Wednesday, November 7, 2012

Bankrupts: CPF inheritance goes first to...

IF A person wills his Central Provident Fund (CPF) money to a bankrupt, the funds will be channelled towards settling the bankrupt's debts when the CPF account holder dies.
Any money left after paying off creditors will be held in trust, that is, managed on behalf of the bankrupt, the Court of Appeal has ruled.
The highest court in the land also ruled that if information on the bequeathed sum comes to light after the bankrupt is discharged from his debts, the money still has to go to the Official Assignee (OA), who will hold it in trust.
These definitive rulings were made by the Court of Appeal in a judgment released last week, after a test case in which a discharged bankrupt sought to keep $102,000 left to her by her late sister in CPF money and SingTel shares.
Lawyers say the rulings underscore the need for CPF account holders to pick their nominees carefully, since funds meant as bequests to nominees who are bankrupts will go to creditors instead.
In the test case which led to the rulings, Madam Lim Lye Kiang was a bankrupt when her sister Lye Keow died of cancer in March 2008. Madam Lim, 52, a kitchen helper, had been a bankrupt for 11 years, owing $1.18 million to 13 creditors.
Under the law, all assets belonging to a bankrupt are held by the OA for distribution to his creditors. Hence, when Madam Lim Lye Keow died, the CPF money she bequeathed to her sister should have been transferred to the OA.
But the OA was unaware of the bequest. In October 2009, the OA sought a court order to discharge or release the bankrupt Madam Lim Lye Kiang from her debts on the basis that she had been bankrupt for more than a decade, and had made monthly contributions of up to $150 to her bankruptcy estate.
She also had no further realisable estate.
After her creditors each got $11,664 in a final dividend declared by the OA, she was discharged in November 2009.
Two months after this, when she sought to claim the $102,000 from CPF which her late sister had left her, the CPF Board transferred the money to the OA.
The OA then applied to the court for an order to distribute the money among Madam Lim's creditors.
In October last year, the High Court agreed with the OA and rejected Madam Lim's argument that since the CPF authorised the release of the money after she had been discharged from bankruptcy, the money belonged to her.
The judge also held that the protection extended to the money of CPF account holders did not extend to nominees like Madam Lim, and that the money could thus go to the OA to settle debts.
Madam Lim appealed and the appeal court ruled that the money had to go to the OA because she was a bankrupt at the time of her sister's death. Her lawyer Foo Soon Yien argued that her discharge from bankruptcy had the effect of revesting the entitlement to the money in her.
The Court of Appeal rejected this, agreeing with the OA's lawyer Lim Yew Jin that the discharge did not reinstate Madam Lim's right to the money.
The court, comprising Judges of Appeal Chao Hick Tin, Andrew Phang and V. K. Rajah, held that bankruptcy laws make plain that the administration of a bankrupt's estate may continue after his discharge, as in this case.
It said the OA may have decided that a bankrupt was deserving of discharge, but may not necessarily by then have completed distributing the bankrupt's assets.
The bankrupt's discharge releases him from debts, and does not affect the debts themselves, said the court, so assets which come to light after a final dividend is paid to creditors will be held by the OA in trust for the discharged bankrupt.
It falls to the ex-bankrupt to apply to the OA to ask that the assets be revested in him; he may appeal to the courts if the OA rejects his request or sets conditions.
The CPF Board said a year ago that a CPF member does not need to make a nomination if he wishes to distribute his CPF savings under the intestacy laws.
'When making a nomination, he should consider who is to receive his CPF savings and how much each nominee should receive, taking into account family and other circumstances,' CPF said.

Thursday, May 17, 2012

Few insurers here cover supercars

Source:     The Straits Times© Singapore Press Holdings Limited.
Author:     Leslie Kay Lim   

ONLY a handful of insurers here offer coverage for million-dollar supercars like Ferraris and Lamborghinis.

The insurance policies do not come cheap, with annual premiums for Ferraris, for instance, starting from as high as $30,000, said insurance brokers and importers of these high-end cars.

This is almost 30 times the premium for, say, a medium-sized Japanese family sedan. But the same procedures apply when claims are made, whether the car involved in an accident is a high-end or a run-of-the-mill car.

A check by The Straits Times yesterday showed that while AXA Insurance, Liberty Insurance and Chartis will accept such business, at least one major industry player - NTUC Income - does not.

'NTUC Income does not focus on the supercar segment of the market,' said its vice-president of branding and public relations Karen Yew, adding that the company prefers to focus on the needs of a mainstream market.

Dealers and parallel importers, such as Meridian Automobile, said that after owners have submitted a police report following an accident, insurers will typically assess the condition of the car and examine the evidence - to determine who is at fault - before paying out claims.

Provided the driver is not at fault, the insurer may have to foot the entire repair bill of his car although it can claim that amount from the other motorist. If the driver is at fault, the insurer is not liable for costs of repair but will have to pay the claims from the other motorist.

