COMMENT POSTED IN MY BLOG
It would supplement the compulsory annuity if we can some control of the use of CPF fund. Currently, the control isn't good, it still gives almost free rein to the members. The capping of the usage for various purposes needs further tweaking. Example, for housing. The 120% limit is not good enough because people are buying houses bigger than they need and over stretch their fund. This leaves little or nothing for other areas like accumulation for retirement.
Members still need to grow their fund because the minimum sum for annuity just provides subsistence living.
Another area needs tweaking is using the fund for investment. As you have noticed from all reports of CPF investment very few members made profit and if they did it was just above 2.5%. If this is so, members may as well leave their fund in the CPF to grow at 2.5% without the unnecessary risk they have been taking.
I propose that CPF make it compulsory for members who wish to invest to invest directly into some life cycle funds run by CPF or approved by CPF, otherwise leave it in CPF. This is to prevent abuses, mismanagement and losses in the hands of insurance sales agents who have no idea about investing but sales. With this in place, I believe members can earn as high as 6% to 8% rate of return, easily.
Cut out all intermediaries (agents, advisers, stock brokers etc) and go direct. The saving of cost will add to the return. It has proven again and again the intermediaries have done nothing but damages.
REPLY:
I agree with this proposal, to a large extent. They are similar to my suggestion that was published in the Business Times. Read here
Sunday, September 2, 2007
How to get better advice
COMMENT POSTED IN MY BLOG
I think some kind of legal precedents will help to tidy up the industry. A body to advise on legal suits against roque insurance agents like CASE (Consumer Association) at affordable fee should be set up.
Once policyholders get litigious and know their rights and where to turn to for advise, this will then make insurance agents not to play play. Their recommendations must be able to withstand close scrutiny by third party review.
However customers must be educated on financial awareness. It is not about insurance only but about many areas of their personal finances. They have to know that all their needs are always competing for attention and the right and qualified adviser can help them to sort it out and not an insurance salesman.
Insurance agents are trained to sell, push and peddle products. They don't know about financial planning. Most are looking for get rich quick scheme and insurance selling offers them this opportunity. So unless the industry is cleaned up of these unscrupulous and unethical and cheats insurance salesmen we will continue to risk engaging one. A unified effort is needed.
To start with, only engage advisers with accredited tertiary qualifications like CFP, CFA, CPA, MFP or Master of science in wealth management.
REPLY:
I agree with most of the views.
High net worth people can engage advisers with tertiary qualifications. They can benefit from savings in tax through estate and tax planning.
Ordinary people should be educated about the simple facts of investments and encouraged to buy simple, low cost products available in the market. They do not need to pay high commission to advisers who do not add value to their financial planning.
I think some kind of legal precedents will help to tidy up the industry. A body to advise on legal suits against roque insurance agents like CASE (Consumer Association) at affordable fee should be set up.
Once policyholders get litigious and know their rights and where to turn to for advise, this will then make insurance agents not to play play. Their recommendations must be able to withstand close scrutiny by third party review.
However customers must be educated on financial awareness. It is not about insurance only but about many areas of their personal finances. They have to know that all their needs are always competing for attention and the right and qualified adviser can help them to sort it out and not an insurance salesman.
Insurance agents are trained to sell, push and peddle products. They don't know about financial planning. Most are looking for get rich quick scheme and insurance selling offers them this opportunity. So unless the industry is cleaned up of these unscrupulous and unethical and cheats insurance salesmen we will continue to risk engaging one. A unified effort is needed.
To start with, only engage advisers with accredited tertiary qualifications like CFP, CFA, CPA, MFP or Master of science in wealth management.
REPLY:
I agree with most of the views.
High net worth people can engage advisers with tertiary qualifications. They can benefit from savings in tax through estate and tax planning.
Ordinary people should be educated about the simple facts of investments and encouraged to buy simple, low cost products available in the market. They do not need to pay high commission to advisers who do not add value to their financial planning.
