Endowment Plan is sold by many insurance agents as a saving products. Customers are easily to be persuaded. I believe most people want to save money and get good returns from their savings and they are willingly persuaded by insurance agents and bank staff to commit in endowment plan.
Our trainers in insurance companies will teach us not to mention 'insurance products' when we sell endowment plan. It should be addressed as 'saving plan'. I try but I give up cheating myself because insurance is always insurance. If the primary element of an insurance product is not insurance, then something is wrong.
Anyway, the reasons that I don't encourage endowment plan as a financial planner due to the following:
1. Once you have committed, you must faithfully pay for the duration of the payment term. As like other insurance products, the distribution cost for the first few years are expensive. Once you stop, you lose what you have paid before.
2. It is unlike saving in the bank if the sales person try to compare with the bank deposit returns. You can't withdraw your money for the 'money saved' (premium) in your endowment plan, while you won't lose your capital in the bank saving account.
3. The sum assured is very low
4. An endowment plan projects high returns. If you only take the guarantee maturity value into consideration, it is quite similar to putting money in FD.
Worst still, many of the 'cash return' insurance products are package whole life. What is the point of locking your money with insurance company and getting the annual 'cash return'? The 'cash return' shrinks every year because the value of the same amount money depreciates over time.
Tuesday, 9 October 2012
Monday, 8 October 2012
What is Ponzi Scheme 庞氏骗局
What is a Ponzi Scheme? It is a scheme that looks good at the surface with irresponsible motive behind. It is sweet in the beginning but end up bitter at the end.
Ponzi Scheme promises an above normal rate of return, but not so high as to be unbelievable. The setup is not transparent as to how the return is to be generated. The scheme will convince some investors first and the promised return will be given for a few or many periods. These investors will invest more, and bring along their friends and relatives. Typically, those earlier investors will earn. The later investors' investment will be used to give to the earlier investors. Until such time that the holes are too big to cover, or the ponzi scheme master is happy with the amount of money he is holding, he will just disappear, or change the scheme, or change the man behind the scheme.
Doesn't it sound familiar? Even direct selling is patterned this way. Maddoff is a famous example in 2008 in US.
Even though we perceive the US people more knowledgeable than us in Malaysia, they still fell prey to this kind of scheme. Be practical, the hard earn money when invested, must exercise due diligent. Otherwise, just leave it in Fixed Deposit. Though sound unintelligent, but better than falling prey to ponzi scheme.
Ponzi Scheme promises an above normal rate of return, but not so high as to be unbelievable. The setup is not transparent as to how the return is to be generated. The scheme will convince some investors first and the promised return will be given for a few or many periods. These investors will invest more, and bring along their friends and relatives. Typically, those earlier investors will earn. The later investors' investment will be used to give to the earlier investors. Until such time that the holes are too big to cover, or the ponzi scheme master is happy with the amount of money he is holding, he will just disappear, or change the scheme, or change the man behind the scheme.
Doesn't it sound familiar? Even direct selling is patterned this way. Maddoff is a famous example in 2008 in US.
Even though we perceive the US people more knowledgeable than us in Malaysia, they still fell prey to this kind of scheme. Be practical, the hard earn money when invested, must exercise due diligent. Otherwise, just leave it in Fixed Deposit. Though sound unintelligent, but better than falling prey to ponzi scheme.
Is Genneva Gold a Ponzi Scheme?
I have heard about Genneva Gold from my clients. They asked me whether I have any investment in gold in Genneva. I came to know gold investment a few years ago reading the monthly magazine called "Money". From there I only knew that I can invest in gold via Public Bank Berhad and Maybank Berhad.
Prior to that, I thought to invest in gold, you need to buy in the form of gold jewelry.
I called up these two banks to find out how to invest gold in their banks. In general, it is very much like unit trust. There is a difference between buying and selling price. To open a gold investment account, your initial investment would be to purchase 10 gms of gold (about RM1790 now). Subsequent investment is 2 gm (about RM358). This is affordable. The banks will give you a gold saving account book for records. You do not have to keep the physical gold yourself. Since these banks have licenses from Bank Negara Malaysia to trade gold, you are rest assured. If you want to withdraw, you can sell the gold back to the bank, or withdraw in the form of physical gold.
