG have agreed to pay back US$50 million in bonuses. Lets us make a guess on how much of these $165 will eventually be returned. See if greed or morality will win.

Wednesday, March 18, 2009

No Will? No Money?

I have been very busy since my return from Australia 3 days ago. There was plenty of backlog with my work and I was busy preparing our team for our first ever roadshow in Suntec City from 18th Mar to 22nd Mar. I also spent quite a bit of time in handling issues with regards to my late uncle's estate. Eventually none of my task was done properly. Very stressful and how I wish I can stop time for a while to breathe.

I like to share part of my experience while handling my late uncle's estate and found it truly frustrating.

Problem 1:
His HDB flat is registered solely under his name as he was a divorcee. All his children are underage and my granny is not eligible to own that HDB flat. Technically, the house should be sold, but if sold, where my granny and his children going to stay?
* HDB allowed us a grace period where we must get the court to appoint an administrator to take over control of the flat.

Problem 2:
If the administator took over control of the flat, he must continue pay for the monthly mortgage instalment and all the expenses with regards to the flat. End of the day, the house will still belongs to the kids.
* The next problem is that everyone is trying to avoid being that administator when my uncle don't have so money to fully pay off the house?

Problem 3:
Went to seek lawyer's advice on this issue and to check on the administration process. The legal fee, dispensation of surety and the court fees cost around $4,500. Next problem is that no one want to come out with this money. They want me to bring the kids and granny to see Member of Parliament to try get cheaper alternative.

Problem 4:
While trying to find money. I was hoping for the successful claims from Great Eastern and NTUC Income. The cheque from GE was not released because they demanded a letter of administation before the payout. Luckily NTUC Income did not demand this letter of administation and had payout the insurance proceeds within 1 week on submission.

Problem 5:
The kids expenses are high and they spending without parental control. The bank account money will run dry fast with such expenditure and I have no rights to scold them and my granny is too old to control them. The Education policies from NTUC Income did not come with the premium waiver rider. All policies must continued to be paid. There was no HPS or Mortgage Term plan and hence the housing loans must be paid as well.

Most problem lies with 2 issues. No Will and No Money.

When it comes to "No Will", a lot of things are delayed and you have to spend more money in the legal process. There are also no proper guidance to the kids and who supposed to have control over them.
When it comes to "No Money", nobody wants to be responsible. Its not that they have no money, its because they want government to pay and want me to meet the MP.

Its certainly not easy to translate all these legal and estate stuffs into Hokkien to my uncles and aunties. I'm trying to convince them not to waste time looking for MP and pay the legal fee to get things done. The outstanding interest from the mortgage is compounding. I may also try get Great Eastern to release the DPS money on compassionate reason without the need of letter of administation.

Sometimes how I wish my late uncle had left behind some money for me to compensate all the time and frustration I'm bearing for him. I'm the family "Chosen One" because I'm a financial planner and they know that I don't need to report to office everyday like my other cousins and siblings.

From this scenerio, I'm more convinced that I must get people to have adequate Insurance and to get their Will done to avoid such mess...

Monday, March 16, 2009

10 days Melbourne and Tasmania Experience

I had a hard time looking for sample itinerary when I started planning for my Tasmania Trip since early January. I like to share my experience so that someone can benefit from the hours that I’d spent planning especially for the Tassie Trip. We’d chosen this period to Australia because of the cooling weather and the long daylight hours as well as the Moomba Festival in Melbourne over that weekend. Melbourne is also the place where both my wife and I studied but never met there. We were there to rekindle our memories and we to bring each other to the places we used to go.

6th March 09 (Friday)
We took the SQ flight from Singapore to Melbourne on 5th March 11:40pm. The flight took around 7hrs 15 mins and we reached Melbourne at 10am. Paid $26 each for the Skybus at Tulmarine Airport and alight at the Southern Cross Station. We then had a early check-in at Ibis Hotel along Little Bourke Street. We chose this hotel because it is within walking distance to the Southern Cross Station.