Mr Joey Lim, 45, owner of workshop Harmony Motors, said repair bills of supercars can escalate if certain components or spare parts have to be flown in.

Should the car be considered a total loss - meaning it is beyond repair or if the cost of doing so exceeds the current market value of the vehicle - it will often be replaced.

This may not be easy though for rare models like the one involved in the accident last Saturday that claimed three lives, including Chinese national Ma Chi, 31, who was behind the wheel of the rare Ferrari 599 GTO.

The high-end supercar that hit a ComfortDelGro taxi cost about $1.4 million. The Ferrari was sold only to a select few here as it had a limited production run. The Straits Times understands it was insured by AXA.

'It's impossible to find parts for a GTO in Singapore,' said vehicle sales executive Desmond Lim who works at parallel importer Executive Automobile, which sells around 10 Ferraris a year.

If a replacement car cannot be found, the insurer may opt to pay what it is worth in cash to the owner or, in the event that he is no longer alive, to his estate.

The Land Transport Authority said 17 new Ferraris were registered here as of March this year. In all, there were 4,149 Porsches, Maseratis, Ferraris, Lamborghinis and Aston Martins registered here last year, up from 3,376 the year before.

Wednesday, April 4, 2012

MAS Introduces Panel for the Financial Advisory Industry Review (FAIR)

Singapore, 2 April 2012...  The Monetary Authority of Singapore (MAS) has announced the composition of the Review Panel for the Financial Advisory Industry Review (FAIR).
2   The Review Panel will be chaired by MAS’ Assistant Managing Director for Capital Markets, Mr Lee Chuan Teck, and comprise representatives from industry associations, consumer bodies, the investment community, academia, media, and other stakeholders.  The panel composition is in Annex A. 
3   The Review Panel will review and propose recommendations on the five key thrusts of FAIR, as outlined by MAS Managing Director, Mr Ravi Menon on 26 March 2012:
(i) raise the competence of financial advisory (FA) representatives;
(ii) raise the quality of FA firms;
(iii) make FA a dedicated service;
(iv) lower distribution costs; and
(v) promote a culture of fair dealing.
4   FAIR will build on the foundations laid by the industry-led Committee on Efficient Distribution of Life Insurance (CEDLI) which, in 2000, made far-reaching recommendations for the insurance industry on areas such as needs-based advisory process, disclosure practices, and training and competency requirements.  FAIR will cover all firms engaged in the financial advisory business – including banks, insurers, stockbrokers, financial advisory firms – and their representatives, and all investment products regulated by MAS under the Financial Advisers Act (CAP. 110).
5   Said Mr Lee Chuan Teck, Assistant Managing Director for Capital Markets, MAS “Our vision is for financial institutions to put customers first, and for customers to have access to affordable life insurance and investments to meet their financial planning and retirement needs.  We are not there yet.  Preliminary findings in a recent Mystery Shopping exercise that we commissioned show that up to one-third of recommendations by FA representatives were “clearly unsuitable” and representatives were not upfront in disclosing fees and charges.  FAIR is an opportunity for financial institutions and consumers to build mutual trust, towards sustainable growth in the FA industry, and a more secure financial future for Singaporeans.”
6   MAS invites consumers and industry practitioners to work with us to achieve our objectives of financial institutions that consistently deliver fair dealing outcomes and competent representatives who provide quality advice. Please refer to Annex B for the questionnaire and feedback channels. The completed questionnaire should reach MAS by 1 May 2012.

Feedback should be provided to MAS through:
(i) Emailing your general comments to us at;
(ii) Filling in the FAIR Questionnaire (1 May 2012) on our MAS website at the following link; or
(iii) Mailing a hardcopy response to 10 Shenton Way, MAS Building, Singapore 079117, marked for the attention of “Capital Markets Intermediaries Department – FAIR”.
Please provide us with the following when submitting your feedback:
(i) your name;
(ii) your email address;
(iii) your contact number; and
(iv) an indication of whether you are currently working in the financial advisory industry.
Please note that any submission received may be made public unless confidentiality is specifically requested for the whole or part of the submission.

Wednesday, March 28, 2012

Customers come first in Financial Advisory Industry Reviewfi

To protect and benefit customers of life insurance and financial advisory services, the Monetary Authority of Singapore (MAS) will be launching the Financial Advisory Industry Review, or FAIR. This was announced by MAS Managing Director Mr Ravi Menon at the Life Insurance Association’s 50th Anniversary dinner.

