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Me & My Money Series (Sunday Times)
Nov 7, 2010
me & money
Dad's death turns him to insurance line
The benefits of being covered became clear when his father died of heart attack at age 43
By Lorna Tan, Senior Correspondent
Insurance veteran Richard Vargo witnessed for himself the benefits of life insurance when he was a student.
He was just six weeks from graduating from the University of Colorado when his 43-year-old father died of a heart attack. While Mr Vargo's university expenses had been paid for, his sister was in her second year and his brother in only his first. Fortunately, his father had bought life insurance.
'From the proceeds of a US$100,000 life insurance policy, both my siblings were able to graduate, with my sister continuing and completing her medical degree,' recalled Mr Vargo, 51.
Today, his sister is a respected orthopaedic surgeon in Chicago and his brother owns a very successful air freight business in Boston.
Inspired by his own experience, Mr Vargo embarked on a career in the insurance and financial services industry and has not looked back. The United States citizen and Singapore permanent resident is currently DBS Bank's managing director of bancassurance.
'The financial consequences from my father's thoughtful planning have literally meant millions in additional earnings to my family over the last 30 years and is an outstanding example of the long-term impact that life insurance proceeds can have on a family,' he said.
He graduated with a bachelor's degree in finance in 1981 and worked at John Hancock till 2000. During that period, he was posted to Singapore in 1991, where he was vice-president of marketing and alternative distribution.
After he quit John Hancock, he worked at OCBC Bank, Axa Life Indonesia, AIA Singapore and AIA Asia Pacific life operations division in Hong Kong, before joining DBS in 2008.
DBS is now the No. 2 bancassurance player here after OCBC, and he aims to help it clinch the top position by 2013.
Mr Vargo is married to Singaporean Michelle Soo, who is a housewife, and they have a son, Richard, 16, and a daughter, Vanessa, 15.
Q: Are you a spender or saver?
I am a saver with two dominant goals of growing my children's future education fund and my retirement fund with my wife. I put in a monthly contribution in both funds, and in good years, additional sums from my bonus.
I save about 10 to 15 per cent of my pay and most of my bonuses.
Q: How much do you charge to your credit cards every month?
I charge a lot, including utility bills, to my cards each month primarily for convenience, consolidated statements and time efficiency. I also make it a point to pay the balances off each month. Using these cards greatly reduces the amount of cash I carry in my pocket. In months that I travel, the amount charged to cards could be a five-figure sum.
Q: What financial planning have you done for yourself?
My financial plans can be broken down into four categories - a budget to manage monthly cash flows, insurance for my protection needs, a college savings fund and a retirement fund. I am a big insurance consumer. My wife and I are well insured. I have eight life policies from whole life, investment-linked, term, disability income to critical illness. I have a total life cover of about $4 million.
My college fund is a combination of private equity, equity-based unit trusts, bonds and some individual stock. At one time, both children had endowment insurance policies but they have matured and the proceeds have been put into other investments. I have been a regular saver for this fund for many years, starting with US$25 a month back in the 1980s when I was single. My goal has been to accumulate $800,000 in this fund by 2013-2014, based on the very high cost of studying at US universities these days. Despite the ups and downs over the last several years, I will be close to achieving this goal.
Similar to the college fund, my retirement fund is made up of a well-diversified and broad range of equity-based and bond funds offered by various international fund houses. For further diversification, funds are in Singapore, Hong Kong and the US.
The majority of my retirement funds are invested in equity (fairly aggressive at 70 per cent) and bond funds (30 per cent), with a heavy bias towards Asia and emerging market funds. My annual target returns are 7 per cent to 10 per cent.
I also own blue-chip stocks like DBS and Singapore Press Holdings in Singapore, and US stocks like Bank of America and AIG. When I select stocks, I look for long-term growth and dividend yields.
Q: Moneywise, what were your growing-up years like?
My dad was a sales and marketing executive in a cash register and retail system firm. Mum worked in a legal firm as an administrative executive. The five of us, including my two younger siblings, lived in a four-bedroom, two-storey house in New Jersey. It was a typical suburban house. My dad was 43 when he died of a heart attack.
Q: How did you get interested in investing?
