Author Archive

Posted on December 18, 2009 - by Adrian Khiat

System and Discipline

My non-investment clients or friends always pop 2 questions for me “Should I buy or sell now? or “What to buy and sell now?”

They always expect that I have inside information and able to give them “Tips” on making quick money. When they realise that I don’t have any inside information to fulfil their expectation, they will go back into the stock market and look for their quick money investments.

Clients often have an unrealistic expectation of advisers and advisers who are able to make them believe that they are able to fulfil their expectation will make a sales. However, are advisers who are not able to create such impression deems as incompetent?

Some advisers who focus on returns can invoke greed of the client. Some adviser who warns on the volatility of the market will invoke fear of the client. The fear factor is frequently stronger than the greed factor and many will choose not to invest. As more people around them makes money, the greed factor will over the fear and start chasing the hot trend. Read more…

Posted on December 1, 2009 - by Adrian Khiat

Starting an Investment Plan(3)

Step 5: Funds Selection
As Financial Advisers, one of the thing we can do is to help select funds for our clients. There are hundreds of mutual funds in Singapore and it is a challenge to find reliable fund managers to be included in our portfolio. Other than the recommended funds from our i-fast and Navigators platform, I try to find out more about other funds as well if they deserve recommendations.

I will first get to http://www.fundsupermart.com/ website to download all the funds info by asset classes and geographical allocations. The usual ones I download are Equities: Global, Asia Ex-Japan, BRIC/Emerging Markets, China, Latin America, Bonds: Global, Asia, High Yields.
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Posted on November 27, 2009 - by Adrian Khiat

Starting an Investment Plan? (2)

Step 3: Agreeing on the Asset Allocation

Determining on the asset allocation is the foundation of my client’s investment plan. The 3 asset classes are Equities, Fixed Income and Money Market.

Equities are more risky but offers potential to get higher returns while Bonds are able to get reasonable returns with lower risk and money market are shorter duration bonds of as short as 1 year which are even more stable than normal bonds.

We’ll agree on the percentage band of equities in the portfolio depending on the client’s risk profile.

For example, Growth Portfolio (60% to 80% equities),

Aggressive (70% to 90% equities), etc.

I adopted some suggestions from Larry Swedroe’s book “What Wall Street Doesn’t Want You to Know” as a guide on the maximum equities allocation to be recommended on top of what my company suggested.

a) Investment Horizon ==> Maximum Equity Position

<3 yrs =”=”"> 0% Equity

4-6 yrs ==> 30% Equity

7-10 yrs ==> 70% Equity

11-20 yrs ==> 90% Equity

>20 yrs ==> 100% Equity

Read more…

Posted on November 13, 2009 - by Adrian Khiat

Starting an Investments Plan?

I was questioned some clients on my capabilities in investment and asked to view my portfolio before they are willing to part their money for investment. I’m a very straight talking person and tell him that I’m a poor man. I don’t have much to invest; I don’t have a fantastic track record of investing on my own. I also don’t have a long track record of managing client’s fund.

I’m honest about my own capabilities that I’m not an investment guru or genius who can promises high returns without taking significant risk for my clients. I can’t spot the top or the bottom and I’ll not switch funds as often as they buy shares and I shall follow a systematic and disciplined methodology towards investments.

For those who feel that I’m not capable, I’ll wish them well in looking for the adviser with the crystal ball. They are very likely do better than me. I help those who don’t know or have no interest to know what to do.

What are the steps I took before investing my clients’ money? Read more…

Posted on October 28, 2009 - by Adrian Khiat

Cost of surrendering an insurance policy

I get disturbed if I get to know of any advisers asking their clients to terminate their Whole Life Plan or ILPs for certain reasons. I’m not against terminating an insurance policy if due diligence been made but my observation is that some advisers do not advises properly before asking their client to terminate their existing policy.

One common objective of these advisers who asked their clients to terminate their Whole Life plan or ILP is by asking them to buy another Limited Premium Term Whole Life Plan. Even if they can’t convince them to surrender the existing policy, they will still tell them to get one more whole life plan as if a limited premium term whole life plan is a “must have” type of policy.

When these advisers see a regular Whole Life Plan, they will emphasize to their client that they have to pay whole life for their whole life plan and why not switch to a limited term one? They will also harp on the point that it will tough to pay when you are retired and you may have to surrender the policy when you do not have money. Read more…

Posted on October 20, 2009 - by Adrian Khiat

Earnings from a Shield Plan

I am quite disappointed when someone wrote in his blog as if agents are unethical by selling Shield Plans. I like to be transparent as of how much I will earn from a Shield Plan to illustrate that no adviser of sound mind will wants to be unethical using Shield Plans.

