Last Updated on 25, June 2016
In a survey done in August 2014 by Cicero Group & commissioned by Blackrock, it was found that:
- Singaporeans (59%) lagged behind its Asian counterpart (69% average) when come to saving specifically for retirement.
- The top reason for not saving specifically for retirement was due to the high cost of living (61%) and the second top reason was not earning enough money (43%).
- In fact 70% of the Singaporeans surveyed were having difficulty staying on top of bills and saving for retirement.
- Singapore has one of the largest proportion of advised investors (36%) compared to Asia (35%) and globally (25%).
- Yet, the reliance on financial advisers was actually quite low. For instance, only 9% of those who wants to purchase a home took professional advice from a financial adviser. This compared to 30% who spoke to a family and friends for advice when come to purchasing a home.
Source: Singapore Investor Pulse Survey 2014, Blackrock
My comments:
Singaporeans are in big trouble – misconception of financial planning
Singaporeans are in big trouble. They are behind their Asian counterpart in saving for retirement and cannot cope due to the high cost of living. By my experience, many are delaying doing a proper financial plan to overcome these obstacles due to a misconception.
Last year, a couple came to see me to find out more about financial planning. After that preliminary discussion, I followed-up with them whether will they be proceeding to embark on comprehensive financial planning. I was disappointed they decided not to proceed for the time being. I was disappointed not because they did not engage me but because they wanted their finances to be ‘in order’ before a formal financial planning exercise.
In fact, this was not the first time I encountered such a case. I counted there were at least 4 such cases last year in which the reason for delaying doing a financial plan was to wait for things to be 'in order'. There are whole lot of excuses people can make to delay doing a financial plan. I can even create a story out of it. Here are examples of actual excuses used to delay financial planning (the linkages between the excuses are fictitious):
- Need to wait to have more money before committing to a financial plan;
- And when the person has more money, to wait for career to settle down;
- And when the career is more settled down, to wait until get married;
- And after getting married, need to wait for wife/husband to be free;
- And after when wife/husband is free, need to wait for wife/husband to give permission;
- And when wife/husband gives permission, need to wait for wife to give birth;
- And when wife gives birth, need to wait for wife to regain her strength;
- And when wife regains her strength, need to wait for baby to be older because newborn cannot go out;
- And when baby becomes bigger, need to wait for company's project to finish (i.e. too busy with work);
- And when company project finish, need to wait for all loans to be refinanced;
- And when all loans are refinanced, need to wait for existing investment losses to become positive;
- And when investment losses become positive, need to wait to retire first; and
- And when the time comes to retire, they discovered they could hardly withdraw money from their CPF due to unable to meet their Minimum Sum. As their significant source of wealth is the CPF, they blame the government.
- They would than see me and I will tell them it is already too late as they lost nearly 4 decades of their life living a life without any financial goal. They just need to continue to work as retirement is not an option.
In this time of age, there is no such thing waiting for one's finance to be 'in order'. The only thing that is constant is change. A financial plan does not assume any kind of stability or normality. A financial plan is not a one-off exercise or a single transaction. It is an on-going process. That is why I prefer to have clients who are on for a long-haul so that I can coach them on a long-term basis (see video: About me).
By the way, I find it strange why would anyone wants to engage me if their finances are already in order. It is the sick who needs to see a doctor. The healthy does not need a doctor!
So for those who are ‘sick’ and need help in coping with high cost of living and does not have time to plan for retirement should seek help now instead of hoping their problems will just go away – because it will not.
Most well advised
Blackrock’s survey revealed that many Singaporeans do have advisers.
The high level of people having used financial advisers could due to the fact that there are really a lot of financial advisers to begin with.
Here is a proof that there are a lot of financial advisers compared to other countries: Oversupply of Financial Practitioners And Its Effects.
... but few relied on financial advisers
By right, many Singaporeans should already have a proper financial plan since there are so many financial advisers. But in reality, Singaporeans hardly relied on them for advice.
The question is why so few actually relied on their financial advisers despite the large number of available advisers? I think it is the way the questions were phrased in Blackrock’s survey. Blackrock used two hypothetical life events and asked whether participants would seek professional financial advice on those events:
- On buying a home; and
- Paid for child’s schooling.
It was found that only 9% took professional advice from a financial adviser when purchasing a home. On the other hand, 7% took professional advice from a financial adviser if they are paying for a child’s schooling.
You see, these two life events have little to do with insurance and investments. Naturally, few would seek to consult financial advisers.
This brings me to the next point that financial advisers may be expert in giving insurance advice and/or investment advice but they are in no way expert in financial planning.
What most people need is to get financial planning advice and not another person to sell them unwanted insurance products.
Most financial advisers are not financial planners although all financial planners are financial advisers. Think about it.
Learning about financial planning
Last week, a client told me that he and most people take a long time to figure out the importance of financial planning. So I am aware that financial planning as a topic is quite alien to most people.
