Dear Mr Tan,
The fixed deposit interest rate is very low at the moment (<2%). I consider parking a sum of said $30,000 in the Flex-Cash (ie Money Market Fund) as it return is stated at 3% or more.
What do think, is it a right move?
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REPLY:
The yield on Flexi Cash has also fallen in recent weeks. It should be about 2% p.a. now.
I think that it is all right to put into Flexi Cash as you have the flexibility to take it out at any time, without any penalty.
Friday, June 29, 2007
Money market fund - NTUC Income
Hi Mr Tan,
Recently, I put a sum of money in NTUC money market fund. The bid/offer rate was 1.066, but it drop to 1.065 the following day.
Assuming I had invested 100,000 units, I would have lost $100. Is my assumption correct ?
Why does the price go down? The MMF is not a safe investment. Perhaps I should park my saving in FD or Govt Bond, correct?
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REPLY:
You should look at the price over several days and not on a specific day. The drop in price is probably due to a unusual situation (eg usually due to change in money market interest rate) and is corrected the following day.
If you wish to take out your money, you can ask NTUC Income to wait until the price reaches a certain level, so that you are not subject to this temporary fluctuation.
For example, I wanted to withdraw some money when the price was at 1.066. It had been at this level for many days. I gave instruction to make the withdrawal when it reached 1.067. It occured within a few days.
Recently, I put a sum of money in NTUC money market fund. The bid/offer rate was 1.066, but it drop to 1.065 the following day.
Assuming I had invested 100,000 units, I would have lost $100. Is my assumption correct ?
Why does the price go down? The MMF is not a safe investment. Perhaps I should park my saving in FD or Govt Bond, correct?
-----------------------
REPLY:
You should look at the price over several days and not on a specific day. The drop in price is probably due to a unusual situation (eg usually due to change in money market interest rate) and is corrected the following day.
If you wish to take out your money, you can ask NTUC Income to wait until the price reaches a certain level, so that you are not subject to this temporary fluctuation.
For example, I wanted to withdraw some money when the price was at 1.066. It had been at this level for many days. I gave instruction to make the withdrawal when it reached 1.067. It occured within a few days.
Subprime lending
Source: Wikipedia
Subprime lending, also called "B-Paper," is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history.
A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others.
Subprime lending is typically defined by the status of borrowers. A subprime loan is, by definition, a loan made to someone who could not qualify for a more favorable rate. Subprime borrowers typically have low credit scores and histories of payment delinquencies, charge-offs, or bankruptcies. Because subprime borrowers are considered at higher risk to default, subprime loans typically have less favorable terms than their traditional counterparts. These terms may include higher interest rates, regular fees, or an up-front charge.
Proponents of the subprime lending in the United States have championed the role it plays in extending credit to consumers who would otherwise not have access to the credit market. But opponents have criticized the subprime lending industry for predatory practices such as targeting borrowers who did not have the resources to meet the terms of their loans over the long term. These criticisms have increased since 2006 in response to the growing crisis in the U.S. subprime mortgage industry, wherein hundreds of thousands of borrowers have been forced to default, and several major subprime lenders have filed for bankruptcy.
Subprime lending, also called "B-Paper," is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history.
A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others.
Subprime lending is typically defined by the status of borrowers. A subprime loan is, by definition, a loan made to someone who could not qualify for a more favorable rate. Subprime borrowers typically have low credit scores and histories of payment delinquencies, charge-offs, or bankruptcies. Because subprime borrowers are considered at higher risk to default, subprime loans typically have less favorable terms than their traditional counterparts. These terms may include higher interest rates, regular fees, or an up-front charge.
Proponents of the subprime lending in the United States have championed the role it plays in extending credit to consumers who would otherwise not have access to the credit market. But opponents have criticized the subprime lending industry for predatory practices such as targeting borrowers who did not have the resources to meet the terms of their loans over the long term. These criticisms have increased since 2006 in response to the growing crisis in the U.S. subprime mortgage industry, wherein hundreds of thousands of borrowers have been forced to default, and several major subprime lenders have filed for bankruptcy.
Property Insurance
When you insure a property, you should be covered against the following perils:
* Fire, lightning, explosion
* Bursting or overflowing of water tanks
* Theft or burglary - has to be caused by forcible and violent entry
* Malicious damage
* Riot & Strike
* Earthquake, wind and storm, flood
* Fire, lightning, explosion
* Bursting or overflowing of water tanks
* Theft or burglary - has to be caused by forcible and violent entry
* Malicious damage
* Riot & Strike
* Earthquake, wind and storm, flood
My management style
How do you describe your management style?
Reply: I set values and goals.
I work with my colleagues on the broad strategies to achieve specific goals. I let them choose the specific strategy and take the specific ations to achieve the results.
I let the results decide on whether they have taken the right actions. Often, the actions can be modified, so that the results can be improved.
My colleagues who worked with me for 5, 10 or more years, generally like my style. I describe it as the "entrepreneurial" approach.
Reply: I set values and goals.
I work with my colleagues on the broad strategies to achieve specific goals. I let them choose the specific strategy and take the specific ations to achieve the results.
I let the results decide on whether they have taken the right actions. Often, the actions can be modified, so that the results can be improved.
My colleagues who worked with me for 5, 10 or more years, generally like my style. I describe it as the "entrepreneurial" approach.
Engaging the customers
How does NTUC Income engage the customer (during the time that you were the CEO)? Does this help in the development of its business?
MY REPLY:
Over the past years, NTUC Income has actively communicated with its customers (policyholders) on the following:
* NTUC Income is a cooperative society
* Most of its surplus are distributed among its participating policyholders
* It shareholders receive only 2% of its surplus
* Its primary aim is to serve its policyholders (members) by offering low cost and a better return
* NTUC Income communicate actively and in a transparent manner
* It does not need to maximise profit for shareholders (ie avoid conflict of interest)
This active communication strategy has built up a strong loyalty among its policyholders.
