TheFinance.sg » Wilfred Ling

Finance & Insurance worst in productivity

Wilfred Ling — Fri, 18 May 2012 14:15:16 +0000

Written by Wilfred Ling Friday, 18 May 2012

In the latest statistics from MTI, Finance & Insurance industry suffered the worst productivity of -4.8% for the 2012 first quarter. Sharing the worst spot was from the Infocomm. Singapore’s overall productivity was -2.2%. I don’t know enough about Infocomm but I do know why the Finance & Insurance industry has negative productivity. When a person wants to buy a product, the following have to be done:

(1) Know your client (KYC) option A or B (because the industry need to have a majority numbers transacted either Option A or B as it is somekind of KPI.) So need to collect the intimate details of the client like their asset, liabilities, existing investments, married/widowed/divorce. Risk appetite (2) Fill up the Client Knowledge Assessment form which is another form of KYC (as if the first one not enough) which …

6 Hours workshop on estate planning (9 & 10 May 2012)

Wilfred Ling — Mon, 14 May 2012 17:59:43 +0000

Written by Wilfred Ling Monday, 14 May 2012

On 9 & 10 May 2012, I conducted marathon workshops on estate planning. This is my first time doing so as I was unsure how the response would be. Each workshop lasted 6 hours. Altogether, there were 16 individuals who attended this talk. I consider it to be a well-received workshop. Below were some of the comments made on the feedback forms:

The winning team lead by the professional planner

Wilfred Ling — Mon, 30 Apr 2012 21:36:24 +0000

A professional financial practitioner does not work alone. He worked as a team. More than merely a team member, the professional financial practitioner is the one that exhibit the leadership quality to lead the team. An analogy is that the general medical practitioner does not work alone but relies on other professionals.

But the difference between a professional financial practitioner and a medical practitioner is that the latter works with a 100% human client, the former works with a 101% human client. Put it this way, the professional financial practitioner is a very person-oriented individual. He does whatever it takes to complete the financial plan consisting of a theoretical framework he developed, implementation and execution. To do this, the professional financial practitioner cannot work alone. He needs to work with other professionals. Some of the professionals that need to be part of the ‘A-Team’ are:

Life insurance specialists
Investment specialists
…

Theory and Evidence in Understanding the Incentives of Commissions Motivated Agents

Wilfred Ling — Wed, 25 Apr 2012 07:58:32 +0000

Someone informed me of a research done by three researchers from Wharton,Harvard Business School and Harvard University relating to commission-based agents in the India life insurance market. The following were some observations:

In our first experiment, we randomly vary both the stated belief of the customer as to which product is most suitable, as well information the client provides about his or her actual needs. Thus, we have some treatments where the customer has an initial preference for term insurance but where whole insurance is actually the more suitable product, and vice versa (whole insurance could be a suitable product for an individual who has diffculty committing to saving). If an agent’s role is to match clients to suitable products, only the latter information should affect agent recommendations. In fact, we find agents are just as responsive to consumers self-reported (and incorrect) beliefs as they are to consumers needs….. We …

Pay for actual work rendered is the right way, but are you willing to do the right thing?

Wilfred Ling — Mon, 23 Apr 2012 08:20:33 +0000

The Straits Times forum page (online and paper version) continues to receive letters on people who either support or oppose the assumed direction in banning commissions earned by advisers. Therefore, I will also just keep on writing the same subject on my blog. For today, I want to write on why consumers are mainly at fault why the fees charged by financial planners are so high. Yup, my fees are very high too.

For many years, I offer both simple planning and comprehensive financial planning. The former will just take up at most 2 or 3 hours of my time. The latter will take up at least 20 hours to 30 hours. Naturally I must charge according to the actual work rendered. However, I’ve hardly any takers for the ‘simple planning’ cases. Even fresh graduates are not interested in ‘simple planning’. Most people either decide to engage me for comprehensive …

What is the hourly fee an adviser should charge? It is just $1.85

Wilfred Ling — Sat, 21 Apr 2012 22:03:28 +0000

Recently, I have been asked about the fee-based model and whether is it viable. In the past, few advisers asked me this question because it is more lucrative to sell products. Although MAS did not say commission will be removed, it appears that the industry thinks this is the direction. So many firms and advisers have started to prepare themselves for the change. I was asked again and again whether is fee-based viable and exactly how much should advisers be charging? There are many ways to calculate how much the advisers should be charging. My blog readers would have read it from my past articles. The fee is dependent on a combination of the adviser’s expertise, experience and business cost. Today, I’ll give another perspective to how much an adviser should be charging based on a comparative approach.

