Another Hoax Email

It is amazing that I have literally thousands of email to clear in my email account. But what never fails to interest me are the number of hoax and scam emails that I receive. One that I received today is attached below for your reference:

Hi,

My name is Mrs. Mutsakorn Chauvinist, the wife of the former deputy Prime minister and finance Minister Suchart Chauvinist who died of cancer. Due to the death of my husband as you can read from the Bangkok post news website to this linkhttp://www.bangkokpost.com/news/politics/26113/suchart-69-dies-of-cancer. I am very worried over the political crises and I have decided to contact you to help me to move some funds to your country, and go into investment with you. My warm regards to you and your family, as I wait to read from you. Please treat with utmost confidentiality and secretly.

Regards,
Mrs. Mutsakorn Chauvinist,
Bangkok, Thailand.

http://www.bangkokpost.com/news/politics/26113/suchart-69-dies-of-cancer

Profitable Plots - Another Land Investment Firm Gone Wrong?

I wrote sometime back warning readers about land banking.

I was just generally uncomfortable with some of the ideas that were being surfaced in the market and after talking to a few friends who had invested in land banking products, realised that the deals might not be as good as they are marketed to be. Of course, I could be wrong and there might be some good land banking deals out there. But for me, I will stay clear of this kind of investment.

Of course, I was not surprised to read in the papers about another troubled investment firm - Profitable Plots which is currently under probe by the Commercial Affairs Department (CAD). I remember their glitzy advertisements during EPL half time match breaks and also saw some of their booths at Great World City before. So I am not surprised that some investors have lost their money. Who can resist such sales tactics?

It seems that 106 investors have lost a combined $9.5 million. Profitable Plots has some 1,000 clients here so I am not certain why only 106 people went to the CAD. Shouldn't all the clients be clamoring for the $60,000 that is left in Profitable Plots coffers? If that is so, each one of them will only be entitled to less than $60. And I hope that they don't need to pay any legal fees for that!

My guess is that some of these clients probably do not even know that Profitable Plots is in trouble. They are probably not monitoring their investments and the news. After all, I also did not know that Profitable Plots was in trouble. I just found out like today when reading the newspapers.

I have said it once, and I will say it again: Beware of any deal that sounds too good to be true.

AIA Agent's Insurance Scam

Another scam has hit the market. This time in the insurance industry again. It is like...AGAIN??


It is not surprising that in my first post in IMSavvy, I decided to write about whether one can trust your financial planner. I wrote that post because I cracked my head hard to think of a posting that would truly be timeless in a certain way. And I have been proven right in a certain sense. There are definitely conflicts of interests in the financial advisory business where the salary model is that of a sales business (i.e. commission based). A lot of unethical people lurk in the insurance business where the entry into business is easy and the rewards are high.

No matter how hard you try to argue that there is no conflict of interest, this conflict of interest will exist.

But I guess in the AIA agent's case, this has been brought to a whole new level. Selling non-existent insurance products! Who is to blame? Surely not AIA. Which insurance company can actually stop its agent from selling non-existent products? This is just an outright scam and the agent involve just lacks the ethics. It could literally happen anywhere and it is just unfortunate that this happened in the insurance industry AGAIN.

So what can the consumer do?

Simple. Just make sure that whatever contract you sign is really legal and is from the insurance company. Letter heads can be faked and so can many other things if the agent is out to cheat your money.

Another way is to not pass hard cash and when in doubt, call the customer service for info (yes, please get the customer service number from the website and not from your "trusted" agent)

Beware of this Insurance Agent

There are many insurance agents that we ought to be afraid of. After all, the typical insurance agent has a glib tongue that can probably out talk most of us. But the worst kind of insurance agent isn't the talkative one. It is the one who masquerades as a financial planner and yet is always trying to get client's to cancel their old policies to buy a new policy from them.

This is an especially common situation in Singapore where insurance agents change companies the way they change shoes. Because of buyout clauses, failure to hit sales quota, or some other kind of reason, insurance agents often change from one company to another over the years. This is nothing common and we should not blame them. After all, who really sticks with one company for more than 5 years in today's job market? Where people are encouraged to gain as much job experience in as wide a variety of roles possible, it is not surprising that people change companies.

But what happens when an insurance agent changes to another insurance company is probably the worst thing that can happen to his clients. It might be better if the insurance agent had left the industry altogether. For the insurance agent who changes company will soon try to convince his existing clients to switch over their policies to his new company. It is not a new trick. It is an old trick that has happened time and time again.

True. There are instances when an apple to apple comparison is done, the consumer can clearly see the benefits of a certain policy over another policy. However, the worst kind of comparison is the kind that tries to compare an apple to an egg. With this kind of insurance agent, one must beware.

This insurance agent will take a whole life policy and compare it with an ILP. And from there he will show you all the benefits the ILP has over your whole life policy.

If you have an ILP, he will take a term insurance and compare it to your ILP!!

