Financial Planning Central » Others

Millionaires Are Shunning Private Banks In Asia

Tiang Chuan — Sun, 25 Sep 2011 01:43:55 +0000

As F1 roars into town and private banks get to wine and dine their clients, a growing number of millionaires are realizing who actually is footing the bill.

According to the 22nd September 2011 report on Bloomberg (Millionaires Form Family Offices to Avoid Private Banks), successful Asian families are setting up family offices and avoiding private banks. According to the managing director of a Singapore-based wine and spirits distributor, “Private banks try to sell you everything and not necessarily what’s best for your family office or for yourself“.

According to the PwC Global Private Banking and Wealth Management Survey 2011, the reason for more than half of the relationship managers leaving is due to encouragement from the banks for under-performance. The cost-to-income ratio for private banks in Hong Kong and Singapore stands at 97% for 2010. With the sky high salary needed to poach bankers from each other and the less prevalent sale of high commission products, it is no wonder that the industry is not making money. Even industry events are coming up with ‘how-to-sell’ seminars for private banks.

Bearish Brokers Have Skinny Children

Horror Story – Bank Sells Endowment Plan To 70 Year Old

Tiang Chuan — Sat, 27 Aug 2011 10:12:15 +0000

The story is familiar isn’t it. You go to the bank just to deposit cash. You are brought to a desk from the queue ‘to reduce your waiting time’. And the next thing you know, you are pushed a insurance plan/structured product/minibomb…

A friend’s dad went to the bank just to deposit cash. He was lead to a desk from the long queue and sold a 5 year endowment plan. I thought bank counters are not allowed to refer customers to their RMs anymore? Well, it seems that this ‘problem’ can be easily solved if you are lead to the RM directly from the queue without going through the counter! Brilliant isn’t it?

After confronting the bank, my friends were made to submit all sorts of documents to prove their case. How come they don’t require anything when selling the endowment plan?

Warn your elderly friends and relatives when visiting banks. Do you banking and leave. Ignore all kinds of promotions/freebies and what have you. It seems that the banks are back to their old tricks.

Ex-AIA Agent Charged In Court Over Fake Policy

Tiang Chuan — Wed, 11 May 2011 01:31:27 +0000

An ex-AIA agent has been charged for allegedly selling a fake US $5 million ‘AIA Thank You’ policy to a semi-retired businessman in November 2002, reports the May 11th 2011 edition of The Straits Times (Ex-AIA Agent Charged Over Fake $6.2m Policy). The story was first reported here.

The accused was remanded at Changi Women’s Prison last Friday after she failed to come up with the $2m bail. She was fired by AIA in September 2009.

Part of her charges, which includes cheating and fraudulent use of forged documents, was for using the money to pay for a down payment for a Sentosa Cove condo.

The lady claimed that she was just an accomplice in an elaborate scam conjured up by the businessman to defraud AIA.

The trial continues.

Possibility of Police Report Over Blog On Head of Financial Advisory Firm

Tiang Chuan — Wed, 30 Mar 2011 05:16:54 +0000

The head of a advisory firm in Singapore is in the process of making a police report over blog comments, reports the 30th March 2011 edition of The Business Times (Head of financial advisory firm flamed).

Read the article here.

No related posts.

Will Fund Distributors In Singapore Follow The Way of the DoDo?

Tiang Chuan — Sat, 19 Mar 2011 06:51:29 +0000

A local insurer has launched a FA company that is a hybrid between a agency only model and the FA model. The new company, which targets the mass affluent, will offer life insurance from the insurer (with the exception of products from a foreign insurer), general insurance from multiple companies and unit trust from a local distributor. The insurer had a similar setup earlier but the FA company operates like other FAs with life insurance from different companies.

Will a model that offer life insurance of 1 company plus pure investment through a fund distributor work?

Another insurer had launched a fund platform earlier, offering their agents the chance to sell ‘pure investments’ through a zero coverage single-premium Investment-Linked-Plan (ILP). The platform has stop accepting new subscriptions recently.

A technology vendor told me that Singapore is unique in Asia for its wide-spread use of fund distributors by local IFAs. Advisers in other countries generally use ILPs, which, in the vendor’s words, ‘is more rewarding‘ to the adviser. Coincidentally, a fund distributor closed down its Hong Kong operations not too long ago.