Under comparative approach, advisers should compare themselves with other similar occupations. By …

My Feedback for Financial Advisory Industry Review (FAIR)

Wilfred Ling — Wed, 18 Apr 2012 12:47:04 +0000

I just submitted the letter to MAS:

Dear Sir,

RE: Feedback for Financial Advisory Industry Review (FAIR)

As a full time fee-based professional financial planner for many years, I bring with me significant experience which I want to share with the committee. I am a CFA charterholder, Chartered Financial Consultant and as well as an ISO 22222 (SCI) certified person. I am an Appointed Representative.

1a. Currently, any person who possesses 4 GCE “O” Level credit passes can become an FA representative. Is this sufficient? If not, what do you think is an appropriate educational requirement for representatives, and should exceptions be made for existing and/ or older representatives?

These days, many consumers are highly educated. Financial representatives should possess a tertiary education as they would have to demonstrate the possession of a minimum intellectual capability. The tertiary education I recommend is at the university level. In my …

"Fee-based" is a four-letter word for financial adviser client

Wilfred Ling — Tue, 17 Apr 2012 08:03:17 +0000

Written by Wilfred Ling Tuesday, 17 April 2012

I read this article with amusement “FEE-BASED” IS A FOUR LETTER WORD FOR FINANCIAL ADVISOR CLIENTS. In the article it stated that:

About 64 percent of respondents had a negative reaction to the phrase “fee-based.” … Here are a few investors do like: savings, growth, goal, insured, portfolio, appreciation, return, results, trust and no fee.

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Setting up a trust isn’t estate planning

Wilfred Ling — Sat, 14 Apr 2012 08:22:01 +0000

There was a business times article entitled “Estate planning: Private bankers or lawyers?” It was an article on engaging lawyers and private bankers for estate planning.

Many people think that setting up a trust is estate planning – it is not. Trust is one of the many tools and products used by an estate planner in implementing an estate plan. But these tools are not estate planning. The financial industry got it wrong when it gave the impression that buying an insurance policy (product) is financial planning. Similarly many people thought that writing a Will or setting up a trust is estate planning.

To build a building, we first must have the architecture design. It is followed by construction using construction tools such as bulldozers, crates, etc. Estate planning is like the architecture design. Wills and Trusts are tools similar to that of the bulldozers and crates. Without …

Photos taken for the Investment Workshop 14/4/2012

Wilfred Ling — Fri, 13 Apr 2012 23:00:00 +0000

Written by Wilfred Ling Saturday, 14 April 2012

This afternoon, I conducted an investment workshop entitled “Money Supply and Economics” at my office. Despite it being the second time I am conducting a workshop on the same topic, it was well attended with many questions from the attendees. I had deliberately capped the size of the workshop as I wanted more interaction with the attendees. Nevertheless, I think the room is getting a bit small for my workshops :)

The topic was not an easy topic and so I had spent quite a lot of time trying to make it easily digestible for the lay person! This group of attendees asked many interesting questions such as:

Japan and US are heavily indebted countries. However, the Yen appears to be much stronger than the US dollar. Why?
Is the growth of money supply in Singapore due to economic growth of …

ST Forum letter: Financial advisers go beyond writing reports

Wilfred Ling — Tue, 03 Apr 2012 23:00:00 +0000

The following was published on the ST Forum Online on 31/3/2012: HERE

AS A fee-based financial practitioner for many years, I take issue with the reported comments by Mr Vincent Ee, vice-president of the Association of Financial Advisers Singapore (‘Financial advisers seek gradual changes’; Thursday).

He said financial advisers who are paid a fee for their advice, rather than commissions based on the products they sell, would be ‘interested only in coming up with a nice report and charging a fee’.

The report is necessary for documentation and compliance, but is in no way the central focus of the client-adviser relationship.

Professional financial planners adhere to the industry-wide practice of a six-step process in financial advisory, which includes the obligation to implement and review the financial plan. The process is embraced by professional bodies such as the Certified Financial Planner and Chartered Financial Consultant.

Consumers who want to have greater …

Talk given to Down Syndrome Association

Wilfred Ling — Sat, 31 Mar 2012 21:04:41 +0000

Written by Wilfred Ling Saturday, 31 March 2012

Today I gave a 1 hour talk to members of the Down Syndrome Association on financial planning for persons with special needs. Special Needs Trust Company was also there to give a 1/2 hour talk. Representative from Center for Enabled Living was present to answer questions relating to Special Needs Saving Scheme.

This is one of the best talk given. Not because I spoke well but because the audience was really interested in financial planning. You see, majority of Singaporeans cannot be bothered with financial planning and only like to get into get-rich schemes. But for this audience, their eyes opened when I introduced to them what is really meant to have a financial plan for their children with special needs. Although there are 15,000 advisers in Singapore and I am very sure every single audience members were prospected by agents …

ST Forum letter: Fee-based scheme not a problem

Wilfred Ling — Fri, 30 Mar 2012 05:49:59 +0000

The following letter was published on Straits Times online HERE:

I SUPPORT the Monetary Authority of Singapore’s review of the commission-based structure of financial advisers (‘Financial advisory sector faces shake-up‘; Tuesday).

