The Real Singapore: Evidence on little understanding on financial planning from stolen article

Last Updated on 9, February 2016

The original title of this blog was "zero understanding on financial planning". Hence the above zero picture. But I decided to change the title to "little understanding on financial planning".

Recently one of my old article entitled Man lost almost his entire HDB property to siblings due to poor financial planning got “stolen” and was published without my permission on The Real Singapore website and shared on their facebook page. I was going to write to the editor of The Real Singapore for copyright infringement when I got shocked with the reaction of the commentators. The reaction was so comical that I decided to also share to all by copying and pasting the facebook comments:

and

Fact: The judge actually took pity on Mr. Cheong and did not accused him of being greedy.

Fact: Property is a financial asset. Family disputes, financial planning, property ownership and money matters are not mutually exclusive but in fact are closely interrelated.

Fact: The above two posts were the most comical among all the comments. Financial planning is meant to avoid family disputes and financial losses. CPF Nomination cannot be used to bequeath property. Comparing Will and CPF Nomination is like comparing applies and oranges.  They are two mutually exclusive legal instruments.

Fact: Government policies and laws are not designed to be anti-Singaporeans. But ignorance of existing laws and regulations can indeed caused families into poverty just as ignorance of traffic laws can led to accidents and deaths.

Fact: Estate planning is part of financial planning.

Fact: Housing and Development Board does not become the Trustee of the property if the deceased sole owner does not have a will. Given that the Public Trustee cannot accept estate size above $50,000, Jophrey Lim's statement is incorrect since HDB flats are worth more than $50,000 these days. For clarity, the Public Trustee cannot act in the following situation:

• Where the estate exceeds $50,000 in value.
• Where a Court application for Letter of Administration or Grant of Probate has been taken out.
• Where there are conflicting claims to the estate or disputes among the beneficiaries.
• Where the estate has outstanding debts or liabilities.
• Where the Deceased had shares or other interest in unlisted companies (foreign or local).
• Where the Deceased was a partner, a sole-proprietor or had interest in a firm or other business.
• Where the Deceased was the sole lessee (owner) of a HDB flat and there are minor interests.
• Where there are pending lawsuits which involve the Deceased.
• Where there are insurance policies under Section 73 of the Conveyancing and Law of Property Act (Cap. 61)
• Where there are trust bank account(s) opened with a minor
• Where there are commercial vehicles involved like taxis

Fact: It seems the above commentator is confused between estate distribution of CPF monies and non-CPF monies and as well as the involvement of the Public Trustee. Her last paragraph is correct to some extend. The part on CPF charging money to investigate is the first I have heard though.

The facebook link can be found HERE.

What is really financial planning?

The comments are evidence of the lack of understanding of financial planning. Some of the comments provide us with some insight as to certain misconception about financial planning such as:

1. The misconception that financial planning and property ownership are unrelated. In fact, the largest financial assets are often properties.
2. The misconception that financial planning and disputes are unrelated. In fact, the purpose of financial planning is to avoid problems, disputes and financial losses. If there is not going to be a problem, why do financial planning?
3. There is also significant demonstration of lack of understanding in Singapore laws and rules related to financial planning. But to be ignorant is not a sin after all everybody is born ignorant. What is troubling is that people do not realised that they are ignorant of the laws and try  to act smart by advising others with misinformation. When things go wrong, people blame everybody else except themselves.
4. The misconception that estate planning is not part of financial planning.
5. The misconception that financial planning means buying insurance or it is disguise to sell insurance policies.

Financial planning actually covers all of the following:

1. Budgeting (cash flow) and net worth.
2. Risk management (insurance)
3. Credit management (normally related to mortgage loans)
4. Children’s education
5. Retirement Planning
6. Investment Planning
7. Tax Planning and
8. Estate Planning (wills/trusts/nominations).

MoneySense, a national financial education programme for Singapore and supported by Monetary Authority of Singapore defined financial planning as (they missed out on the credit management):

1. Managing your cashflow for your needs today and also to meet future goals like your retirement or your children’s education;
2. Managing you and your family’s exposure to unforeseen events like pre-mature death, illness or disability;
3. Investment planning to meet your financial goals;
4. Planning for your retirement;
5. Planning your taxes efficiently; and
6. Planning the transfer of your estate to the people and causes you care about.

Financial Planning and consumer education are strongly discouraged by proposed new legislation

Ironically, financial planning is going to be defined as a non-Financial Advisory (non-FA) activity. Under the near final draft of the legislation, Monetary Authority of Singapore (MAS) will not permit Licensed Financial Advisory companies to derive more than 5% of its revenue from financial planning. In other words, it seems MAS wants these companies to sell insurance and investments (although risk management/ insurance and investments supposed to be part of financial planning).

Don’t believe me? Go to the draft consultation paper by clicking on this website here: Consultation paper October 2014. Go to page 14. Paragraph 15 and 16 are saying that the licensed financial advisory firm’s revenue must not exceed 5% deriving from:

1. Providing training and consultancy in respect of financial planning or financial literacy aimed at educating and empowering consumers;
2. Providing will writing, estate planning and tax planning services.

For lawyers, you can read the draft legislation here:

1. Click: SECOND DRAFT AMENDMENTS TO THE FINANCIAL ADVISERS REGULATIONS
2. Search for “Part VIA Prescribed Non-Financial Advisory Activities”
3. Section 38B(1)(a)(b) and (b) stated the financial planning, will writing and tax planning are declared permitted ‘non-FA’ activities.
4. Section 38B(3) says these non-FA activities cannot exceed 5% of annual revenue.

My impression in MAS capping revenue to a tiny amount implies that it is a bad thing to provide consultancy on financial planning. Worst, does it implies that MAS is discouraging FA companies from educating and empowering consumer? Or put it another way round, does it mean it is a good thing to see consumers to continue to be ignorant and get cheated?

Did I miss out anything? Or am I becoming cynical?

Conclusions

1. There is a lot of misinformation on what constitute financial planning.
2. Ignorance can be overcome through education. But it is very dangerous when those who are ignorant does not know of their ignorance and try to act smart by spreading misinformation to those who are already ignorant.
3. New regulation discourages professional financial advisers from providing training and consultancy on financial planing.
4. New regulation discourages financial advisers from educating consumers to become financial literate.
5. New regulation discourages financial advisers from empowering their customers.

Because of (1) to (5), consumers will always be ignorant.

Update 3 May 2015: MDA orders The Real Singapore admins to disable access to online properties

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