If you have a term insurance, he will take an ILP or Whole life policy and show you the benefits of it over your term insurance!!!!!

With this kind of apple to egg comparison, it is impossible to refuse the "benefits" that are proposed by the agent.

Rule of thumb: Always do an apple to apple comparison. When you try to compare an apple to egg, it is impossible.

Don't say you have not been warned.

Surrendering Insurance Policies?

I read the news article a few weeks back about insurance agents/financial planner shifting around the various companies in Singapore with handsome buyout clauses and stuff. These insurance agents get paid lots of money just to jump ship from one insurance company to another company.

While that might be a concern to most people, it is important to note that if your insurance agent has switched companies, he or she is not supposed to induce you to lapse or surrender your existing insurance policies and buy a new policy from them. This unethical agents are just out to earn extra commission as they no longer earn the trailer commissions that they would have earned if they had stayed with the same company. When they join a new insurance company, they start from ground zero all again and have to start building up their client base all over again. The fastest and easiest way that they go about doing this is to ask their previous clients to take up new policies with them, often citing the benefits of doing so.

Some of them might even suggest that they can continue to "take care" of you. That is not the case as the insurance policy contract that one purchases and owns is an agreement between the insurance company and you. The insurance agent is just a distributor and does not own the clients in a legal sense. When your insurance agent leaves the industry or leaves the company, the insurance company will get another insurance agent to "service" you. If all else fails, just call the customer service hotline. That is the usual way I find out information and it is much faster than going through your insurance agent.

In the insurance industry, this malpractice of replacing old policies with new policies has led to agents being caught and fired. Many have also been disillusioned by the unethical conduct and have left the industry or lamblasted the industry. However, the practice is still very widespread. I have met with many insurance agents before and all of them have at certain points in time asked me to surrender one of my existing policy to buy a "better and newer" policy from them. This happens even when I have met IFAs.

This point has been elaborated by Mr Tan KL before at his blog. In most cases, surrendering your insurance policy does not make sense. This is especially so if you are asked to buy a similar insurance policy to replace the policy that you have surrendered or lapsed.

From a monetary point of view, it is very difficult to justify surrendering a policy for another policy. Always remember to get a 2nd or 3rd opinion when in doubt so that you can make a more informed decision. Better still, ask people like me who are not in the industry and you will probably get a more informed and independent opinion. Of course, you will have to buy me coffee =) .........Just kidding..

Beware Land Banking?

On the Straits Times today, it was reported that over 200 investors have lost $6m in British land deals.

These investors had been persuaded to buy to a piece of land in rural places like Swindon and Gatwick in England for $15,000 each through Singapore company Land International (Far East). They had been promised "high returns with regular payouts for three years".

The parent company was shut down by the British government in 2008 following an insolvency probe.

Now, investors literally own the piece of land as they have been given title deeds. They now have to look for a way to dispose of their land in ways that might be costly. Investors will also not find any shelter under the law as land banking is not regulated by MAS or any other Act in Singapore like the Securities and Futures Act (SFA) and Financial Advisers Act (FAA)

"As land-banking investments involve investors acquiring direct interests in real estate rather than securities related to real estate and, as such, fall outside the scope of the SFA and FAA." - MAS spokesman

I do know of people who have invested in land-banking before and my advice or questions to them is always this:

1. Land-banking is not regulated by MAS. You will not get any protection from the law should anything bad happen.

2. If you are investing in land-banking, you are literally buying a small plot of land. Do you really want to own a piece of land in a faraway country which you have never set your eyes on? If I asked you to buy a piece of land instead of presenting it as "an investment opportunity with great returns and proven payouts", would you still be investing in it?

3. If the potential for development is so good, why do they need to sell their land to foreigners? Why aren't the locals or the English buying their own land? Why isn't the company seeking bank loans to just acquire the land for themselves and develop them to keep the profits for themselves? Don't give me the rubbish about regulations stating that blah blah blah...

Many people are often too trusting when it comes to money and investments. Always open your eyes really BIG before going into any investment that promises high returns.

Endowment versus ILPs for Education Fund

Over at another blog, we had a discussion on the chatbox whether an endowment or an ILP would serve better as an education fund for our children. I personally chose an ILP to save for my child's education so I will be harping on all the good points about it here. Nevertheless, I will try my best to give a fair comparison in this piece.

An endowment policy and ILP are quite different in nature.

An endowment basically provides coverage / insurance protection only for a term (e.g. 20 years) and gives back money at maturity. This maturity cash amount comprises guaranteed and non-guaranteed components.

An investment-link plan (ILP) provides lifelong coverage (up to age 99 years actually) and also allows you to draw out money as long as you leave a certain minimum sum within. There are NO guaranteed components.

As a basis for comparison, I have chosen to look at the following factors (these were actually the considerations I had when I decided to get an ILP over an endowment):

1. Protection. In terms of protection, an ILP trumps the endowment hands down. For the same amount of premiums, I can get a much higher protection for death, TPD and critical illness for my child. In addition, while the endowment protection amount is fixed throughout the policy term, you can vary the protection requirements for the ILP.

