My Clients(1) - The Singles

Over my 6 years as a financial adviser, my current clientele base is around 20% young singles, 20% matured singles, 50% young families and 10% matured families. Most of them are in the region of mid 20s to early 40s. My age is between them and hence I can understand their concerns quite well when I met up with them. I can perhaps share a bit of my observation about these 4 groups of my clients with you.

Young Singles

The Young Singles I described here are between early 20s to mid 30s.

a) Singles theoretically have lower needs against death. Their parents are probably between late 40s t0 early 50s and are not depending on their children earnings. When I asked them how much they will like to provide their parents on a monthly basis, they will give me a very low figure or even providing nothing at all. I have to encourage them to give to set a higher amount by telling them how much their parents had spent for them over the past 20+ years.

b) Those who are getting married are confused on how much they need to spend for the big day and for their 1st property. They need our help in analysing their situation.

c) Many aspires to buy a car because they have low commitment and able to see good surplus every month.

The good and not so good about this group of client
d) Many are not very concern with insurance and likely miss an appointment when they have slightly more work in the office or when they have a new appointment.

e) They have plenty of time to research and read from Internet and even meet with multiple advisers before they buy their first shield plan. They can ask many interesting questions and quite are quite demanding on us.

f) The good thing is that they are the group which I can see them grow and they will look out for me when they form their family nucleus.

Matured Singles

The Matured Singles group I described are between mid 30s and above

a) The matured singles I met are normally professionals like Engineers, Managers and Lecturers, etc. Their expenses are still low and have good monthly cash surplus.

b) Their parents are older and they begin to see the need to provide for their parents when they are not around, especially on hospitalisation expenses. Their Insurance needs for death is probably lower at this stage because they will have more resources/savings by this age.

c) They are concern about retrenchment, not able to work and hence they like to leave a huge amount of liquid cash in banks for all sort of unknown emergencies

d) Many of them look out for a property. Perhaps a 3 room condominium or HDB flat because they will have quite a bit of CPF monies and they have quite good monthly surplus.

The good and not so good about this group of client

e) They are relatively busy and it is not easy to fix a date to meet them. Many don't even like to reply my sms or emails. However, onces a date is fixed, they will do their best to meet up.

f) They will have many friends in the Financial Advisory industry and they like to look out for their friends first because they don't have the time to do all sort of research. Its usually by referrals that I'm being introduced to this group.

g) The good thing is that this group of client see a more urgent needs towards financial planning as they understand that they are solely responsible for their own retirement in future.

Till here and I will share more about young and matured families in my next posting.

Shield Plan Comparison

I always advocate to my clients on the importance of having a good medical coverage. I don't understand why some people will choose to spend that extra $20/mth on good food or shopping but save that similar $20 on a medical insurance.

However, most of my clients are confused because they have no idea how a shield plan works and what are the difference between the different insurers. I believe many advisers themselves are not sure as well.

I try to provide some info for you today but pls note that these info is not a comprehensive guide and can only be used for your quick reference. The data are updated as of today and I'll try not to clatter too many items and hence summarizes for you as below:

* I'd used the "As Charged" Private Hospital plans as the basis for comparison. I'm not going through every single point but will highlight one or two more significant ones for you.

NTUC Income
* Lowest Premium for most ages
* Provide Letter of gurantee (condition applies)
Great Eastern
* Highest Final Expenses Benefit at $7,000
* Only insurer that did not put a unlimited lifetime benefit
Prudential
* Lowest Day Surgery Deductible. $1,500 for Subsidized and $2,000 for non-Sub. Most insurers deductible stands at $3k for day surgery.
AIA
* Do not cover congenital abnormalities for kids but upto $5k for mother's policy for newborn below 1 yrs old.
Aviva
* Allows for moratorium underwriting
* Free Plan 2 for children below 20 yrs old when both parents on Plan 1 or 2.
* Highest premium for all ages
* Also provide for LOG (condition applies)

How about the Riders?
Riders are added to the main plan to cover the deductible and Co-insurance so that we do not need to worry about the smaller bills below $2k or $3k.
However, insurers have made these riders more complicating by adding many features which we do not know if we really need or not.

