My Backside Itchy

I dare say I am a relatively adventurous and spontaneous person. I and a friend have planned a trip to Malaysia one Chinese New Year over a coffee on CNY eve. He was lamenting how CNY is always so boring as he does not go visit his relatives. I told him I will be free after visiting relatives in the morning. We arranged very tentatively that we will go to KL the next day after visiting.

Chinese New Year came and after the usual 'Gong Xi Fa Cai' and collection of ang pow. I waited at home for this friend to call to leave for KL. 3pm, no call. 5pm, no call. 7pm, no call. Finally at 11pm, I called him. 'Eh! Thought we going KL?!'. He said 'Gia la!' (Let's go in hokkien). Hopped into my car, went and picked him up and realized in between us we had less than RM$10. We couldn't go to KL, at least not on the north south highway. We did not have enough to pay for toll. We changed plans and decided to go to Kuantan using route 3, so the only toll we have to pay is the one at Woodlands.

Off we went entering Malaysia just past midnight. We figured we can just try and find a resort in Kuantan and since it's CNY there should be rooms. As we got onto route 3, me being relatively familiar with the roads because of my frequent dive trips to Tioman, I told my friend that he has got a very important job: look out for cows. Those were the days when cows still roamed freely along route 3, they have since installed electric fence along the route to prevent stray cows getting onto the highway. I knew it is going to be at least 5 hours to get to Kuantan. 

About 2 hours into the drive, we were chatting when over the hill coming from the opposite direction another vehicle with its full high beam on, we were blinded. 'This fella so inconsiderate' (language used was far more colourful, adjusted for the purpose of this blog post) 'never mind, we high beam him back!'. Just as I flicked my high beam on, my lights caught the silhouette of a cow, it's ass taking up half the lane I am on. Instinctively, I swerved into the path of the oncoming vehicle and swerved back into my lane to avoid a head on collision with the vehicle and successfully avoiding the cow. 

We were silent for awhile, knowing that we were so close to getting into an accident either with the car or cow. Both would not have ended nicely. But as the initial shock faded we joked about it nervously and carried on our way, but at a relatively slower speed. 

We got to Kuantan at 5am plus, went into some more decent looking resort just to find out they are mostly full too! We forgot that it's Chinese New Year, the other non Chinese holiday too! Oh no! We are in Kuantan at 5 plus in the morning and no resort! My friend said :' bro, I've got friends in KL at the moment, we can bunk in the hotel room till we get a room tomorrow.' Ok, I said. KL then. I know that from Kuantan to KL we have no need to pay toll and therefore the lack of Ringgit will not cause any problem. But little did I know I will get a shock when I reach the highway.

I kept thinking that Kuantan and KL is on the same plane on the map. It should be a short drive from the east side to central Malaysia, when I got to the highway the road sign read: Kuala Lumpur, 270km. OMG! It's another 3 hours of driving! We have not slept at all and I know I am feeling sleepy. I looked at my friend and he was nodding off to sleep. I told him to sleep first, I will rest when I cannot take it. I drove for another one and a half hour and saw a petrol station along the highway and told myself that I better not push it, rest so that we can go further. So at 7.30am I parked the car in the petrol station and slept. 

Woke up at about 9am and continued our journey. We arrived safely in KL.

I took up diving in 1994 and have not looked back since. Diving is a great sport accept that it is still dangerous if not practiced properly. You may get decompression sickness, you may get lost at sea, you may be compromised if the boat you are on sinks. But if done properly all is good.

Got my driving license in 1994 and got my motorbike license in 1996. Upgraded to class 2 in 2002. Bought my BMW and eventually my Harley Davidson 5 years ago. Met my wife in 2004 and made frequent trips back to her hometown in Malaysia. Took my bike up to Melaka, KL, Cameron Highlands numerous times. Flew to Vietnam twice to rent Motorbikes to go up their mountains. 

Visited the Demilitarized Zone in South Korea on the day North Korea said they had missiles that can hit US. 

