L A I C N A N FI G N I N PLAN
2019 r e b m e v No
DISRUPTIVE TRENDS IN
WEALTH MANAGEMENT
STRATEGIES FOR HALF TIME
FINANCIAL PLANNING
or vis
You r
usted A r d T
BOOK REVIEW
NARRATIVE ECONOMICS
F F O O E E L L B AB TA T S S T T N N E E T NT ON CO C 3 4 6 8 10 12 14 16 18 20 22 23 24 26 27 28 30 30 32 35
President's Message Chief Editor's Message Disruptive Trends in Wealth Management Preventing and Managing Financial Disputes-Stories by FIDReC CPF Sharing for Financial Planners Planning for Retirement Holistically Vision Without Execution is a Daydream Strategies for Half-Time Financial Planning The Mental Capacity Act, You & Your Retirement Planning Why Don't Our Client's Decide on the Spot? Book Review: Billion Dollar Whale Book Review: Narrative Economics Recognition and Support Needed for Financial Planners CPF Talk: Taking Charge of Your Healthcare Costs FPAS Stakeholders' Luncheon FPAS Financial Planner Awards 2019 World Financial Planning Day 2019 (Professional Series) CFPÂŽ and IBF Certification Ceremony World Financial Planning Day 2019 (Consumer Series) 2020 Upcoming Events Calendar Financial Planning Association of Singapore 112 Robinson Road #07-02, Singapore 068902 (65) 6372 1030 Tel: (65) 6372 0121 Fax: admin@fpas.org.sg Email: Website: www.fpas.org.sg MCI (P) 013/01/2020
reessiiddeenntt''ss Pr P GE MESSA
Dear Members,
Alfred CHIA, CFP®
I am pleased to inform you that a new Exco was elected to serve for a term of 2 years at FPAS AGM held on 26th April 2019. On behalf of FPAS Exco, I would like to express our appreciation to Mr Edy Hartono, Immediate Past President, and EXCO members Mr Daniel Tan, Mr Michael Borchert and Ms Kee Siew Poh for their past contribution. Together with my new committee, we will continue to serve you and the community to further uplift financial professionalism. We look forward to your continued support as we chart towards FPAS' vision. We are glad to have the secretariat led by Ms Samantha Wong supporting us. In 2019, FPAS has successfully organized several events with strong attendance including talks by CPF where we had over 300 professionals attended the event. CPF shared on questions regarding CPF schemes to help their customers. FPAS also participated in the panel of speakers during the World Investor Week (WIW2019) a global initiative by IOSCO supported by MAS and SGX. We are also pleased to organize the 2nd World Financial Planning Day in Singapore (WFPD2019) led by the Financial Planning Standards Board (FPSB). This is a global event supported by 27 CFP territories where it aims to help consumers to understand the importance of having a financial plan and working with a competent and ethical planner who put clients' interest first. FPAS continues to support pro-bono workshops for general public through its collaborations with NTUC U Associates, CPF, People's Association and Moneysense roadshows, managing its financial health clinic. I would like to take the opportunity to thank our CFP® speakers and volunteers. We look forward to greater participation by our members who wish to volunteer their time and skills to support FPAS' initiatives, as we continue to grow and bring value to the general public. FPAS once again is pleased to announce that it has launched its 3rd Financial Planner Awards. The competition will be more intense as we see rising number of high-quality submissions. I strongly encourage your participation to showcase your excellent financial planning skills. On behalf of FPAS, I would like to thank you for your continuing support, participation and contributions! I wish everyone a Happy Holiday and Merry Christmas!
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C Chhiieeff E E d d ii to or r MESSA t ''ss GE Dear Members, As we get into the last month of the year, the financial markets continue its bull run. The recession narratives have slowed down, the Brexit deadline came and went, Geo-politics continues to take centre stage with TurkeySyria escalation and the US-China trade war being soft peddled into potential tariff reduction.
Yash Mishra, CFP®
It was a year of coming of age of the Unicorn ipo's – Uber, Pinterest and Shelved ones as We-work that moved from their lofty valuations to discover the reality checks of listing. We-Works went from $47B valuation to distressed asset in a span of a month. These were disruptive a company in the technology sector. To understand the same trends that may affect some of the Wealth management industry, we feature the "Disruptive Trends in Wealth Management". To help navigate that macroeconomic Narratives and how they end up shaping broader macroeconomic policies, we share with you in the book review section, how Prof Robert Shiller's book Narrative Economic that helps you understand how you can identify these viral stories that affect both individual and collective economic behaviour and thereby improve our ability to predict, prepare for or at least lessen the damage from recessions or other crises. As the year draws to a close and, the year end is about reflection and planning for the new year ahead in form of new resolution. Enjoy the holidays, safe travels, and we feature a good travel read – The Billion Dollar Whale – reads like a whodunit, but exposes the world of hubris, that exists when unbridled greed meets large capital. Wishing all readers, a wonderful 2020!
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in Wealth
Management
By Yash Mishra, CFPÂŽ
Wealth Management one of the most attractive sectors within financial services for at least two reasons: First, WM businesses tend to have greater growth prospects, lower capital requirements – unless you count the cost of human capital, and a higher return on equity (ROE) than most other retail banking businesses, hence their appeal to diversified financial services firms at a time when capital is viewed as more expensive, growth is hard to come by, and equity returns for the banking industry are close to the cost of capital. The wealth management offerings are essential to attracting and retaining profitable retail customers. For instance, based on our experience, mass affluent customers can typically represent 80% or more of the net income generated by retail banks, and they often regard their relationship with a provider of WM services as their most important financial relationship. As a result, many diversified financial services firms are doubling down on their WM businesses. However, this industry is in the midst of significant change: a new generation of investors, whose expectations and preferences have been shaped by new technologies and by their living through the last financial crisis, have brought new standards to the industry in terms of how advice and investment products are being delivered. Furthermore, a challenging investment environment, characterized by increased levels of uncertainty and rising costs of risk to investors, is making it harder for advisors to generate superior investment performance for their clients. Shifting demographics with the ageing of advisors and an upcoming transfer of wealth from baby boomers to the next generation will upset many established advisor/client relationships and create opportunities for new firms to grow market share at the extent of incumbent firms. Finally, increasing regulatory burdens, new business models like digital banks and new competitive patterns will compound the complexity.
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From my perspective, there are 3 key trends: Rise of the New Age Investor
This refers more to the changing expectations and standards by a new generation of investors. They have been labelled Gen X and Gen Y and the baby boomers who are being influenced by their younger peers. This New Age investor is more sceptical of authority than previous generations of the investor. They believe in the wisdom of the peers and likely to seek opinions and views from multiple sources of advice simultaneously, think their social media groups of peers that include University alumni, work colleagues, amongst others. The expectations are further shaped with non-financial digital firms (e.g. Google, Facebook) as well. They expect to be able to access advice anywhere and at any-time, through multiple channels as part of a cohesive digital experience. They want tailored customised advice instead of being treated as a segment. They have their unique goals, with specific preferences (It's Me, not someone else). They seek to stay in control and reluctant to buy into discretionary services and increasingly comfortable doing their research. The perception of risk has also changed for the investors as they perceive risk as downside rather than volatility. An example of this may be that advisors have had to emphasize on capital markets and hedging strategies that seek downside protection more than traditional portfolio allocations that seek to manage risk through diversification. This new age investor feels entitled to the same investment products and strategies available to Ultra High Net worth (UHNW) or even institutional investors forcing WM firms to think through new ways to give their retail investors access to alternative as investments and new asset class is likely to increase.
