Tuesday, June 17, 2014

If you want to rich, be a bigger asshole !

Here's a conversation I had with a colleague some time ago :

Me : If are walking along Orchard Road, an insurance agent and a snake approaches you. You have a gun with two bullets, what do you do ?
Friend : I shoot the snake and the insurance agent.
Me : Wrong, you should shoot the insurance agent twice, just to make sure he's dead.
Friend : Actually, I disagree, if you're lucky the snake will bite the agent and kill him for you. So you save two bullets.
Me : Nah, if the snake bites the agent, it will die a slow and horrible death from drinking poison from his blood. No innocent snake should suffer this fate.

A lot of success literature is, in my humble opinion, written by hypocrites.

Almost all popular books on success talk about giving and charity. There's enough bullshit on giving so that it can expand you capability to earn more because of some stupid Law of Attraction. Motivation books talk about giving primarily because of fear - fear that the 99% will just get fed-up with trickle down economics and start waging economic warfare against the 1%.

The scientific evidence is a lot more damning on capitalism and modern society. The richest members of the population almost invariably measured more conscientious and less agreeable than people of normal socio-economic status. In psychological experiments which prime people about money, they become more selfish. This is now an empirical fact.

My article does not intend to turn you into sociopaths. Instead, I think in some cases, becoming an asshole is necessary for survival in Singapore.

Take the case of insurance...

Wilfred Ling is a Financial Adviser I thoroughly respect ( along with other folks like Christopher Tan of Providend ) and he wrote this recently :

http://www.ifa.sg/aviva-saf-group-insurance/

His thesis is that basically, insurance agents have little incentive to sell you the insurance plan you need and are instead incentivized to sell you expensive plans like ILPs. ( I think maybe its so that they can reach financial independence much earlier than you ).

I think this is where being agreeable becomes a serious liability in Singapore. The people who are eager to sell you something, probably are interested in their commissions than your protection. You might also want to preserve harmony with your family and friends, so you buy a policy to appease the other party.

This is how most insurance is sold. Buying insurance is almost like giving someone a pity fuck to improve his self-esteem. You don't want to be seen as the asshole in the family who refuses to give support.

Turns out the consequences are horrible :

In Wilfred's sample, his client spends close to $10,000 on insurance premiums a year. If this money were directed into a portfolio of high yield assets at 8%, that's a passive income increase of $800 every year. In twenty years, this portfolio would be yielding at least $16,000 a year even if you had spent the dividends on yourself. That will pay for most  meals and utility expenses.

This is where sometimes, in order to be rich, you should consider the following :

a) Be an asshole

If a "friend" wants to sell you insurance, land banking, timeshare, borrow money or get you into MLM, a loser would give in to preserve harmony. You should happily lose a friend. I think if a relative does the same, lose the relative. I have great relatives who are agents but they don't sell to me - so we remain related to each other.

b) Cultivate a "CB-Face"

I dress shabbily like most unemployed uncles and shave about once a week. I also cultivate what people call a "CB-Face" when I am in town.

The upseide I experience is that now insurance folks avoid me because I look very poor and disagreeable. My wife comments that I am so ugly insurance agents and people selling Singtel Mio plans look away when I walk towards them.

That's a feature, not a bug.

c) Go online to buy insurance.

This is probably the biggest game changer in the insurance industry.

http://www.diyinsurance.com.sg/portal/home/index.jsp

This website will educate you on buying an insurance, so no more pesky commissioned salesman. This will cut commissions by 30%. It is also a place where you cna pick up some term life without being dissuaded from doing so.

Hope that in time to come, that irritating salesman will wish that he remained an engineer !

d) Take personal responsibility

From an insurance agent's perspective, they want to protect you from everything possible because it is just so profitable to do so. Their job is to create fear by telling you horrible stories of the uninsured.

Of course, if you  refuse to listen to them, you need to start taking personal responsibility for your own life.

This can be quite a tall order...

You need to learn to invest your own portfolio. You need to know your family history of illnesses and figure out how much to put aside. You need to have regular medical checkups, eat a healthy diet and maintain a healthy exercise regime. Most importantly, some risks like eating cockles and bungee jumping should be avoided. Any residual risk, you can buy a term life and transfer it to an insurance company for less than $150 a month.

One of societies biggest problems today is that we expect so much protection, that we will lose out on the upside ( insurance earns all the commissions which could have been invested ) and we start taking on more risks because we know something that will kick in to protect us from harm ( moral hazard ).

The sad thing, of course, is that most people cannot take that amount of personal responsibility and so cannot afford to be assholes to financial advisers, which is why the insurance industry will always have its share of success stories.


















4 comments:

HM Shak said...

I really enjoyed reading this, perhaps because I share the same views on insurance as you do. Will try and cultivate the cb-face from now on, haha
Well written piece.

Pips said...

muahaha.. the Cb-Face is a tactical move..

Christopher Ng Wai Chung said...

Looks like you folks really like the CB Face idea !

SMK said...

*shake head*
that sounds more like escapism to me.

you sound like a very bitter man.
take care. all the best to you.