Is regular premium policies affected by 1st Apr 08 CPF ruling?

Just some sharing of a question that I was asked today.

"I have only $12,000 left in my Ordinary Account now and I have a regular premium Endowment plan which I used CPFOA since 1995. Will I be affected by the $20,000 cap set by CPF Board in April 2008? Must I use cash to pay for the premium if I am to continne with this plan?"

The answer is "No". You can also continue to pay for your agent bank fee and to service the future premiums of your regular premium insurance policy even if your Ordinary Account balance falls below $20, 000 after the 1st April 08 Ruling.

However, this does not apply to recurring single premium insurance policies or regular savings plans for unit trusts.

6 claims this week!!!

It was a busy and stresful week for me but unfortunately nothing to do with income generating but time taken away from me to generate more income.

I don't know what happened this week. I normally receive one to two claims per month but this week, I received six!!! My zodiac star probably went out of position.

4 Incomeshields, 1 Personal Accident and 1 motor.
For the Shield Plans,
1 due to H1N1 in Malaysia (2 yr old boy)
1 due to Piles Removal
1 due to Prostate Enlargement
1 due to a 3 days Observation (Weak Heart and bloated stomach)
For the Accident Plan, the child fractured his finger
For the Motor Plan, its a 3rd party claim against another driver.

For the H1N1 case, I received so many calls from the worried mother in Malaysia asking if his insurance is claimable, asking what I need to get from doctor, asking if I need to send her form, etc. For the rest, they all called me to ask if the insurance is claimable.

I was very stressful to be asked "My insurance can claim or not?" because I cannot be absolutely sure everytime and I'll be stress until the payout is made.

Once payout made, I'll need to help clients with the pre and post hospitalisation bills. This is when the busy time comes. For some cases, I will need to bring claim form, fill up for them and monitor the claims process.

For the Motor case, I'm also stressed because the accident happened in the early morning 7:30am when I'm still in bed. My client sounds agitated and asked me what to do at the scene of accident. I had a very late night and was very tired. It took half a day before his car are sent to the workshop and he kept calling me from time to time.

Claims is part and parcel of our profession and I very sure that I'm probably doing more claims than other advisers due to the large no. of Shield and PA clients that I have. I know the type of common claims and I have a good idea on the type of bills to be expected. For certain medical conditions, the bill can still be sizeable even when you choose the B2 ward. Medishield alone might not protect you adequately. I'm speaking from my personal experience and I hope you can be proactive in ensuring that you get protected early.

Unburden those bills!

I received an email from a lady called "Jennifer Lohan" indicating that she like to share this article via my blog. I feel that its a good read and I hope to share this with you guys too.

++ QTE ++

How to pay off bills is a common question that haunts the minds of almost everybody. Paying off your bills fast needs both effective planning and discipline. If you owe more than what you earn every month, then it is really something to worry about.

However, there is hope for you. You can slowly pay off all your bills by following some useful tips. You just need to remain patient and careful.

The following tips would help you get an idea about how to pay off bills without troubling your finances:

Step 1: Work out the total amount of your debt.
Using credit cards carelessly frequently keeps you out of touch with your finances. You would require a clear understanding of your financial condition if you wish to create a feasible plan to come out of debt quickly. Assemble all your bills (loans, credit cards and so on) and sum up the amounts due to work out how much debt you have.
Take a note of the minimum monthly payments, the interest rates and due dates for every bill. Talk to your creditors for bargaining reduced interest rates. Your debt burden is lowered by reduced interest rates and then it becomes simpler to pay off your bills soon.

Step 2: Create a repayment strategy.
If you owe money to numerous creditors, pick out the one with the minimum balance owed. You must try to pay them in the beginning. At the same time, you must continue making the minimum payments to all other creditors barring the one you've chosen for payoff.
While creating a repayment strategy, research your needs why you wish to pay off your debts soon. Usually, working on something with a particular goal would better your odds for success.

Step 3: Evaluate your income and expenditures.
Note down and analyze your income and expenditures cautiously to get the money you would require to make additional payments on your targeted debt. Search for areas where you can reduce your expenses. Cut off your vouchers, carry coffee and lunch from home, choose basic rather than premium cable and so on.
Seek opportunities to save and raise your income (selling items on eBay, carpool, delivery business or switching a pastime into an income-producing activity).