Holistic GoalBased Advice
The business models have been based on investment advice where portfolio allocation, stock picking, mutual fund selection) and tried to convince clients of their ability to deliver superior investment returns for them. However, investment advice has now largely commoditized, at least for mass-market or emerging affluent clients with most WM firms, even the smaller RIAs, having access to the same products, tools and models. Consequently, it is hard to differentiate the financial advisors to prove their services are differentiated based on their investing prowess. Client's trying to achieve multiple goals over time need to understand the trade-offs and see how to make them. This requires a shift in Wealth Management firm's ability to develop and train advisors on goal-based advisory framework and tools. Despite these developments industry still faces significant barriers to providing holistic advice to clients, including access to the right tools and software training, access to the right tools and software training, access a wide range of products and services and compensation. Wealth management firms need to address these a barrier in order to meet their clients' changing needs.
Longevity Challenge – Of lifespans, Capital and Advisory Talent pool
Wealth managers serve clients across the wealth spectrum. All clients but the wealthiest have of these have one primary concern which is outliving their assets a. Many investors simply want assurance that they can generate enough income in retirement aa to continue their current standard of living a. Simple as it may sound providing this assurance is no longer simple as life expectancy has risen, medical costs have risen, potential insolvency of government entitlement programs a have generally shaken these investors aa confidence in their retirement a security For advisors, providing advice and planning around retirement income is an incredibly complex task. Advisors need to help clients make numerous assumptions around portfolio returns, inflation, future tax rates, longevity, housing costs, healthcare expenses, the future of social security and many more issues. This is further compounded that about 43% of financial advisors in the US will be over 55 years old and the industry contends that a third of those will retire from the workforce in the next decade. That leads to a focus where with the rise of digitisation, longer lifespans, changing life expectation, we also have a shrinking pool of qualified, experienced financial advisors.
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G N I T N E V E A G N ING A R M P ND A sputes l Di Fi nancia by FIDReC Stori es
By Eunice Chua CEO, FIDReC
In recent years, the Financial Industry Disputes Resolution Centre ("FIDReC") has seen an increase in the claims filed by consumers against financial advisers licence holders and insurance brokers. Most of these claims related to allegations of inappropriate advice, misrepresentation or disclosure issues. Most commonly, the product involved was investment-linked insurance products. Through two case scenarios, this article provides some tips to prevent and manage financial disputes.
the shopper
Mary was an administrative assistant who would be retiring from her job in a few years. One afternoon, Mary went shopping at a mall when she was approached by a financial advisor, John, during a roadshow. John told Mary that she could convert her local bank savings account to a "saving policy" that could earn her interest at 3%. Attracted, Mary sat down to listen to more. She heard John say that she could draw or save yearly for a maximum of 15 years. She later purchased the product with a view to save for her old age. However, when Mary chatted with her financial advisor friend some months later about this policy, she was shocked to discover that the policy was an insurance plan and that she would have to pay monthly premiums of $1,000. She worried that she would not be able to finance the premiums after she retired. She approached the relevant financial institution to ask if she could be refunded the amounts she had paid. After a few unfruitful discussions, she was referred to FIDReC.
The Expatriate
Tom was a busy expatriate. He ran a small business and had two young children who would soon start school. He was introduced to a financial advisor, Mark, at a social event and shared with Mark that he had some modest savings of $50,000 that he wanted to set aside for his children's education and other future plans. Tom later met up with Mark again. After going through a financial review questionnaire with Tom, Mark recommended a certain investment-linked insurance product to Tom and went through the policy benefits. Tom understood that he had to make an initial contribution of $45,000 and thereafter pay a sum of $700 every 3 years. The initial contribution would double as this product qualified for a special benefit. Tom purchased the product after some further email exchanges with Mark.
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Later, Tom discovered that he needed to make a yearly contribution of $20,000 for 20 years. He felt worried as his children would soon start school and his expenses would increase. He believed that he had been mis-sold a product unsuitable for him and complained to the relevant financial institution. He wanted a refund of his initial contribution and to terminate the policy. The financial institution refused and said that Mark had not done anything wrong as he had explained the product fully to Tom. Dissatisfied, Tom approached FIDReC.
Mediation: the First Step
Both Mary and Tom went through a mediation session at FIDReC with a FIDReC Case Manager. A representative from the financial institution was present at the mediation as well. During the mediation, the Case Manager facilitated negotiations between the parties, asked questions to clarify points, strove to help each party understood where the other was coming from, and provided suggestions on how to move forward when parties became stuck. In Mary's case, although the financial institution felt that there was no wrongdoing on the part of its financial advisor based on its interviews with the advisor, the financial institution acknowledged Mary's plight and eventually worked with the insurer to reduce the sum assured so that the monthly premiums were reduced to $180 a month, a sum that Mary was comfortable paying. Mary and the financial institution entered into a written settlement agreement and the case was concluded. In Tom's case, the mediation did not produce a settlement as neither party was willing to compromise.
Adjudication: the Second Step
When a case at FIDReC does not settle at mediation, the complainant can choose to pay an adjudication fee of $53.50 and proceed to adjudication. Under FIDReC's Terms of Reference, the financial institution will be bound by the adjudicator's decision, but the complainant is not. All parties will have to prepare submissions and provide supporting documents to the adjudicator to substantiate their case. Tom's case could have very different outcomes depending on the amount and quality of evidence that he and the financial institution are able to produce to support their claims. Assuming that the financial institution had all the relevant documents in order, including the duly-signed questionnaire and benefits illustration, email correspondence, and witnesses to convince the adjudicator that the relevant terms of the policy had been explained to Tom and that the policy was indeed suitable based on the information that Tom provided to Mark, then it is likely that the adjudicator will rule in the financial institution's favour. On the other hand, if Tom can produce evidence to show that based on the completed questionnaire and the information he had given Mark the policy was unsuitable for him, and that Mark had misled him on certain crucial aspects of it, with Tom and Mark's exchanges captured over email correspondence and WhatsApp messages, then it is likely that the adjudicator will rule in Tom's favour.
KEY TAKEAWAYS
To prevent disputes from arising, financial advisors should: a. Take care to fully understand the client's financial objectives, situation and needs, before recommending suitable products.
c. Never make deceptive, false and misleading statements to the client.
b. Comprehensively explain the recommended products, both benefits and risks, to the client. Ideally, the explanation or the client's confirmation of understanding can be documented.
d. Ensure they make full and adequate disclosure of all facts that a client would need to make an informed decision.
When a dispute arises, the first step should always be to find an amicable resolution whether through negotiating directly with the client or, if that is not successful, mediation at FIDReC. Parties should try to work out a win-win situation and be realistic about the strengths and weaknesses of their case. Showing empathy is always appreciated and can often be the catalyst to generating a solution. In the event that a dispute is not settled amicably, then it is important to gather the best possible evidence so that a clear case can be presented to the adjudicator. Presenting a case is not about just listing the facts, but explaining how and why they support what a party wants the adjudicator to believe. It is also appropriate to provide a response to the other party's claims. In conclusion, disputes are an inevitable and natural part of life that we should be prepared for. FIDReC is available to offer assistance where required.