Let me try summarise for you below:
a) Prudential, Great Eastern and AIA are able to give 100% coverage because they cover both deductible and Co-insurance
b) NTUC Income covers Deductible but not Co-insurance. Eg. For any bill size, NTUC Income will cover 90% and Policyholder 10%. However Policyholder co-payment is capped at $3,000 for their plan preferred.
c) Aviva covers the Co-insurance but not the deductible. Eg, For any bill size, Aviva will only start to pay provided policyholder pay up to $3,000 first.

Now comparing the 3 companies that gives 100%
* Prudential Hospital Benefit for lower ward stay seems good
* GE and Pru emergency outpatient treatment looks attractive but I wonder what is the chance of emergency yet only outpatient treatment.
* AIA post hospital home nursing benefit is certainly useful for those with mobility problem on discharge.
* In short, AIA provide the basics and you pay the least

e) How about the other 2?
* Aviva is the least comprehensive of all riders. The $3k deductible applies every policy year and if the condition is a prolonged one, policyholder will not lose out.
* Children free under plan 2 when parents under plan 1 or 2. Depends if you really want your children to be under a lower plan when you are on a higher one?
* The $300/day hospital benefit for staying in the lower ward is the highest among all insurer.
* For those who do not mind self-insuring himself or herself a larger portion of the bill and save by getting the free coverage for children, Aviva will be a good choice.
* NTUC Income stands in the middle between Aviva and the rest by covering 90% of a bill capping at $3k.
* The cover is rather comprehensive and premium are reasonable across all age group.

Which one the best?
* There will not be an answer because everyone view each benefits different. Some wants the least, some wants the most, some wants in between. Your adviser will guide you along in your decision.

Disclaimer:
The above information is not a comprehensive guide and may not be 100% accurate. It contains much of my personal opinion and you are free to agree or disagree with them.

One Year Free Term Insurance

Someone giving free lunch
I get to learn of a big IFA firm giving one year free term insurance from a particular insurance company(Insurer A). This is probably a marketing tactic to create new business for the company and their advisers. I get to know about it when one of my prospects went to that IFA firm and took up the Sum Assured that I’d recommended. The premium from that insurer is about 10% - 15% higher than the insurer(Insurer B) I’d recommended. (Example $1,190 Vs $1,060p.a; $130 more expensive).


Analysing that free lunch
On analysing the remuneration structure from Insurer A, they are paying 60% commission and 95% over-riding to that IFA firm. This means that the IFA firm will get 60% + (60% x 0.95) = 117% of 1st year premium. For a premium of $1,190, the firm will get $1,392.30 as first year commission. We have not factored the 2nd to 6th year commission which adds up quite substantially too.

What if Client surrender policy after 1 year
Even if the client surrender the policy after 1 year, the firm will still earn $202.30. Why?
The firm received $1,392.30 from the insurer and premium paid for the client is $1,190. ($1,392.30 - $1,190 = $202.30)

If 100 of their advisers submit one such case, the IFA will get a revenue of $139,230. Even if 50% of such cases lapse, they will still get ($1,392.30 x 50 + $202.30 x 50) = $79,730. Even if 100% surrender the policies, they still get $20,230.

How about Insurer B?
For the insurer B that I'd recommended, it is paying 10% + (10% x 0.45) = 14.5% as first year commission. For a premium of $1,060, the IFA will only get $153.70 commission. If 100 of advisers like me recommended Insurer B, the company will get only $15,370. Even if all 100 clients surrender their policies in Insurer A and all 100 clients keep their policies in Insurer B, the firm that recommend Insurer A will still get $4,860 more than the firm that recommend insurer B.

Whose interest was served here?

I explained to my client that he may save the premium in the 1st year but over longer term, he will incur higher premium. The $1,190 that the adviser paid for him is able to absorb 9 out of the 30 years. He will eventually pay $2,730 more over that next 21 years. He decided to buy from that IFA firm and his reason is simple. He will get the free insurance for this one year and decide next year if he wants to switch back to me. I explained insurability issue and he told me that he’ll take the risk. So was the client's interest served?

The IFA firm is smart
The IFA firm is smart because someone already holding to an insurance may not take the trouble to terminate it and the person with a large term insurance may not seek alternative view from another adviser for comparison. The client will eventually pay $2,730 more over that 30 years for exactly the same cover. There will be surrenders but unlikely to be 100% or even 50%.

I'm angry and disappointed to see how IFAs themselves are undercutting each other in such intense environment. In my opinion, client interest is not served here and this is definitely not true professionalism at work. I hope that this particular IFA firm will stop telling their advisers to do such thing and Insurer A should revise their remuneration structure.