That is why I seek to educate people on financial planning first before they meet me. I do this by using this blog, seminars and newsletters through mailing list.
Those who signs up for my mailing list will receive regular tips on financial planning. After three years, everybody on my mailing list will be quite well educated on financial planning. Majority will take action after that. Some will decide to seek professional advice from me.
As an added incentive, those who signs up this mailing list will receive a eBook entitled “Introduction to Personal Investing” written by Investment Management Association of Singapore. Feel free to sign up my mailing list below.
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1. First of all, most people including govt ministers and MNC CEOs think of financial advising as selling & buying products. Hence when people see “financial adviser” on a questionnaire or survey, they will think for what purpose I will buy insurance or endowment or ILP?? If it’s buying a house, they will be WTF?!? Buy house go see property agent lah, why see financial adviser for fish?!?
When the survey talks about paying for kid’s schooling, people will think of paying for Pri, Sec, JC school fees, or even local Poly or Uni. For this, people will also be thinking why the fish must see financial adviser?? Main thing is to remain employed, not be retrenched or jobless or end up under-employed in some low-paying dead-end job.
2. Most of the excuses are simply “nice” ways of saying “I got no money to pay your fees” or “Can I pay by 0% interest instalments?”.
3. The overall picture points to same conclusion –> for young people, it is most important in terms of getting as high-paying job as you can. In the first 2 years of your working life, the salary you get, the type of job you do, the company you join, usually determines the rest of your 40-60 years of life. This is based on my 25 years working experience and lifetime experience observing my relatives & friends. This is even more important in Singapore where the GINI coefficient is so high, and where the salaries of many jobs are depressed.
And by “the rest of your 40-60 years of life”, I mean who you can marry, where you will stay, how many kids you will have, chances of having dysfunctional or well-adjusted family, quality of family relationships, quality of circle of friends, your health status, your family health status, how long you will live, whether you can retire, etc etc.
One well known insurer recently announced its Participating Fund performance. This is for their wholelife and endowment products.
Investment returns in 2014 = 5.45%
Asset allocation = 67% bonds, 23% equities, 4% property, 3% loans, 3% cash
Their largest equity holding (at 7%) is in another company’s fund = Vanguard Global Equity
Death and/or Critical Illness payout:
$135 million to 2,215 policies
i.e. Average of $60,948 per policy.
Savings maturity or Surrender payout:
$2,128 million to 63,114 policies
i.e. Average maturity / surrender of $33,716 per policy.
Annuity payments:
$151 million to 34,112 policies
i.e. Average of $4,426 annual annuity; i.e. $368 per month annuity payout.
Is this public information? If yes, can reveal the insurer name?
This insurer is the one the ceo called their sales agents super DUPER salesmen.
Among the insurers T, M, A, G it has the lowest average actual return from 2009-2013 of 5.33% despite having the biggest AUM(life fund of 24.3B). T has the highest of 7.33%. Surprised?
Well, well who was helming the company then? Cost is the killer.
This super DUPER insurer also has the distinction of offering the LOWEST annual bonus in Singapore at 1.3%
Imagine your wholelife and endowment only increasing at 1.3% per year.
With only a non-guaranteed wishy-washy “promise” of extra 100% terminal bonus if you die or surrender after 30 years.
There is only a handful of advisers who really put their clients’ interest first and who are honest and competent; the rest are snakeoil salesmen if not conmen and women.
At the roadshow they almost behave like insurance products lelong. How can trust them with your finance let alone rely on them for planning for your future..
There are too many salesmen and if the population can be reduced to just 5000 good advisers the public will benefit. MAS should continue to raise the bar by making them pass more exams like M9a or M8a or some eliminating musical chair exams
I was amused by a bus panel advertisement which asks rather convincingly ,” DO U HAVE WHAT IT TAKES TO BE A FINANCIAL CONSULTANT”……I laughed when I thought of the many who can fit the bill….from ah soh, ah peks to aunties and uncles, as long as they don’t have an impaired vocal cord or dumb and even if they can make some sound like the mute they have what it takes to be the ‘consultant’. CMFAS exams should be no problem if they are allowed to take since dogs and cats can pass, they surely can too. This is a load of craps but that is what the insurance companies and their insurance managers are looking for .
If you leave your future to these salesmen you WILL NEVER NEVER EVER ACHEIVE YOUR GOALS OF FINANCIAL INDEPENDENCE but the salesmen’s future.
Few people rely on financial planners for advice because many “planners” are more interested in selling rather than providing advice. This is because of the commissions system, something U.K and Australia (and more) have banned.
In addition to this, many financial planners are also not knowledgeable enough to provide financial advice. Few planners have the CFA designation despite it being extremely useful in providing real investment advice.
I believe DPI and the Comparefirst aggregator are promising steps that will slowly prod the financial advisory industry to upgrade, but more remains to be done.