Thursday, 12 April 2012

E-Security, FAIR Shake Up & Penny Wise Pound Foolish

5 more securities trading firms offer enhanced e-security

Five more securities trading firms have adopted the national two-factor authentication (2FA) system.

AmFraser, CIMB Securities, DMG Securities, Lim & Tan Securities and UOB Kay Hian have joined Maybank Kim Eng Securities and Phillip Securities in offering enhanced e-security transactions for investors.

The five companies will activate the OneKey 2FA device for online services according to their own schedules.

The 2FA system requires a user who is accessing his account or initiating a transaction to provide an additional one-time password received via a token or a mobile phone in order to complete the transaction.

Assurity Trusted Solutions, the operator of the system, said that a few hundred thousand more users will be able to enjoy the enhanced security and convenience of OneKey.

Ms Melinda Sam, chief executive officer of the Security Association (Singapore), said: "Online securities trading is becoming more common ... However, with convenience comes risk and OneKey helps to mitigate such risks." Channel NewsAsia

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Financial Advisory Industry Shake Up

It seems that the recent speech by the Managing Director of MAS has triggered a strong response from the industry. I guess it is because he mentioned points that will have a significant impact to the industry like raising the entry criteria from the current 4 'O' levels to keep up with current education trends and removing commission based sales to fee based structure.

Some opinions I heard include:
- "Oh no, it is going to mean more exams and paperwork."
- "It simply will not work! Customers will not pay a fee. They have been so used to receiving free advice."

In my opinion, raising the entry criteria is only keeping up with the current education standards. Most of the population is at least a diploma holder. At least, it will make the industry seem a little more professional as this point is often poked fun at with comments like "If you only have 4 O levels and cannot find a job, just go and be an insurance or property agent.". That speaks volumes of the image of this profession.

As for the second point about the reduction of cost, the suggested approach of removing commission based sales will be a real interesting to see how it will be played out:

- What will happen to existing managers enjoying all the overriding
- How will the fee be determined
- If online avenue is available, what is going to stop people from getting "free" advice from commission based agents and going online to purchase themselves
- The insurers themselves need to buy in to this structure and at the same time, not anger their source of income - their self employed business agencies
- There is currently, no proper education system or qualification on knowledge in areas like trust, CPF, mortgage loans, government grants and schemes

Well, I do feel what is shared is a step in the right direction. However, my fear is that it becomes "no action talk only". In addition, the hurdles faced by Financial Advisory Industry Review (FAIR) are going to be very challenging so even if it is going to happen, it may take a really long time. So in the near future, everyone can still rest easy and focus on Business As Usual.

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Are You Being Penny Wise, Pound Foolish?

Are You Being Penny Wise, Pound Foolish?

(Or in Singapore terms, Cents Wise Dollar Foolish)

Recently I had sent a friend home and went up to his apartment for a short 20 minute drink. As Murphy would have told me, anything that can go wrong, will go wrong: Saving the trouble of tearing a 50 cent coupon cost me a $30 parking fine (Gentle reminder: these highly trained ninjas catch you when you least expect it).

Well, enough of my sad story, this experience led me to think about two couples in their late 50s I recently met.

Couple A were typical hard core savers. They worked hard their whole lives, paid off their HDB mortgage (which wasn’t very much since they bought their flat 20 years ago) and received a fair amount of CPF at age 55. They do have some cash savings since they have set aside their income consistently, and put it in fixed deposits as they do not wish to take any risk at all. However, they are afraid that the amount saved right now might not be enough to last as their children need their help for a head start in their tertiary education, wedding and housing. Hence, even though they are retired, they are still worried as interest rates are so low. So they are still working odd jobs just in case.

Couple B, have children too and are not “earning” as much. They too worked their whole lives and fully paid up their 20 year ago purchased HDB flat. For CPF, when the government announced many years ago that it could be used to purchase property, they jumped on the bandwagon and emptied their CPF into two private properties. At age 55, though they will not have much CPF to withdraw, they have two fully paid assets that have more than doubled in value. In addition, they do not have any worry about income as they have been receiving a steady stream of rental from the two properties.

“Earnings” is in terms of salary paid as an employee. However, inclusive of rental income, they will have more income overall than couple A.

Surprisingly, couple A is much more educated and earn a salary twice that of couple B. No doubt investing does carry risk, however, it is important to see the big picture. Scrimping and saving on day to day expenses but neglecting to properly manage your overall savings will cost you dearly in the future. What couple B did was risk and unsophisticated but it allowed them to be financially free.

Disclaimer, I am not saying that property is the best investment and is the only way to financial freedom. In fact, this may not prove feasible today with the high property prices, high COV vis-a-vis affordability. Just felt like sharing their stories and let everyone know that instead of being constantly tied down with everyday decisions on small expenses, some serious thought must be put into seeking a suitable path to financial freedom in the long run.

Courtesy of Mr Lau of Living Healthy, Staying Wealthy, a blog that promotes the need to have a healthy lifestyle and wealth management through proper financial planning.

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