Licencing of financial advisers
COMMENT POSTED IN MY BLOG (edited)
Dear Mr Tan,
In your opinion, is there a need for MAS to license insurance agents? For those IFAs operating in a licensed financial firm, why do they need a license individually to practice?
I feel that MAS is trying to distinguish these 2 groups of advisers but doing it slowly over time. I do hope the licensing requirements (including renewals) do help to weed out unethical advisers.
Also, i feel that there is a conflict of interest in the insurance companies trying to enforce compliance issues on their representatives and watching their bottomline.
I share your vision where advisers operate in a fee-based model and salaried advisers. Free of commissions and conflict of interests.
REPLY:
My view is:
* There is a need for MAS to licence insurance agents, and not leave it to the insurance company. Currently, MAS licence independent financial advisers only.
* There should be clear standards of products and practices that are fair for consumers. Currently, some financial products are designed to make a lot of commission for the distributor and the product issuer (i.e. the insurance company or investment bank), and give poor value to consumers (who are not knowledgeable).
* There should be stronger enforcement of the practices, to make sure that the financial advisers and act in the interest of the consumers (which is their duty anyway).
* We need standards similar to the medical and legal professions.
Dear Mr Tan,
In your opinion, is there a need for MAS to license insurance agents? For those IFAs operating in a licensed financial firm, why do they need a license individually to practice?
I feel that MAS is trying to distinguish these 2 groups of advisers but doing it slowly over time. I do hope the licensing requirements (including renewals) do help to weed out unethical advisers.
Also, i feel that there is a conflict of interest in the insurance companies trying to enforce compliance issues on their representatives and watching their bottomline.
I share your vision where advisers operate in a fee-based model and salaried advisers. Free of commissions and conflict of interests.
REPLY:
My view is:
* There is a need for MAS to licence insurance agents, and not leave it to the insurance company. Currently, MAS licence independent financial advisers only.
* There should be clear standards of products and practices that are fair for consumers. Currently, some financial products are designed to make a lot of commission for the distributor and the product issuer (i.e. the insurance company or investment bank), and give poor value to consumers (who are not knowledgeable).
* There should be stronger enforcement of the practices, to make sure that the financial advisers and act in the interest of the consumers (which is their duty anyway).
* We need standards similar to the medical and legal professions.
Save energy
When I was in Japan last week, I learned about their energy saving movement. Their offices are encouraged to set the thermostat at 28 degrees Centigrade. The outside temperate is above 30 degrees.
The male employees are encouraged to wear short sleeve shirts, called "Cool Biz". They do not wear tie and jacket.
The Japan Ministry of the Environment calculated that the annual saving in energy per household from 1 degree of efficiency (from cooling and heating) is 84.6 kilowatt.
The offices in Singapore are quite wasteful in the use of energy. Many offices are cooled down to as low as 22 degrees. The employees have to wear jackets to keep warm. Knowledgeable people tells me that 25 to 26 degrees is the right temperate.
The cost of 1 kilowatt hour is $0.20. If offices and households in Singapore can be more energy saving by 2 degrees, the annual saving could be (just a rough guess), 2 million household X 2 degrees X 84.6 kilowatt X $0.20 = $34 million. (I hope that the experts can verify my figure).
It is not only just saving of $34 million. We have to do our part to prevent global warming and climate change.
The male employees are encouraged to wear short sleeve shirts, called "Cool Biz". They do not wear tie and jacket.
The Japan Ministry of the Environment calculated that the annual saving in energy per household from 1 degree of efficiency (from cooling and heating) is 84.6 kilowatt.
The offices in Singapore are quite wasteful in the use of energy. Many offices are cooled down to as low as 22 degrees. The employees have to wear jackets to keep warm. Knowledgeable people tells me that 25 to 26 degrees is the right temperate.
The cost of 1 kilowatt hour is $0.20. If offices and households in Singapore can be more energy saving by 2 degrees, the annual saving could be (just a rough guess), 2 million household X 2 degrees X 84.6 kilowatt X $0.20 = $34 million. (I hope that the experts can verify my figure).
It is not only just saving of $34 million. We have to do our part to prevent global warming and climate change.
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