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G N I R A H S CPF Planners For Financial FP ÂŽ ng , C By Adrian To
Greetings, I attended a talk by the CPF board on the 8th of August. I learned some interesting things that might be useful to us. Here's what I learned. The talk started with issues regarding the self-employed. For this group of people, they only need to contribute to their Medisave account. As people in this group have irregular income and do not have corporate health benefits, it makes sense for them to voluntarily contribute to their ordinary and special account to plan for their future. Based on a recent survey, most people have no idea how much they need for retirement, and many people interviewed estimate that they need around a lump sum of one million dollars, or around one thousand dollars per month, upon their retirement. The whole idea behind the CPF is that it is designed for retirement. For retirement, one should have one fixed payment and one variable. And as the CPF is designed to cater to basic needs, to payout a constant flow of income, upon retirement, as a regular pay cheque for our later years. Any additional income from other sources of investment can be a pay cheque that can enhance our retirement lifestyle. This is why there are a few retirement plans under CPF: Basic Retirement Sum (BRS), the Full Retirement Sum which is 2x the BRS, and the Enhanced Retirement Sum which is 3 times the BRS. 10
At age 55, one would be able to withdraw the first $5,000 of their Ordinary and Special Account savings, while further withdrawals would depend on covering the BRS first. After that, the remaining money will be put into the Retirement Account (SA). This would be used for regular payout under the CPF Life scheme for our retirement. We can choose from the basic plan which leaves more money for the next generation, the standard plan which give us a higher monthly income, or the escalating plan which increases the payout at 2% a year to help us fight future inflation. The escalating plan would be the best plan to choose if the person believes he can live to a ripe old age. Note that the payouts are not in proportion to the sum invested in the CPF Life due to tier interest. Men and women have different payouts due to women living longer generally. One way to make use of this is: if only one spouse works, the working spouse can transfer money to the non-working spouse to enjoy a higher total payout.
who to give our CPF money to when we pass on, we must make a nomination. By default, CPF money will be given to the beneficiaries in cash, not into CPF, this includes Medisave. If we want to out the money into our beneficiaries' CPF instead, we need to make a special type of nomination called Enhanced Nomination. Note that for each nomination, it can either be in cash or into her or his CPF, and not partially cash and partially CPF. Different beneficiaries can receive the money in different modes. We can either go to a CPF customer service, or go to the CPF website to print out the form, sign and mail it to CPF for the nomination. However, claims for the Dependent Protection Scheme Insurance, and our HDB are covered by our will instead of Nomination. Note that for Minors,
In order to get a higher monthly payout, we can also do more cash top up. Currently, the maximum we can top up into our special account is the Full Retirement Sum while the retirement account is up to the Enhanced Retirement account. Money that is used to top up our CPF account, up to the Full Retirement Sum can also get a tax relief. However, we must also look out for the CPF annual limit. Putting more money into CPF is a good idea as not only are the interests high and risk-free, the CPF money is also protected from debtors. We should try to go for enhanced retirement sum if we have the money. We can also make a voluntary housing refund. If we had used some of our ordinary account money to pay for our flats, we can pay it back into our ordinary account using extra cash. This can help to increase our CPF Life payouts. Finally, we can also do it by deferring our payout age. The earliest we can get our payout is at age 65. However, with every year we defer, we will get extra 7% payout, up to the age of 70. If no choice is made, the CPF Life will be the standard plan by default and will payout at age 70. Finally, when a person passes away, the CPF money is not covered by one's will. If we want to choose
if they are CPF Nominees, the money will be held by public trustees until age 18. However, if no nomination is made then the money will only be given to them at age 21. And for enhanced nomination, the person can choose which accounts to put into. For the purpose of housing, if one's mortgage is paid using CPF and the loan term goes beyond the age of 55, one needs to call CPF to leave money in the OS for mortgage payment in OA, as money in the OA and SA will all go into the RA at age 55.
Jointly organized by FPAS and CPF Board
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Planning For
T N E M E RETIR ICALLY HOLIST By DBS Bank
Financial independence is what all of us want to achieve when we approach retirement. We want to live in relative comfort, meet our daily lifestyle needs, and ideally, be able to afford pursing our dreams. As such, repaying our debt and adequately preparing for retirement should be of focus when we are still actively working. Otherwise, the two decades or more that we live as retirees will be plagued with constant worry about financial adequacy for basic needs and unexpected events.
PRERETIREMENT: HOW WOULD YOUR PRIORITIES CHANGE?
In your 40s Seeking significance over career succes
Having enough money to take a sabbatical to travel the world to broaden our horizons or upgrade our skill sets to meet the demands of this changing world or scale down on work to focus on family may be part of the plans during this life stage. This could range from pursuing a passion to supporting a child taking the PSLE exam. Failing to plan to set aside enough funds for these career breaks may force people to dip into their retirement savings, causing them to fall back on their retirement plans.
In your 50s Seeking stability
As retirement nears, some look to fully repay or "right-size" their homes to prepare for the time they stop work. Supporting various loan repayments adds to the monthly living expenses required during retirement. Often, loan repayments make up a sizeable chunk of monthly outflows and people forget how much they cost as they get accustomed to paying this monthly sum automatically while still working.
In your 60s Health is wealth
Unexpected medical expenses or chronic long-term care becomes more of a concern as one grows older. Getting your personal insurance when young and healthy will ensure sufficient coverage to meet the cost of medical inflation in the future. It is also important to consider rider options to cover the cost of co-payment for future medical procedures. Solely relying on company insurance is not enough as the option to buy over that insurance may not be on the table. In some cases, buying over company insurance will be costly due to the high premiums. Depending on individual circumstances, setting aside money for home care, physiotherapy and other old age care is also recommended. 12
INVESTING AND RETIREMENT
With rising life expectancies, it is no longer viable to simply live off the sum of accumulated savings from a lifetime of pay checks, so being invested well into retirement becomes a practical approach to sustain the desired retirement lifestyle. In fact, the amount of money to set aside for retirement should consist of a healthy sum of savings, complemented with investments that continues growing over time, and insurance for protection against unexpected, large medical expenditures. There are also alternatives, like endowments that cash out at certain points to give you a lump sum to use for the next several years, and annuities that pay a fixed monthly sum throughout retirement until death (provided premiums are fully paid up before retirement). The 'must have' pot is for basic needs, like food, groceries, transport, medicine and shelter. With this pot of money, you should seek preservation. Taking minimal risk as you absolutely need it to support your basic quality of life and cannot afford to lose it. The 'nice to have' pot will include finances set aside for your dreams, such as round-the-world luxury cruise or private dance lessons. You can afford to take some risks with this money knowing that if part or all of it is lost, you could delay or scale down your aspirational plans without affecting your basic quality of life.
SO HOW DOES ONE SUPPLEMENT SAVINGS WITH INVESTMENT?
The 'need for now' pot are funds that you need to keep liquid as you are deploying them for near-term needs. The 'need for later' pot can take on varying degrees of illiquidity, thereby increasing your investment options (in terms of time horizon and instruments).
The viable options on how to grow your wealth is dependent on the number of years left to your target retirement age. Starting at 45 years old versus 60 years old makes a significant difference when considering the effects of compounding and the ability to withstand losses over a 15-year time horizon. In your 40s, you have time on your side. You can re-invest your gains and allow compounding to grow your money. Or if there is a market downturn, you can afford to wait out for an upturn for your investments to recover or exceed their pre-downturn value. Generally, as one grows older with age, their risk tolerance declines, and capital preservation becomes increasingly important. A good approach to take is to grow your wealth in parts. Split your retirement fund into several compartments: the 'must have' and 'nice to have'; as well as the 'need for now' and 'need for later'.
