First blog of the year 2015: my journey so far from 2006 to present

First of all, happy new year to all my blog readers and clients. Regardless of how 2014 was for you – whether good or bad, richer or poorer, happiness or otherwise – 2015 is a new year for you to start with.

The push factor

I have been in this industry since 2006. 2015 will be my 10th year (9 years in the industry). Previously I was in a completely different occupation. My former occupation was a sunset industry. The industry was moving out of Singapore. Locals were replaced by cheaper alternatives. I became disinterested and going to work was something I was not looking forward to.  Don’t get me wrong. I liked my colleagues. Majority of them were from PRC but I became quite good friends with them. Still, I know how the entire industry in Singapore was moving towards & I cannot imagine where I would be.

The pull factor

I found interest in the financial industry. So I join the industry. But the financial industry had a lot of problems especially in the area of having the bad reputation of mis-selling and cheating customers. I predicted that the industry would change for the better. In 2003, the Financial Advisers Act was enacted which for the first time put in place a comprehensive regulatory framework. Hence, I join the industry in 2006 hoping to ‘ride’ on the benefits of improved reputation. Looking back, my prediction was wrong. The industry reputation did not improve at all. Remember the churning cases in 2007-2008 (“Don’t fall for the lure: churning of CPF funds”, 27 December 2009)? Many financial advisers and companies were tempted to the dark side – colluding with syndicates to churn customers’ CPF accounts and rebating part of the commissions as a form of early withdrawal.

A laughable start of the journey

Still, the experience I gained was invaluable. Sometimes I laugh at myself!

I remember one of my first cases was like a joke. Remember the NTUC Income Incomeshield “free lunch” in which any existing policyholder can upgrade from a dollar cap plan to ‘as-charge’ without medical underwriting? I helped a former colleague to upgrade his Incomeshield to as-charge via this ‘free lunch’. And you know what? I did not know I had to also submit a change of adviser form. As a result, I did not get any commission (initial and recurring!) It was not just one case but many!

The mistake

In my first year, I did not know how to do prospecting. So I just do what everybody did. I met my clients in McDonald’s, their homes during evenings and public holidays. Sometimes I go home at 1am. It was crazy. Then I realised something was not right. In 2006, my income from financial advisory after netting expenses was just $2,508.88!

That shocked me and I know I needed to change. I discovered many  prospects were buying products from others using my recommendations.  If my advice was not good, why were they buying the same products recommended by me from others?  I never get to ask them for the reason. But what I concluded then was that these were serious prospects with real intentions to buy products but they were not serious with me.

Human psychology

I decided to change the way I do my business on my second year by insisting my prospects meet me at my office during working hours. Since I was already earning almost zero, it cannot get worst. To my surprised, my closing rate increased from almost 0% to 90%. My advice given to them did not change. I always do a full fact find. What I did was the change in venue and time of the meeting. It was in the year 2007 that I discovered the power of understanding human psychology. You see, I was never in sales and marketing. I did not know anything about human psychology and how it was linked with sales. By insisting prospects meet me at my office made them more serious with me!

(Understanding human psychology turns out to be the most important skill a financial planner must have. You cannot learn it from any of the CMFAS mandatory exams. You cannot learn it by sitting for any exams like ChFC/CFP. I learn it by simply on the job. It was my understanding of the human psychology which eventually helped me to conclude many interesting financial planning cases in later years.)

In the later years, the reason for having meetings in my office changed to one of productivity and confidentiality. It is not possible to do comprehensive planning in the public place because so much confidentiality data has to be discussed.