There are so many things that I have done and still doing that increases the chance of a hospitalisation. But never was I hospitalized for 38 years of my life till 24th July 2014. And the reason I was hospitalized: an infection on my left butt cheek......

In the course of my career as a financial planner, I have seen and heard many that have told me that it is not going to happen to them. I admit that I am guilty of that thought too. I never thought I will ever be hospitalized for an infection on my left butt cheek. I should be hospitalized for a collision with a cow on north south highway or falling asleep over the wheel. Maybe a diving encounter with a shark or poisonous creature. Or maybe an over ambitious attempt at a corner on my bike. Or maybe a food poisoning from an over adventurous try out at some Bangkok food street stall. But no... An infection on my left butt cheek.

And I will tell you my left butt cheek now cost $8,000 after a 2 night stay. Almost $1,000 from daily dressing change. And all I can say: thank God for insurance!

So I urge you that if you have not re-looked your financial portfolio recently especially your insurance, please email me tngjinyau@gmail.com. Even if it's just to ask me out for coffee to find out more.

What you don't want to know, but need to know..

Well I realised I have been posting alot about investments and as a financial adviser I should be well rounded and post other financial portfolios too. This post I devote to insurance.

Now I grew up never being a believer of insurance because, my father told me they cheat people's money. My friends told me insurance agent very pushy. Other people tell me insurance don't pay till you are dead.

Well in some ways those saying ain't wrong. The truth is there is nothing wrong with the product but something wrong with the salespeople. After being in the industry for 13 years, I know exactly what some salespeople will do to make the sale. I know in times of desperation people can do stupid things.

I have met many clients who have told me their regular premium investment linked policies don't make money.... sigh.. its not suppose to. The mortality charges paying for your death and disability coverage is being drawn from your units, so as you grow older more is drawn to cover those charges.

Many a times the failure is not in the product but the failure to manage expectations. Just like what makes a good horror movie. Well my expectations of a good horror movie is one that leaves you thinking about it after the show ends. One without a soppy happy ending. Just think about horror classics, they never ended resolving the issue.. closing scene is still flickering lights and evil laughter. But nowadays horror movies has happy endings with issues resolved and they live happily ever after... yawn.

Ok ok that may not be the best analogy of managing expectations.. so lets look at some other expectations. Now imagine this scenarios:

1.  You are in a plane, the pilot comes over the radio telling all passengers to put on your life jacket and prepare for crash landing

2.  You bought a new car but damn suay, on the way home you got tire puncture

3.  It started to rain, you go into the shop to buy an umbrella. You walked out of the shop, opened the umbrella, its full of holes

What is the expectations for each scenario?

1.  Life jacket is under the seat

2.  Spare tire is in the trunk

3.  Go back to the shop ask for refund

But what if there was no life jacket under the seat, no spare tire in the trunk and no refund at the shop. You will feel cheated! Because its expected. But if you took the flight and the airline company have told you before you bought the ticket that their policy was that passengers have to pay if they wanted the life jacket. You have the choice to take the flight without the life jacket, take the flight with life jacket but top up some money or not take the flight even though it could be the cheapest.

Lets say you took the flight cheap without the life jacket and if scenario 1 happened, your expectations have been managed. You will not be upset (probably upset for not paying more for a jacket) because you chose. The airline company disclosed and you fully understood the risk. They probably made you signed some indemnity to indemnify them from the risk of you not wanting the life jacket.

That will be too much risk and paper work for them... but if only the financial industry have something like this. Imagine I go speak to a family man, I know his family. I try to talk to him about coverage but he tells me: insurance bluff people, cheat money, I cannot see until I die. Then I whip out an indemnity form ask him sign. The form will state the exact time, place, setting and whatever the guy said on it. He will sign on it. If something untoward happens and people start coming to ask why no insurance, why Tang you never ask him get himself covered since he got family, I can whip out this indemnity form and say I did, but he want to invest property, buy car, entertain frequently, invest stock market, find business opportunity, go shopping, everything else but buy insurance......

