ALOHA. Doc Money and family are in Hawaii for the holidays. I find it fascinating to see how business is run in other countries.
While our companies are first rate, there is always room for improvement.
Here are four ideas from the US that I predict will hit Singapore soon.
Head to head advertising
Competition is anything but friendly in the US.
When dining at Subway, the first thing I noticed was the napkins. What was printed on them, to be exact.
Subway prints information on the nutritional quality of their sandwiches on their napkins.
I found out that Subway sandwiches have between 250 and 400 calories. For example, the best-selling "turkey breast and ham" sandwich has 345 calories.
But it was the bottom half of the napkin that got interesting. It said: Subway's 350 calories compares with McDonald's Big Mac Value Meal (940 calories) and Burger King's Whopper Value Meal (1,030 calories).
I then took my Subway napkin to a McDonald's restaurant and asked the manager about Subway's claim.
He, in turn, showed me the nutritional information of their meals on the back of their own placemats.
It's war!
I expect that we'll see this kind of brutal head-to-head advertising in Singapore within 5 years.
Investing
We have unit trusts and investment linked products (ILPs) while the US has exchange-traded funds (ETFs) and mutual funds.
(i) ETFs will become popular
ETFs have super-low expense ratios. Charges are about one-third that of unit trusts and ILPs.
We have 17 ETFs traded on the Singapore Exchange. Only one stock ETF is approved for CPF investing.
ETFs are the wave of the future. Expect more of these investing bargains soon.
(ii) Mutual funds as current accounts
US mutual funds are nearly identical to our unit trusts and ILPs. Costs are almost as low as ETFs.
One advantage is you can use them as a current account. Writing cheques on money market funds has been possible in the US for decades.
Now, you can do it for long-term investments as well. For example, you can buy a Japan fund on Monday and write a cheque on Tuesday to draw money from it.
(iii) Transparency
All US mutual funds and ETFs report their expense ratios. Ours do too but it is usually buried deep in the prospectus.
In the more widely read brochures and fact sheets, our unit trusts and ILPs report only management fees. These are a fraction of the annual expense ratio, which is how much the fund really charges you.
Legal issues
When you buy a private home here, it is common to get a law firm to represent you in the transaction. You give them your money and at closing, the firm releases the money to the seller.
While there are plenty of safeguards, it isn't foolproof. Sometimes the buyer's lawyer runs off with the money.
Guess what? In the US, no lawyer has ever run off with the home buyer's money. Are US lawyers more honest? Ha. That's a joke.
The reason the risk is zero is that US lawyers never get a chance to touch the money.
The buyer's money goes directly into an escrow account controlled by a bank. Banks are more experienced at handling large sums of money than law firms.
If a banker runs off with the money, it doesn't matter. The money is guaranteed by the bank under the escrow agreement.
Escrow accounts are also an effective way to make sure private schools do not misappropriate student tuition fees.
Students deposit the money into a bank's escrow account. The bank releases money to the school gradually.
Private home buyers can insist on this arrangement as an alternative to depositing the home's purchase price with a law firm.
Credit cards
Let's say you buy a pair of track shoes. You get home and find you received two right shoes. You call the store and it won't exchange one of your right shoes for a left one.
What to do?
(i) Dispute the charge
In the US, if you paid by credit card, you can call the card company and dispute the charge. The card company contacts the seller and decides if you still need to pay.
(ii) Cancel the cheque
If you paid by cheque, it is easy to cancel it. You call your bank and request a "stop payment". After that, it is up to the store to collect from you.
(iii) Unauthorised charges
A third unique feature of US credit cards is their handling of unauthorised charges.
Our banks make you responsible for all charges made before you reported the card lost or stolen. It doesn't limit your liability.
In the US, the cardholder is liable only for the first $75 of unauthorised charges. In practice, card companies usually waive this fee as well.
Our banks push the risk of unauthorised charges to the credit card holder. There are two notable exceptions: (a) Maybank's Visa and MasterCard and (b) American Express.
These limit your liability to $500 and $100 of charges, regardless of when you report the card lost or stolen.