HOW INFLATION IMPACTS YOUR RETIREMENT PLANNING
One way to estimate the amount needed for retirement is to reference the Wage Calculator provided by the Monetary Authority of Singapore. This calculation method assumes that the total savings collected while you are actively working will become your 'wage' during your retirement years. According to the calculator, to purchase $2,000 worth of the same basket of goods and services in 1998, a person would need to earn $2708.46 in 2018. This means that to maintain the same level of purchasing power over a 20-year period, one will require a significant 35.42% increase in 'wage'. Assuming the inflation rate stays constant and you plan to retire in 20 years' time and need a monthly living expense of $2,000, you will need to start saving $2,708.46 every month from now to fund one month of future retirement. Realistically speaking, this calculation shows that savings alone is not enough to fund for your full retirement as inflation rate does not stay the same over time. Once your current financial situation is under control, you should start planning to grow your wealth by investing designated amounts steadily over the long term. 13
VISIOUUNTT O HO TH W WIIT N O I T U C E EX IS A DAYDREAM
There is a need for planners to overcome human biases and entrenched behaviours to enable clients to unlock the benefits of advice. Research shows that financial planners can transform the lives of their clients, but only if advice is accessed in the first place, and then only if the advice is implemented. Financial planners need to do more than just inspire their clients. They need to overcome human biases and entrenched behaviours before clients can unlock the benefits of advice.
By Jason Andriessen, CFPÂŽ
MANAGING DIRECTOR OF COREDATA
We know that Australians worry about money more than anything else in life. According to the Australian Psychology Society, financial issues are the leading cause of stress amongst Australians; higher, even, than worries about health. Financial stress is bad for our families and it's bad for our communities. Those who feel financially stressed drink more, sleep less, have worse mental and physical health, and have more conflict in their personal relationships. But while many Australians worry about money and feel short-term financial stress, we know that advice can help. In recent years, CoreData has undertaken research into the value of financial advice. We have found that consumers with an active relationship with a financial planner feel more organised, are more confident when making financial decisions, and they're less likely to suffer from financial stress. When a financial planner successfully reduces a client's financial stress, they may also lessen the client's tendency to turn to alcohol or drugs, help them sleep better, and improve the quality of their family relationships. And that's just the start. Consumers who have an active relationship with a financial planner are also demonstrably better off financially. They are able to spend more, do more, and they enjoy more wealth with less risk exposure along the way.
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For instance, in research recently undertaken for Sunsuper, CoreData found the value of ongoing advice first accessed by a single 58-year-old female amounted to more than $200,000 over her lifetime.
But advice is only helpful if it's accessed
There are lots of reasons people don't access the services of a financial planner. Concerns about trust, particularly following the Royal Commission, have been well-documented. Trust in advice has dropped by almost half since the start of that inquiry. There's also a perception amongst Australians that their circumstances aren't complex enough and they don't have enough money to make seeking advice worthwhile. Sure, people are worried about the cost of advice as well, but what's often overlooked is fear. People are fearful of looking silly, being embarrassed about their past decisions, and generally being told bad news that it's all too late for them. The technical term for this is cognitive dissonance – the discomfort someone feels when their behaviour is disconnected from their values system. It feels bad, so people put their heads in the sand and avoid action.
story. But inspiration alone simply doesn't get us there. If it did, then everyone who watched the 1981 film Chariots of Fire and learned about Eric Liddell, would be hard at it in training for the Olympics.
Implementation is a grind
So, just telling people what they should do in a Statement of Advice isn't particularly helpful. It's not helpful because it doesn't actually change anything. In order to effect meaningful change and bring about new outcomes, we need to change our clients' behaviour. According to Harvard positive psychology professor, Tal Ben-Shahar, the key to creating lasting change lies in three intentional behaviours: reminders, repetition and rituals. This is a useful framework for a financial planner seeking to execute on advice and help the client actually achieve the goals in the plan.
In the past, super funds have engaged their members poorly. Over several years they have written to their members advising them that in order to have a comfortable retirement, members will require more than $60,000 a year to live on. They would inform members that in order to fund that, they would require a balance of more than $1 million. And what would happen? Precisely nothing. Members would suffer cognitive dissonance. Everyone wants a comfortable retirement, but not many people have any chance of achieving a super balance of $1 million. It all feels too hard, so they disengage. But superannuation funds are now awake to this and financial planners should be too. People don't make rational decisions, so we need to appeal to their emotions. This is commonly achieved through a process called 'nudging'. It demands only small, non-threatening changes in people's behaviour at any point in time. But the cumulative effect of repeated nudging produces a significant end result.
Talk is cheap
Most of us make financial planning more complex than it needs to be. Strip it back and it's about gaining an understanding of the client's current circumstances, what they want to achieve, sizing the gap, and setting a course for achieving the articulated goals. It's understandable that clients feel an instant sense of relief when they're presented with their financial plan. They feel inspired, optimistic, and a sense of control. And these positive emotions feel great. But they don't actually change anything. In fact, neuroscience tells us that they may make things worse. That's because the anticipation of the reward in itself triggers the dopamine pathways in the brain, so that we feel a sense of joy. That sense of joy satisfies us, so we don't actually feel like we need to do the hard work. We see the same phenomenon with our sporting heroes, where we can share some of the glory without sharing any of the pain. Consider Eric Liddell, the extraordinary Scottish athlete who won the 400-metre race at the 1924 Paris Olympics. It's a particularly inspiring story because the 400-metre race wasn't even his event.He was a natural sprinter but withdrew from his preferred 100-metre race because the trials were on a Sunday, the sabbath for Christians. That's just the start. Eric Liddell died in 1945 in a Japanese civilian internment camp in China – five months before liberation. It's an uplifting and inspirational
Reminders are external cues that focus our attention on a particular commitment we made. The best reminders are simple, like a daily calendar note telling us to review our discretionary expenditure. These regular reminders will pave the way to repetitive action, which is essential for lasting change. In time, a new ritual is formed. And that new ritual becomes a part of your daily life; a new way of operating. It becomes natural to you because, physiologically, a new neural pathway in your brain has been created, which leads you to act in a certain way, under certain conditions.
Unlocking the benefits of advice
Telling people, they should eat less and exercise more is good advice. But it's not really very helpful. In the same way a wellcrafted financial plan is useless unless it's implemented. The implementation is where the value of advice is really unlocked. Clients need support to make lasting changes to achieve their goals; that support is best achieved by a financial planner within the context of an active ongoing relationship.
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or Strategies f
HALF-TIME ING ANN L P L A I C N A FIN By Kee Siew Poh, CFP® Imagine you are in a soccer match. The first half of the game is over. Then comes the interval of 15 minutes before the second half begins. Whether you are winning or losing, you will need a strategy for the second half. In some cases, the midway interval time and a change of strategy in the second half can have a huge impact on the overall outcome. Similarly in our own financial planning, it is important to take a pause at halftime and to relook at the strategies to adopt in the second half in order to finish well! For many people, this pause happens in their middle age, or some term it as 'mid-life crisis', usually from the 40s onwards. So what would be some important strategies to adopt in the second half? Let us examine it from the 3 areas of planning.