Everyday I live in fear of knowing that life is unpredictable. Not fear for myself but the fear of the people around me who some chooses to just ignore the need for financial planning. The fear that I may not have the opportunity to speak to the closest people before something happens. Then again, I ain't Snata Clause. I do not have a sleigh pulled by Rudolph and friends that can traverse the whole world on the 24th of December. 

Some clients I have spoken too very quickly will tell me, Tang I have insurance already. Ok.. but when it starts raining, umbrella has holes. You cannot believe that there are individuals with $10,000 coverage: I have already...

Ever considered liabilities and who is going to pay for them if something happens? Some people's credit card debts already more than $10,000. Well that is why sometimes families have to lose their dignity to ask for money from relatives, friends and even social support just to get through life after something bad happens to a key family member...

I have this very funny client when I showed him a term plan he commented: Wa this one like 4D. Term plans are plan that has very high coverage no cash value, just like car insurance. But if objective of client is coverage for death then I will recommend term. To put into perspective, it can be like $200 per month for coverage of a $1,000,000.

Told my client yes its like 4D except that for 4D you hope you tio, then get pay out, if not tio jia (get eaten). But for term plan, don't tio good thing, but if you tio got pay out. Win win situation,4D win lose situation.

For investment savvy clients, I will ask them if they know what an option is? Options are investments, you buy for a strike price and pay a minimum option fee for it. At the strike price you have the option to exercise it. Just like insurance, you pay option fee (premiums) for a future promise of exercising it at certain events.

Insurance are like options. Its a small fee for a big payout later. If you took the above example of a term plan paying $200 per month for $1,000,000 you need to pay 400 years of premiums before you cover that amount.

So if you now think you actually have an umbrella(insurance) already. When was the last time you opened it to check for holes? You don't want to check it for holes when it is raining. Do it now while its sunny. They say make hay while the sun shines. Think about it.

Coming Back To Reality

I have just came back from Bali and reality is setting back in. Its back to work and its not any better even though I may have my own time. Its still work and fortunately I enjoy my job. Confucius said “Choose a job you love, and you will never have to work a day in your life.”

I started my career in the financial industry since the year 2000. It was one of those friends that asked me to join them in an insurance company. But I don't believe in insurance was my reply. She was persistent and asked me to just go and be open about it. Since I was not really happy where I was and she was a friend, I said ok.

I was then in the office automation industry selling Multifunctional Products. The thing you call copiers in the office. They now scan, fax, print and copy, therefore multi functional. Anyway then it was new technology. Do you remember the time the scanners in your copiers actually move to copy documents? So if you have one document to copy 100 copies, the scanner in your copier has to scan your documents a hundred times. You cannot remove your documents until all is done.

So there I was after ORD from the Police Force National Service, being a photocopier sales person. I was schooled in Architectural Technology in the Polytechnic and knew that there was a big market for copiers in the architectural firms. Managed to get a listing of architectural firms and called them one by one. In the mean time, my boss also told me my territory was in Tuas! Tuas! Sigh... Tuas was then filled with many new companies and factories starting shop here.

The first few days, my boss drove me around to show me the ropes. It was still heaven because I was doing a part time degree and had night classes. I could still go to class at night relatively fresh! But after the honeymoon period, when I had to drive myself to Tuas it all changed. Driving is tiring and the journey up and down from Tuas drained me when I go to class at night. I cannot stay awake!

I managed to convince some companies to take up my copiers, that was when the job started feeling like work! I delivered 4 machines to 4 different companies to get 3 of them calling me back telling me there was a problem with the machine. I remembered a customer in Tuas, send her the machine in the morning. Everything went smoothly during the demo. Went back to the office feeling good about it.

Lunch time, phone rang. Tang, machine says paper jam my customer said. I check already but got no paper jam. Ok ok stay calm try and remember all the things to do trouble shooting. Mam the LCD screen will tell you where the jam is. Check already don't have. Ok next step. Turn your machine off and on? Done already. Eerr... Switch off the mains wait 5 secs. Also do already. Alamak! How? Ok ok mam tell you what I come right now. The time 5 pm, suppose to knock off soon. Ran down to my car and started my lonely drive to Tuas.