A recent article from the 16th March 2011 edition of The Business Times (S’pore Scores in Mutual Funds) seems to validate the vendor’s views. From the article, Singapore ‘offered investors choice as it is one of two countries in the survey that has more than 80 per cent of funds sold through open platforms that offer funds from a wide variety of firms‘. However, the actual report from Morning Star states that 8 countries that offered choice.

My first thought on hearing from the vendor was – “wha, IFAs here are pretty good, offering investment choice even when it comes with lower commissions/fees“. However, personal experience and deeper thought points to other reasons. My personal take on the widespread use of fund distributors is that the launch of the first platform coincided with the enactment of the Financial Advisers Act (FAA) without other serious competitors around. When IFAs just started offering investments, most are novices and got used to the idea of using fund distributors after some time. The habit stuck until recently when foreign insurers started offering low/no coverage regular premium ILPs which are essentially investment platforms. Sources claim that the leading fund distributor here is suffering due to the arrival of such ILPs.

Recently, the Monetary Authority (HKMA) is enhancing the regulatory requirements for the sale of investment-linked assurance scheme (ILAS) products ‘in view of the popularity of ILAS products and their salient features and risks (including in many cases long tenor or lock-in periods)‘.

The investment tool of choice here seems to be shifting. If the trend continues, the fund distributors here might have to consolidate to survive.

Would advisers really offer the more suitable choice in view of the big difference in commissions? Only time will tell.

Get The Full Picture

Tiang Chuan — Sun, 06 Mar 2011 10:30:28 +0000

We are constantly being bombarded with new information. These info are often biased and we, the information recepians, are often not aware of these biases. Just like to share some recent incidents that highlighted the information asymmetry we face.

Incident 1

There have been widespread reporting on the charges a well-known surgeons charged the family of some royalties. Focus has been placed on the amount she had charged. Whenever there was any private discussion on this, the direction have always been that the surgeon was wrong to charge that kind of money. However, my view has been altered after talking to a client who had once served the royal family. Based on his experience, the charges may not be unreasonable. I shall leave out the details for obvious reasons.

From talking to someone with first-hand experience, I have a more complete and balanced view of the matter now compared to the time when all information was from the papers.

Get The Full Picture.

Incident 2

A friend received an unsolicited sms from a agent from a local insurer. In the sms was some info about a newly launched endowment product with ‘5.1% yield‘ and ‘capital guarantee‘. Wow, not a bad deal right. The truth is, the ‘5.1% yield’ is projected yield on maturity. The annual projected yield is 1.7%. Capital guarantee applies only if held to maturity.

Get the full picture.

Incident 3

There was a huge advertisement on the 06th Mar 2011 edition of The Sunday Times which showed the returns from a particular fund. The return is something like this:

Again, impressive returns! Let’s look at the return since inception:

I am not saying that it is not a good fund. Just want to give a different perspective.

Get The Full Picture.

Incident 4

My mum bought some biscuits at just $0.50 a packet from a supermarket about two weeks ago. Now the did we realise that it will expire on the 21st March. I do not know how many aunties realise this.

Get The Full Picture.

Excuse Me, Are You A MBA?

Tiang Chuan — Fri, 21 Jan 2011 02:30:49 +0000

‘Don’t judge a book by it’s cover‘, the old saying goes. Now, we have to add another – ‘Don’t judge a man by his titles‘. In the 21st Jan 2011 edition of The Straits Times (Insurance agents’ body sued for offering dud degree), it was reported that a financial adviser has sued an professional body for offering a MBA from a non-recognized university.

Kudos to the man who has stopped mentioning the MBA in his business card. However, not all have done the same. A lady agent was quoted saying:”I just wanted to learn more – never mind if it’s unaccredited.”. Another PhD holder from the same university said:”I’d heard it was an unaccredited university, but it’s OK – no issue to me“.

