FPAS - May 2021

MAY 2021 Relief, Recovery, Reform

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Singapore Budget 2021 – A Kinder Look at Budget 2021

No Storm Lasts Forever – Boost your Financial Resilience

CPF Nominations vs a Living Trust

Contents 3

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President’s Message Chief Editor’s Message

Singapore Budget 2021

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Singapore Budget 2021 – A Kinder Look at Budget 2021

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IFPHK Asserts Financial Literacy is Key Component for the School Curriculum in Education Bureau Consultation

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Setting Your Financial Life Goals

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Repositioning Your Retirement Plan to Retire with Peace of Mind

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Single Parent’s Guide – Looking Forward

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No Storm Lasts Forever ­— Boost your Financial Resilience

Future of Money: Digital Crytocurrency

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Advice in the Streaming Age

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CPF Nomination vs a Living Trust

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Resetting Portfolio Strategy Post Pandemic

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Book Review: Bill Gates: How to Avoid a Climate Disaster

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Upcoming events calendar

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FPSB: Update from the Global Network

FPAS' Vision FPAS envisions that all

Planning Singaporeans have access to No Storm Lasts Forever – Boost responsible and appropriate your Financial Resilience

financial planning advice by raising the professionalism in the industry through education and Future of Money: Digital shared code of ethics. FPAS also Cryptocurrency provides a range of services to consumers including:

Advice in the Streaming • Educate and inform the Age public of the need for objective professional advice in making secure financial CPFdecisions. Nomination vs a Living Trust

• Ensure sufficient professional and ethical standards to maintain the confidence and trust of consumers.

Resetting Portfolio Strategy • Provide education, training and Post Pandemic

information to our members to enhance their skills in providing holistic and objective financial advice. Book Review: Bill Gates:

How to Avoid a maintain Climatehigh Disaster • Develop and ethical standards within the CFP professionals. • Represents the industry and CFP Upcoming events calendar

professionals to continue to raise the professionalism of the industry and to provide high quality FPSB: Update from Global financial advice to the Singaporeans.

Network

Importance of Long-Term Care

Financial Planning Association of Singapore UEN: S99SS0008L GST Registration No.: M90005984L 50 Raffles Place #37-00, Singapore 048623 Tel: (65) 6829 7166 Email: admin@fpas.org.sg Website: www.fpas.org.sg CFP®, CERTIFIED FINANCIAL PLANNER™ and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. Financial Planning Association of Singapore is the marks licensing authority for the CFP marks in Singapore, through agreement with FPSB. AFPCM, AWPCM, ASSOCIATE FINANCIAL PLANNER and ASSOCIATE WEALTH PLANNER are registered certification marks of the Financial Planning Association of Singapore. MCI (P) 013/01/2020

Editorial Board CHAIR Ms Lisa Lee, CFP®

MEMBERS / CONTRIBUTORS Ms Yash Mishra, CFP® Ms Kee Siew Poh, CFP® CHIEF EDITOR Mr Adrian Tong, CFP® Ms Yash Mishra, CFP® Mr John Sim, CFP® Ms Joanna Leng, CFP® Mr Ron Miura, CFP® Mr Tan Hwee Heng, CFP® Mr Lawrence Chow, CFP® Ms Irene Yee

Financial Planning ­– Relief, Recovery, Reform • Page 2

GUEST WRITERS Ms Lorna Tan, DBS Bank Mr Solomon Lim, Singapore Kindness Movement Mr Dennis Lau, IFPHK Mr David Haintz, CFP® Australia FPAS SECRETARIAT Production of the Magazine. Please email admin@fpas.org.sg for advertisment / article contribution.

President’s Message, by Alfred Chia CFP It has been more than a year since Singapore introduced Circuit Breaker to control Covid-19 pandemic. Despite the sudden surge of infections in the migrant worker dormitories, the situation was swiftly stabilized. Singapore has done well in managing the pandemic and keeping the residents safe. We are blessed to be staying on this island.

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to online. Our Exco meetings are conducted via Zoom which have been productive. Like many, I look forward to effective vaccination being rolled out globally so that we can all get back to our normal life. While virtual meetings have been effective, conventional face-toface networking is still essential for business networking.

