Cashback websites

These make the unlikely sounding premise of getting paid to shop become a reality. Cashback websites carry links to hundreds of retailers, restaurants, travel companies and financial services providers who pay a referral fee each time a customer clicks through from the cashback website.

With most cashback sites some of that fee is passed to the consumer, in the case of the TopCashBack site, 100% of the referral fee is paid.

A bad investment product

The investment-linked policy is probably one of the worst type of investment that is sold to a consumer in Singapore. Here are the reasons:

• The consumer takes the investment risks, without any commensurate return
• The consumer is locked into the policy due to the excessive upfront charge
• The insurance company levies a high fee to manage the investments
• The insurance company is not good at investing the funds (generally)

With all of these negative factors, why are consumers investing in these policies? They are given bad advice by the financial adviser, who pushes the product to earn a fat commission. Some financial advisers tell lies to mislead the consumer. Other advisers are quite naive about the nature of these products and sincerely believe, quite wrongly, that they are helping the client to get a better yield compared to CPF.

Many investment linked polices have a reduction of yield of 4% p.a. If the investment earn 6%, the net yield to the consumer is 2%. This is a poor yield for locking up the money for 25 years. It is not sufficient to cover inflation. It is a very poor yield, considering that the consumers takes all of the investment risk. I wonder why the regulator allow consumers to be given such a bad deal on their long term savings.

At least whole life and endowment policies provide some guarantee for the policyholder, in return for the low yield.

If you can find an investment linked policy that takes away less than 1% per annum for the management fee, and invest 100% of the premium from the first month (i.e. the premium is not used to pay commission and other distribution cost), then the investment linked policy is acceptable. So far, there is no such policy in the market. The best choice is to invest in the STI exchange traded fund, available in SGX.

Tan Kin Lian

US Financial Crisis Inquiry Commission

Here is the report of the inquiry commission set up by the US government to look into the causes of the financial crisis of 2008.
http://www.bbc.co.uk/news/business-12297002


It concluded that the crisis was caused by a number of factors:

• Failures in financial regulation, including the Federal Reserve's failure "to stem the tide of toxic mortgages"
• A breakdown in corporate governance that led to "reckless" actions and excessive risk taking by financial institutions
• Households taking on too much debt
• A lack of understanding of the financial system on the part of policymakers
• Fundamental breaches in accountability and ethics "at all levels".

My comments

It is frank and direct to the point - no hiding of the truth.

Sample financial plans

Here are the sample financial plans for:

Age 25
Age 35
Age 60

The reflect the financial situation of people at various stages of their life. You can view the financial plans to understand the approach and request for a projection for your own situation in this website, http://projects.easyapps.sg/life21d/Planning.aspx

Even those who approach retirement need a financial strategy on how to invest their retirement savings to get a good yield. The sample projections show the importance of:

• Adjusting the capital sum and monthly income at retirement for the effect of inflation
• Getting a yield at least 2% higher than inflation
• Avoid buying the bad financial products that gives a low yield or have high risks.

Tan Kin Lian

Aviva Car Insurance Cashback

My car insurance was due earlier this month. I never, ever renew car insurance with my existing insurance company as there are always better deals to be had as a new customer. Loyalty to service providers does not pay, but what did pay was using a Topcashback link to purchase online direct from Aviva Car Insurance.

The amount of cash back I earned from TopCashBack was £70.70 for buying a fully comprehensive insurance policy that cost just £174 in total. So in effect I got 12 months car insurance for a little over £100. By the way that is on a 2.3 litre Ford Scorpio.

Get the Aviva deal - 12 weeks free car insurance! Aviva are offering new customers a great deal - 12 weeks free car insurance from Aviva Car Insurance.

The deal from Aviva was the best I could find before factoring in the amount of cashback I would receive. The cashback was simply a huge extra bonus on top.

What I always do before my car and home insurances are due is to first obtain online quotes and determine roughly which companies are going to offer the cheapest or best deals. I then look at what cashback deals are available at the time through TopCashBack and make my decision which company I will purchase from.

When I am ready to purchase, I then delete cookies from my computer and erase all history of my previous quotes and searching. This is essential to ensure that the transaction is tracked to me.

If you have used a price comparison website or (often unknowingly) an affiliate link from another website prior to making your purchase, you will have cookies on your computer that will result in a commission being awarded to them and your TopCashBack transaction will not be tracked. I will try to cover this issue in more detail in a later post.

Since I bought my car insurance from Aviva via the Topcashback website the amount of cashback has reduced. With the 12 weeks free car insurance offer it was the lowest quote I could find anywhere online and in addition because I went through the Topcashback website link I earned £70.70 cashback. The current rate of cashback is still over £60 so continues to be a massive amount of cash to earn for a single transaction.

So if your car or home insurance is due soon how can you not take advantage of this simple and effective way of making money.



TopCashBack and Aviva Car Insurance

Unethical practice by insurance agents

Hi
I recently came across a practice by some agents which i find rather uncomfortable. But there is nothing much I can do about it so I hope you can raise some awareness about this so as to prevent more people from falling victim.

The scenario is as follow: Agent/financial advisor went back to all his/her existing/orphan clients with an regular ILP plan and told them about a new plan which is a similar ILP(change in version/name) and advise them that they can get more coverage with the same regular premium. client took up the plan without realising that the first ILP will be going into non forfieture.

After 2 years, the client can terminate his first ILP and get back a sum of money.
This is very unethical as the client as the client could have avoid unnecessary charges by maintaining the initial plan instead of getting the new ILP.
Agent/FA gets away with the commsion, production as non forfieture is not considered as replacement for some Insurance company.

I guess you have better resources to educate the client or to engage the relavent department to put a stop to this. Hope to clear the bad name of insurance.

REPLY
It is very sad that insurance agents are acting unethically and the insurance company and the regulator are not taking action to stop the abuse. This type of case is quite rampant. It is easy to catch the financial adviser who engage in this abuse, if the regulator is willing to take the trouble.

Big professional liability risk

Financial advisers are not aware that they face a big professional liability risk. They are selling large life insurance policies to high net worth individuals, without explaining  the distribution cost (more than $100,000) or the effect of deduction (more than $500,000).

When the customer learns about these huge charges at a later date, they are likely to engage a lawyer to sue the financial advisers for negligence. It will be easy for the lawyer to prove that the financial adviser had failed to give proper advice, or worse still, had deliberately withheld relevant information or misled the customer. The damages could be large and the legal fees will add to the damage. One strong argument is that the financial adviser had breached the code of ethics and professionalism.

The financial adviser will not be able to hide behind the excuse that "they are disclosed in the benefit illustration". It is the duty of the financial adviser to explain these key points to the customer, so that the customer can make an informed decision. The failure  to provide the proper explanation will be taken against the financial adviser - who has a fiduciary duty. The insurance company can get away by saying, "we rely on the financial adviser to give proper advice to the client" but it will be difficulty for the financial adviser to escape the liability.

It is likely that some lawyers may take the case for the consumer on a special understanding, similar to a contingency fee arrangement. When this type of arrangement is made, it is likely that many cases will be taken up. Financial advisers should be careful about their role, or they can be easily bankrupted by a few of these legal suits. The days of lax supervision and non-accountability may be over.


Tan Kin Lian