In 2009, a self-styled trading expert was sued by his students over his doctorate from an unaccredited American university. He lost the case and had to refund them. Following that, another ‘trading expert’ with an characteristic loud voice removed his doctorate title from his websites. One wonders what happened…

In the financial advisory business, one can easily find name cards with all sorts of titles. One common practice is to pass the first paper of a recognized programme, join an association, and whala, you have an “Associate-something-something”. Pass all the other papers and you get a “Certified” or “Chartered-something-something”. You can get 2 titles by passing one industry recognized programme. Pass 2 programmes, of which one can ‘convert’ to another by passing additional papers, and there can be 4 titles! The joke is that clients would think that the “Associate-something-something” is better than the full programme of “Certified-something-something” or “Chartered-something-something” because ‘A’ comes before ‘C’! Disclaimer, I hold one of the “C-something-something” and this is a recognized programme.

Yes, clients do not know. But the title-holder knows. And that is the most important thing….

Cessation of Financial Advisory Representative Licensing

Tiang Chuan — Sun, 17 Oct 2010 14:07:38 +0000

As reported in the 17th October 2010 issue of The Sunday Times (Financial reps no longer need licenses), Financial Advisory Representative (FAR) of financial advisory firms no longer needs to be licensed by the Monetary Authority of Singapore (MAS). All representatives will be given similar regulatory treatment.

Under the current system, representatives from exempt Financial Adviser (FA)s such as insurers and banks are not required to be licensed by MAS. In the course of the regulatory oversight provided by MAS, issues like reference checks with previous employers, enforcement actions taken against the rep, checks with police and credit agencies are undertaken by the authority. The lead time for for the issuance of a license could range from 1 month to 6 months. Under the new Representative Notification Framework, such due diligence responsibilities will be handed to the FA companies. This is inline with what is practiced for representatives from the exempt FAs and will ‘level the playing field between licensed and exempt representatives’. Also, MAS will maintain a online public register called the Register of Representatives which will allow FAs and the public to check on the representatives. The lead time shortens to 7 to 14 days.

What impact will the new regulations have on the industry? Below are my personal views.

Increased Movements of Advisers Across FA firms

The current lead time for license issuance stands at 1 to 6 months. It could be longer. This is a big factor for advisers looking at switching FA firms as they have to resign from FA firm A before joining FA firm B. It is not easy to stop having income for 6 months or more.With the lead time shortened to 14 days, there is no more such concerns.

There are some vindictive FA firms around. Some of these firms have played punk and threaten or make things difficult for representatives who are considering the option of changing FA firms. Under the current scheme, a bad report from the FA firm could lengthen the lead time for a license considerably or even impossible. Under the new system, if the new FA firm is convinced that the adviser is a victim or is wiling to give him or her a chance, it could be relative easy to switch firms.

It would also become easier for agents to switch over to the FA companies due to the same reasons. The route in the opposite direction remains unchanged.

Drop In Professional Standards?

Not necessary. MAS enforcement actions and prohibition orders and 3 years of employment history are listed in a public registry. FA firms, insurers and banks may not be willing to have someone with a bad record listed amongst their representatives. Churners, advisers who churn investments and life policies, that switch companies often would have 3 years of their employment shown. Again, would a company be willing to accept someone with a long list of former employers?

Quoting The Sunday Times article: “… while larger financial institutions like banks and insures could be relied on to keep standards high for fear of damaging their reputations, the same cannot be said of smaller firms.”. I totally disagree with this statement. This statement suggest that representatives from larger financial institutions are superior to the smaller firms. What has been your own experiences? I am not trying to suggest that representatives from the larger firms are inferior or reps from smaller firms are superior. I am just saying that the size of the company have little bearing on the quality of the rep. By quality, I mean both intellectually and ethically.

In the recent mess over the foreclosure in the United States, hundreds of foreclosure papers a day were signed by so-called robo-singers without officers going through them. Many of the banks involved are huge companies and the reputation to match. Does size matter?

In the bigger firms, where senior management are outsiders hired to manage the firm, a problem known as the Agency Problem may exist. The Agency Problem refers to the potential moral hazards and conflict of interest between management and owners. Senior management may be only interested in generating the numbers and justifying their fat salaries and bonuses and less in the long-term future of the firm. In the smaller firms, where the senior management are normally the owners, there is no such problem. In this case, the Agency Problem may lead to low professional standards of their representatives with indiscriminate recruitment. Has this already occurred? You be your own judge.