Many advisers and firms have their doubts, anticipating that clients will be unwilling to pay for advice.

But that is the case because the main focus of financial advisers now is product sales. As a fee-based financial practitioner for many years, I have had no problems finding clients who are willing to pay fees for advice as long as they understand that the client-adviser relationship is not focused on products.

Patients are willing to pay consultation fees to doctors because they are confident of obtaining good advice without fear of being prescribed unnecessary drugs.

Similarly, advisers can be confident about charging a fee provided they are competent to advise holistically on retirement, investments, Central Provident Fund, …

Sweeping changes to the financial industry is coming…

Wilfred Ling — Tue, 27 Mar 2012 10:13:18 +0000

Yesterday, the Managing Director of Monetary Authority of Singapore announced possible sweeping changes to the financial industry at the anniversary gala dinner hosted by the Life Insurance Association. It was also reported by the Straits Times Financial advisory sector faces shake-up Mr. Ravi Menon spoke of the need to put customers’ interested first. The following topics were addressed:

Raising the Competence of FA Representatives
- MAS introduced new modules specifically for structured products effective 1 January 2012 to ensure FA representatives have sufficient knowledge of the wide and complex range of investment and insurance products currently available in the market. Some representatives questioned the need to take these exams if they are selling simple products. MAS takes the view that a good financial adviser should be able to explain the advantages and disadvantages and the risks of competing products – both simple and complex.
- Currently the minimum entry requirement for FA …

FSA sees synthetic ETFs as an emerging risk area

Wilfred Ling — Fri, 23 Mar 2012 23:00:00 +0000

Written by Wilfred Ling Saturday, 24 March 2012

I always admire the role of the FSA which is the UK financial regulator. If I am not wrong, they are probably the first in the world to outlaw commissions earned by financial advisers. This meant to be good because financial advisers who no longer earn commissions can recommend anything else which previously did not pay commission. Exchange Traded Funds (ETFs) are the beneficiaries of this good thing. Unfortunately, what’s happening at the ETFs space isn’t all things good.

Synthetic ETFs have become more and more common. I am always against buying synthetic ETFs. But I thought I am alone until today. It was reported that the FSA considers these products to be an ‘emerging risk’ to the UK retail investors. In fact, the FSA did some audits on firms that recommended such products and found them to have poor practice. …

Recovable nominations now permissible under new fatwa, says Muis

Wilfred Ling — Thu, 22 Mar 2012 07:56:30 +0000

Written by Wilfred Ling Thursday, 22 March 2012

MUIS has issued a new fatwa permitting Muslim to make recovable nomination on their insurance policies. Previously, only irrecovable nominations were permitted. With this, there are 5 estate planning tools available for Muslims:

Irrecovable insurance nominations
Recovable insurance nominations
CPF Nominations
Will (up to 1/3 of estate to non-heirs)
Irrecovable inter vivo trusts…

Girl,11, molested by uncle 20 times. This can happen to your daughter.

Wilfred Ling — Sun, 18 Mar 2012 23:00:00 +0000

According to a Straits Times article Coach driver molested niece when she was 11, it was reported that the girl’s uncle molested her 20 times. She did not dare to report it earlier due to out of fear. Of course, this can happen even for young boys as well. Sometime, the greatest enemy turns out to be a relative.

This highlights the fact that young children are extremely vulnerable. First, for the very young they seriously do not know what is right or wrong. Second, even if they know what is wrong, they are fearful to report it. If their closest relative can do harm to them, do you think they trust a teacher or a policeman who are strangers? Third, do they seriously know who to report to anyway? Fourth, if the issue at hand involves civil suits (i.e. not a police case) such as mismanagement of …

Personal Finance of a Singaporean Youth

On workshops & seminars and mailing lists

Wilfred Ling — Thu, 15 Mar 2012 20:50:29 +0000

Written by Wilfred Ling Thursday, 15 March 2012

There are only 3 seats left for the workshop on “Money Supply and Economics”. The maximum capacity is 20. I am quite surprised by good response despite it is 1 month away. I guess most people took advantage of the early bird discount. Sign up before it is too late. The registration page is HERE

In the meantime, I will be involved in various speaking engagement for various organizations in addition to those organized by myself. All topics will be related to finances. Some of the talks are opened to public. If anyone wants to be informed of these seminars/workshops in advanced, make sure you are on my mailing list. I have two mailing lists, one is for financial advisers and another one for non-financial advisers. To ensure I only sent out relevant emails, I decided to segregate the two groups …