I can remember my dad and grandfather talking about stocks and investing when I was 12. I also remember my mum taking me to a stockbroker when I was 15 at my request. My first investment was in Getty Oil, through my dad, when I was 15. In college, my fraternity brothers and I invested what little money we had in penny stocks. As I recall, those were great learning lessons on how to lose your money.
Q: What property do you own?
We've just moved into our new home, a recently completed 2,200 sq ft, four-bedroom condo unit off Thomson Road. I bought it for almost $3 million in 2007. Its current value is up about 20 per cent.
Q: What's the most extravagant thing you have bought?
Hmm... nothing very extravagant. It would be a Marriott time-share membership in Phuket bought in 2006, and a number of Mac products over the last couple of years... All loads of fun. The time-share membership cost $40,000 and it gives an unlimited period of ownership. It would have gone up in value, but I'm not sure by how much.
Q: What's your retirement plan?
I am currently planning for 25 years of retirement, and have assumed that both my wife and I will live into our 90s based on our current health, lifestyle and family history. This also means I am planning on working until age 70, which I think is realistic for my generation (I am at the tail end of the baby boom generation). Aside from the real estate, my retirement fund consists of private and public pension schemes in Singapore, Hong Kong and the US.
Q: I drive....
A dark grey Honda Odyssey MPV.
lorna@sph.com.sg
--------------------------------------------------------------------------------
WORST AND BEST BETS
Q: What's your worst investment to date?
The worst investment would have been a high-tech private equity investment during the dotcom period between 1999 and 2000. A lot of people lost money during the dotcom craze. I lost a five-figure sum and it was a humbling experience. I learnt not to take a short-term view and to avoid gambling on things that I don't understand.
Q: And your best investment?
My best investment to date would likely be one of my unit trusts invested in China equities that would have more than doubled during the last decade.
My most fun current investment would be some physical gold bars I bought in Hong Kong at the end of 2008 for US$10,000. My total return is currently 54 per cent over the last 20 months. Not bad, considering the time period and risk class.
My most important investment, however, is in my time and money devoted to my two children. The income and economic value they will generate for their families and communities during their lifetimes as a consequence of a stable upbringing and a good education will likely be significant.
me & money
Dad's death turns him to insurance line
The benefits of being covered became clear when his father died of heart attack at age 43
By Lorna Tan, Senior Correspondent
Insurance veteran Richard Vargo witnessed for himself the benefits of life insurance when he was a student.
He was just six weeks from graduating from the University of Colorado when his 43-year-old father died of a heart attack. While Mr Vargo's university expenses had been paid for, his sister was in her second year and his brother in only his first. Fortunately, his father had bought life insurance.
'From the proceeds of a US$100,000 life insurance policy, both my siblings were able to graduate, with my sister continuing and completing her medical degree,' recalled Mr Vargo, 51.
Today, his sister is a respected orthopaedic surgeon in Chicago and his brother owns a very successful air freight business in Boston.
Inspired by his own experience, Mr Vargo embarked on a career in the insurance and financial services industry and has not looked back. The United States citizen and Singapore permanent resident is currently DBS Bank's managing director of bancassurance.
'The financial consequences from my father's thoughtful planning have literally meant millions in additional earnings to my family over the last 30 years and is an outstanding example of the long-term impact that life insurance proceeds can have on a family,' he said.
He graduated with a bachelor's degree in finance in 1981 and worked at John Hancock till 2000. During that period, he was posted to Singapore in 1991, where he was vice-president of marketing and alternative distribution.
After he quit John Hancock, he worked at OCBC Bank, Axa Life Indonesia, AIA Singapore and AIA Asia Pacific life operations division in Hong Kong, before joining DBS in 2008.
DBS is now the No. 2 bancassurance player here after OCBC, and he aims to help it clinch the top position by 2013.
Mr Vargo is married to Singaporean Michelle Soo, who is a housewife, and they have a son, Richard, 16, and a daughter, Vanessa, 15.
Q: Are you a spender or saver?
I am a saver with two dominant goals of growing my children's future education fund and my retirement fund with my wife. I put in a monthly contribution in both funds, and in good years, additional sums from my bonus.
I save about 10 to 15 per cent of my pay and most of my bonuses.
Q: How much do you charge to your credit cards every month?