Similar to unit trust, you wish for a return by hoping the gold price will rise eventually in the long run. You can check the gold price in the internet. They are the same globally.
Unlike Genneva gold, the company promises you very good return. I was told 2% monthly. In a year, you get a return of 24%! The agent told me that they get 1.5% of the customers' investment! If the customers do not sell back their gold, and renew their license, they continue to get 1.5%!
This scheme has attracted a lot of investors. Quite a number of investors invested their life saving because the monthly dividend is really attractive. If you are retired and withdraw your EPF of RM200K to buy Genneva Gold, you get RM4K monthly for your living expenses. Your agent will get RM3K from your investment. Doesn't that sound good? Better than rental income if you wish to purchase a house for rental. Where can you find a house that cost you RM200K and give you a monthly rental income of RM4K?
However, when investments are too good to believe, hold back and ask yourself this question. How do they make money from my investments to pay me dividend and the agent commission? Does gold price really rise so fast? Look up information in the internet. Plenty of discussions going on in the internet.
Prior to that, I thought to invest in gold, you need to buy in the form of gold jewelry.
I called up these two banks to find out how to invest gold in their banks. In general, it is very much like unit trust. There is a difference between buying and selling price. To open a gold investment account, your initial investment would be to purchase 10 gms of gold (about RM1790 now). Subsequent investment is 2 gm (about RM358). This is affordable. The banks will give you a gold saving account book for records. You do not have to keep the physical gold yourself. Since these banks have licenses from Bank Negara Malaysia to trade gold, you are rest assured. If you want to withdraw, you can sell the gold back to the bank, or withdraw in the form of physical gold.
Similar to unit trust, you wish for a return by hoping the gold price will rise eventually in the long run. You can check the gold price in the internet. They are the same globally.
Unlike Genneva gold, the company promises you very good return. I was told 2% monthly. In a year, you get a return of 24%! The agent told me that they get 1.5% of the customers' investment! If the customers do not sell back their gold, and renew their license, they continue to get 1.5%!
This scheme has attracted a lot of investors. Quite a number of investors invested their life saving because the monthly dividend is really attractive. If you are retired and withdraw your EPF of RM200K to buy Genneva Gold, you get RM4K monthly for your living expenses. Your agent will get RM3K from your investment. Doesn't that sound good? Better than rental income if you wish to purchase a house for rental. Where can you find a house that cost you RM200K and give you a monthly rental income of RM4K?
However, when investments are too good to believe, hold back and ask yourself this question. How do they make money from my investments to pay me dividend and the agent commission? Does gold price really rise so fast? Look up information in the internet. Plenty of discussions going on in the internet.
Thursday, 4 October 2012
Emergency Cash Fund
Who are among those who lapse their life insurance policies easily?
From my experience, most of the lapsed policies are owned by young adults. My young adults customers are mostly at least having tertiary degree at local universities. I noticed that once they lost their jobs, they stopped their premiums immediately. However when I meet them for appointments, they are normally quite well-dressed and equipped with the latest phone.
My advise to these young adults would be to keep 6 months of emergency cash fund. This means to say that if you are out of job for 6 months, you still have this saving of emergency cash reserve to keep you through. This assumes when you lose your job, you will be able to get another one within 6 months time. You estimate how much you need to spend every month. Do not underestimate. Multiply this estimation with the number of months you think will get you back to a job.
As you get older and more fuzzy about jobs, you must keep more emergency cash fund.
Draw up a worksheet to record your daily expenses. At month end, you will know how much you require in a month. Remember to consider some expenses that recur once a year like your motor insurance, road tax renewal, land assessment, PA insurance and fire insurance.
From my experience, most of the lapsed policies are owned by young adults. My young adults customers are mostly at least having tertiary degree at local universities. I noticed that once they lost their jobs, they stopped their premiums immediately. However when I meet them for appointments, they are normally quite well-dressed and equipped with the latest phone.