We went sample the Vietnamese Beef Vermicelli at Russell Street and Swanston Street (An argument we had for years of which taste better). We concluded that the one in Russell Street to be better. We then took bus no. 350 to visit Latrobe University. My wife simply can’t stop telling me all the stories about her campus life throughout the walk. We then took the tram to Dockland and Lygon street for some shopping and dinner and not forgetting the famous Galati Ice-cream along Lygon Street (Argle Street Junction). That’s one of the best Ice-cream I ever had.

7th March 09 (Saturday)
We took Tram 86 to St Kildas Beach in the early morning for our breakfast. There are several bakeries that serve good pastries. We visited the Farmer’s Market where the locals sell their fresh produces and took a cooling stroll along the beach. We did not forget to take a picture at Luna Park before we left.

Took the tram back to the city and had our lunch at Sharkfin House at Chinatown area. We’d arranged to meet our Melbourne Friends there. The place serves very good Dim Sum and you should not miss it. The rest of the day was spent shopping in the city, Victoria Market and enjoying ourselves at the Moomba Festival and the Crown Casino.

Trust me, the fireworks at the Moomba are very different from what we used to see in Singapore. The fireworks are so near that we can hear the music that goes with the fireworks and feel the heat from the fireworks pyrotechnic platform. The fireworks also stretched across the Yarra River that make it so beautiful.

8th March 2009 (Sunday)
We check-out our hotel at 5am and walked to the Southern Cross Station for the Skybus back to Airport. We were on our way to Launceston via a domestic flight. We reached Launceston at 9am and collect our red Mitsubishi Lancer at the Airport. It is recommended to book your car in advance just in case there are no cars of your choice when you reach the place.

Our First stop is at Cataract Gorge where we sat on the longest Chairlift in Southern Atmosphere and have a nice view from the top. We than took a nice walk across Alexandra bridge before we had our late breakfast at the park. We then drove to Gridelwald (The Swiss Village) and Port Sorell to view the beautiful long and clean beach of Northern Tasmania.
We proceed down to Penguin to visit the Penguin Sunday’s Market and shopping for our dinner before driving to Stanley and checking at Ellie’s Studio Apartment.

Right after checking in, we proceeded to Highfield Historic Site and climbing up the Nut to view the lovely Sunset. We then had a nice BBQ dinner at the courtyard of Ellie’s Studio that night too.

9th March 2009 (Monday)
We left Stanley and visited Rocky Cape and Table Cape. The Tulip Farm at the Table Cape will not in season until November. We stocked up our supplies at Wynyard for our Cradle Mountain night. Along the long journey, we stopped at Hellyer Gorge for our prepared sandwiches and snacks. We then proceeded to Waratah Fall to view the peaceful town and the unique little waterfall there. We finally reached Cradle Mountain Discovery Caravan Park at 4:30pm. (Caravan Parks was chosen because cooking facilities are normally found there).

We walked along the Dove Lake before going up to Marion Lookout where we can have a beautiful view of Cradle Mountain and the Lakes below. The climb took us nearly 2hrs return trip with occasional stops. I really loved the air and the view up there. If you are still young and active, it’s a must to take this track to see the beauty of God’s creation.
We finished our walk at nearly 7:30pm(sun not set yet) and back to our Caravan Park to cook our own dinner. (Mushrooms and Sausages were real cheap there)

10th March 2009 (Tuesday)
Left Cradle Mountain early in the morning and proceeded to Sheffield to see the so called Mural. There were plenty of wall paintings in the town and we took a lot of pictures there. Along the way, we stopped by several “Look-out” points to enjoy more mountain views as well as stopping our car to pose picture with the sheep and cows. We went to Christmas Hill near Elizabeth Town for our Rasberry lunch and to purchase plenty of Rasberry Jams and Syrups for our friends and colleagues.
We then drove to Perth to buy honeys before going to Campbell town and Ross to snap more pictures of the Churches and Bridges. We purchased the Scallop Pies and plenty of bread from Ross well known bakery before going to Bicheno. We checked in another Caravan Park that night and had our dinner before going for the Penguin Watch. We’d booked this Penguin Tour via internet 2 weeks in advance.
The Penguin Watch was lovely, we were actually so close to these little creatures during the guided tour. There weren’t a lot of them as compared to what we seen in Melbourne but the experience was certainly different as they were actually so close to us.