Getting burnout

In 2007-2008, I was closing every few days to the point I was getting burnout. The amount of paper work generated was terrifying. In my former job, I did not even need to print any documents. Reports could be emailed to colleagues and bosses. I did not even had a pen in my office! But in the financial industry, the amount of trees being killed was (and is still) terrible. Productivity was and is still negative. So many documents need to be written by hand. Systems were and are still not integrated. Each insurance company has their own quotation system. None of these were integrated with our KYC. Every insurance company has their own compliance rules which are always slightly different from others. My pens ran out of ink every few weeks for doing almost everything by hand.  I was getting burn out. I figured that it was not sustainable. I don’t even recognise some of my clients when I meet them in the streets because my client base built up rapidly! I did not have sufficient time to even know my clients personally. All I know was their hard financial data. Without knowing my clients personally at the deeper level, I know many will not be my long-term clients.

The need to focus

I decided that I needed to focus on specific markets instead of handling everybody who comes by my way. But this was easier said than done. I was also studying to upgrade myself. I remembered there was one insurance agent who accused me of not being qualified because I did not have ChFC. So I decided to take ChFC. Okay, later on I took ChFC because it was a good exam to take because it really helped to improve my technical competency and it was ultimately beneficial for my clients.  ChFC was easy but the only problem was there are just too many papers to take.

Financial Crisis

Then in 2008 - the financial crisis. It was the worst financial crisis since the Great Depression. Around the second half 2008, I suddenly did not have any business. Partly because of financial crisis and partly because another company was offering commission rebates to the extent that the first year premium becomes free (and they did not charge any advisory fee). Most of my prospects decided to buy from that company (“AXA demanding S$7 million back from Finexis, according to report”, 24 July 2010).  It was this period that I decided that I must charge a fee so as not to get con by clients. Again, I was already earning zero and it cannot get worst by charging fee. It turns out to be a blessing in disguise. Charging fee actually opened up a new market I never seen before. More on this later.

Since it was the financial crisis which I predicted would last for at least 3 years (which turned out wrong because everything recovered in 9 months!), I decided to upgrade myself to take the CFA charter examinations. I think 1/3 of my brain cells got fried taking those exams. But no worries, most of my fried brain cells recovered when I passed and obtained my charter in 2011.

The three years studying for the CFA examinations was probably more stressful than doing my engineering degree at NUS. During this period, I had to juggle between taking care of family, work , and studies. During that period, there was a major upgrading outside my home which created huge amount of dust everywhere. The noise, dust and stress triggered serious allergies reaction in me.  I eventually completed and obtained my charter in 2011.

During those three years of studying, I had a blog to record my study journey. It was nothing special but I hope those who are thinking of taking the CFA exam will be inspired by it: http://cfaprogramstudent.blogspot.sg/. Looking at that blog, I must had suffered a lot. I did not even know I actually went for a blood test thinking that the exam was killing me!

Partnering with Rockwills

In 2010, I signed an agreement with Rockwills Corporation Pte Ltd. Prior to that, my estate planning cases were referred to lawyers which unfortunately did not live to my expectations. For instance, one lawyer had a face to face meeting with my client for only 5 minutes and the will written was nonsense. This was terrible. I realised many lawyers did not like to write wills and even they did, they did a bad job. They were not sufficiently detailed and they did not know how to ask the right questions. I am sure they were good people but many could not ‘connect’ with their clients to understand their psychology. Maybe we just call it the lack of EQ. Estate planning – like all financial planning matters – is 2/3 EQ and 1/3 IQ.

To cut the long story short, it was only when I began partnering with Rockwills that I could provide full-fledge financial planning services.  I did the EQ part and outsourced the IQ part to Rockwills. It was the ideal combination!

However, many financial advisers I know who signed similar agreements with Rockwills did not benefit from the partnership. I think it’s because these advisers were not providing financial planning services in the first place. Selling insurance is not financial planning. Estate planning is part of financial planning. If you do not know how to do financial planning, you will never be able to do estate planning.

Special Needs Planning

In 2012, I wanted to try something new and decided to reach out to the special needs market. I visited special needs school and associations. I conducted countless seminars (free) and workshops (paid).  My paid workshops were well attended. But I also offered free consultation to countless parents face-to-face whose children had special needs because these workshops could only address the generic needs for individual families. The face-to-face consultations were needed to address the unique needs of each family.