Step 4: Put all your money that you save towards your targeted debt.
If you can, make weekly or bi-weekly payments to lower your average daily balance. Finance charges are calculated on the basis of this balance. You can make this payment arrangement simply through adding your creditors to your online banking service. Once the money is available in your account, you only have to click and the online payment is made.
Just keep on doing this again and again till you get out of debt. Select the debt with the next lowest balance and utilize your funds (including the funds that you were using to pay down the debt with the lowest balance) for paying this bill.

++ UNQTE ++

When I tried asking who she was, she replied:

Very nice of you too have checked my domain. Honestly, I would't care much to mention anything about myself but I would rather be glad to give all the credit to my friend Jason Holmes. We worked out the post together and I am from the United States of America . Singapore is a wonderful place to be in.

Author : Jason Holmes is one of the financial writers associated with the Debt Consolidation Care Community. With his in-depth knowledge and vast experience, he has made a profound impact through writing and advising on all debt issues and has presented useful tips on debt. His remarkable guidance and support has improved the community into a global hub for the debt related situations.

Starting an Investment Plan(3)

Step 5: Funds Selection
As Financial Advisers, one of the thing we can do is to help select funds for our clients. There are hundreds of mutual funds in Singapore and it is a challenge to find reliable fund managers to be included in our portfolio. Other than the recommended funds from our i-fast and Navigators platform, I try to find out more about other funds as well if they deserve recommendations.

I will first get to http://www.fundsupermart.com/ website to download all the funds info by asset classes and geographical allocations. The usual ones I download are Equities: Global, Asia Ex-Japan, BRIC/Emerging Markets, China, Latin America, Bonds: Global, Asia, High Yields.

I’ll transfer the funds information to my excel spreadsheet and use a colour coding system for 4 criteria namely 1,3,5 years returns, Sharpe Ratio, Expenses Ratio and Fund Size to select up to 4-5 funds. For those without long term track record, I’ll check out its mother fund in http://www.trustnetoffshore.com/ for guidance.

With the 4-5 funds available, I’ll check out the Lipper Website http://www.lipperleaders.com/ to check out their Returns Consistency and Preservation Score. I’ll then check out the Morningstar website http://sg.morningstar.com/ to check out the Alpha, Beta, style box, PE and PB ratio.

On completion, 2 or 3 funds will remain in my respective portfolio and the same process of review will be conducted 6 months later.

Step 6: Review and Rebalancing for Clients
I’ll print all my clients statement and manually key in the returns into my excel monitoring system. I know exactly how much their equity allocation and return is as per beginning of each month. I also set alarm function into my funds monitoring system to inform me when my clients portfolio reaches specific profits or loss. When this happens, I’ll evaluate if action is necessary at that stage to review allocation or to rebalance. For some clients, I also set alarm function for specific funds where I’ll be prompted when it reaches certain price.

For my clients, I email them my views on the global economies every 1st week of the month. I'll try to email specific report to some clients on a quarterly basis and to meet up at least every half yearly or yearly. For those with smaller investments, the meeting shall most likely be on a yearly basis.

The process of Funds Selection and Funds review are very tedious processes. I hope I'll be able to engage a part-time staff to help me with these 2 steps in future.

Hai Sing Golden Jubilee Dinner

Hai Sing Catholic School celebrated her 50th Birthday yesterday at Suntec Convention Hall. I am always proud to tell others that I belong to the 1st batch of boys in the school when it moved from Hougang to Pasir Ris in 1990. Thinking back, 19 years had passed and its really great to see many friends and ex-teachers who had left deep memories for me and my fellow classmates. For my batch, we had nearly 2 tables filled where we arrange via "FaceBook". Facebook is really powerful and it had keep quite a number of us in touch.

At the entrance, this picture caught my attention. I was standing on the top right corner and I have a good laugh with my friends just to see how much we had changed. Its probably one of the sports day in Secondary 2 or 3.

The dinner was quite boring with all the talks and slideshows initially but things get lively when all these ended. Our table became noisy and we joked about old days again. We quickly walked around and meet our ex-teachers.

The one in the picture is my ex-Chinese Teacher who taught me from Secondary 2 to 4. I was really happy to know that she still remembers me and her impression about me is that I'm a very quiet boy sitting at the corner of the classroom. There are many other photos taken but with my friend's camera. We are very proud to tell all our teachers that almost all of these first batch of boys are well established in our career.

The dinner ended with our school song and one Catholic song which we sang every Moday over my 4 years in Hai Sing. I really sang it loud and clear with my heart.