The five key thrusts of the review include:
  1. Raising the Competence of Financial Advisory Representatives
    The current minimum entry requirement of four GCE “O” level passes for Financial Advisers (FAs) will be reviewed to  keep pace with Singapore’s rising educational levels,  the increasing complexity of products and higher public expectations.
  2. Raising the Quality of Financial Advisory Firms
    MAS will review the management expertise and financial resources of financial advisory firms to ensure that they are well managed and financially sound.  The review will also be taken into consideration when admitting new firms.
  3. Making Financial Advice a Dedicated Service
    Noticing a worrying trend of FA representatives branching out to conduct other activities, some of which are in conflict with their advisory role, FAIR will  review the activities that FA representatives can conduct outside their advisory role to ensure that representatives continue to put their customers first and will not be distracted from their professional focus.

    It will also review the practice by FA firms and representatives who tap on “introducers” to reach out to customers, as well as the scope of financial advisory activities conducted by insurance brokers.
  4. Lowering Distribution Costs of Insurance Products
    To make insurance more affordable for consumers, MAS will also review the commission-based, multi-tier distribution structure, where representatives in upper tiers have a share of commissions earned by lower-tier representatives.   The review will examine if such a structure aligns the interest of representatives with customers’ long-term interests, or adversely incentivises representatives to sell products that pay them higher commissions.
  5. Promoting a Culture of Fair Dealing
    FAIR will also promote a culture of fair dealing by financial institutions, to instil customer trust in life insurance and financial advisory services.  
Read Mr Ravi Menon’s full speech “Financial Advisory Services: Putting the Customer First”.

Financial advisory sector here faces shake-up

Financial advisory sector here faces shake-up

by REACHSingapore on Tuesday, March 27, 2012 at 3:13pm ·
MAS to review industry in move to lower costs, raise professionalism
 By Robin Chan

The financial industry is in for another dramatic shake-up, this time involving tens of thousands of insurance agents and financial advisers that make their living through commissions.

The Monetary Authority of Singapore (MAS) said on Monday that it will launch a Financial Advisory Industry Review (Fair) aimed at lowering the costs of these products and raising the quality of advice given by those who sell them.

Chief among the sweeping proposals is a move to relook the cost of buying life insurance policies. This is currently a tiered structure which sees the customer paying commissions not only to his agent, but also his supervisors.

Financial advisers, who can sell a variety of investments, will have to be better-educated to serve a more literate and sophisticated public, as well as keep up with more complex products on the market.

'The overriding aim of Fair is to protect and benefit the consumer. Putting the customer first - that must be at the heart of all our efforts,' Mr Ravi Menon, managing director of MAS, said on Monday.

He announced the launch of the review at the 50th anniversary dinner of the Life Insurance Association on Monday, taking many in the room by surprise.

Among those left most worried by the impending changes are senior agents and managers who have benefited for decades by what Mr Menon described as a 'commission-based, multi-tier distribution structure'.
'Take for example a whole life insurance policy,' he said.

'Together, the total commissions and overrides earned by the representative and his supervisors would be equivalent to about 160 per cent of the insurance policy's annual premium.'

He added that these commissions, together with other costs, can account for as much as 8 per cent of the total premiums paid by a customer.

The panel will examine whether this commission structure aligns the interest of representatives with the long-term interest of consumers or adversely induces representatives to sell products that pay them higher commissions.
Mr Menon noted that Britain and Australia have already banned commission payments and are moving to a fee-based model.

Another key aim of the review is to increase the current entry requirement of four GCE O-level passes for financial advisers. This is too low and does not reflect Singapore's rising education levels or the increasing complexity of products, said Mr Menon.

In this area, Singapore is again behind Britain and Australia. Australia's current requirement is a diploma, and Britain will match that by the end of this year.

'I am heartened to note that some insurers are already consciously recruiting better qualified individuals... but we must level the playing field and make this the industry norm,' Mr Menon said.

MAS has noticed a worrying trend of representatives going into other activities, including moneylending and selling real estate.

It will look at banning them from these other activities deemed 'in clear conflict' with financial advisory activities.
'Some financial advisory representatives have even applied to the Casino Regulatory Authority for a junket promoter licence,' said Mr Menon.

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, said the changes were long overdue for an industry that needs 'a dose of enhanced professionalism'.

'Consumers can look forward to having advisers who are better qualified, and to a higher degree of professionalism in the industry.'

Mr Tan Kin Lian, former chief executive of NTUC Income and a long-time proponent of lower costs for financial products, also cheered the changes.

'MAS has re-affirmed quite strongly that the interests of the consumer is very important. Commissions should be capped, or even removed entirely, as consumers are paying far too much and are not aware of this,' he said.
Major industry players seemed to take the news in stride.

But Mr Tan Hak Leh, president of the Life Insurance Association, cautioned that there must be in-depth consultation with practitioners and sufficient time to 'assess the effectiveness and viability of the recommendations made'.
Source: The Straits Times © Singapore Press Holdings Limited. Reprinted with permission

Tuesday, February 14, 2012

Happy Valentine Day!

Happy Valentine Day to all the my friends, clients, subscribers and those of you reading this website!

History of Valentine day.