Investing your CPF Monies

I'll like to share some common questions and answers that you may like to know about investing your CPF. Our Govt allows us to use this CPF Investment Scheme (CPFIS) to invest our CPF savings in a wide range of investment products to enhance our retirement nest egg and please take 2.5 minutes to read the 5 points that I'd summarised for you...

1) What Criteria must I fulfil before I can invest my CPF
a) Your CPFOA must have more than $20,000 if you want to invest your Ordinary Account
b) Your CPFSA must have more than $30,000 if you want to invest your Special Account
c) At least 18 years old
d) Not a undischarged bankrupt

2) How can I start my CPF investment?
a) You need to open a CPF Investment Account with DBS, OCBC or UOB to invest your OA. (Compulsory)
b) You do not need to open any investment account to invest your SA

3) What can I invest for my CPF Monies? (Note the 3 groups with different %)
* 100% of investible OA and SA can be invested in:
a) Fixed Deposits
b) Singapore Government Bonds
c) Singapore Government Treasury Bills
d) Bonds Guaranteed by Singapore Government
e) Annuities
f) Endowment Insurance Policies
g) Selected Investment-linked Insurance Products
h) Selected Unit Trusts
i) Selected Exchange Traded Funds (ETFs)

* Up to 35% of investible OA can be invested in:
a) Shares
b) Property Funds (or real estate investment trusts)
c) Corporate Bonds

* Up to 10% of investible OA can be invested in:
a) Gold
b) Gold ETFs
c) Other Gold products (only UOB offers these new gold products)

4) Do I pay tax for my investment returns?
Your investment profits and interest earned from investments are not taxable. However, dividends received are taxable at your individual tax rate

5) How about my discounted Singtel Shares? How much do I have and what will happen when I sell?
* The Special Discounted Share (SDS) Scheme is part of the Government’s asset enhancement programme to make Singapore a share-owning society, thus giving Singaporeans a greater stake in the country.
* Click here to find out how much Singtel Shares you have.

* You can sell your discounted ST shares through any Singapore Post office or if you have a trading account with a broking firm, you may sell your discounted ST shares through your stockbroker.
* When you sell the discounted ST shares, the sale proceeds will be refunded to your CPF Ordinary Account.

Buying on Trust - The Mango Saga

Along my way home last week, I passed by this stall that sell mangoes outside Pasir Ris MRT Station. The mangoes really looks yummy and I decided to buy some back for my family.

There were 2 group of mangoes on 2 different tables. The first group cost $3 for 3 mangoes and the second group cost $5 for 4 mangoes. Both group of mangoes looks rather similar to me. I tried to analyse the mangoes by touching and smelling it. No matter how I tried to analyse, I couldn't spot the difference and it prompted me asking the stall owner.

Adrian: Uncle, may I know what is the difference between the 2 group of mangoes?
Uncle: Same same. 2 group also very nice.
Adrian: Then which one is sweeter?
Uncle: Also same. Both very sweet.
Adrian: If same, why both different price?
Uncle: Price different a bit only mah. You think expensive, then buy $3 one lor.

I couldn't decide which group of mango to buy and started walking off.
Just as I stepped away from the stall, the Auntie beside the Uncle shouted at me.

Auntie: Xiao Di, this one is smoother and the seed thinner.
She was pointing at the $3 for 3 table. Immediately, I buy that group of mangoes...

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My lessons from this mango incident:
1) You have to know your stuff when you do sales. If you don't know what you are selling, you may lose your customer.
2) Something that looks exactly the same outside may not be the same inside. We may need help when we are not sure.
3) I am not a mango expert, I relied on that Auntie's statement to buy the mango. I trusted her fully and hope she is not lying to me.

*****************
This "Mango" saga brought me to think about those people who are ignorant about Financial Products just like how ignorant I am about "Mangoes" will tends to trust their Financial Adviser like how I trusted the Auntie about the mango.

Then I remembered reading about how Insurance companies are stepping up their recruitment drive to increase their insurance agency force from the newspaper and a blog article from Mr Eng Tiang Chuan on the implication of such move http://www.ifa-sg.com/career-of-last-resort/

I'm also not very optimistic about more new agents coming into this industry. I had met many new advisers along my career and some of them came into this industry because they saw the success of their managers, the promise of high income and the time flexibility. Some of them treated this job as temporary and was engaged with MLM, Property, Land Banking, Forex trading, etc at the same time.
When they realised that its not so rosy or attracted by other opportunities, they will totally leave the industry. Their clients will suddenly realise that they do not have a agent anymore.