MY REPLY:
Over the past years, NTUC Income has actively communicated with its customers (policyholders) on the following:
* NTUC Income is a cooperative society
* Most of its surplus are distributed among its participating policyholders
* It shareholders receive only 2% of its surplus
* Its primary aim is to serve its policyholders (members) by offering low cost and a better return
* NTUC Income communicate actively and in a transparent manner
* It does not need to maximise profit for shareholders (ie avoid conflict of interest)
This active communication strategy has built up a strong loyalty among its policyholders.
How to run a world class call center
I wish to share this secret about how NTUC Income wins the award for being a world class call center:
* it uses low cost, effective technology
* the calls are answered immediately by a human voice (without the need to press buttons)
* it has a low turnover rate of employees
* the front line officers handle simple calls and refer difficult cases (about 5% of calls) to specialists to call back
The cost of the technology is only 10% to 20% of what big organisations spend on their call center systems, without sacrificing on the necessary functionalities.
By using a two level system of handling enquiries, it is easy for the front line officers to handle 95% of the calls (with less training and better service quality). They refer the difficult enquiries and complaints to the specialists. This reduces the stress of the job.
They enjoy providing the customer service.
I was involved in the strategy to build up the call center when I was CEO of NTUC Income.
* it uses low cost, effective technology
* the calls are answered immediately by a human voice (without the need to press buttons)
* it has a low turnover rate of employees
* the front line officers handle simple calls and refer difficult cases (about 5% of calls) to specialists to call back
The cost of the technology is only 10% to 20% of what big organisations spend on their call center systems, without sacrificing on the necessary functionalities.
By using a two level system of handling enquiries, it is easy for the front line officers to handle 95% of the calls (with less training and better service quality). They refer the difficult enquiries and complaints to the specialists. This reduces the stress of the job.
They enjoy providing the customer service.
I was involved in the strategy to build up the call center when I was CEO of NTUC Income.
Importance of Customer Service
How important is customer service?
My view: it is very important, especially for a financial institution. It allows the provider to build a long term relationship with the customer.
I observe the following principles in dealing with customers:
* attend to their matter promptly
* be honest, open and transparent (ie HOT)
* look after the customer's interest (helps to build trust).
A good customer is willing to pay a fair price that allows me to meet the expenses and make a fair profit.
I keep my cost low by reducing waste and operating efficiently. This is also appreciated by the customer, as they do not have to pay more for good customer service.
My view: it is very important, especially for a financial institution. It allows the provider to build a long term relationship with the customer.
I observe the following principles in dealing with customers:
* attend to their matter promptly
* be honest, open and transparent (ie HOT)
* look after the customer's interest (helps to build trust).
A good customer is willing to pay a fair price that allows me to meet the expenses and make a fair profit.
I keep my cost low by reducing waste and operating efficiently. This is also appreciated by the customer, as they do not have to pay more for good customer service.
Primary values that drive a business
What are the primary values that drive NTUC Income's business (during the time that you were the CEO)? Are these values responsible for the success of the business?
MY REPLY:
The primary values were:
* act in the best interest of the customers
* act honestly, with integrity, and be transparent
We act in the best interest of the customer and offer good value in the form of lower prices or better return on their savings. We achieve it by operating efficiently, reducing cost and cutting down on wastage.
We were able to earn an adequate margin to meet our expenses and to provide a modest profit to shareholders.
We act honestly, with integrity. We offer products that meet the genuine needs of the customer. We keep the product simple, so that they can understand it, and choose it for its value.
Some business make profits by offering products that "cream off" the customer. They "hype up" the products beyond its real value. We do not engage in these misleading practices.
These values allowed us to build strong loyalty and trust from our members (customers) and contributed to the growth of our business.
MY REPLY:
The primary values were:
* act in the best interest of the customers
* act honestly, with integrity, and be transparent
We act in the best interest of the customer and offer good value in the form of lower prices or better return on their savings. We achieve it by operating efficiently, reducing cost and cutting down on wastage.
We were able to earn an adequate margin to meet our expenses and to provide a modest profit to shareholders.
We act honestly, with integrity. We offer products that meet the genuine needs of the customer. We keep the product simple, so that they can understand it, and choose it for its value.
Some business make profits by offering products that "cream off" the customer. They "hype up" the products beyond its real value. We do not engage in these misleading practices.
These values allowed us to build strong loyalty and trust from our members (customers) and contributed to the growth of our business.
Stop paying premiums earlier
Dear Mr Tan
I bought a living policy (to cover critical illness) from NTUC Income. It requires me to pay premium until age 85. I am not prepared to pay premium for so many years. What should I do with this policy?
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REPLY:
You can decide on when you wish to stop paying the premium, say at age 60, 65 or 70. At that time, you have the following options:
* cancel the policy and receive the cash value
* convert the policy to a "paid-up policy"; you do not have to pay any more premium, and will be covered for a reduced sum assured
You can ask the adviser to get NTUC Income to quote the cash and paid up value at age 60, 65 and 70. You can decide on when is the best time to stop paying the premium
I bought a living policy (to cover critical illness) from NTUC Income. It requires me to pay premium until age 85. I am not prepared to pay premium for so many years. What should I do with this policy?
------------------
REPLY:
You can decide on when you wish to stop paying the premium, say at age 60, 65 or 70. At that time, you have the following options:
* cancel the policy and receive the cash value
* convert the policy to a "paid-up policy"; you do not have to pay any more premium, and will be covered for a reduced sum assured
You can ask the adviser to get NTUC Income to quote the cash and paid up value at age 60, 65 and 70. You can decide on when is the best time to stop paying the premium
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