I charge a lot, including utility bills, to my cards each month primarily for convenience, consolidated statements and time efficiency. I also make it a point to pay the balances off each month. Using these cards greatly reduces the amount of cash I carry in my pocket. In months that I travel, the amount charged to cards could be a five-figure sum.
Q: What financial planning have you done for yourself?
My financial plans can be broken down into four categories - a budget to manage monthly cash flows, insurance for my protection needs, a college savings fund and a retirement fund. I am a big insurance consumer. My wife and I are well insured. I have eight life policies from whole life, investment-linked, term, disability income to critical illness. I have a total life cover of about $4 million.
My college fund is a combination of private equity, equity-based unit trusts, bonds and some individual stock. At one time, both children had endowment insurance policies but they have matured and the proceeds have been put into other investments. I have been a regular saver for this fund for many years, starting with US$25 a month back in the 1980s when I was single. My goal has been to accumulate $800,000 in this fund by 2013-2014, based on the very high cost of studying at US universities these days. Despite the ups and downs over the last several years, I will be close to achieving this goal.
Similar to the college fund, my retirement fund is made up of a well-diversified and broad range of equity-based and bond funds offered by various international fund houses. For further diversification, funds are in Singapore, Hong Kong and the US.
The majority of my retirement funds are invested in equity (fairly aggressive at 70 per cent) and bond funds (30 per cent), with a heavy bias towards Asia and emerging market funds. My annual target returns are 7 per cent to 10 per cent.
I also own blue-chip stocks like DBS and Singapore Press Holdings in Singapore, and US stocks like Bank of America and AIG. When I select stocks, I look for long-term growth and dividend yields.
Q: Moneywise, what were your growing-up years like?
My dad was a sales and marketing executive in a cash register and retail system firm. Mum worked in a legal firm as an administrative executive. The five of us, including my two younger siblings, lived in a four-bedroom, two-storey house in New Jersey. It was a typical suburban house. My dad was 43 when he died of a heart attack.
Q: How did you get interested in investing?
I can remember my dad and grandfather talking about stocks and investing when I was 12. I also remember my mum taking me to a stockbroker when I was 15 at my request. My first investment was in Getty Oil, through my dad, when I was 15. In college, my fraternity brothers and I invested what little money we had in penny stocks. As I recall, those were great learning lessons on how to lose your money.
Q: What property do you own?
We've just moved into our new home, a recently completed 2,200 sq ft, four-bedroom condo unit off Thomson Road. I bought it for almost $3 million in 2007. Its current value is up about 20 per cent.
Q: What's the most extravagant thing you have bought?
Hmm... nothing very extravagant. It would be a Marriott time-share membership in Phuket bought in 2006, and a number of Mac products over the last couple of years... All loads of fun. The time-share membership cost $40,000 and it gives an unlimited period of ownership. It would have gone up in value, but I'm not sure by how much.
Q: What's your retirement plan?
I am currently planning for 25 years of retirement, and have assumed that both my wife and I will live into our 90s based on our current health, lifestyle and family history. This also means I am planning on working until age 70, which I think is realistic for my generation (I am at the tail end of the baby boom generation). Aside from the real estate, my retirement fund consists of private and public pension schemes in Singapore, Hong Kong and the US.
Q: I drive....
A dark grey Honda Odyssey MPV.
lorna@sph.com.sg
--------------------------------------------------------------------------------
WORST AND BEST BETS
Q: What's your worst investment to date?
The worst investment would have been a high-tech private equity investment during the dotcom period between 1999 and 2000. A lot of people lost money during the dotcom craze. I lost a five-figure sum and it was a humbling experience. I learnt not to take a short-term view and to avoid gambling on things that I don't understand.
Q: And your best investment?
My best investment to date would likely be one of my unit trusts invested in China equities that would have more than doubled during the last decade.
My most fun current investment would be some physical gold bars I bought in Hong Kong at the end of 2008 for US$10,000. My total return is currently 54 per cent over the last 20 months. Not bad, considering the time period and risk class.
My most important investment, however, is in my time and money devoted to my two children. The income and economic value they will generate for their families and communities during their lifetimes as a consequence of a stable upbringing and a good education will likely be significant.
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