Visit the financial adviser

When you are sick, you visit a doctor at his clinic. The doctor treat you and charge you for the consultation.

As the doctor sees many patients in a day, the cost of the consultation is relatively low. The doctor makes a good income from the large number of cases treated. This is high productivity.

I hope that insurance can be handled in this manner in the future. If the customer is willing to visit the financial adviser and to pay a fee for the consultation, it will benefit all parties:

* the cost to the consumer will come down, as pay a net price (after removing the commission)
* the adviser can earn a good income by handling many cases each day
* productivity is increased
* the adviser can recommend the right product to serve the best interest of the customer.

Some insurance companies now allow customers to call them directly on the telephone or transact through the internet, and to give a lower cost to the consumer. I hope that this channel will be more popular in the future.

Singapore is 14th most expensive city in the world

Singapore is now the 14th most expensive city to live in the world, according to a report by Mercer Human Resource Consultancy. It has moved 3 rungs from 17th position has year.

This has many disadvantages:

* foreigners will find it unattractive to work in Singapore
* Singaporeans are stuck with higher cost of living, and do not have much choice

According to the same report, Singapore is now more expensive than New York. Considering that wages in Singapore (for most people) are lower than New York, this matter is quite serious.

We need to look for ways to keep our cost of living down. Here are some suggestions:

* Wait for the property prices to come down to a more reasonable level, before you buy it. It will come down. Be patient.

* Take public transport, such as MRT or bus. They are more cheaper, faster and more enjoyable (compared to driving)

* Pay your credit card on time (ie avoid paying interest on credit cards).

* Invest in simple products that gives you a fair rate of return, and low charges. Invest in the money market fund, bond fund or equity fund that have low upfront and annual fees. Avoid complicated financial products.

* Read the FAQs on financial planning.

Tan Kin Lian Has A Blog

COMMENT POSTED IN ANOTHER BLOG:

Tan Kin Lian has a blog. The dude is the ex-CEO of NTUC Income, which obviously didn’t exactly endear him to me. I knew he had been blogging for quite awhile, but I simply dismissed it as NTUC propaganda. However I had another look today and realized that there were many unbiased financial planning gems written in his strange simple english style. Very highly recommended.

Comments on Dr Lee Kum Tatt's blog

Dr. Lee Kum Tatt has received comments to some of his articles in his blog on “research and its management” and “overcoming the fear factor”. Read his blog for the comments and his candid replies.

Save for an early retirement

Dear Mr Tan,

I wish to save now for an early retirement. I am in my late twenties. How much should I save each month? Should I buy a life insurance policy? What is your advice?

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REPLY:

Most life insurance policies has a high upfront charge, that is used to pay commission to the insurance agent. After deducing the charges, the policy will give a negative return for 10 years or longer. After that, you may get a modest return, but it is quite low.

Due to the high upfront cost, you are locked into the policy for many years, even if you are unhappy with the low return. You can only get out of the policy by taking a loss.

It is better for you to save and invest in a fund that has the following features:

* low upfront cost (less than 1.5%)
* low annual fees (less than 1.5%)
* flexibility to change your regular savings
* flexibility to change your fund

You can buy your insurance protection separately through a low cost term insurance.

You can read more about it in the FAQ on this webpage.

Help a friend

Hi Mr Tan

I have just started work. My classmate and a good friend joined a life insurance company. She asked me to take a life insurance policy from her, to help her to meet her sales target. I like to help her, but will this be disadvantageous to me?

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REPLY:

You should take care of your own financial future and make sure that you are buying the right product, as you will be committed for many years into the future.

You can read the FAQ on Financial Planning for the Young.

Many young people joined the insurance field for a few years, and moved to another job. Their clients are then passed to another agent. You may not be serviced by your friend a few years later.

Save adequately for your child

Dear Mr Tan,

I have been advised by an agent to save $200,000 for the tertiary education of my child. I find the premium to be too costly. What is your advice?

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REPLY:

You can read my FAQ. It explains the amount that is needed. It should fit into your own financial capacity