During this period, FPAS has seen strong demands in enrolment of AFP and CFP programs. It is definitely a productive use of time when many of us have to work from home. It also demonstrated the eagerness of the financial practitioners to have continuing professional education when environment and time permit. The strong support from IBF is very instrumental too.

There will be a new team of Exco in the new term after our AGM. I’m very grateful to my Exco members and Secretarial team for their support in such an unprecedented time.

It has been a hectic year for the Secretariat team as they have to manage surge in e-examination while maintaining social distancing policy.

FPAS is in a strong financial position and will continue to develop and promote the professionalism to provide unbiased financial advice to the Singaporean public.

We have also moved to a new premise to better serve our members early this year. We have canceled many physical events but shifted

It has been an honor and privilege to serve as the President of FPAS. I believe that the new Exco will bring FPAS to greater height!

Chief Editor’s Message, by Yash Mishra, CFP

of the traditional asset class returns in the need to position investment portfolios as long term hedge to real inflation.

As the world tries to re-emerge from the Pandemic of the second and third wave, the vaccination programs continue being rolled out in different parts of the world, including in Singapore. In this ‘new normal’, the inevitable buzz of a common invisible force flows - the indomitable human spirit of “Resilience” and we continue to focus on “Rebuilding Financial Resilience”. The Singapore Government continues its very supportive monetary and economic policies, and its work through the Budget 2021 – Stronger Together. It shifts the focus from ‘Containment to Restructuring‘ as the Singapore economy continues to reopen slowly. The budget outlines and discusses the specific measures that continue to support the households and businesses unprecedented supportive Resiliency and Recovery measures in the Singapore Budget Article. As the digitization continues to accelerate, it also shines the spotlight on digital currencies where central bank digital currencies are under discussion, we discuss the digital asset class in “The Future of Money – Digital Cryptocurrencies” as e-payments systems continue to accelerate and as practitioners who will embrace digitization to continue to be trusted advisors. To build resilience into personal finances, we discuss the importance of “Setting Financial Life Goals” and all aspects of Re-positioning and relooking at investment portfolios in the context

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Building resilience flows through in the consumer section and into understanding the elements of investment portfolios that need to withstand market volatility as was seen in financial markets when the treasury yields rose. In “Resetting Portfolio Strategy Post Pandemic“ we help you understand the challenges that remain as you plan ahead to ensure planning. As the pandemic has reset the focus on a good healthy environment, sustainability and climate continues to get the most world’s attention from policy makers, scientists, activists, to everyday change, we review in our book section Bill Gates book – “How To Avoid A Climate Disaster“ as no matter where we live, or how busy we are we are all affected by the changes in our environment and we can all do our part for Planet Earth. Of the many readings, the one from Chinese Philosopher Lao Tzu reminds one to accept and adapt. “Let reality be reality. Let things flow naturally forward in whatever way they like“. To the spirit of human resilience and to times when we can travel and explore soon.

Financial Planning –­ Relief, Recovery, Reform • Page 3

Supporting Our Businesses For High-Growth Enterprises • Extend and enhance the Enterprise Financing Scheme – Venture Debt Programme • Increase cap on loan quantum from $5 million to $8 million • We expect about $45 million of venture debt to be catalysed over the next year

For Mature Enterprises: Micro, SMEs and Large Enterprises • New Emerging Technology Programme will co-fund costs of trials and adoption of frontier technologies like 5G, artificial intelligence, and trust technologies • CTO-as-a-Service to provide firms with access to professional IT consultancies • Digital Leaders Programme to help promising firms hire a core digital team, and develop and implement a digital transformation roadmap • Continued support for enterprises to innovate, transform, and scale • Extend enhanced support levels of up to 80% for enterprise schemes, such as Scale-up SG, Productivity Solutions Grant, Market Readiness Assistance, and Enterprise Development Grant from end-Sep 2021, to end-Mar 2022

For Large Local Enterprises • Co-invest $500 million with Temasek in a $1 billion Local Enterprises Funding Platform, to help LLEs enter their next bound of growth

