Putting a side the arguement of whether we have a government of integrity or not, let’s look at the matter constructively. In my opinion, Malaysia should have reduced the subsidy a long time ago, because the high fuel cost will enable many important factors to happen, such as:

1) cost of goods sold will reflect the actual cost, not at subsidised cost, this will spurr producers to be more efficient in the usage of fuel and transportation,

2) housing and commercial buildings development, town planning will seriously take into account the transportation and energy cost factor.

3) indivuduals will be more concious of fuel price and will choose more economical cars, or ways to reduce such costs.

4) more local companies will produce energy efficient goods, logistics and distribution will be improved

The list can go on, and this will help Malaysians to get ‘real’. The cost of fuel is so high out there and yet other countries can still be competitive, Malaysian companies will have to face the challenge without the fuel subsidy. We can’t have an economy that is on painkiller for too long can we? Suggestions for the people and the government ? Well I have a few..

1) zero import duties on any vehicles that does not require fossil fuel and nominal tax on hybrid cars for a start

2) tax holidays and interest free loan to companies investing in the production of green renewable energy, such as solar, wind, tidal, even fusion energy.

3) encourage intelligent townships without cars; one idea is to provide public transport in the form of energy efficient one/two person buggies. The buggies can be powered by NGV, electric or petrol.

4) intelligent township such as mix development projects with large residential-retail-office-SOHO-recreation concept will help save a lot of moving around

4) improve broadband service to enable virtual conferencing, shopping, so that people can reduce the need to travel.

The very first step in order to start the above, is probably what we are not used to; i.e. to get real, remove the subsidy and let the market forces to guide us to a better future. And what the governement should do? My two cents worth is, stop being in the way and stop putting toll gates….. if you get what I mean…cheers!

Time and time again, people have forgotten the key to human success as a race is our very own ingenuity and will to survive. I believe if oil prices were to maintain at current level of USD140/barrel or more, the positive impact will be, alternative and greener fuel will be commercially viable much sooner. Remember Thomas Malthus, in 1796 this English bloke wrote a book talking about the world will eventually run out of land to produce food for the growing population. People need to eat and also to have sex resulting in more babies and more mouth to feed. People grow in geometric progession and food grow in arthimatical progression (remember our add-math? ). Anyway he has been proven wrong, the world population probably have grown 10 times more but the land for food cultivation has grown much lesser. It is understandable that he made such an assumption because he was born 100 years before the industrial revolution. The productivity per hectare of land has grown so much since then, with better farming equipment, irrigation, breed, pest control etc.

The high oil prices have motivated businesses and government to build and experiment on solar, wind, tidal or even fusion energy. Most of these projects requires huge investments because they are new and not in mass production yet. It is now commercially viable. Coupled with the gloabl fear started by Al Gore’s famous ‘An Inconvenient Truth’ I guess it all will come to a happy ending.

Burning fossil fuel actually has a very high cost if we were to include the price of cleaning up the environment caused by the pollution. We are just deferring such expenses to our future generation. I think it is up to us now to do something about it, and the high oil price could just be a blessing in disguise.

Its about time….

 Anyway the reason he called me was to ask me to give him an education plan. So I went to his apartment with my lap top. The moment I took out my tools of trade, he was surprise by the sight of it. He told me “I just want an education plan, and you don’t have to be so serious to bring a lap top to show me”. I said ” I am a tailor, I tailor-make financial plans and I am no hypermarket ..he….he..”

Through questioning, he found out himself that medical insurance to him is not a priority as his employer has already given a very good cover for his family. Though he sees the necessity in the future but it was not his priority at the moment. He also states that there is no point getting a death/disability insurance cover on his son and thinks it is preposterous to do so. He believes he is more important as he is the breadwinner in the family. He also thinks education premium relief of Rm3,000 is too little to excite him, as his tax bracket of about 20% and the annual RM600 discount on the RM3,000 premium is no big deal, as it is one off relief. He prefers unit trusts, especially those capital guaranteed fund, as over the 15-20 years, the funds could easily make back the one off 20%.

I asked him, since he does not think he needs most of the benefits from an education plan, why would he ask me to do an education plan to show him? He said everybody buy one for their children, so I wanted to get one also.