Overall, I feel this is good news for FA firms. Although we would lose the bragging rights to higher MAS regulatory oversight, the online registry would add transparency and hopefully, help improves the quality of the reps by removing unsavory people like churners .

All advisers will be listed in a public register

A US$5m Insurance Scam Allegation Against Ex-AIA Agent

Tiang Chuan — Sun, 10 Oct 2010 04:26:29 +0000

In what is believed to be the first of its kind in Singapore, an Indonesian businessman is claiming that his ex-AIA agent has sold him fake insurance policies costing US$5m. This was report in the 10th October 2010 edition of The Sunday Times (US$5m insurance scam).

According to the report, the businessman , Mr Ong, claimed that the ex-AIA agent has sold him non-existence insurance policy called ‘AIA Thank You Policy’, which was offered only to selected clients. The premium was actually used to buy four policies for Mr Ong, his wife and daughter, without their knowledge. The ex-AIA agent, who was sacked by AIA in September 2009, had produced fake policy schedules and letters from AIA officers such as Mr Mark O’Dell, who was the insurer’s general manager at that time. There was a myriad of complex surrendering policies and returning the money to the insurer due to ‘computer crashes’. The money to be returned to AIA was to be made out to the ex-AIA agent. Authorizing letters bearing the then AIA general manager Mark O’Dell’s signature was produced.

Ms Low, the ex-AIA agent, had a totally different version of the story. She claimed that Mr Ong had conceived the plan and she was merely an accomplice. She claimed that Mr Ong had hoped that AIA would be responsible for Ms Low’s wrongdoings and compensate Mr Ong’s losses and even honour the maturity sum. Ms Low also claimed that she regretted and asked for a free hand in investing some of is money in a bid to achieve returns that would match the amount Mr Ong had wanted to achieve from the plot. She failed to do so due to the financial crisis.

Ms Low was a high filer and was reported to be a Top of the Table (TOP) agent, the highest honour for Million Dollar Round Table (MDRT) agents. In 2000, she was believed to among the youngest, if not the youngest TOP agent in the world. She was even featured in a rags-to-riches story in The Sunday Times in March 2001.

With two totally different versions of what actually happened, someone is not telling the truth. But in whichever is the true version of the story, Ms Low has committed some wrong. Are there any other deeper reasons for her doings? No one ones.

This court case has again highlighted the importance of not letting down your guard just because someone has got an award or is featured in the media. Victor Tan, the ex-CEO and Managing Director of Accord Customer Care Solutions (ACCS), an ex-listed firm on SGX, was convicted of manipulating financial statements at ACCS in 2006. He was given the Emerging Entrepreneur of the Year by Ernst and Young in 2004. A landbanking company, which was featured in Channel News Asia and run many ads, is now being investigated by CAD. James Phang of Sunshine Empire was featured in The Straits Times in October 2007 and was quoted with the words “I’m a Legend – Better Than Warren Buffett“. He was convicted of perpetuating fraud, criminal breach of trust and falsifying accounts in July 2010. There are many others out there who readily quote having won some awards and being featured in the major papers or TV programs such as CNBC or Channel News Asia.

All these awards and media features can easily mislead non-discerning consumers. At the end of the day, awards and features may count for nothing.

Insurer Facing Manpower Drain Retaliates

Tiang Chuan — Wed, 18 Aug 2010 05:22:42 +0000

Facing the problem of dwindling agent force, a major insurer has rolled out its own version of red carpet in a bid to stop the agent exodus and even recruit agents from other companies. This follows a previous article that highlighted this issue of agents jumping ship. According to The Straits Times, benefits include:

– sign-on bonus of up to 135% of previous years income
- Up to 125% of previous year’s income paid over 3 years
- ‘Golden handcuffs’ of millions of dollars
- $2000 referral fee for introducing new agents
- $10,000 to agency manager if new agent stays and performs

Such high incentives come with stings attached – in the form of sales targets.

The issue of private bankers playing ‘musical chairs’ has been reported extensively in the media. Now, insurance advisers are also joining in. I have written about the issue of sales targets and other constrains money managers face in the article What Your Money Don’t Want You To Know.

With poaching spree taking place so extensively, consumers would probably be the one to loose out.