Of course, the current problem of College Assurance Plan (CAP) meeting tuition fee obligations of its planholders is largely the fault of its managers. They were too aggressive on property investments, and the MRT investment is still a losing proposition. People say CAP's actuarials failed to realize the tremendous increase in tuition fees across time, which unfortunately could not be matched by returns on sour placements.
But that's the risk every planholder should have known. I knew that from the beginning. That's why I ran away as fast as I could every time those persistent pre-need salesmen knocked on my door. And I managed to keep my money away from these people, in spite of their tactics, which at times were similar to boiler room operatins. Those who managed to land an appointment with me got an hour's doze of lawyerly cross-examination, and walked away vowing to sell nothing to me ever again.
Yet, at the end of the day, if CAP eventually shuts down (look at what happened to industry pioneer PAMANA), CAP shareholders and managers can walk away, and say, "Sorry guys, it didn't work," while their insolvency lawyers take charge. And the poor planholders will have nothing but the proverbial empty bag. Whoever said that you should save money for your child's future education and put it on pre-need plans should be shot.
Is that all there is to it? I think the accusing finger should also point to the Securities and Exchange Commission (SEC). The SEC is the single government agency tasked to monitor and supervise CAP's operations. Why did they fail to check CAP's over exposure on the property sector? Why did they allow CAP to move its money to the MRT project? When CAP's investments didn't return with the projected numbers, why didn't the SEC do something about it?
A few years back, I noticed CAP suddenly becoming very aggressive in advertising its products. They were all over the radio, tv and print media. They even had a full page ad with the names and pictures of their directors and officers who were prominent businessmen. Some were even esteemed lawyers. Sun Tzu guy that I was, I knew CAP was in trouble. (Take a tip: when financial institutions are suddenly all over you, on the radio, tv, and newspaper with big promises, it's often a last grasp of breathe. That's the Sun Tzu principle of deception. "When you are strong, pretend to be weak. When you are weak, pretend to be strong"). Unfortunately, blogging wasn't popular then, and I could not warn any one about the possible dangers. Alas, I was right. Last year, CAP check payments for planholder tutition fees bounced. Why did the SEC allow this to happen?If it had known that CAP's investments were not kicking in, why did it allow CAP to indulge in that expensive campaign, which I surmised was initiated to generate new revenues from new planholders to allow CAP to meet maturing obligations?
CAP is run by businessmen with revenue targets to meet. They are expected to take risks. If they just got the money and put it in the bank, the whole thing would have crumbled easily. And as in all business endeavors, the bigger the risks the higher the returns. They took the risks, big and small, but they didn't pay-off. That's why the CAP managers could simply say, we did our jobs, but it didn't work. Pasensya na.
Next to CAP's Board of Directors, the only other people who could have known CAP's situation (and who had the power to prevent the fall-out) are the people in the SEC. When CAP's managers pushed, the SEC regulators were expected to pull. The SEC is the last bastion of protection for planholders. That was how the system was designed to protect the investing public from the businessmen, and the businessmen from themselves.
So who did not do their job?
People in the SEC -- YOU, yes, you, you deserve every curse from the parents of the kids whose tuition fee check payments have bounced.
Please hand in your resignations before the next pre-need company "bites the dust", as Freddie Mercury would put it.