11th March 2009 (Wednesday)
We went around Bicheno in the morning before leaving for Freycinet National Park. It is a 30 minutes drive and we visited Cape Touville and Wineglass Bay. Same as Cradle Mountain, we need to pay $22 for our Car Pass to enter the National Park. If you need to enter any National Parks for more than 3 days, then it is recommended to get the multiple day pass which cost $56. The climb took us around 1 hour return trip. We should have visit Wineglass Bay first before Cape Touville because there was quite a large crowd by 10:30am and it is hard to take a nice picture with so many people around.

We left the place and proceeded towards Swansea for Lunch. It is known to have fine seafood there but due to time and budget constraints, we just had chicken wraps. We stayed for a while to enjoy the nice seaview before going to Buckland to see the famous stained glass of the St John’s Baptist Church.

We rested in Buckland for a while after the long drive before heading southwards to Port Arthur to check in our accommodation at Rocking Horse Cottage. This Rocking Horse Cottage is the best place I ever stayed. There are plenty of apple trees, the host was so friendly that we played with the dog, cat and the horses. We were even given such crunchy and sweet apples called Nubeena. We visited the Remarkable Cave before heading back to the beach outside our cottage for a small romantic picnic. It was also the night when the full moon rose from the eastern mountains. Such scene was indeed unforgettable.

12th March 2009 (Thursday)
We then visit Port Arthur Historic Site in the morning. We took the Bronze Pass where we enjoyed a guided tour as well as a river cruise. The place is very unique and picturesque. Every angle seems so nice for a photo shot.

We left Port Arthur in the early afternoon and went to Sorell Fruit Farm to experience fruit pickings. As most fruits are not in season, we only picked apples, pears and plenty of strawberries. Fresh picked strawberries are indeed very juicy. Remember that there are many varieties of strawberries and you must ask which plot of land gives you the best ones. The amazing thing is that it only cost us $4.50 each to pick all these strawberries into box big enough to cost at least $20 in Singapore.

Our next Destination is Richmond Bridge which is the oldest Bridge in Tasmania and was built by convicts. It’s a very lovely place where we relaxed for nearly an hour, eating the strawberries that we picked from Sorell.
After the strawberry feast in Richmond, we went Barilla Bay to savor some of the best oysters in Aussie. However, we were too early and the restaurant was not opened, we can only pack the oysters in the takeaway stall and head towards Geeveston for our night stay. Along the way, we also visited the Apple Museum.

We went all the way to Geeveston, not for the Tahune Airwalk or the Hasting Caves but for the special accommodation which we see on the internet. It’s a Bed and Breakfast apartment with the concept of Teddy Bears. This place is really so charming and sweet that I’m not able to describe here. (Do note that B&B sometimes don’t allow you to cook your own food)

13th March 2009 (Friday)
We slept soundly in the beautiful Teddy Bear apartment till 9am and we left for Mount Wellington after the breakfast. From Mount Wellington, we can see the whole city of Hobart and the view was just marvellous. We stayed for nearly an hour before heading to Bonorong Wildlife Park.
At Bonorong, we were allowed to hand feed the Wallabies and Kangaroos as well as posing pictures with the Wombat, Tasmania Devil and best of all, the chubby and cute Koala. The Koala is simply so lovable. We enjoyed the whole of 1.5hours in the park before driving south to Hobart. We stayed at Wrest Point Casino Hotel.

After checking-in the hotel, we walked to Battery Point and Sullivan Cove as wells as to Castray Esplanade to experience the night life of Hobart.

14th March 2009 (Saturday)
We reached the Saturday Salamanca Market as early as 8:30am to ensure we have parking lot near the market place. It was not too crowded in the morning and we took a lot of pictures there. We had a nice 1.5hrs walk before going to Hobart Airport to catch our Domestic Flight to Melbourne and the connecting flight to Singapore. We reached Singapore at 10pm that night.

A big mistake we made in this trip was our decision to carry our jams fearing that they would break in the check-in luggages. We forgotten that they were not allowed to board the plane as they are more than 100ml. All our Jams purchased from the Christmas Hill were thrown away right in front of us. I was very upset over it but if we put this aside, I think this is the best holiday I ever had.

