As someone growing up in a family where my parents saved their way to financial freedom, I take wealth management seriously. I have seen first hand that average wage earning Singaporeans can raise 2 kids, fund their education and retire well. Prior to COVID19, my retired mom takes 2 long trips yearly with her friends. Were my parents business owners or high wage earners? No... they never crossed 5 digits in their monthly income.
However, because I've personally witnessed their success story in a comfortable retirement, I firmly believe most people can achieve this goal. It doesn't take genius, it only takes discipline and a desire to improve your life.
On the flip side, my work in financial advisory has also exposed me to many households who struggle with retirement. I've heard so many stories how poor financial planning has created scenarios where children leave schools saddled with education loans. The term sandwiched class also highlights the problems of a generation where they grow up with the responsibilities of financing their parents' retirement and also their own childrens' upbringing. The most common false rhetoric I keep hearing? Peoples' belief that they will dial down on their expenses once they retire.
After seeing how my thrifty low maintenance mother lead her retirement and also witnessing first hand how her entire social circle lead theirs... I dare to say with confidence that dialing down on your retirement expenses when you have unlimited loads of time won't be by choice.
Treating financial solutions like achievements unlocked
One of the most interesting observations in my financial advisory career is the number of people who approach managing their wealth with begrudging unwillingness. Many end up taking up financial solutions only because they rationally know wealth management is a need. However, beyond the ritual of making themselves believe they have behaved like responsible adults, there's no real desire or motivation to make an effort towards generating more wealth with their existing resources.
As an advisor, I often get the vibe that many financially apathetic individuals tend to treat taking up financial solutions like achievements unlocked. There's a certain amount of glee whenever they proudly proclaim they have fulfilled all their financial planning needs when asked to do a review.
Common objections to avoid reviewing their portfolio include:
1. Have a servicing agent already
Recently, my client's spouse who has an existing servicing agent became my client because she took up certain solutions that agent didn't carry. All this while, I've not insisted on a review because of this client's objection that she already has a servicing agent. The outcome of the policy review revealed that her coverage was 10 times lesser than my client even though they earned an equal income and shared the household expenses equally. This is not an issue when a couple has no children and are self sufficient but when children comes into the picture, the implication changes.
When a spouse under insures, the financial burden gets transferred to the healthy/surviving spouse. If the finances are not robust to address the unexpected financial changes, then there will be major adjustments that the family would need to go through on top of the stress of caring for a sick loved one or dealing with the demise of a loved one.
Having a servicing agent doesn't mean anything unless you are certain you got a pretty competent servicing agent.
2. Have insurance already
Another common objection that people like to raise is the issue of already having insurance. This is also the classic example of how people treat taking up financial instruments as unlocking achievements. The purpose of insurance or other financial solutions is to address a need you cannot solve on your own. It's not about proving that you are a responsible being because you have it.
If we look at the above example where my client's spouse is under insured, then when problems happen it's not as simple as clicking restart in a game because you didn't upgrade your superpowers enough to kill a monster. When problems arise in poor financial planning, families can break up from the stress created, you might go into debt and children might be deprived of opportunities they once had.
It's more important to know if your solutions can REALLY solve your problems or improve your life. Can it really ensure that your life or your family's life won't turn upside down?
3. Invested my money already
"Oh so how is your investment doing?" "No idea, my agent says it's making money."
Making money is a very vague word. 0.5% is profit, 1% is also profit, 10% is profit and 50% is also making money. More importantly, how long does it take to make this money?
Sometimes, people very proudly throw up big percentages at me because their agent told them so. However, when I sit them down and calculate their returns based on their investment duration, their per annum yield can be equivalent to a fixed deposit return. For example, a 10% return in 1 year is fairly good for most moderate risk individuals. But a 10% return over 5 years is actually only 2% per year. Is 2% worth taking a risk where you might potentially lose money? Food for thought.
This logic is similar in property investments. Many people think they are making tons of money through rental income but when asked if their yield is just as attractive after deducting the cost, they usually haven't calculated. They simply assume their investment is lucrative.
4. Did my retirement planning already
This idea of done is always puzzling. Even my mom who is happily retired is actively trying to seek new ways to grow her funds today. The thing is, we all do not know how long we will live. The impression that we have more than enough without having to downgrade our lifestyle only holds true if we have an on-going income stream and do not have to touch our savings. That's why a lot of her friends also actively seek out financial instruments to preserve their wealth. Once you start drawing down on your savings, it is the first sign that you might run out of money if you live a long life.
A relevant article: 5 Retirement Strategies Common in Singapore
2 Questions to ask yourself to know how robust your financial planning is
If you fall sick or pass on, can you and your family live as though nothing happened to you? For how long?
Once you retire, will you have enough money to allow you to live as though you are working for another 20-30 years?
These 2 simple questions if answered objectively will tell you if you need a second opinion or whether you need to review your portfolio.
If you would like to get a second opinion or do a portfolio review, please speak with a trusted advisor. You can also drop me a message if you would like me to help you with it.
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Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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