Went through the door to my customers office went straight to the machine. Looked at the LCD display. True enough paper jam. Did whatever the LCD display asked me to do. Still paper jam! Went down on my knees peered up through the paper trays just to ensure the paper is not there (I was in my shirt, pants and tie). Don't have!

Stood up, looked at my customer meekly and said mam don't worry my service guy will come first thing in the morning. She said ok. As i walked out the office, picked up my phone and started dialing for my service manager. Can you send one technician down to my customer tomorrow first thing in the morning. Sure, my service manager said.

What a day, well at least its settled (so i thought) and drove home.

Family Impact Analysis

Let us look at our family, do we run our family like a business? Let us look at how similar a family is compared to a business. Businesses is about profit and loss. Its about bottom line. Its about being responsible to their shareholders. 

So who are the shareholders of your family and are you being responsible for them? Parents, kids, spouse and anybody who may have a vested interest. The profit or loss in your home will be taking your combined household income minus all expenses. 

Businesses have balance sheets every month to ensure they are still running on profit. If they know they are running close to a loss, they have measures and strategies to cut cost and bring the business back into the black. They know their fixed expenses and cash flow needed every month. They project how much expenses may be needed in future to sustain the business. They have risk management strategies to ensure that profitability and net worth of business is not compromised.

Do you know if your family is running on a profit or loss? Do you have a strategy if your family is running on a loss? Do you have projections for the future so that you know the family is sustained? Do you have risk management strategies to ensure profits and net worth are not compromised in your family?

Businesses also understand that they have to invest their liquid assets to allow their money to work harder for them. They may think of doing other businesses to diversify their exposure in their core markets. They may also employ asset management companies to invest their monies. They leverage on these companies' expertise in markets and sectors they may not be familiar with.

Are you letting your monies sit in liquid assets? Is your family's assets being invested to allow it to work harder for you? Is your assets diversified to reduce your exposure in one market?

If you have not thought about the above you may like to consider doing a Family Impact Analysis. Think about all the possible risk that may affect your family. Think about the probability of the risk happening. Think about the impact on the family. Then if you want a better understanding, complete the below questionnaire with your name, email and phone number

Lessons From Businesses You Can Port Into Your Home

I will like to thank Mr Steven Ng Liang Hwi who has gave me much inspiration for this post. Your input as a risk manager in your company is a great learning lesson for me too.

Have you ever wondered what the risk management department in your company does? They seem to disapprove many of your initiatives or create many unnecessary red tapes before you can push your idea through. Why are they being so narcissistic about new ideas and initiative? Don't they realise the amount of productivity/ sales/ bottom line that will be increased if this initiative is passed through?

Well that is the job they do. They have a system called a Business Impact Analysis, they look at the company as a whole, find out all possible risk that may affect the company. Put a figure to the possibility of the risk happening. Put another figure to the impact of the risk if it happens. Put these figures into a software which will calculate whether the risk is big enough to mitigate it.

For example, if the risk is not probable and will not impact the company they may choose to neglect the risk as the impact to the company is negligible. But if the probability of the risk is high and the impact to the company is high then they will have to adopt one of 4 strategies to mitigate this risk.

Therefore when you decide that you have a great idea and initiative that will greatly benefit the company, you have just created another risk for the risk department. They will have to go through the whole process of finding out all the risk that is associated with your idea; Put the figures in to the software for the probability of the risk happening. Calculate the financial impact of the risk happening. Then decide which risk they want to take and which they do not and on and on and on. By the time they say ok, the fire in your belly for the idea has extinguish.

The Strategies to Mitigate Risk

So now lets say your idea is fantastic and risk department has identified the risk and wants to mitigate it. There are 4 strategies and these are to:

1) Accept the risk,

2) Avoid the risk, 

3) Reduce the risk, or

4) Transfer the risk

Lets look at each strategies individually. Lets assume that one of the risk for a company is working at height. If a company Accepts this risk, they will just get workers to work from height without safety gear and accept the fact that if a worker fall they will cover the bills and liabilities that come with it. 