He told me, actually he thinks he should upgrade his own life coverage. He finally settled with a wholelife non-participating policy for himself. A wholelife non-par plan is a plan that covers up to 99 years old and it is relatively much cheaper in terms of premium as compared to a participating wholelife policy. The idea is that the policyholder believe that he has better avenue to invest the money than the insurance company. Therefore the premium saved will be invested elsewhere. Wholelife non-par has a big advantage over term policy, because term policy coverage stops at a certain age and no cash value upon expiry of the term. The answer you have for the question ” will I still need insurance coverage after age 60, will I still have the ability to pay for the premium” will determine whether wholelife par, non-par or term is more suitable.

I hope I have sent out the correct message, that is , every plan has its usefulness. It is the matching of the client’s intention, profile and circumstances that counts. A typical education plan helps to ensure an education fund is ready when the child reaches the college-entry age. There are of course certain costs associating with an education plan, they are there to ensure the benefits of covering the payor’s ability to continuously save the money, to provide a systematic and discipline way of saving money, to protect the money saved from medical emergency expenses etc. Past decades , many children have gone to college/university to realise their dreams, certainly it has proven its usefulness, time and time again.

On the last note, if you can save money, you would already have save some by now. Else, better get an education or a savings plan from an insurance company.

Is our current world economic situation similar to the ‘oil shock’ in the 70’s? I reckon the current global situation is quite different from the one that happened then. Mainly because it was then a ’shock’, a sudden increase in oil prices due to political instability that have affected the oil supply.

Currently, profits from the increase in oil revenue seems to have gone back to the world economy, look at the massive building in the U.A.E., massive investments in the US and all over the world by the oil rich nations. These countries will have to invest their money to ensure wealth will continue to grow even after their oil in the ground has been depleted. It is a matter of national security. I suppose they are very happy now that price of oil is unpresedentedly high.

Increase demand for investment instruments has helped bouyed the Exchanges around the world. High demand for gold and other world commodities as a safe investment haven plus demand due to the rising of China and India have all contributed to the positive impact the countries producing such such goods and hence the world economy.

Chinese economic conditions are somewhat like a ‘big faucet small drain hole bath tub condition’. Lots of money moving in through export revenue and relatively little goes out except for purchase of raw materials. widgets are usually not imported into China, manufacturer set up factories for local market as well as overseas market. The side effect now is, this excess liquidity sloshing around in the economy has caused high inflation, escalating properties and stock prices. In my opinion, China will have to move quickly, to spread these excess richness over to the west, creating more jobs and increase the living standards over there. This will in turn increase the economic capacity and at the same time improve social stability.  I am sure they are doing it right now.

India has so much to offer. In fact I believe India is involved in areas so much more sophisticate than China, such as software engineering, human resource outsourcing activities. To quote a good example is Google and Microsoft. Companies in the information technology business can in a short span of time, grow to a size larger than some countries endowed with natural resources, or companies with decades of good business decisions.

Imagine or rather it is already a fact, if only 10% of India and China population have risen to the rank of middle class, this will translate into more than 300million. A figure equivalent to the population of USA. See the demand ? This also means that the current rise in prices has a lot got to do with demand and not ’sudden scarcity’.

Actually I am more concern about our country. Yes our prices are rising, but is there increase in FDI especially people from oil rich country? Yes they have a lot of money and are interested to invest here; I think the problem is choices are limited and some of the policies can be quite discouraging. Our poitical climate is still a bit uncertain, too much of witch hunting now. I would term it as growing pain. A sign that our country is coming of age, in terms of political maturity. It is a necessary process. Lets hope it will be quick.

My gut feeling is, Malaysians are quite an unique lot of people. Many of us are global thinkers, highly adaptive, entreprising and multi talented. One of our competitive edge is, we come from a multi racial environment. Last week an NZ businessman told me, if you are a MLM company and looking to penetrate Asia, the first stop should be Malaysia. Malaysians are generally very entreprising, you can see them doing deals,even late at night in mamak stalls. The next thing you know, you have downlines in China, India and Indonesia …..and other English speaking countries as well.