I hope those who read this posting understand that the adviser who took hours to patiently explain the features, who filled up 30+ pages of documentation works in compliance with MAS regulations, who negotiate with the underwriters for substandard cases, who helped with all type of queries, who helped with claims, who update on changes, etc are NOT earning a lot of money. He is really helping people and not trying to be unscrupulous by scaring people to buy a medical insurance. If he is unethical, he will rather spend his time telling them about ILPs or Whole Life policies.
I swear that it is a lot of work for an adviser who have hundreds of clients under Shield plans.

I take the Enhanced Incomeshield as an illustration based on age 1 and 55 for Plan Basic and Preferred.

Premium for Age 1
Medishield – $33(Not sure if they include GST)
Basic – $70 ($65.42 before GST)

My 1st Yr Earnings – ($65.42 – $33) x 30%(Commission Rate) x 145%(Over-riding) = $14.10 (Total paid to my company)
59% of earnings from my company will be paid to me which equates to $8.32.
Read more…

Posted on October 11, 2009 - by Adrian Khiat

Pre-existing Illnesses – Shield Plans(2)

The most common exlusion in Health Insurance is a “Pre-existing condition” exclusion. This exclusion means that any illness or disability that you have, or have had, when you sign up for the plan will not be covered. We have to also bear in mind that the definition of “Pre-existing condition” varies among different insurer.

Let us go through the definition of “Pre-existing Illnesses” clause of our Shield Plan providers.

Aviva – MyShield
means any Injury, Illness, condition or symptom:
(a)for which treatment, or medication, or advice, or diagnosis has been sought or received or was foreseeable by You or the Insured Person prior to the Insured Person’s Effective Date or the date of Upgrade or the date of the last Reinstatement, whichever is later, for the Insured Person concerned, or
(b) which originated or was known to exist by You or the Insured Person prior to the Insured Person’s Effective Date or the date of Upgrade or the date of the last Reinstatement, whichever is later, whether or not treatment, or medication, or advice, or diagnosis was sought or received. Read more…

Posted on October 7, 2009 - by Adrian Khiat

Pre-existing Illnesses – Shield Plans(1)

Someone emailed me recently to seek my opinion about Pre-exising Illnesses for her Shield Plan. She was advised to switch out from Aviva Myshield to GE SupremeHealth. The adviser claims that she was in a vulnerable position due to Aviva’s definition about “Pre-existing Illnesses”.

I replied to her that she should look into other benefits in the long term other than this “Pre-existing clause. It is a bit too extreme to say that she is in a vulnerable position just because of the “Pre-existing Illnesses” definition.

a) Her policy was already been inforce for several years. It is very difficult for the insurer to prove that a Pre-existing condition exist prior commencement of the policy. If the insurer is to refuse the claim, they have to prove this point.

b) It is not the responsibility of the insurer to refuse a claim when it happens. The pre-existing condition clause was present to largely protect the pool of policyholders against anti-selections. Every claims should be viewed objectively with this in mind.

c) Aviva have around 100k+ policyholders for their Myshield Plan and is known to make around 5,000 claims per year. It is not heard of many cases whereby Aviva rejected claims purely based on Pre-existing illnesses. Read more…

Posted on September 29, 2009 - by Adrian Khiat

Timing the Market?

Many of my clients are sitting on a profit of between 20% to 30% for their investments especially those who heed my advise to invest during the early part of the year. Some of them asked in May, some in June and July if they should sell their investments. I instead proposed to increase equity position and switch to corporate bonds during May and June. Fortunately, it pays off.

I’m still sticking to the 60% equity position for balanced investors, 75% for growth investors, 85% for agressive investors. I’m trying not to time the market too much and manage risk via the asset classes of equity, bonds and money markets using largely geographical allocation with bias towards Asia and Commodities. Read more…

Posted on September 24, 2009 - by Adrian Khiat

Keeping track of my Budget

Many people monitor their cashflow by looking at how much cash they have in their POSB account whenever they withdraw money. If their POSB Savings is growing, it probably means positive cashflow. If its not, then they may only complain that they are not earning enough.

This group of people will always feel that their POSB savings don’t seems to grow and whenever the amount gets larger, its time for some big ticket expenses and the POSB savings comes back to a small amount it was originally 1 year ago.

For me, I keep track of my budget by using my monthly Balance Sheet and Cashflow Statement. It is actually a very simple excel spreadsheet which I file under “Adrian’s Money” in My Document folder.

My Balance Sheet

• I only have Cash and Invested Assets in my balance sheet.
• Personal Use assets and CPF are left out of the picture. As I don’t have specific debts except mortgage and I pay all my credit card bills on time, I also leave debts out of the picture.
• I make use my internet banking to check the balances of all my bank accounts and key all the figures in my assets positions every 1st or 2nd of the month.
• I will also log into the SGX and i-fast account to check on my investments. From my balance sheet, I know very clearly if my savings and investments are growing. Read more…