My advise to these young adults would be to keep 6 months of emergency cash fund. This means to say that if you are out of job for 6 months, you still have this saving of emergency cash reserve to keep you through. This assumes when you lose your job, you will be able to get another one within 6 months time. You estimate how much you need to spend every month. Do not underestimate. Multiply this estimation with the number of months you think will get you back to a job.
As you get older and more fuzzy about jobs, you must keep more emergency cash fund.
Draw up a worksheet to record your daily expenses. At month end, you will know how much you require in a month. Remember to consider some expenses that recur once a year like your motor insurance, road tax renewal, land assessment, PA insurance and fire insurance.
职场增值 Increasing your value at work
A Singaporean motivational speaker was invited by a KK church to conduct workshop on increasing your value at work. Every attendant has to pay more than one thousand to attend the 2 days workshop. I heard that the respond was very good. The church said that this speaker charged more than RM5000 for similar workshop outside the church, and this was a very special "discount" for church members. After the workshop, the pastor asked the participants to share. The participants were excited and motivated, and many said value for money.
However, one church member who has been life insurance for at least 30 years, was fury after the workshop. He said he has attended so many similar motivation talks in life insurance industry. And why should the church members including the elders stood up clapping their hands welcoming the entry of the speaker. The speaker is neither God or Jesus!
After a few months, the same workshop was brought to the seminary. Charges remained above RM1000. I signed. Many Christians in KK are innocent. I should not question them but I think some people became regular church goer or cell group members because they just want to belong to somewhere. Perhaps church is perceived as a safe place to belong to. Do churches more like clubs to non-christians?
However, one church member who has been life insurance for at least 30 years, was fury after the workshop. He said he has attended so many similar motivation talks in life insurance industry. And why should the church members including the elders stood up clapping their hands welcoming the entry of the speaker. The speaker is neither God or Jesus!
After a few months, the same workshop was brought to the seminary. Charges remained above RM1000. I signed. Many Christians in KK are innocent. I should not question them but I think some people became regular church goer or cell group members because they just want to belong to somewhere. Perhaps church is perceived as a safe place to belong to. Do churches more like clubs to non-christians?
Mr.Wong's Personal Financial Planning's Workshop
Mr. Wong KS is a well known Financial Planning speaker in Chinese speaking community. He was a regular financial planning speaker at Ai-FM. He was also invited to give talk and to conduct workshop in Kota Kinabalu and Tawau.
I had listened to his talk several times over the radio. I like his sharing. Because of his popularity, he was invited to conduct workshops at one of the church several times in Kota Kinabalu. Mr. Wong KS charged RM3300 for the workshop. If you want to attend the same workshop again, you pay 1/3 of the original price. I personally find this very, very expensive. Surprisingly, many people are willing to pay for that amount of money in order to know how to manage their money. One of my customer attended his workshop, and called me to tell me now she knows what she wants for her life insurance. When I met her up to review her policy, she told me that she wants to increase her critical illness cover to RM100K. Naturally, I asked her why RM100K? She said Mr.Wong said so. In Kota Kinabalu, most people are very innocent. They come to adore a person easily. And whatever the person said, they just follow faithfully without asking why.
My customer continued to tell me that her income will be allocated according to 2116 formula. 20% saving for financial independence, 10% for protection, 10% for children's education and 60% for living expenses. This is a good guideline, but keep in mind that this is a general guideline. If I have big income, there is no need for me to spend 60%. I can save more. If I am a single person, I don't need so much protection.
Nevertheless, at least, by attending the workshop, these attendants are more aware of their spending and their investment, hopefully.
I had listened to his talk several times over the radio. I like his sharing. Because of his popularity, he was invited to conduct workshops at one of the church several times in Kota Kinabalu. Mr. Wong KS charged RM3300 for the workshop. If you want to attend the same workshop again, you pay 1/3 of the original price. I personally find this very, very expensive. Surprisingly, many people are willing to pay for that amount of money in order to know how to manage their money. One of my customer attended his workshop, and called me to tell me now she knows what she wants for her life insurance. When I met her up to review her policy, she told me that she wants to increase her critical illness cover to RM100K. Naturally, I asked her why RM100K? She said Mr.Wong said so. In Kota Kinabalu, most people are very innocent. They come to adore a person easily. And whatever the person said, they just follow faithfully without asking why.