Our country has produced so many famous gloabal citizens with standards beyond our shores such as ;

Robert Kuok, Tan Sri Syed Mokhtar Al-Bukhary (Forbes Asia top philanderer), Petronas (presence in 26 countries) AirAsia (Now all Asians can fly), Resorts World (World cruise biz), YTL, Datuk Jimmy Choo, Datuk Michele Yeoh, Fish Leong, Guang Liang, Zang Toi, Sheila Majid, Badminton champions, Karamjit Singh,Bernard Chandran, Nicole Davids, Lillian Too, Ling Tan (supermodel) …just to name a few

BNI KL08 S.N.A.P.

Based on my own experience, every circle of friends I know tend to stop at the first layer, unless they also belong to other groups of friends that I have. Insurance agents are quite good at moving on to the next level of connection through referrals.

For example, in year 2002, an old high school mate of mine got a wholelife 36 illnesses policy from me, and he introduced me to his then girlfriend (Investment-linked with medical card) and also his parents (Wholelife non-par insurance). His parents in turn introduced me to their 3 other younger children and each one of them as they graduated from university bought a policy from me (Wholelife 36 illnesses policies). The second child referred me to his bosses (Business Value Protection Plan), and colleagues (Staff loyaty program). The ex-girlfriend referred me to her sister (GreatLady Program), who in turn referred me to her sister’s boyfriend (Fire, Burglary, Product Liability,Personal Accident for his company). The boyfriend referred his parents to me, and while I was explaining the benefits of the medical policy to them, the sister was there, and this afternoon she called up to set up an appoinment with her husband to talk about child education plan…… Next week I am also seeing my old high school mate’s current girlfriend.

Isn’t life as an insurance planner interesting ?

I have across businesses such as sublime relaxation cds, renewable energy using solid waste, solar panel, health food, software house from India, event management companies, eye specialist, tour agencies, ergonomical products etc….. this is what I call education.

While I am learning what my new friends do, they are also learning what I do. Together we go back with more knowledge and the ability to look out for new opportunities for each other.

Besides promoting my business, I was also there to test out certain new businesses. I am looking at the Barter Exchange business, and surprising I got quite a good respond. I reckon the people who can comprehend how barter can help in their business share one thing in common. They have the ability to think laterally.

Now I need get back to sort all the new contacts…

Here’s some networking tips from Robert French at the opening of BNI KL08..

 I have been focusing on networking for the past 2 years and I am enjoying every bit of it. I see every new person I meet as a connection to a new universe. I suppose opportunities usually come from other persons, so the more people we know the more opportunity we will be getting.

 I met Ivan Misner the founder of BNI the man himself and took a photo and got his autograph. BNI was formed in 1985 and now it has more than 5,000 chapters around the world.

 BNI is a business organisation which helps entreprenuer to increase their sales through

a) word of mouth marketing and

b) education and training to be a better communicator of their business

I believe people who are serious about improving their business and their business skills should take a look at what BNI offers. It will help a lot by shortening the learning curve and avoid a lot of unnecessary hardship due to ignorance on how the real business world actually works.

 Today I was asked by a friend who have just finished attending the T.Harv Eker seminar. She was so motivated to start to do some form of investment or savings plan. According to her, Mr. Eker gave the idea of people should create many goal specific savings funds. Such as for buying a house, vacations, car etc. And also, they learned the idea of to pay oneself first before paying others.

 She then told me, she would want to start saving by putting RM150 per month into unit trust for her house and vacation funds. My question to her was, when would she expect to buy a nice house and a vacation. She said in 1-2 years time.

I said, after 2 years, she would probably have Rm3,600 in the fund, assuming there is no gain or loss in the investment. Will that be suffiecient for a downpayment for the house ? She said no.

 To make the long story short, I wish to add a caveat on the idea of setting up a fund for every purpose. I think for most people it is not practical. Simply because most of the things they wish for are beyond their means in the near term. Unless, the funds were set up for self motivation purposes.

One practical suggestion is, we need to find out how much money is needed and when it is needed. Take for example, if I want to make a trip to Japan in 3 years time. The costs of the trip is estimated to be Rm7,200. This means that I will need to save Rm200 per month for the next 3 years. And come next year, while I am still saving the Rm200 per month for the vacation, I can start another fund to save for a car if I have additional disposable income…  and so on.

