Saturday, February 16, 2008

Can we really retire comfortably? (3)

The 3rd barrier Singaporeans faced is the misconception of Financial Planning and the Execution of a wrong Financial Plan which they DIY themselves.

A survey by MoneySense in 2006 claims that
- 86% of Singaporeans Save
- 61% keep track of their spendings
- 83% done their financial planning
- 73% considered the risks involved before investing
- 61% monitored their investments
- 86% understood about risk diversification

With my experience, the above sounds too good to be true. Generally,

1) Talking about Singaporeans Mindset in Savings
a) When they save a dollar today, they will spend the same dollar at a later date
b) If that dollar is not totally spent, the savings will land up in 3 places
* Bank to earn 0.25% interest
* Pay premium of many Whole Life Insurances + Endowment Policies
* Accumulate and invest in the stock market
c) Many don't have a proper objective and blueprint when they save. They either put in assets that earns too little returns or lose money in their investments.

2) Talking about Singaporeans claiming having done Financial Planning
a) I doubted so. Maybe an agent simply show a concept and tell him to buy a whole life policy or endowment, he thought a Financial Planning is completed.
b) They thought that having a few insurance policies is Financial Planning
c) They thought that when their budget is stretched and they cannot buy any more insurance, it means that Financial Planning need not be done.
d) The don't even know their retirement and insurance numbers.
e) They simply don't want to see a qualified planner because they cannot differentiate a qualifed planner and pure Sales Insurance Agent who just sell. To them, all of them are just Insurance Agents.

3) Talking about Singaporeans knowing risk diversification and monitored their investment
a) Yes. They monitor their investment. But on a short term basis, probably on their stock market. Its just like watching the teletext for the 4D results every weekend.
b) They monitor their investment and when their investment loses money, they cut loss and sell
c) Yes. They diversified their investments. But in the same market! Eg, China Fund, India Fund, BRIC Fund, Emerging Market Fund all in the same portfolio.
d) Yes. They considered the risk before investment. But they underestimate Risk and overestimate returns.
e) There are systems and guideline in place for investment. Not the haphazard style that most adopted. The investment mindset is not correct.


Anonymous said...

Adrain, i agree with what you have written. Generally, customers don't know what it is going on in thier lives. Of all the people in this world they leave and trust their insurance sales agents to 'advise' them on personal finances.It is like getting a plumber to fix the leakages in their retirement fund.That is still not too bad but having insurance agents they will plunder people's financial future.That is what is going on today.The customers got all entangled up financially and messed up by insurance agents. The mess only discovered after many years. By that time the insurance agents already not in the business. Looking for quick fix? solly, lah, not easy.

Anonymous said...


Ask the agents about diversification, many will divert you to their endowment plans. The reason is they are scared or not confident to help you with ILPs. They prefer to play safe FOR THEMSELVES and not YOU. So don't be mistaken that they have your interest in mind They think so. Wait till the law catches up with them. Clients of these agents can never achieve retirement because they are not qualified.