PROTECTION Focus on Hospitalisation, Critical Illness & Long Term Care
• In the first half, often in the late 20s to 30s, after one settles down, buy a house and build a family, it is often advisable to increase one's life insurance as a form of provision for family in event of pre-matured Death & Total Permanent Disability.
Optimisation of Portfolio The 2 areas to look into would be : Comprehensiveness
•
If we have Critical Illness Coverage bought in the 1990s & 2000s, this would usually refer to Advanced Stage Critical Illness. With more people going for routine health screen, it is not uncommon for one's condition to be detected at the early stage. Imagine the disappointment for a patient diagnosed with Carcinoma-in-situ of the breast, when she discovers the numerous plans she purchased 10 or 20 years ago do not cover this! Such conditions would have been covered under the Early Stage Critical Illness Plan.
•
It is therefore important to identify the gaps in one's coverage, and to consider if one would like to transfer this risks to the insurer and the cost involved
• In the case of a young father, his role and responsibility has suddenly increased, with the birth of the first child. He is not just a father and a husband but also an Income Earner. The loss of a father and husband cannot be replaced, but the loss of an Income Earner can be replaced. Hence the importance of life insurance, to replace the loss of income.
• Contrast this with the second half journey, often in the 50s
and 60s, when the children are all grown up and enter into the workforce. Making a financial provision for the children is no longer as important as compared to making a provision for one's OWN healthcare needs
• The impact of longevity and rising medical inflation cannot
be underestimated. With a medical inflation rate of around 10% in 2019 (assuming this rate does not further increase), applying the Rule of 72, it simply means healthcare cost is set to double every 7.2 years. This is where an operation which costs $10k today can cost as much as $80k in just less than 30 years! While the good news is that Singaporeans now have the longest life expectancy in the world at almost 85, the bad news is that the number of years spent in poor health had also increased to about 10 years! How much would 10 years of poor health cost?
• This is where it is important to ensure adequate provision 16
being made for oneself (through insurance or otherwise) specifically in the area of Hospitalisation, Critical Illness & Long Term Care.
Cost Effectiveness
•
Would it be possible for a term plan purchased 5 to 10 years ago (when one is younger) to be more expensive than today (when one is older)? It need not be so, in some cases. Premiums for term plans have been on the decline because of longevity and competition. Reviewing this can potentially result in a cost savings, provided there is no change in health.
RETIREMENT Accumulation vs Distribution
•
There are 2 phases in wealth management, the Accumulation Phase typically between the age of 30 to 50 or 60, and the Distribution Phases typically from 50 or 60 onwards and for a lifetime.
•
Accumulation Phase is like ascending the mountain, where the focus is to grow the assets, and typically this involves the use of market-dependent instruments eg stocks, unit trusts, property etc. Growth often comes with risks. Since 1953, more than 4,000 people have risks their life to climb Mount Everest. About 660 have reached the peak, while 180 have died, most of them died on the way down.
•
•
Sadly, the same is true when it comes to investment. Many people can do very well investing on the way up the mountain and build a decent nest egg for themselves. But when they start the descent down the mountain, and they start to draw down from their retirement nest egg, all of a sudden, something bad happens. The markets take a plunge, and guess what? They did on the descent. Can anyone accurately predict the market, world event and natural catastrophe? When the great market crash of 2008 happened almost unexpectedly, we have seen the retirement nest egg of some retirees plummet from $1m to $200k almost overnight! While the focus of Accumulation is to grow the assets, the focus of Distribution is to ensure a Lifetime of Income, and a safe descent.
Asset vs Income
•
The success of your retirement is not really about how much assets you have, because Assets can be lost, stolen, swindled, sued, divorced, decimated in a market crash. Hence it is important to ensure one has Income which is paid out monthly or annually for a Lifetime.
•
Stocks do not know when you are going to die. Neither do Exchange Traded Funds or Unit Trusts or even Cash. Many retirees can have a huge portfolio of stocks or bank deposits as their retirement nest egg (asset). The first group could end up taking out too much money in the earlier years
and running out of money eventually. The second group could take out too little and forfeit the retirement they could have had. They are afraid to touch their money, and living a "just in case something happens tomorrow" retirement, and never fully enjoy the fruits of all their labour.
•
With a predictable income planned out on a monthly or annual basis, you will not have to worry about 'over living' your life and worry about finances later, or 'underliving' your life and realizing that it is all not worth it!
Pay-Cheque & Play-Cheque
•
An important strategy in the second half is to firstly incorporate a Pay-Cheque Income for Basic Living Expenses, followed by a Play-Cheque Income for Fun & Leisure.
•
Pay-Cheque Income is simply a very predictable Income stream that isn't vulnerable to the inevitable ups and downs of the market, and structured as a monthly or annual income that last a lifetime. This is similar to our monthly Pay-Cheque received while we are gainfully employed. It does not fluctuate with the stock or property market. This is important because the purpose of Pay-Cheque Income is for basic living expenses.
•
Once you have essential expenses covered by a Lifetime Income, you gain peace of mind and freedom to pursue the things you love in life. You may then invest the remaining assets for growth, and this is where the Play-Cheque comes in.
•
In your second half journey, you may not need to work as hard as your first half and have more opportunities for fun and leisure eg holidays, hobbies etc. Hence the need to make an allowance for fun stuff in your retirement plan. Income for these fun activities is called Play-Cheque Income. It is market-dependent and can fluctuate with the stock market or property market. While it has downside risks, it also has upside potential, allowing one to ride on market growth and an opportunity for an additional boost to the Income.
ESTATE PLANNING - WILL, TRUST & LPA: Poor Health & Mental Incapacity
•
With life expectancy rising to an average of 85 in Singapore, the number of years of ill health has also risen to an average of 10 years. Currently 1 in 10 people above 60 has dementia, and for those above the age of 85, it is 1 in 2. The number of people living with dementia is expected to double by 2030.
•
In the event of mental incapacity, one loses the capacity to make informed decisions in managing their financial affairs, thus making them vulnerable. They could be manipulated to giving away their money without even realising it eg in the case of Madam Chung & the tourist guide Yang Yin.
•
Having a Will alone is not good enough because this only comes into effect upon Death. Estate Planning for a person in the second half journey would not be complete without a Lasting Power of Attorney (LPA). This is to ensure that our assets can be used wisely for our own care instead of someone else's holiday!
Instant Gratification vs Delayed Gratification
•
In the event of premature death, wealth and assets can be lost quickly if we do not plan for potential pitfalls.
•
With only a Will in place, it means that our estate distribution
will be in a lump sum. Hence, when children reach the age of 18, they will have the full insurance proceeds and when they reach the age of 21, they will acquire title to the properties and inherit all the assets. What took years of hard work (delayed gratification), comes to them in an instant (instant gratification). Will this enrich or ruin them? Will it be in their best interest? Beyond a Will, a Trust may be important to address some of these concerns.
•
Beyond just preparing our money for our children, it will be equally important to prepare our children for our money.
My house vs My Community
•
There was once a story told of this farmer who had been blessed with a lot of crops, so much so that his barn cannot contain. The farmer then decides to tear down his barn and build a bigger barn. Unfortunately, the same night, calamity struck and his life was taken away.