The idea of saving 10% of our income according to the book “The Richest Man in Babylon”, is to inculcate the habit of saving money. To pay oneself before paying others. 10% of income may not be a lot but it does call for a lot of discipline to do so. It builts character, to a certain extend.

Education is the greatest form of leverage. Therefore after paying oneself, the next priority is to invest in education for the purpose of increasing income. What is the difference between a person who earns Rm3,000 a month and a person who earns RM30,000 a month? 

A lot of us might say it is RM27,000 per month. It is actually time. In one year, the 30k person earns the 3k person’s 10 years’ income. In 3 years time, the 30k person earns the 3k person’s 30 years income (his lifetime income).

The second difference is, the Rm3k person probably can only squeeze out RM300 max to save; whereas the Rm30k person can most likely set aside Rm3k (or even more) without much issue. That is 10 times more!

Coming back to my friend, eventually she decided to save the money in a savings account through monthly deduction from her usual current account. She will now focus on learning and making efforts on improving her business in order to improve her income.

See! Ultimately it is still about making more money. No money, a lot of things cannot be done. Only the right type of education will lead us to the answer to the question ‘What are the differences between the person who earns Rm3k a month and a person who earns RM30k a month? In terms of the way they add value, the attitude towards work and life etc …

I noticed that one of the common attribute of a successful business person is, they are nearly always passionate and excited about their businesses, their life and even hobbies….

If the premium is allowed as an expense, then when there is a claim, the sum assured paid (or surrender/maturity value) will be taxed, so we will need to get a higher cover to take into account of the tax impact on the proceeds. If the premium is added back as non-allowable expense, then logically the sum assured paid out (or surrender/maturity value) will not be taxed.   As far as tax is concern, it is no longer important whether the insurance plan chosen is a wholelife or a term, because the premium will be paid by the individual shareholders. Usually the company will effectively increase the Salary/directors’ fee/ Benefit-in-kinds/Dividend of the individual shareholders(directors) for the amount of premium paid for the insurance policies in relation to the BVP. In other words, the premium amount will be included in the EA forms of the directors (cum shareholders). If the shareholders’ tax bracket is already 28%, then tax will have to be paid accordingly. Instead of going through the EA form, the company can also declared dividend for the amount equivalent to the insurance premium. This will effectively reduce the tax rate to the current corporate tax rate of 26% (or less) 

The common suggestion is to let the company pay for the insurance premium and let the premium be a wholly deductible expense. This will raise 3 issues;

1) service tax of 5% will be levied on the premium paid,

2) term policy will have to be used, and

3) the proceeds will be paid to the company instead of the shareholders.  

Most people have no trouble with 1) and 2), but for 3), if the proceeds is meant for the family of the deceased shareholder, it is quite cumbersome to take it out of the company and to pay to the beneficiaries. The following are some of the suggestions that we find challenging to execute : 

1) Company pay the beneficiaries with the insurance proceeds and the remaining shareholders get the shares.  - The challenges will be Section 67, company’s act 1965, where companies are not allowed to extend funds to shareholders to buy its own shares. Taking the insurance proceeds and pay to the beneficiaries, in exchange for the shares of the deceased shareholders, is effectively using company fund to buy shares. 

2) Company buy the shares from the beneficiaries and cancel the shares. - The challenge will be the restriction on capital reduction/ shares buy-back. Private limited companies are usually not allowed to buy-back their own shares. So if the company were to buy the shares of the deceased from the beneficiaries with the insurance proceeds, it will contravene this statute. 

3) Company pays death gratuity to the deceased estate and the shares transferred back to company at a nominal price – This is somewhat workable but an extremely cumbersome to plan and execute. The gratuity will have to be worded in the employment contract and the buy sell agreement will have to state the nominal value, if required. There is no guarantee that employment contract will be honoured immediately, and the buy-sell agreement could be superfluous or the terms incorporated into the shareholders’ agreement, which can be amended at a later date.

So to end with a good note, the BVP structure is still the best structure after all.