My customer continued to tell me that her income will be allocated according to 2116 formula. 20% saving for financial independence, 10% for protection, 10% for children's education and 60% for living expenses. This is a good guideline, but keep in mind that this is a general guideline. If I have big income, there is no need for me to spend 60%. I can save more. If I am a single person, I don't need so much protection.
Nevertheless, at least, by attending the workshop, these attendants are more aware of their spending and their investment, hopefully.
Hong Leong Income Builder Plan
Sharon is 22 years old. She does not have a steady job. She is still depending on her parents when her odd jobs income do not meet her expenses. In fact, Sharon is spendthrift. She likes to buy branded clothes, go clubbing and drink at starbucks.
Her friend, Magdalene is also 22 years old. Through Sharon's social friend, she came to know Magdalene, who has just started to earn extra income by joining Hong Leong Assurance as life insurance agent.
One day, Magdalene called up Sharon to have lunch with her. Magdalene showed her concern for Sharon's way of spending, and encourage her to take up Hong Leong Income Builder Plan. This plan is popularly promoted by HLA agents as well as HLB's sales officers. Magdalene proposed to Sharon that she should save RM200 every month with her for 12 years. On the first anniversary, Sharon will start getting dividend from HLA.
Sharon went home to ask permission from her mother to take up the plan, and her mother agreed. After paying for 2 months, Sharon was not in good term with her mother. Her parental assistance of pocket money halts.
When Sharon talked about this with me, I pointed out to her that this saving plan is a wrong choice for her. She should keep her money in the bank as she doesn't have steady income. Furthermore, an insurance saving plan is not a good idea for saving at all. When she needs money, she will not be able to withdraw the premiums that she has paid. She should have deposited her money in the bank. It is also ridiculous to ask premium from mother to 'save' in the saving plan.
I notice that many consumers when heard of the product name "saving", they will assume that it is similar to saving account in the bank. Agents or bank officers will seldom point out to them that they are at a loss should the policy be discontinued.
On my advise, Sharon stops the plan losing a few hundreds. When I called up the young agent, she even told me that Sharon can get back 70% of her premiums paid. From here, I concluded that this young agent doesn't even know her products well, how can she give correct recommendation to her customers?
I wish Bank Negara has better control of the insurance agents and bank officers selling insurance plan. Should there be any complaint or mis-selling, the premiums should be refunded to the customers.
Her friend, Magdalene is also 22 years old. Through Sharon's social friend, she came to know Magdalene, who has just started to earn extra income by joining Hong Leong Assurance as life insurance agent.
One day, Magdalene called up Sharon to have lunch with her. Magdalene showed her concern for Sharon's way of spending, and encourage her to take up Hong Leong Income Builder Plan. This plan is popularly promoted by HLA agents as well as HLB's sales officers. Magdalene proposed to Sharon that she should save RM200 every month with her for 12 years. On the first anniversary, Sharon will start getting dividend from HLA.
Sharon went home to ask permission from her mother to take up the plan, and her mother agreed. After paying for 2 months, Sharon was not in good term with her mother. Her parental assistance of pocket money halts.
When Sharon talked about this with me, I pointed out to her that this saving plan is a wrong choice for her. She should keep her money in the bank as she doesn't have steady income. Furthermore, an insurance saving plan is not a good idea for saving at all. When she needs money, she will not be able to withdraw the premiums that she has paid. She should have deposited her money in the bank. It is also ridiculous to ask premium from mother to 'save' in the saving plan.
I notice that many consumers when heard of the product name "saving", they will assume that it is similar to saving account in the bank. Agents or bank officers will seldom point out to them that they are at a loss should the policy be discontinued.
On my advise, Sharon stops the plan losing a few hundreds. When I called up the young agent, she even told me that Sharon can get back 70% of her premiums paid. From here, I concluded that this young agent doesn't even know her products well, how can she give correct recommendation to her customers?
I wish Bank Negara has better control of the insurance agents and bank officers selling insurance plan. Should there be any complaint or mis-selling, the premiums should be refunded to the customers.
Subscribe to:
Posts (Atom)