But this project was rather disappointing. The numbers of cases which I concluded were below my expectations.  I know large number of my audiences and individuals I met did not implement what I thought them in the workshops. Even if it was implemented, it was only partially implemented.

One reason was because many parents were not prepared to plan for the long-term. One person told me that he could only plan for tomorrow as having a special needs child was too draining for him and his wife. Since estate planning is for the long-term, it has to be KIV to the long-term. I felt this was just short-sighted. It is like saying to put off repairing a small leak in a boat because there are other more important things to do after all the boat will not sink so fast. However, eventually the boat will sink and that is what these parents are asking for.

I decided that I need to charge a fee for consultation instead of FOC advice and amazingly a number of parents with special needs children engaged me to help them to have their wills and trust setup for their children. Again, charging fee appears to make people more serious.

By end of 2012, I concluded that the special needs market is not worth the energy to be specialised in. There are currently large number of children with special needs but their parents are more concern with tomorrow’s problems. Such clients are not in for the long-term and hence are not suited for financial planning.

The experience in charging fee

I wrote a few times above that when I started charging fee, I began to find clients whom I would never have met if I had offered my services for free. These were clients from “heaven” (as opposite to clients from hell).  To date, my best clients are those who are fee paying. These are clients whom all financial advisers dream off:

1. These clients actually understand that financial advisers also need to earn a living.  These clients understand financial advisers also have a family to support.
2. These clients understand the difference between value and price.
3. These clients never expect to get any free lunch from financial advisers. They do not ask for free gifts,  “promotions” and “discounts”.
4. These clients are honest from the start. They tell you what they don’t like and what they like. If they have a brother who is an insurance agent, they tell you right from the beginning they will buy from that brother if the product I recommend is from that insurer.
5. They want the financial adviser to be objective and competent (ok, for this point everybody also want).
6. Finally, but most importantly, they are serious on financial planning and they only want holistic advice.

2015 and beyond

These days, I no longer “anyhow” take in any clients. My mistake in 2007-2008 was to be an adviser for all persons. It was also not sustainable for the long-term.  It was better to have fewer but ‘deeper’ clients. I always tell my potential clients that I hope to build a long-term relationships.

In 2015, I intend to conduct investment education to small group of individuals (maximum 2 persons per group). The story started in 2013 when I decided that I would embark on investment education. I acquired the copyrights to a set of materials to teach investments. Most investment courses in the market places were focusing on speculation or only focus on one or two subjects. Normally it is on stock investing. Majority of such courses were teaching nonsense and that is because there is no regulation stopping people from teaching nonsensical investment subjects. I wrote to the Straits Times to complain about unregulated investment courses.

I wanted to teach the investment subject holistically. I developed the entire syllabus meant for more than one year worth of course. The initial lessons were well received in 2013 but subsequently more and more students dropped out. My ‘good’ students were learning fast while the rest were falling behind. It was this that I learn why “streaming” is important – streaming is the process of segregating the stronger and the weaker students. I also made the mistake of believing that it was actually possible for EVERYBODY to learn about investments. The hard truth I learn was that there are some who will never have the aptitude to learn about investments as it is a subject that is both academic and subjective. If an individual does not have the minimum academic background and abilities, they will not be able to learn investments. If an individual is not comfortable with making decisions based on subjective and ‘gut’ feelings, it is not possible to learn about investments.

In 2015 January, I intend to restart the investment teaching but this time it will be in the form of “tuition model” of at most 2 persons in each group.  The tuition days will be on Saturdays. Monday to Fridays are reserved for financial planning. There will still be a syllabus. Opps, it is January already! Anyone who is keen can drop me an email.

With this I shall end my article. Once again, happy new year and wish you and your family good health. Cheers!

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