I encountered something more juicy today. A lady, one year my junior, approached me and asked if I'm Adrian. I replied positively and she told me that she remembers me quite vividly. I was puzzled because I don't know her at all and she is one year my junior. I tried to probe further by asking which CCA she was from and she replied "Choir".

I was more puzzled because I never even know that there is a Choir in my school. She can even tell me that I'm from NPCC. I again probed why she can remembers me, she din give me a direct answer and the conversation stopped shortly as we get busy with other stuffs.

I may never have an answer as of why she remembers me as I din get her contact and I very sure I'll not recognise her if I'm to meet her again. However, its quite a nice feeling to know that Adrian Khiat, being such a low profile guy in Hai Sing Catholic School, so many years ago, actually have a lady, one year his junior, who remembers him. I always thought that I'm such an insignificant guy that nobody will ever even notice me in the past.

Starting an Investment Plan? (2)

Step 3: Agreeing on the Asset Allocation
Determining on the asset allocation is the foundation of my client’s investment plan. The 3 asset classes are Equities, Fixed Income and Money Market.
Equities are more risky but offers potential to get higher returns while Bonds are able to get reasonable returns with lower risk and money market are shorter duration bonds of as short as 1 year which are even more stable than normal bonds.

We’ll agree on the percentage band of equities in the portfolio depending on the client’s risk profile.
For example, Growth Portfolio (60% to 80% equities),
Aggressive (70% to 90% equities), etc.

I adopted some suggestions from Larry Swedroe’s book “What Wall Street Doesn’t Want You to Know” as a guide on the maximum equities allocation to be recommended on top of what my company suggested.

a) Investment Horizon ==> Maximum Equity Position
<3 yrs ="=""> 0% Equity
4-6 yrs ==> 30% Equity
7-10 yrs ==> 70% Equity
11-20 yrs ==> 90% Equity
>20 yrs ==> 100% Equity

b) Maximum Tolerable Loss ==> Maximum Equity Position
5% ==> 20% Equity
10% ==> 30% Equity
20% ==> 50% Equity
30% ==> 70% Equity
40% ==> 90% Equity
50% ==> 100% Equity

Step 4: Designing Core and Supplementary Portfolio
I’ll separate the Equities portion into Core and Supplementary Portfolio. The Core Equities position will mainly be global and regional diversified. The Supplementary portfolio will normally be more speculative such as single country, futures or sector funds such as technology and financials, etc. The rest will be in Fixed Income and Money market.

I believe in diversification with bias towards specific sectors or countries instead of diversification to the extent that I’m forming a fund for global equities or global balanced fund.100% of my clients are managed via a portfolio manner.

Example of a Core and Supplementary Portfolio

Core Funds
Global Equity - 20%
Global Resource Equity - 10%
Asia Ex-Japan Equity - 30%

Supplementary
BRIC Equity - 10%
Asia Financial Equity - 10%

Fixed Income
Global Corporate Bond - 10%
Singapore Money Market - 10%

There are so far none of my client whose money are parked in just 1 or 2 funds other than those under RSP (Regular Savings Plan).

(To be continued...)

The people who will pull you up

I received this package in my office this afternoon. I met this person once for a cup of coffee. He subsequently referred his daughter and son-in-law to me for Financial Planning.

What I want to say is that "There are people who will pull you up when you are down". Its always the little thoughts from someone else that will make your day.

Thank you, Mr Foo...

Starting an Investments Plan?

I was questioned some clients on my capabilities in investment and asked to view my portfolio before they are willing to part their money for investment. I’m a very straight talking person and tell him that I’m a poor man. I don’t have much to invest; I don’t have a fantastic track record of investing on my own. I also don’t have a long track record of managing client’s fund.

I’m honest about my own capabilities that I’m not an investment guru or genius who can promises high returns without taking significant risk for my clients. I can't spot the top or the bottom and I’ll not switch funds as often as they buy shares and I shall follow a systematic and disciplined methodology towards investments.
For those who feel that I'm not capable, I’ll wish them well in looking for the adviser with the crystal ball. They are very likely do better than me. I help those who don't know or have no interest to know what to do.

What are the steps I took before investing my clients’ money?

Step 1: Letting them understand why they need to invest
After completing their financial plan, I’ll get to understand their assets available and their short to long term financial goals. This is important in the time horizon point of view and the necessary rate of returns to achieve their goals. We will discuss if taking some risk is necessary for them.

On segregating their assets and accumulation plan meant for specific goals, they will appreciate that this particular investment is meant for what purpose and for how long. I must manage their expectation that I’m not trying to make as much money in as short time as possible. My objective is to remove the fear and greed element towards investment.