•
Life is short. In the second half journey, our days are more numbered. There are some who has been blessed with a tremendous increase and beyond just making a provision for their family, they have a heart for the community. Second half planning can incorporate how we can make a difference to our community beyond just our house. 17
ALL TA NT EN ME EM HE TH T , , T T C C A A Y Y T T I I C C A A P P A CA C R UR OU YO &Y U& OU YO Y Retirement Planning
By Irene Yee, CFP®
18
Since the implementation of the Lasting Power of Attorney (LPA) through the Mental Capacity Act in Singapore in 2007, applications of the LPA to the Office of the Public Guardian (OPG) have increased manyfold. In the first eight months of this year alone, 16,279 individuals applied for an LPA, according to the OPG, the agency that protects the interests of the mentally incapacitated. This number exceeds the 13,919 individuals who did so for the whole of last year and 2,373 people in 2013. In addition, a recent significant development with the LPA in Singapore is the newlylaunched Professional Deputies and Donees scheme. Now, an individual who is mentally sound can hire and appoint a person, called a Professional Donee, to make decisions on his behalf should he lose his mental capacity in the future. This development plugs the current gap where individuals who prefer professional accountability from their LPA Property and Affairs donee and Personal Welfare donee have the choice of corporate trustees as their Property and Affairs donee but not a similar choice for their Personal Welfare donee. As more Singaporeans reach their retirement ages, more attention needs to be given to the LPA as a tool to navigate one's retirement landscape with Full Retirement Sum (FRS) at $176,000 and Basic Retirement Sum (BRS) at $88,000 for individuals who turn 55 years old in 2019 which is in turn invested in CPF Life, a significant number who approach their retirement years will have their retirement monies invested in different asset classes to support them in their golden years. This includes securities such as equities and bonds and rental income (some even in through overseas properties). These individuals may be capable and willing to spend the time managing their own investments immediately following retirement; but priorities in retirement can change quite quickly, as can capability. With more and more in Singapore's ageing society making complex decisions on their retirement monies into old age, the risk of being unprepared in handling retirement finances increases in the event of developing a sudden illness or condition such as dementia. Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up an LPA is well before one needs it. It is vital that one plans ahead for a time when managing one's retirement monies may become difficult, or even impossible. For some, selecting a corporate trustee as their LPA property and affairs done (instead of a relative or friend) through LPA Form 2 may be the prudent choice, given the higher accountability of a professional corporate trustee who performs the role of the LPA Property and Affairs donee and the more robust and reliable presence of a corporate trustee. Speaking to a trusted estate planning financial adviser will help with this decision-making process.
Some Main Points of the Mental Capacity Act
The Mental Capacity Act was passed in Parliament in 2008 to allow Singaporeans to appoint persons/entities whom they can trust to make personal welfare or healthcare and/or property & financial decisions on their behalf if they lose their mental capacity in future. The Act came into effect in 2010, when the Office of the Public Guardian was set up. Under this Act, Singaporeans who wish plan in advance for themselves can do so through a statutory procedure called the Lasting Power of Attorney ("LPA"). With the LPA, the individual (i.e. "LPA donor") can appoint a proxy (i.e. "LPA done") to make decisions relating to her property and financial affairs, personal welfare and/or healthcare if she loses her mental capacity. The donee can be a family member, relative or trusted friend, or an entity (e.g. trust company) in the case of the financial donee.
1 Retirement Sum Schemes administered by the CPF Board 2 Retirement Sum Schemes administered by the CPF Board 19
Why Don ' t
Our Cli ents Deci de
P O S T? E H T N O By GoalsMapper
InsurTech of the Year 2019
"I will think about it." "Let me talk to my wife and get back to you." "It sounds like a great idea! however/but..." We all have all been there. We have listened to our clients, understood their needs and requirements, crafted a proposal that would meet those needs and put them on the right path towards their dreams. To have them tell us, after multiple meetings that they need to think about it. Or that they need to consult another person despite already having consulted with you extensively. Why is that? Could it be a matter of affordability? Or could it just be the way people make decisions in general? Affordability is a keystone of financial planning, and you have prepared Powerpoints and Excel sheets of information with projections after projections of the various key milestones in life. According to sound financial planning principles, they can afford the products. You start to wonder if they can connect with the information you are providing. For some of them, their eyes glaze over as the information starts to pile up. For others, they are just distracted by their newborn in between them to pay any serious attention to what you are saying. Why do our prospects and clients delay such essential and pivotal decision making in the face of so much overwhelmingly relevant information? Just how many ways can we express the importance and magnitude of taking advantage of this wonderful platform called Insurance, to secure their future, hopes and dreams? 20 20
From our experience and interviews, we have discovered that people generally apply "delay" as an attempt to maintain the status quo. It is the same for most of us in many circumstances. The following reasons fuel this desire to delay, They are not in the right frame of mind They are not able to relate to the information The proposal is missing private information that they have deliberately withheld The proposal is presented in an unfamiliar way They feel that the long term benefits do not outweigh the short term compromise
Attracting the attention of a person can be quite challenging, especially if you are meeting them after a long day at work or just before a long weekend. The right frame of mind colours all the information we receive. Hence the right frame of mind is essential. What is $1,000,000 to someone who has yet to accumulate $20,000 in their bank account? What is a $500,000 coverage to someone young enough to have never seen a medical bill larger than $98.80 including an MC for Monday? We all have different sensitivity to numbers, and sometimes we need help. Without the right climate of trust or an excellent reason, we are not likely to share personal and sensitive information. It could be our real saving ratio, our bonuses or even our budget for our more unique hobbies. Our proposals are likely to be perceived as less relevant if such essential information is omitted. We need a good reason to share. What does 4% return mean to someone who is saving $100 a month? How about a 2% return for someone who already is renting out a few houses? People understand information best when it is compared across time or against similar offerings. People need to compare for them to comprehend better. Benefits are experienced, and experiences require time. If a positive experience is very distant in the future, it's benefits are perceived to be lesser. If the pain is immediate, we will fear it more even though the pain might not last as long. If we are to help our clients more professionally, we must visually show them the impact of their decisions.
These preferences are deep-seated and etched deeply into our minds. You might even say that this is part of our human nature. However, the good news is that there is a tool that Financial Consultants can use to help their clients visualise their financial reality and future. We are referring to GoalsMapper. What GoalsMapper can do, It is appealing, colour coded and easy to understand
People have become used to tables and numbers. GoalsMapper has refined our user interface and experience to present the data appealingly. This layout attracts the attention of the user and puts them into the right frame of mind.
It is personalised
GoalsMapper allows the user to input a host of key data points into the user-friendly interface, and it will generate a dashboard that is personalised and unique. As the data is presented over time, the user can immediately visualise t financial standing and potential shortfalls.
It is real-time
You can input your client's information such as coverage, cash value and even dividends against their liabilities and expenses and watch the graph transform in realtime. This format encourages users to input accurate data to visualise a result which is as relevant to them as possible.
GoalsMapper has tapped on proven and tested financial planning principles and digitalised the whole experience to make financial planning a fun and exciting process. As an award-winning software and Singapore #1 financial planning software, we have helped high performing and sincere financial consultants better connect with their prospects, better present lifesaving plans and better communicate retirement plans.
We would like to invite you to visit our website at
www.goalsmapper.com
or scan the QR code here
to request for a FREE demo of the software.
We are confident that you will find the system easy to use, beautiful to the eye and fun to share with your prospects and clients.
