Fee-Based Financial Planning in Singapore

Are you looking for a fee-based financial planner in Singapore? Look no further because you could be looking for a needle in the haystack! Fee-based financial planning in Singapore is rare. Few offer it.

Wilfred Ling is one of the very few advisers in Singapore providing fee-based financial planning in Singapore.

Why are there so few fee-based financial planners? The following are some reasons (click on the relevant titles to expand):

1. No regulatory requirement on financial planning

You will be surprised that anyone can call themselves Senior Financial Consultant, Wealth Manager or even Money Coach. The truth is there is no regulation stopping them from using such confusing labels. While financial advice on insurance and investments are regulated activities, regulation is only pertaining to one-one advice. Anyone can conduct a forex course to a class full of students and yet there is no regulatory oversight although advising on leveraged foreign currencies to an individual is regulated.

Other financial planning matters such as budgeting to buy a house, drawing up a proper Will, dealing with a spendthrift child, advice on CPF and HDB rules, etc are all unregulated activities. The lack of regulation means anyone can do all these without any form of accreditation and qualification. This means consumers will be confused as to who they can trust. Confusion leads to risk aversion towards engaging a professional fee-based financial planner. With no demand for professional fee-based financial planners due to such confusion, the number of such professionals offering fee-based financial planning in Singapore remains the minority.

2. 80% of consumers only want free advice

In 2012, Monetary Authority of Singapore found through an online survey that 80% of consumers in Singapore do not wish to pay for advice. In other words, consumers in Singapore want free advice. Naturally the supply of goods and services will cease to exist once the price is zero. That is why, the fee-based financial planning community in Singapore can be considered very small servicing the needs of the 20% who are willing to pay for advice.

There are about 15,000 registered financial advisers in Singapore. Do they work for free? No, of course not. Many advisers and agents earn commissions. It is easier to sell a product that gives $10,000 in commissions than get the client to pay a fee of $500. Due to the ease of selling products with embedded commissions as compared to charging an upfront fee that is transparent and known, most registered financial advisers are product salespersons.

It is this reason why most consumers have never met a professional financial planner before. By the way, free advice could cost you your entire HDB flat!

3. Only 20% have accessed professional advice

According to a survey done by Russell Investments, less than 20% of Singaporeans have accessed professional financial advice on retirement plans despite longer life expectancy. "These findings are somewhat startling; they reflect the continued lack of awareness or the avoidance on the need for professional retirement planning and the implications of the increase in retirement age".

It is this reason of the lack of desire to seek professional advice that the demand for professional fee-based financial planner is low. Without demand, there is a low supply of professionals offering fee-based financial planning in Singapore.

4. Low profit margin in advisory fees

There were firms in Singapore which charged clients for advisory fees. One such firm was Ipac. Ipac was acquired by Axa in 2002. Ipac specialised in providing high-end, fee-based advice to wealthy individuals. Ipac never produced a profit for Axa for 10 years despite servicing high networth individuals who can easily afford to pay fee for advice. In 2012, Axa decided to close down Ipac with an estimated 92 employees.

To date, ALL firms in Singapore takes commissions.

5. Deliberate confusing 'fee' pricing

One of the problems which cause quite a lot of confusion is the ‘fee structure’. Can you guess what the following fees are?

Total distribution cost
Wrap fee
Trailer fee
Sales charge
Platform fee
“Fee-only”
“Fee-based”
Performance fee
Retainer fee (this one is invented by Wilfred Ling)

Are these fees or commissions or both? To make matters worst, one firm advertised itself to be ‘fee-only’ because its advisory fee is based on a portion of the commissions earn! If that is the case, all insurance agents are ‘fee-only’ too!

To me, fee-based financial planning means that the client has to pay for the advice regardless of product purchases. This is the same model as a doctor who will charge two kinds of fees – consultation (advice) and the cost of medication (product).

6. The big boys are against fee-based financial planning

Singapore is a financial hub. A large part of its economy is driven by the financial sector. Unfortunately many financial institutions are against charging fee. Great Eastern Life, Manulife, AIA, Prudential and all 'independent financial advisory firms' represented by the Association of Financial Advisers (Singapore) voiced their objections against fee-based financial planning in Singapore.