Many of these new agents are told to sell only specific products by their companies and managers. They are enticed with large bonuses, posh holiday trips, etc. Some do not have the relevant knowledge and experience to identify what is good and bad for their clients and they just follow what they company and managers teach them to do.

Any ignorant prospect will have a very high chance of buying what they may not urgently need because they trust their adviser and the brand of the company.

2 things crossed my mind

1) I'm wondering if there is a need to have so many insurance advisers around.

2) Knowledge or experience can be gained over time but Integrity of the adviser is even more important in this field in order that the consumers are really getting the right plans.

Disclaimer:
There are good and bad advisers, whether they are fresh or old. I'm not against any new adviser when I wrote this...

Eldershield Supplements

I had wrote about Eldershield several times in my blog but nothing mentioned about the supplements. A lot of people are already confused with Eldershield, not to say about the supplement. Even many advisers are confused about these plans.

Today, I like to share a bit about it and the difference between 3 insurers providing this insurance.

In my comparison, I'd used a few assumptions:
a) Disability Period = 10 and 15 years (Amount paid out)
b) Presuming disabled at an age of 72
c) The insured is 50 years old today when he/she take up this plan
d) Total Premium paid will be from age 50 to 72


The Yellow Portion is the part payable via Basic Eldershield.
The Green Portion is the part payable via Eldershield Supplement
The Blue Portion is the extra/bonus payout from the Supplement plan


NTUC Income - Eldershield Lifetime Care Series

Strength and Weaknesses of the NTUC Income Plan
* The Eldershield Care plan gives additional cover for short period. Value for money only if disabled for short period
* The Eldershield Lifetime plan gives additional cover beyond the basic Eldershield for life
* Eldershield Care and Lifetime Plan combined make the cover very comprehensive
* Premium payable till age 65 and hence higher premium. The high premium paid in initial years hinders growth of Medisave fund.
* Value for money if disabled at a very late age, say 82 yrs old.

Great Eastern - Value Plus and Eldershield Comprehensive Series

Strength and Weaknesses of the GE Plan
* No Lifetime cover and limited benefits
* Yearly Renewable premium and hence need to pay little in the beginning
* Very basic and for budget constraint policyholders
* Value for money if disabled at a very young age and for 9-10 yrs.

Aviva - MyCare Series

Strength and Weaknesses of Plan
* Very comprehensive and include Rehabilitation and Dependent Care Benefits
* Flexibility of limited premium term of up to 20 years and Benefit payout term of 12 years
* Value for money if disabled early and for a long period

Hope above info are useful for you.

Social or Commercial???

I have serveral hundreds of Shield Plan policyholders over my 6 years in the industry as I believe in ensuring all my client are covered in this aspect. I noted a marked change in underwriting for this particular insurer and my best guess is either they are losing big money or they are aiming to earn big money.

Meow Meow......
I'm very disappointed with the change in underwriting style towards being as "猫" as possible. They are now no different from any other insurers, in fact more "猫" than some. In short, they only want the 100% perfectly healthy people.

Are you slightly less than perfect?
If you are slightly less than perfect, you may not be able to get a Shield Plan from them.
When I say "less than perfect", Its perhaps
* you did a simple scope because you have a bad stomachache as long as 3 years ago or
* you were unfortunately sent to hospital by passer-by when you feel dizzy in MRT station, probably due to stress or lack of sleep the night before or
* you went physiotheraphy voluntary for a back strain even when the doctor did not require it
* You have a snoring problem which you went seek treatment voluntarily

* Standard wordings in their letters
In the event that you do not have all of the above report(s) readily available for submission, we regret that we might not be able to proceed on with your application. Please note that should you wish to undergo any of the above test(s), or obtain the above report(s) from the hospital(s) and/or clinic(s), the cost of the test(s) and the cost of the medical report(s) will not be borne by XXXX.

* You will need go get a medical reports at your own cost to prove that your flaw is minor.
* With the hundreds you spent for the medical reports or medical examination, they will most probably tell you that they exclude you for that minor flaw.
* If you are not able to give them a medical report, they will not even continue underwrite this case

They had make the process very difficult by insisting clients to go to the Medical Records Department of the hospital and pay $85 to $100 for an old report before they are willing to underwrite their case again.