21
l l o a D r n W o i hale l l i B By Yash Mis hr CFP ®
I had a chance to listen to the co-author – Mr Tom Wright while he spoke in Singapore – Called Behind the Scenes. It was a fascinating session as he recounted snippets from, his investigative journalism that led to the story unfolding. The book is not fiction were his opening lines. It's based on a true story where greed, hubris, politics and more just spun a web of misdemeanours and financial crimes in one of the largest frauds that has been documented yet on a global scale involving sovereign wealth funds, often to be referred to as the IMDB scandal. The ingredients are familiar, to the movie the Big Short, in this instance ironically the movie financed was the "Wolf of Wall Street" featuring Leonardo Di Caprio.
22
a
It's a book worth read when you need a page turner that will serve a reminder that since the publication of All The President's Men, Barbarians At The Gate and Too Big To Fail, there have been few books of this genre that have gripped the imagination – until the arrival of Billion Dollar Whale. A 'whale' is a high rolling gambler who consistently wagers large amounts of money. High rollers often receive lavish "comps" from casinos to lure them onto the gambling floors, such as free private jet transfers, limousine use and use of the casinos' best suites and more. It infuriates, it appals, it astounds, it shocks and disgust and serves to remind that despite the barrage of financial regulations there can be what is best described as a financial heist in the audacious proportions.
E e c v o i t n a o r mics r a N By Yash Mishra CFP ®
Now I am a voracious reader of both fiction and Non-fiction. I am yet to come across a more engaging and scholarly study of the stories that a shape economic events — stories that go viral, for better or worse given we have technology platforms that can push the story out instantaneously through 24 Hour News Channels and Social Media. The book begins with the: "Viral narrative of Bitcoin as the wave of the technology that changes the future of current forms of "money". It starts out as an anarchist challenge to national currencies meant to disguise the identity of those who hold stores of the "cryptocurrency." It's been valued at something around $300 billion. However, writes Nobel Prize– winning Yale economist Shiller (Finance and the Good Society, 2015, etc.), "Bitcoin has no value unless people think it has value, as its proponents readily admit." It attains value because it's surrounded by economic narratives, some erratic, some untrustworthy — of the sort that fuel classic bubbles: the mania of speculation that surrounded the South Sea Company, the mania for tulips, the fear-of-missing-out mania for being part of the future rather than the past. By the author's account, narratives are too often overlooked, so that "we need to incorporate the contagion of narratives into economic theory," recognizing them to be a driver of
economic change, for good or ill. "Contagion" is a word used advisedly, for Shiller draws some of his models from epidemiology; his work also combines with the growing acknowledgment that people are often not the rational actors of classic economic theory. Accounting for narrative epidemics does not necessarily mean trying to counter them, though economic forecasts — the currently building sentiment that a major recession is about to hit, for example — are best used not to frighten but to warn, so that self-fulfilling-prophecy disasters do not in fact happen. Shiller locates one pioneering forecaster in the economist John Maynard Keynes, who warned — unsuccessfully — that placing heavy penalties on a defeated Germany after World War I would yield an even bloodier disaster powered by the thirst for vengeance. That narrative proved correct even if Ronald Reagan's anecdotal embrace of supply-side economics proved a sham even as his stories "touched off an intense public mandate for tax cutting." Immensely readable, highly relevant today both to practitioners and private investors for them to understand the current global economic trends and how the Narratives are shaped. 23
gni ti on and o c e R rt needed for po Sup
niin nn ng llaan g P P l l a a i i c c n aan s s i o e f n nals n o i i r P F F
By Dennis Lau CEO, IFPHK
It now appears that Hong Kong has to play a game of catch up as the mainland forges ahead with recognition of financial qualifications with an international perspective and are offering incentives to attract such talents, says IFPHK's Chief Executive Officer Dennis Lau. It has always been the mission of IFPHK to promote the services of financial professionals in Hong Kong. In a growing economy, the community will naturally turn its interest towards protecting its financial assets and devising a sustainable platform to ensure those assets will last as the owners age. Unfortunately, not everyone knows how to accomplish this. This is where the professionals come in. They can provide advice, guidance and draw up practical programmes most suited to their clients. The professionals, especially those with CFP certification, are well suited to play this role. Not only do they contribute significantly to help individuals and corporates grow their wealth, but the financial talents have played a major part in Hong Kong's economic development especially in the financial services industry which accounted for 18% of the GDP in 2017. Given the significant contribution to the GDP, it is surprising and somewhat disappointing that the financial professionals, including CFP certificants, in this sector have not been given the recognition that is due to them. One does not have to look further than the mainland which has moved forward to recognize CFP professionals and other financial practitioners with international qualifications and to attract those talents as you will see in the following paragraphs.
The Mainland Moving Forward In recent years, cities in the mainland have realized the significant impact that financial planning has with the economy in general and the population in particular. Key provincial governments, including Beijing, Shanghai, Shenzhen, Chengdu, Shandong, Chongqing, Xiamen, have identified CFP certificants as specific financial talents for which there is a shortage. They have therefore taken practical steps to attract more candidates to take professional examinations to qualify as financial planners, and to induce a greater number of these already qualified professionals to practice in their cities. The targeted group includes those with or seek CFP certification, CFA, CPA and FRM credentials. The incentives being offered are varied and numerous, but significantly include tax concessions, relocation expenses and housing allowances. Some examples are: Shanghai has targeted to develop a pool of financial talents with international qualifications, according to its 13th 5-year plan. The plan states that the city will promote designations including CFP certification, CFA, CPA, FRM and ACCA, 24
and support practitioners to join educational programmes to attain those credentials. It is estimated that the number of international certification holders among financial service practitioners in Shanghai will grow to 35,000 in 2020. Shenzhen aims to nurture a professional training base for financial services through encouraging practitioners to take on overseas designations including CFP certification, CFA, FRM and ICPA. Shenzhen's government intends to offer to eligible professionals housing allowances, educational subsidies and other benefits. Chongqing has designated that CFP professionals and CFA holders as well as actuaries are targeted talents to be offered various subsidies such as relocation expenses, education subsidies, security expenses etc. if they relocate. As at 31 December 2017, there were 17,523 CFP professionals in the mainland. These numbers will grow as the provinces amp up their incentives to attract financial services practitioners who have international credentials. In direct comparison, as at December 2017, Hong Kong has over 4,500 CFP professionals.
Hong Kong Must Play Catch-up As Chinese cities launch ambitious plans to nurture financial talents, Hong Kong as an international financial centre cannot afford to fall further behind. It is just a matter of time before Hong Kong loses its edge in financial talents, and China's marketing efforts generate a brain drain. This is a clarion call for action. In 2015, the Financial Service Development Council (FSDC) published a report, "Developing Hong Kong's Human Capital in Financial Services", addressing the manpower shortage of the financial services industry in Hong Kong. In analyzing the reasons for the talent shortage, the report, among others, pointed out the lack of adequate industry knowledge and soft skills among new entrants. It also stressed that existing practitioners also needed to improve their language, communication and presentation skills. The IFPHK share the same views with the Government on developing a talent pool for the financial services industry. To achieve that, the first and essential step is to institute a systematic curriculum for practitioners to upgrade their professional skills throughout their careers. The IFPHK will suggest to the Government to set up a fund to assist fresh graduates, new industry entrants and existing practitioners to obtain professional qualifications, including the CFP Mark. The government also
needs to require them to sit for licensing examinations. Three years have passed since FSDC published its manpower report. There is a need to conduct a new study on human capital in financial services. It is our hope that the study will promote the value of global financial designations including the CFP certification as practical actions to foster talents so as to maintain our edge in financial talents. We have to forge further ahead or at least catch up with the direction that the mainland has taken in this regard. Hong Kong is poised to become the international financial hub in the development of the Greater Bay Area which will offer a tide of unprecedented opportunities to the financial sector. To make it happen, Hong Kong must align with the mainland in motivating financial practitioners to obtain international qualifications. With efforts to highlight the importance of international credentials like the CFP mark coupled with widespread recognition, career opportunities and training grounds, this will improve the attractiveness of these qualifications and generate a surge of candidates who make career choices in the financial sector.