Thank God for the safety on the roads, the nice weather and all the beautiful sights we saw along the way. The self drive trip was memorable yet not too expensive. We spent ~$4,600 for the whole trip inclusive of all the gifts for friends and family. I strongly recommend the next couple who see this to try it plan for your own holiday... (Okay. I got to start working hard again from today onwards.....)

Thursday, March 5, 2009

Australia from 5th to 15th March

To all my friends and readers,

I'll be on a trip to Australia (Melbourne and Tasmania) from 5th to 15th March. This trip was planned on relatively short notice and did intensive research over the past 1 month. I hope everything will go on as planned...

May not be able to blog unless I have internet access. Keep you guys updated...

Understand your Value system...

Try this game:

Read the following story. Rank the 5 characters from 1-5. 1 being the person you like most and 5 being the person you like least...

"There was once a woman named Mei Ling who was in love with a man named Ah Seng. Ah Seng lived on the shore of a river. Mei Ling lived on the opposite shore of the river. The river which separated the two lovers was full of man eating crocodiles.

Mei Ling wanted to cross the river to be with Ah Seng. Unfortunately, the bridge had been washed out. So she went to ask John, the river boat captain, to take her across. He said he would be glad to if she would spend the night with him. She promptly refused and went to a friend named Boon Teck to explain her plight. Boon Teck said he did not want to be involved at all in the situation.

Mei Ling felt her only alternative was to accept John's terms. She spent the night with him and he then fulfilled his promise and took her across the river to be with Ah Seng.

When she told Ah Seng about what happened, Ah Seng cast her aside. Mei Ling turned to Tom with her tale of woe. Tom then sought out Ah Seng and gave him a good blow which sent him into the River.".


All the characters have a good value and counter value. By choosing the sequence will be able to identify which value is more important to you... I'd tried it with many people and trust me, everyone have a different sequence...

Monday, March 2, 2009

The "Golden" Era

Gold is a chemical element with the symbol Au (Latin: aurum) and atomic number 79. The metal occurs as nuggets or grains in rocks, in veins and in alluvial deposits. Gold has been known and highly valued since prehistoric times. It may have been the first metal used by humans and was valued for ornamentation and rituals. Gold is the most malleable and ductile of all metals; a single gram can be beaten into a sheet of one square meter, or an ounce into 300 square feet. Gold leaf can be beaten thin enough to become translucent.

Gold is often used as a hedge or safe haven against any economic or political crisis, social unrest or even war. I remembered watching TV serials where the rich chinese always bring gold along with them to a foreign land when the Japanese invaded Singapore during WWII.

Gold is sometimes considered as an "Honest Money". Gold represent power and wealth since the beginning of time. Having lots of Gold means lots of money. For about 3000 years, Gold served mankind as money until the introduction of paper currency. Today, it is also a form of investment when we keep them either as Gold bar or even as Jewellery.

From the 1880s, central banks of many countries started building up their stock of gold during the period of classical Gold Standard. Under the Gold Standard, the amount of money in circulation was linked to the country's gold stock and paper money was converted into gold at a fixed price. However, with the development of banking and credit meant that the amount of money in circulation was greater than the gold stock itself.

The total amount of gold that has ever been mined has been estimated at around 142,000 tonnes. Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit. The Gold Standard broke down in 1971 when the then US president Richard Nixon scrap the system in order to get funds for the Vietnam War.

I'd seen quite a few website that talk a lot about Gold Investing

I'm not an expert with Gold and its movement but I'll advocate not putting more than 20% of your investment portfolio into this asset class. Gold do not behave like equities or bonds. The price of gold can be easily affected by the supply and demand due to private ownership. Such ownership is highly liquid and subject to rapid changes while production is unlikely to change in the near future. Based on historical prices, this asset class can run into a multi-year bear market lasting a decade or so.

In March 2008, the gold price reached an all-time nominal high of $1002.80 and again late last month, However, in real terms, this price is still well below the $850/oz peak in 1980 which was never breached over 27 years. Gold price is trading at $936/oz as I'm writing this post. It looks steep to me, just be careful.