I understand that strict underwriting is crucial but the insistent on obtaining medical reports and going for medical check-ups at their own cost before they are willing to underwrite disappoints me.

In the past, if this insurer feel that they have problem in this area, they may offer to exclude this condition in which policyholder can choose to accept or not. When policyholder went medical checks years down the road and proved to be okay, they can appeal to remove that special term.
Social or Commercial???
* Commercial driven sense wise, they should do it because they must make profit for stakeholders.
* Social driven wise, I hope this insurer will not deprived Singaporeans of getting a medical insurance, not because they are not healthy but because they couldn't find the medical report of all sort of minor problems that they truthfully declared.

What exactly is this Bank Stress Testing?

In recent weeks, Federal Regulators have been conducting so-called stress tests at 19 of the US largest financial institutions. The tests were designed to determine just how well or not these most important US banks are able to hold under their current bad loans. These banks are the so called "Too big to fail" banks and as a group, they hold an estimated 2/3 of the assets in the whole US banking system. Among those being tested are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs.

These bank stress tests are important because they could improve public confidence in the financial system. In large part, the economy is hurting because investors lack confidence and the banks themselves are unsure about lending more money even to each other.

One scenario looks at how banks would fare over the next two years based on how the economy was doing in February. The second, more important scenario assumes the economy will sink into a deeper recession than analysts expect. They are also term as baseline and a adverse scenario.

Baseline scenario Economy

a) GDP Shrinks by 2% (adjusted for inflation) in 2009 and grows by 2.1% in 2010.
b) Unemployment -- Averages 8.4% in 2009 and 8.8% in 2010.
c) Home prices -- Drop by 14% in 2009 (from where they ended December 2008) and drop 4% in 2010 (from December 2009).

More adverse scenario Economy

a) GDP Shrinks by 3.3% in 2009 and grows by 0.5% in 2010.
b) Unemployment -- Averages 8.9% in 2009 and 10.3% in 2010.
c) Home prices -- Drop 22% in 2009 (from where they ended December 2008) and drop 7% in 2010 (from December 2009).

Though the result are expected to be announced on the 7th May, Investors are expecting good news and hence reflected the huge surge of equities prices in recent weeks. As these good news are most likely factored into the recent stock prices, we must note that we should take this stress testing with a pinch of salt before we can say the worst are over.

a) The banks might use accounting dodges to keep them away from revealing all the bad loans they have made.

b) The Federal Officials might be too eager to reassure Americans that the worst of the credit crisis is over, and reveal nicer data than they actually looks.

My 2nd Colorectal Cancer Client

Since 1st Jan 09, I had received around 16-18 medical claims from my clients. On average, I received 1 claim notification from NTUC Income every 1-2 weeks. I'm probably one FA Rep who helped NTUC Income lose money...

One of them was diagnosed with Colorectal Cancer. She started her treatment since late last year. Todate, she had made at least 9 claims, Pre and Post Hospital Treatments as well as 3 inpatient stays of which 1 was in a private hospital. She switched to a restructured hospital even though she prefer the previous doctor because she was under a B plan and was not sufficent to pay the bill in private hospital. She is my 2nd client with Colorectal Cancer. The first one went though the whole course of treatment over 1 year and was cured. Hope things will turn out well for her too.

Life is very fragile. She is already my 7th Cancer client of which 3 had passed away.
Let me recap:
2 x Colorectal Cancer (One survived and One under treatment)
2 x Lung Cancer (Both passed away)
1 x Nasal Cancer (Passed away)
1 x Lymphoma (Survived)
1 x Breast Cancer (Not sure status as she was a client I never contacted since taking over from previous adviser - only know she claim from her CI Plan when NTUC Income informed me about it)

Today, I like to share with you what Colorectal Cancer is about.
+++++++++++++++++

Colorectal Cancer
* Colorectal cancer, also called colon cancer or large bowel cancer, includes cancerous growths in the colon, rectum and appendix
* It is 2nd most common cancer only second to Lung Cancer. Currently, more than half of those affected will die from this disease. However, this is a very curable illness if diagnosed in the earlier stage.
* About 90% of those with Colorectal Cancer are above 40 years of age. This Cancer can be hereditary and if you have a first degree relative with colorectal cancer, you have a 6-12 fold increased risk of developing this illness.