If they assume a Avoid risk strategy, they will not take jobs that is too high. They will only jobs that have no heights thus limiting the jobs they take and limiting their income.

The above 2 strategies are totally impractical as accepting the risk creates too significant an impact to a company happens if something happens.

Therefore, the 2 practical approach will be Reduce and Transfer. Risk reduction for the above example will be for company to ensure safety gears are used. Safe standard operating procedure are in place. Penalty in place for flouting of safety guidelines. These will help the company reduce the risk while working from heights.

But reducing risk is only one strategy and does not ensure that accidents don't happen and most companies will adopt a risk transfer strategy as well. They buy insurance that will transfer the financial risk to insurance companies thus ensuring that liabilities resulting from an accident does not affect their profits or savings. They transfer this risk by paying a small portion of their total liabilities in premiums for a substantially bigger payout when an accidents happens.

So what lessons can be learnt from a business? Are we running our family like a business? Are we exposing our families to unnecessary risk without mitigating them? How can we do a Family Impact Analysis? 

Stay tune for the next post!

Lessons From A Taxi Driver

23/10/2012 Tuesday

Dropped my bike off at AMK industrial park 2 for some oil leaking from my engine and decided to grab a cab home. As I was walking towards the junction, a cab pulled up going to make a left turn. Flagged it. Uncle wound down his window,

'Where you going?' He asked. 'Uncle, Simei.'. He hesitated , took a second glance at his clock and waved me on board. 'How you want to go? CTE then PIE then exit Simei?' he asked.

'Uncle, TPE also can' I said.

'CTE then PIE then exit Simei? Ok ah?' he asked again. Figured he was hard of hearing already, I said: 'Ok, ok, can can.'

As I was sitting in the back of the taxi, I remembered attending one of Dr Andrew Goh's training titled: Think Like A Taxi Driver and decided to engage with uncle. 'Uncle, you had lunch already?' I asked.

'After I drop you off I am going to return taxi at Sengkang.' he said.

Eeeerrrrr... ok ok uncle hard of hearing. Ask again: 'Uncle, you had lunch already?' 

'Eat liao. But nowadays don't eat rice, just eat porridge. Drive taxi no time eat.'

'So uncle, how long have you been driving taxi already?' Uncle ask me guess. '10 years?' I answered.

'34 years already. This year I 67. (At that moment I felt at peace knowing I had at least a million dollars worth of insurance coverage) 3 years time, I going to retire'

'Wa uncle so long ah? You got kids or not?' Uncle said got kids, 1 boy, 1 girl. 'Then uncle relax liao la, no need work so hard.' I said.

Uncle went on to tell me his wisdom; he said he used to drive taxi for 12-14 hours when younger now drive for 6 hours, enough to cover his basic needs. He told me not to expect from my kids. If they make it big in life they can give you more ok. If cannot then have to continue working to sustain. He gets $300 from CPF and he has some savings. He said he co-owned his taxi for 20 years. If you don't co-own, you pay $60 rental for taxi in 1980s. If co-own you pay $60 for 4 years and $30 after that. He said he saved the $30 per day and now has savings to pay off some stuff every month. In essence, he told me he cannot stop driving his taxi.

Then he told me: Young man, now that you are still young, better save for your retirement. Don't anyhow spend your money. When young earn more, but also save more.

Sigh! As a financial planner we advocate that to people on a daily basis. We have plans and solutions for many of these financial objectives including retirement. But half of the replies you get when you want to meet up with people: I got already. You people earn so much. Bluff people one. Think about it. No need. And finally the best: NOT INTERESTED. 

And guess when will people be interested to do something about their retirement?

During retirement.  

Well guess life's like that. The quote from Gladiator sums it up: What You Do In Life Echoes in Eternity. So whether your retirement allows you a choice to work or not depends on what you do today.