Step 2: Going beyond Risk Profiling Survey
The questions set by the insurance company or financial advisory firm may not be sufficient to determine the risk profile of the person. I cannot simply use 5 or 10 questions to determine what my client should invest. I need to apply some judgment and commonsense to understand him beyond that 5-10 questions. If the survey shows him to be a particular investor type, it doesn’t mean that he will belongs to that group automatically.

3 aspects are normally surveyed in a Risk Profiler namely
a) Time Horizon and Ability to take Risk
b) Experience and Willingness to take risk
c) Objectives and Needs to take Risk.

Example (1)
A 35 years old man, having strong positive cashflow, desiring a specific retirement lifestyle but not willing to take risk and the questions he answered show that he is conservative. If I am to recommend a conservative portfolio, he may never achieve his retirement goals.
Example (2)
A lecturer, retiring in 2 years has moderate ability, highly willing to take risk and desiring a moderate retirement lifestyle, but had and agressive score for his risk profiler. The point here is that he may not have the need to take high risk in the first place, why go aggressive?

(To be continued...)

Busy busy with many shield plans lately (34 pages of paperwork including a story from how I meet him and how I convince him to buy a shield plan + 1 hardcopy file open for each case + photocopy and scanning before filing + chasing underwriters + data entry + send, deliver, explain policy etc all for peanuts earnings)... no time to write...

Meet and Greet Breakfast with Financial Times

I accepted an invitation from Financial Times PR Agency Fleishman-Hillard for a Meet and Greet Breakfast with Financial Times late last month. I believe that they had invited many bloggers who write about Financial issues for the breakfast session. I accepted the invitation because I was pondering "Why not"? Free breakfast, free talk and force me to start the day early.

The breakfast serves as an introductory meeting for bloggers and FT Regional Online Director Hiroko Hoshino where she updates up FT.com's new initiatives and the recent launch of http://www.howtospendit.com/. Her objective is to help bloggers get easier access to search for credible news, information and commentaries via the FT platform so that we can write better and quality articles.

Mr Kevin Brown, FT Southeast Asia Bureau Chief was also present to showcase the strength of Financial Times and their articles. He also briefly shared on the trend of readership locally and worldwide and reveal why they are able to achieve the unprecedent rise in readership.
I gave my comment about the readerability of the howtospendit.com and that it is not suitable for the local market in Singapore. I also commented that most people will be contented with the Bloomberg and Thomson Reuters news where they provide news for free. Financial Times only allow 2 articles for public and 10 articles per 30 days for registered readers which is far too little.
Kevin replied by giving a lot of examples on how different FT is from Bloomberg and TR and cited that to enable quality articles to be written, good and sharp editors should be retained.

I was sceptible with what he said and I registered myself in FT.com and started to read some of their articles. I noticed that it contains many analysts who write without vested interest compared to those written by Fund managers. I can find investor's view on all regions and even commodities and currencies.

I was given a 6 months free subscription to FT for attending the breakfast session. Good chance for me to use their info for my future postings.

Financial Plan for Charity Program

I had did about 6-8 financial plans per month of which I had never collected a single cent for the hours of analysis, comparison and thinking which adds up to nearly 10 hours for each plan. I had tried asking if they will be willing to pay for what I did and most will reluctently say "Maybe".

It might be that my work is indeed not good or I'm simply not good enough to project what I did for them is worth paying for.

I decided that my time should not comes to nothing. Even if the person don't pay me, I must let the recipient of my financial plan part with some money for the time I spent. I had tried the "Financial Plan for Charity" program for a month and I think its quite successful. I'd managed to convince 4 people to donate last month. I am happier and more motivated to do my planning now.

In my first meeting, I'll let my client know about my initiative for the less fortunate. I inform them that they can select any of the 3 charitable organisation to make a donation after I presented my financial plan. I will emphasize that any donations will be voluntary.

Donation can be as small as $10 via cheque or Credit Card. There will a self-enclosed envelope so that I'll not be kept in the loop and Credit cards details will not be revealed to me.

The 3 charitable organisations I'm helping now are:
Children Cancer Foundation - http://www.ccf.org.sg/
Home Nursing Foundation - http://www.hnf.org.sg/
Society for the Physically Disabled - http://www.spd.org.sg/

Its a win-win-win case. I win because my time are not totally wasted. The charity win because they gain a bit of funds from the public and my client wins because they will get 2x tax rebate for the donations made and hence a reduction in tax payable.