Symptoms
* Bleeding from the rectrum
* Recent change in bowel habit
* Incomplete evacuation of stools
* Narrow Calibre Stools
* Unexplained weight loss
* Poor appetite, etc...

Treatment
* Primary Treatment for Colorectal cancer is surgery. Chemotheraphy and Radiotheraphy are sometimes used in addition to surgery. Between 80%-90% of coloeectal cancer patients recover if discovered and treated early but will drop to less than 50% if detected at the later stage.

Prevention
* Nearly all colon cancers begin as polyps. These growths occur on the bowel wall and may eventually grow in size and become cancerous. Removal of polyps will effectively treat the "cancer" even before it is cancerous
* To reduce risk of contacting colorectal cancer, you can have benign polyps removed through a colonoscopy.
* There is some evidence that a high-fibre low fat diet may play a role in preventing colorectal cancer.
* Go for regular screening especially if you fall in the high risk category of hereditary situations.

Insurance Nominations

Parliament passed the Insurance Act (Amendment) Bill on 19 January 09. It contains a framework for nomination of beneficiaries in respect to insurance policy proceeds. Part of the Act came into operation on 1st March 09.

Prior to the amendment, the Insurance Act did not contain provisions for the nomination of beneficiaries. The new section 49L and 49M will introduce a new framework for nomination of beneficiaries in respect of Life, Accident or Health Insurance with Death Benefits. This Act has yet to come into force, but I believe changes should be on the way anytime soon.

Existing Framework
* When a policyowner names his spouse and/or children as beneficiaries of an insurance policy effected on his own life, section 73 of the Conveyancing and Law of Property Act will automatically create a statutory trust in favour of the beneficiaries.
* The creation of such a trust implies that the policy owner will irrevocably lose all rights and control over the insurance policy concerned, including payouts made when he is alive.
* For the trust to be effective, the policy must be bought after marriage and nomination made at point of inception.

New Framework
* Insurance policy owners will be able to choose whether or not to make nomiation. They can choose between a revocable or irrevocable (trust) nomiation.
* The new nomination framework shall not apply retrospectively. What this means is that insurance policies with existing nominations will continue to be subject to the laws in force at the time the nomination was made.

Revocable Nominations:
* The Policy owner can change his nomination at any time and be paid as per his nomination in event of death.
* Insurance policies paid for with CPF monies will be eligible only for revocable nominations.

Irrevocable (Trust) Nominations:
* An irrevocable nomination will create a statutory trust in favour of the Beneficiaries. This feature is similar to the Section 73 of the CLPA.
* Once such nomination was made, the Policy owner lost all rights and control over the policy

NTUC Income Policies
* NTUC Income is the only Insurance Cooperative in Singapore. They have provision under Section 45 of the Cooperatives' Societies Act that allows their policyholders to make a nomination.
* However, do note that the rightful beneficiaries still have the rights to contest their nomination in court. Just that we probably have not heard of such contest before.

Why make things difficult for us?

I received a call on Sunday night. Conversation as follows:

Mr Chan: Is this Adrian!!!
Adrian: Yes?
Mr Chan: I received a letter from NTUC Income. Tell me what is it?
Adrian: I'm sorry. I don't know what letter they sent. Can you describe a bit more on what was written on it?
Mr Chan: I don't understand what they sent. Can you go find out what letter was that?
Adrian: Can you read a bit on the heading of the letter?
Mr Chan: I tell you to go find out from NTUC Income!!! (Shouting at me). Why ask me so much? Adrian: How about allowing me to drop by your place this week and take a look at this letter?
Mr Chan: I don't have the letter now. You just go find out!

Monday Morning:
I sent a email to NTUC Income CS Dept, trying to find out what it is. So far no reply from them.

Monday evening:
Mr Chan: Adrian Khiat!!! Have you found out what NTUC Income sent me?
Adrian: I still have no idea what NTUC Income sent you. Can I drop by your place this Thurs or Fri evening. I will explain every detail of that letter NTUC Income sent you.
Mr Chan: I had given you a day to find out what they sent me. What sort of agent are you? Can't even do such a simple thing?
Adrian: Pls don't shout at me. Can I offer to drop by your place on Thurs or Fri night? I shall explain on that letter.
Mr Chan: I have no time for you. You call me few days later. I see if I'll free to meet you.
(From beginning to end, he was practically shouting at me)

* Mr Chan purchased an Incomeshield from me in Jan 07, he purchased an annuity and Living Policy from another agent previously. I have no idea if this letter pertains to the bonus issue for his annuity but he refuse to give me info.
* Its a difficult client. He was very rude to me. He took me for granted, he makes things difficult for me on purpose. I felt terrible and lousy but I will keep my promise to see through this letter. Still have to wait if he wants to me meet for such a personalised service. Keep you guys posted.