2. Premiums. When I look at premiums wise, an endowment actually allows you to pay lesser in terms of premiums because most (if not all) ILPs require a minimum $100 per month in premiums. Of course, we know that saving $100 per month for your child's education would most probably be never enough to afford a university education 18 to 21 years down the road.

3. Waiver of premiums. Nothing to compare. Both plans allow riders to waive future premiums should both parents become critically ill, die or get TPD.

4. Premium Holiday. This is something that was important to me. If I am not able to afford the premiums due to a change in job, etc, I needed the flexibility to go on a premium holiday. An endowment does not allow that (correct me if I am wrong). For endowment, the premium holiday period is treated like a policy loan on the existing cash value. This interest can range around 6% interest.

5. Emergency Withdrawal of Cash. The ILP allows me to draw out money from it as long as a certain minimum sum inside (usually $1000). For an endowment, withdrawal of cash before maturation of policy is considered a policy loan (at the interest rate of around 6%).

6. Returns. The endowment will give GUARANTEED plus NON-GUARANTEED returns whereas the ILP only gives NON-GUARANTEED returns. In illustrations, the ILP always shows higher absolute returns because of the 5% or 9% returns showed compared to the endowment 3.25% or 5.25%.

CONCLUSION

To me, the only advantage that an endowment has over an ILP is this thing called the GUARANTEED component. In terms of all other factors, the endowment loses out to the ILP.

I can choose to surrender my ILP in one lump sum when the 20 years are up or I could slowly draw down the amounts in the 20th year, 21st year, 22nd year and 23rd year or I can don't draw out the amount (maybe my child does not make it to university at all)

Some argue that if the market is not doing well when I need the money, the ILP will fare badly. My strategy however is to increase the allocation in bond and fixed income funds as the date draws closer to my child's entry to university. Even so, I can chose to withdraw the funds over the 4 year period and hopefully the market recovers correspondingly.

THINGS TO NOTE:

Please do not take this as an advice or recommendation to buy an ILP for your child's education fund. The reason why you buy it is more IMPORTANT than which to buy.

For me, I have paired my ILP with a POSB Kids Savings account. So in that sense, the "guaranteed" component will come from the money in the bank account.

Also, my primary reason for buying the ILP is for PROTECTION and not savings. (Okay, maybe about 60% protection and 40% savings). That is the reason why I chose an ILP over an endowment as it gives me better protection. I did not consider term insurance as I wanted a plan that would guarantee the insurability of my child even after his university (if he chooses to continue with the plan)

Lastly, I think I know what I am doing. The most important thing is to know what you are doing with what you have. Only time will tell whether what I have chosen is a wise decision when the time comes for the money to be withdrawn. I'd like to think that I have got a strategy in place.

P.S. I know Mr Tan Kin Lian (ex-NTUC Income CEO) is a strong opponent to ILP and advocates a "buy term invest the rest" strategy. While I can agree with his argument intellectually, I find it hard to execute a "buy term invest the rest" strategy. These are due to practical reasons, emotional failures and psychological thinking. But this is better left for another posting.....

CPF Scam?

A recent report on the straits times that details how consumers should be warned against this kind of CPF Scam. I guess in this case, both CPF fund members and the financial advisers are in collusion to get some cash back from the CPF money which they cannot touch. It is pretty similar to those of the HDB cash back practice amongst real estate agents that was rampant over the past few years.

CENTRAL Provident Fund members have been warned they face fines of up to $10,000 if they take part in a scam that has just come to light.

The CPF Board issued the stern warning after a report in The Straits Times on Thursday exposing a practice adopted by unscrupulous financial advisers who plunder members' CPF investment funds.

Some CPF members who are desperate for fast cash have agreed to take part in the scam, which involves the rapid buying and selling - or 'churning' - of investment products using CPF money.

The members dip into their retirement savings to buy and sell investment products under the CPF Investment Scheme - and in doing so they become eligible for cash rebates used as a carrot by errant financial advisers. The advisers get to pocket healthy commissions.

CPF rules prohibit members from pocketing such cash rebates. All gains or rebates from CPF investments must be put back into members' CPF accounts, to ensure they have enough for their golden years.

A CPF Board spokesman said: 'CPF members found guilty of working with errant financial advisers to pocket cash rebates which amount to premature withdrawals of CPF monies may be fined up to $2,500. For second or subsequent convictions, the fine may be up to $10,000.'

Chance to Win $200,000?

I received an official looking letter that states that I am one of a few remaining Singaporeans who stands a chance to win $200,000 in a Sweepstake grand prize draw. It says that I will be receiving some important documents in the next few days which I should return by a certain deadline to qualify for the draw.

Anyone received anything similar. It seem's to come from Reader's Digest though there is no official logo and stuff. Is it a scam?