Tax incentive and commission

In some countries, there is tax incentive for saving in an insurance policy or to create an educational fund for a child. People are not aware about this incentive. The adviser helps them to gain access to the incentive through a suitable plan. The commission earned by the adviser is more than covered by the tax incentive. The customer gains from the plan, after paying the commission. All parties benefit.

In  Singapore, where there is no tax incentive, the commission paid to the adviser is a burden to the consumer. It reduces the net return to the consumer. Some insurance companies do not care about the consumer and are willing to sell "poor value" products to them. They train their agents to "convince" the customer to buy these products. It is enethical to take advantage of the igonorance of the consumer.

All financial products with high upfront fees give poor value to the consumer. They include  investment linked products, structured products,  endowment and whole life policies.

Without any tax incentive, there is no justification for high commissions to be paid to financial advisers who sell the financial products. There is a pressing need for the regulator to set limits to the commissions that can be paid, so that the consumer's are given a fair deal.

Tan Kin Lian

Online Sudoku

Try this website for Sudoku games at 4 different levels and choice of symbols. Try solving with flowers. 

BOC HK's mini-bond holders demand settlement ASAP

May. 25, 2009 (China Knowledge) - Bank of China (Hong Kong) Ltd, the largest distributor of Lehman Brothers-linked products in Hong Kong, has been asked by hundreds of Lehman mini-bond holders to settle their cases faster, the Standard reported.

On Thursday the mini-bond holders gathered outside the Hong Kong Convention and Exhibition Centre, Wan Chai, during the annual meeting at the company's headquarters there, asking the bank to resolve the issue with the mini-bonds as soon as possible.

The bank has already deployed resources to deal with the matter, said President He Guangbei, adding that the bank is handling the issue actively and seriously and expects to wrap up the cases soon. The bank has set up an internal audit committee and continues to discuss the matter with regulators. 

However, he provided no timetable. 
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=23848

Brain Workout in The New Paper

A few readers have asked me where they can buy the TKL Intelligence Quiz book. The bookstores are listed in this website. Several have asked when the next volume will be available. They can also try the online version of the quiz here.

Lesson in leadership from the world of football

What makes Alex Ferguson great? Read this article.

Terminating an existing life policy

Dear Mr. Tan,

I have bought a vivolife policy 2 yrs ago. Recently, I am thinking of increasing my coverage as I am planning to start a family soon.

After reading your blog, I am thinking of the following: switch to term plan and invest my savings on equity personally. Do you think it's advisable?

REPLY
Please read this FAQ before you take your decision to terminate the Vivolife policy.

If you terminate the policy now, you will lose a large part of what you have paid during the past two years. If you look at the cost for the next five or ten years, you can get a better idea about the advantages of making a switch.

You should also find out the cost of the term insurance policy and critical illness coverage.

It is advisable to take up a term insurance policy, rather than a whole life policy, but a decision to terminate an existing whole life policy has to be considered separately on its merits.

BBC: Expense row minister steps down

Read this.