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I met Mr Chan on 5th May from 9:30pm to 11pm. NTUC Income actually sent him a 3 page endorsement to reflect recent changes in the plan. The endorsement looks quite messy to me and hence I had requested a whole new policy to be printed out for him.

I brought that policy to his place, I spent half a day translating a large part of that policy into Chinese and I use it to explain paragraph by paragraph. It was very stressful because my Mandarin is pretty lousy and he scrutinises on every word that I'd said.
He insisted that I must go to his place and update him every year whether there are changes or not.

My feeling was mixed if I should have gotten such client in the first place. Its a difficult client and I'm sure there will be more problems in future. But sometimes, it because of these difficult clients that we learnt the most.

Why so many letters on Eldershield???

In my course of work, I noticed that many people have no idea what Eldershield is all about and confused with all the letters their respective insurers sent over the years. I hope this posting is able to help some of these people.

I often have to spend considerable time explaining about the plan and to go through all the letters they received.

I had written about this 1 year ago and just a recap
http://akhiat.blogspot.com/2008/04/eldershield-keep-or-dont-keep.html

I like to also add on a few items which I did not mention previously...

What is Eldershield?

* A severe disability insurance scheme which provides basic financial protection to those who need long-term care, especially during old age. There are currently 2 schemes.

1) Eldershield 300 - It provides a monthly cash payout of $300 for a maximum of 60 months. It was for those who are already in the scheme before Sep2007.

2) Eldershield 400 - It provides a monthl cash payout of $400 for a maximum of 72 months. It was for those who reaches 40 after Sep2007.

When was it implemented?

* Commenced in September 2002 and a reform from September 2007

* As it is an auto-cover scheme, you do not have to sign up to join ElderShield, or go for medical assessment

Who are affected?
1) All Singapore Citizen and PRs between age 40 and 69, with Medisave accounts, as at 30 Sep 2002
2) Singapore Citizens PRs with Medisave accounts, who reaches the age of 40 thereafter are automatically covered

Who are my likely insurer?
NTUC Income or Great Eastern for those already in the scheme before Sep07.
NTUC Income, Great Eastern or Aviva for those reaching 40 after Sep07.

What letter did my insurers probably sent me?
1) Renewal Notices yearly
2) Notification on Eldershield Reforms and Premium Rabates
3) Proposal form for upgrade from Eldershield300 to Eldershield400
4) Marketing Leaflets encouraging you to sign up for their respectively Eldershield Supplements

If you ignore all these marketing leaflets, they will keep sending you these letters year after year to ask you upgrade and why you should upgrade.
* Hope you have a better idea of the letters your Eldershield Insurers are sending you now **

For more info on Eldershield, you may refer to my previous post as above.

Happy Easter Day

My Lovely and Melody to wish all of you a Very Happy Easter Day. Easter Eggs and Rabbits are commonly associated with Easter Day. I wrote about it last year.
http://akhiat.blogspot.com/2008/03/easter-bunny.html
Take a look if you still have no idea on the origin of Easter Rabbits.

Its been another year my 2 rabbits can come out and greet you guys... Its hard to get both of them posing a picture together...

About Easter Day
On Easter Sunday, Christians celebrate the resurrection of the Lord, Jesus Christ. It is typically the most well-attended Sunday service of the year for Christian churches.

Christians believe according to Scripture, that Jesus came back to life, or was raised from the dead, three days after his death on the cross. As part of the Easter season, the death of Jesus Christ by crucifixion, is commemorated on Good Friday, always the Friday just before Easter. Through his death, burial and resurrection, Jesus paid the penalty for sin, thus purchasing for all who believe in him, eternal life in Christ Jesus.

Participating Policies in Economic Recession

MAS has stipulated in March 08 that insurers have to make known the performance of their par funds for the last three years in the benefits illustration. The investment expense ratio and asset allocation of these par funds shall also be indicated in it. I'd posted some info about Par Fund in my previous blog link below:

http://akhiat.blogspot.com/2008/07/what-is-life-participating-fund.html

http://akhiat.blogspot.com/2008/08/insurers-participating-fund-returns.html

Just to summarise. The money from these par funds normally comes from par policies which are typically sold as Whole Life or Endowment Plans. The premiums from these policyholders are then pooled and invested collectively in a diversified portfolio, which can include government and corporate bonds, equities, fixed income, properties and other assets.