Should you engage Wilfred Ling?

Since 80% of consumers only want free advice and have never met a fee-based financial planner before, I provide an opportunity to all potential clients to know me through this website and my mailing list. Please sign up for my mailing list to receive regular financial planning articles at no cost.

Services provided by Wilfred Ling

The following are all the services I provide:

As for consultation charges, Fees & Charges.

If you are keen to find out more, feel free to contact us at this link HERE.

Why pay fee for advice when others provide free advice?

Reason 1: Overheads

Nobody provides advice for free. All advisers charge a fee for advice – either indirectly through commissions or directly by stating the fee upfront. It is impossible for any advisory firm to provide free advice. The fee you pay – either in commission or agreed fee is meant to help offset the large amount of overhead as illustrated below (Note: not drawn to scale):

There are generally two types of overheads: Direct and indirect expenses. Direct expenses are like utility bills, salary of administrative staff, IT support, licensing fee, professional indemnity, advertisement and rental. Indirect expenses are those which incur opportunity cost due to the long hours spent on it. Examples of indirect expenses will be CPD hours, product launch attendance and research. The time spent on these mean less time to meet clients and thus the lost of income. For other matters like professional courses and conferences incur both direct and indirect expenses.

Reason 2: Commission is an unfair method of remuneration

This is because:

A client who buys the product (which pays the commission) is subsidizing another who does not buy;
Some products pay outrageous commissions for little work done. This is unfair to the client afterall the client is the one who ultimately pays the commission.
Some products pay insignificant commissions despite the large amount of work that the adviser has to do. Thus, the adviser is under paid;
Many superior products pay no commission and thus advisers have no incentive to recommend these if they are relying on commissions;
Many important areas of financial planning do not require purchase of product. Advisers will not be paid for helping clients plan for these areas.

Areas in financial planning that do not require purchase of products are:

Minimizing income tax;
Debt management;
Cash flow, Balance Sheet and Ratio Analysis;
Advice on the selection of employer sponsored insurance;
Investment planning using passive funds like ETFs;
Mortgage loan and installment calculation;
CPF related advice such as amount eligible for mortgage, Minimum Sum Scheme, CPF Life, etc;
Removing duplicate insurance policies;

Reason 3: Fee-based financial planning or fee for advice is the fairest way of remuneration

This is because:

Transparency – you know how much you are paying;
All clients pay according to the actual work done. A simple case cost less than a complex case. No cross-subsidy;
Advisers are free to recommend without worrying about their compensation since this is already decided upfront;
Superior products with no commission payable will be considered by the adviser;

Reason 4: Commission-based adviser may not put your interest first

This is because:

The adviser has no incentive to spent time on matters that will not result in a product sale. Clients will not necessarily get the most wholistic advice;
In the table below, it shows that commission-based adviser will push the client from Stage A to Stage B of the advisory process. That is to say that such an adviser will tend to push the client to purchase some products. On the other hand, a fee-based adviser will not push the client from Stage A to Stage B.
The commission-based adviser focuses on product sale (since he is paid for sales) while a fee-based adviser focuses on the quality of his advice (since he is paid for advice).

Which do you prefer? A salesman or an adviser?

Stage	Advisory Process	Commission-based	Fee-based
A	1. Objectives 2. Fact finding 3. Analysis 4. Recommendation	Nothing paid here	Majority of the fee earned here
B	5. Implementation/ product purchases	Majority of the commissions paid here	Minority of the fee earned here
C	6. On-going review	Commissions repeatedly paid herefor sales of unnecessary products	Fees earned here for providing on-going service

Reason 5: Moral hazard

Imagine a doctor who cannot charge a consultation fee but could only earn through commissions selling medicine. Can you imagine the health hazard of being prescribed unnecessary drugs just because the doctor could only earn through commissions selling drugs? Similarly, the financial hazard of engaging a commission-based adviser could put your family and your retirement in jeopardy.

A financial planner is a financial doctor. Only a person who is financially unwell is required to consult a financial planner. Others who are well would consult a financial planner to avoid future financial trouble through “preventing” advice.