Promoting the CFP Mark As the sole licensing body for CFP certification in Hong Kong, IFPHK has been responsible for various programmes to raise public awareness of financial planning in Hong Kong. The Institute is ready to work closely with the government in its new mission to develop financial talents. A skilled labour force in financial planning services with international designations coupled with our participation in China's ambitious economic initiatives place us in an ideal position to strengthen and expand Hong Kong's competitiveness in financial planning. Some of the important factors that career applicants should be aware of include that CFP certification is one of the professional qualifications recognized by the Securities and Futures Commission as meeting the academic/industry requirements for responsible officers and representatives. CFP certificants are therefore not required to take the industry qualifications such as HKSI Licensing Papers 7, 8, 9 11, and 12. Under the Insurance Intermediaries Quality Assurance Scheme, exemption from the investment linked Long Term Insurance Paper could be granted to CFP certificants. In addition, CFP certificants can have grandfathered in the HKMA Enhance Competency Framework under the ECFRWM. This was launched by the HKMA on 2 January 2018; and CFP certification is a professional qualification and is well regarded by the Investor Education Centre which is sponsored by the government, as qualified advisors. It would appear that the ball is in the Hong Kong government's court to move forward and define international qualifications for financial talents such as CFP certification.
The mainland is already doing so. We can already see that the mainland is taking an aggressive stance to solidify their financial planning initiatives, but more important than that, they are filling the gaps by attracting outside talents with international perspectives to relocate with tempting bonuses and financial incentives. The writing is on the wall. We, as a global financial hub, cannot fail to move forward. This is particularly critical if we are to play a vital part in the development in the Greater Bay Area. It is a goal that IFPHK wholeheartedly supports and we are prepared to take on the challenge in step with efforts and plans by the government. Hong Kong needs to spearhead an economic roadmap to foster financial professionals with international designations. Hong Kong has always been a leader in economics in the region. Financial planning has now become an important element in our economics. The mainland and other regions have recognized professionals with CFP certification and are pushing ahead with talent attraction strategies. We have to do likewise, not only to maintain the status quo, but to continue our leadership status in financial services in the region. We look forward to the government acknowledging the benefits that official sanction of the CFP certification will bring to Hong Kong. It is another checkmark in recognition of Hong Kong as a global financial hub. It will also solidify the standards for financial planning for the community and for the industry as a whole especially within the fast-developing Greater Bay Area. 25
F P C
l Ta
k
C C H H G G A A N N R RG I I G K K E E A A Of Your TT HEALTHCARE COSTS COSTS HEALTHCARE
FPAS was invited as the panel of speakers alongside Ministry of Health (MOH) and Mr Chew Hock Beng. More than 500 participants attended the insightful session on Singapore's healthcare financing framework is designed to ensure key issues such as affordability and suitability of plans.
26
Speaker
Chew Hock Beng, CFPÂŽ
Time
11.00am to 1.00pm
Date
30th March 2019
Venue
Suntec Convention Centre
N N O O E E H H C C N N S U U A L L ' ' P S S F RR E E D D LL O O H H EE 9 K K 1 A A 0 T T SS 2
FPAS annual event graced by Ms Foo Mee Har and attended by leaders of financial institutions, regulators and partners. Sharing about FPAS' initiatives and networking over lunch. This year, FPAS has also engaged the leaders to support the World Financial Planning Day during the luncheon inviting them to share on their thoughts on "Plan Well to Live Well".
Date
Time
Venue
27th August 2019 12.00pm to 2.00 pm NTUC Centre, Room 801
27
S A P F
R E N N A L P L A I C FINAN
AWA S 2019 RD
FPAS had its second Financial Planner Awards Night where outstanding Financial Planners in the Banking, Insurance, and Financial Advisory sectors were recognized for demonstrating excellence financial planning at the highest level and uphold best practices in financial planning in Singapore.
Date
5th April 2019
28
Time
6pm to 9pm
Venue
The Fullerton Hotel Singapore
Awards Website www.fpa.sg
29
World Financial Planning Day 2019 (WFPD) - Professional Series
L A I C N A N I F D Y L A R D O G W N I N N A PL es )
2019
FPAS organized the WFPD to help professionals understand the value of financial planning. The speakers spoke on the following topics – 'Future of Financial Planning Environment' by DBS Bank, 'How to optimize customers portfolio through ETF and REIT's in Singapore' by Singapore Exchange and keynote speaker, Mr Apelles Poh shared his success stories through 'Soar like an Eagle — The Power of Vision, Action, Passion in our practice..'
nal o i s ( Profes
r Se
i
Time
Date
8.00pm to 2.00 pm
2nd October 2019
Venue
NTUC Centre, Stephen Riady Auditorium
ti fi
ca n
ts
CFP® and IBF Certification Ceremony 2019
DBS S A For FP
P AF
Ce
r
Congratulations to the FPASCFP Graduates of 2019! This year graduation was celebrated during the WFPD (Professional series) and it was truly memorable and meaningful moment for the practitioners as they pledge their dedication to promote holistic financial planning and to provide unbiased financial advice to the Singaporean public.
Date
2nd October 2019
Time
11.30am to 12.30pm
Venue
NTUC Centre, Stephen Riady Auditorium
30
31
L A I C N A N I F D L WOR NING DAY PLAN e
s)
2019
S r ( Consume
i r e
This is the second year FPAS organized the WFPD for consumer. It provides consumers a one-stop shop to understand the various aspects of financial planning in various life stages starting from fresh graduates, working adults, young parents, mortgage planning, investment planning, CPF rules and regulations, guide to retirement planning and wills, trust and estate planning – to protect what you have built!
Date
Time
5th October 2019 9.00am to 5.00 pm
32
Venue
NTUC Centre, Room 801
33
FPAS
FINANCIAL PLANNING
Association Of Singapore
Suppor ng Partners
34
January Financial Planner Awards 2020 -Judging PanelShortlisting of Top Finalists
30April FPAS AGM
February
Financial Planner Awards 2020 -Judging PanelOral presentation by Top Finalists
August FPAS Stakeholders' Luncheon 2020
17 April Financial Planner Awards 2020 @ Mandarin Orchard Singapore
October
World Financial Planning Day 2020
* For information on the events visit
www.fpas.org.sg — Events
35 35
FINANCIAL
PLANNER AWARDS 2020
FIRST INDUSTRY-WIDE competition by FPAS for FINANCIAL PLANNERS IN SINGAPORE to be recongnized for their planning excellence in
BANKING, INSURANCE AND FINANCIAL ADVISORY sectors SUBMISSION OF PLAN
15th October — 15th December 2019
ORAL PRESENTATION & MEET THE JUGDES
February — March 2020
AWARDS NIGHT & GALA DINNER 17th April 2020 Mandarin Orchard Singapore