Policyholders will then beneft through a combination of guaranteed and non-guaranteed bonuses, which provide them with medium to long-term returns. Bonuses are usually determined on an annual basis and are an additional to the guaranteed benefits.

From the media release by LIA on 26th March, we can expect several insurers to revise their bonuses for 2008 due to the poor investment climate. This revision will affect the non-guaranteed benefits in the Benefit Illustrations as projected in your policy document.

From the past 2 weeks, I know that NTUC Income and TM Asia Life are not cutting their bonuses and HSBC Life will be. In the latest Benefit Illustrations I seen from NTUC Income, they declared their Life Participating Fund performance to be -11.1%. It seems quite commendable considering that global equities dropped as much as 40% and bonds ~10% in 2008.

As far as possible, Insurers will certainly be reluctant to cut bonuses and try apply smoothing of Returns to ensure that they are able to maintain bonuses in good and bad times. However, in my opinion, those insurers whose par funds did not perform during the economic boom shall have a higher chance of bonus reduction in 2008 because they probably have lesser profits held back in reserve during good times from 2004 to 2007.

The insurers who did not perform well are AIA, Aviva, UOB Life and HSBC Life. HSBC Life is the first one to cut bonuses. Who shall we see next?

Bad Habits of Retail Investors

I was referred by one of my client to his friend recently to help him with a financial plan. I went through his friend's needs, insurance and investments just like any of my other prospects. He is a single professional in the mid 40s. He believes in accumulating his wealth towards retirement and to take care of his aging parents.

When we started to touch on investments, he opened up and told me that he was rather depressed over the investments he made over the last 2 years when he had lost more than 60% of his life savings. He was a saver until the period from Sep06 to Apr08 when he invested into Shares and Unit Trusts.

When he passed his pile of investment statements to me, I nearly fainted. I can understand why he was depressed.

1) Accmulated too much cash

* For 20 years, he saved all his money in fixed deposits and structured products from the bank. He accumulated quite a large amount till he was frustrated with the low interest rate and was tempted with the rising equity market.

* He followed his colleagues into buying shares and purchased Unit Trusts from banks and Fundsupermart, all over a short span of 1.5 years. Nearly all his 20 years savings are put for investment over that 18 months.

2) Over and Under Diversification

* For his shares portfolio, he was under diversified. He owns many China based shares because China Shares are so strong and volatile then. The rest are penny stocks which I barely heard of.

* For his Unit Trust portfolio, he was over diversified. He purchased at least 20 different Unit Trusts from Banks and Fundsupermart. Out of the 20, he has 12 asia funds, 2 commodities funds, 2 property funds, 1 middle east and the rest theme funds. He was confused over what he purchased and knows that many of the funds are duplicative. He said that he has no time to look through his overall portfolio and just watch how his funds lost value.

3) Buying into Flavour of the month

* He walked into the bank one day and was convinced by a lady banker. From then, that banker always called him to update him on "Flavour of the month". He invested into several property funds and China India funds. He believe that new funds are always better just because it start with $1.

* He was excited with his inital profits and started to invest more of his savings.

* He later invested into Middle-east, Latin America, Commodities and all sort of funds like climate change, which many of them are new launches.

4) Surrender and stop investing

* His last purchased was into Commodities, Middle East and Financials in Apr08 when he heard many comments on how these sectors will outperform the rest of the world. The value dropped by 50% since then. He surrendered after that and swore that he will never invest again. He insisted that investments are not for him and became very pessimistic towards it.

3 things I like to highlight here:

a) Look for a trusted adviser earlier to help manage your funds if you have no idea how to do it. They can show you how to diversify your funds correctly and to avoid fundamental investment mistakes. Some bankers or FAs are just interested in selling either a new, hot, or top performing fund.

b) Try to invest part of your cash on a regular basis. Adopt dollar-cost averaging for part of your investments. Too much cash can be a headache and you may take higher risk unknowningly.

c) Don't give up and stop investing during bad times. Greed is what make one invest during boom period. Fear is the one stopping you now. Understand your investment objectives and risk profiling. remove your fear and continue to invest if you are able to.