To Transform Value Chains • Growth and Transformation Scheme for the Built Environment sector • Bring developers, consultants, contractors, and suppliers together as an ecosystem to transform and innovate, as the sector recovers

Creating Platforms for Nurturing Creative Ideas • Pilot Corporate Venture Launchpad (CVL) to provide co-funding for corporates to build new ventures • Enhance Open Innovation Platform (OIP) to match problems faced by companies and public agencies with solution providers, with co-funding for prototyping and development of solutions • Enhance Global Innovation Alliance (GIA) to catalyse cross-border collaboration between Singapore and major global innovation hubs • Expand from 15 city links today to more than 25 cities around the globe over the next 5 years • Singapore Intellectual Property Strategy 2030 will equip businesses with tools to value and commercialise their intellectual property (IP) and intangible assets (IA), and train skilled professionals in these fields

Financial Planning ­– Relief, Recovery, Reform • Page 4

Supporting Our Workers And Jobseekers Jobs Support Scheme (JSS) • Extend support for Tier 1 sector (Aviation, Aerospace, and Tourism) • 30% for wages paid from Apr to Jun 2021, and 10% for wages paid from Jul to Sep 2021 • Extend support for Tier 2 sectors (such as Retail, Arts and Culture, Food Services, and Built Environment) • 10% for wages paid from Apr to Jun 2021 • Continue support for firms in other sectors till Mar 2021, as previously announced

Covid-19 Recovery Grant • Support workers who lost their jobs or experienced significant income loss • Up to $700 per month for 3 months for employees who have lost their jobs or are placed on involuntary no-pay leave for at least 3 consecutive months • Up to $500 per month for 3 months for employees and self-employed persons who are facing average income loss of at least 50% for at least 3 consecutive months

For Aviation • $870 million to preserve core capabilities and extend cost relief for the Aviation sector

For Land Transport • COVID-19 Driver Relief Fund for taxi and private hire car drivers • $600 per vehicle per month from Jan to Mar 2021, and $450 per month from Apr to Jun 2021

For Arts & Culture and Sports • $45 million for the Arts & Culture and Sports Resilience Packages to support businesses and selfemployed persons in these sectors

SGUnited Jobs and Skills Package • $5.4 billion for a second tranche of SGUnited Jobs and Skills Package • On top of $3 billion already allocated last year • Of which $5.2 billion to extend Jobs Growth Incentive’s (JGI) qualifying window to end-Sep 2021, to encourage employers to continue accelerating their hiring • Extend the SGUnited Skills, SGUnited Traineeships, and the Mid-Career Pathways Programmes • Budget set aside in this next phase to support the hiring of 200,000 locals this year through the JGI, and provide up to 35,000 traineeship and training opportunities to continue to support jobseekers in upskilling and access to employment opportunities

Supporting Our Families

Sustainability

Household Support Package

Harnessing Technology

• $200 additional one-off GST Voucher – Cash Special Payment for all eligible Singaporeans • $120 to $200 in GST Voucher – U-Save Special Payment for eligible HDB households • Extended Service and Conservancy Charges (S&CC) Rebate for all eligible households for another year, to offset between 1.5 to 3.5 months of charges • $200 additional one-off top-up per Singaporean child through CDA, Edusave, or PSEA, for families with children below the age of 21 • $100 CDC Vouchers for each Singaporean household, to be used at participating heartland shops and hawker centres

• $60 million Agri-Food Cluster Transformation Fund to continue supporting tech adoption in the agri-food sector • Set aside $30 million over the next five years for Electric Vehicle (EV)-related initiatives, such as improving charging provision at private premises • Narrow the cost differential between electric cars and internal combustion engine (ICE) cars • Lower Additional Registration Fee floor to zero, for electric cars, from Jan 2022 to Dec 2023 • Adjust road tax bands so that mass-market electric cars will have comparable road tax to an ICE equivalent

Older Workers

Green Financing

• Increase budget for the Senior Worker Early Adopter Grant and the Part-Time Re-employment Grant by over $200 million to support more companies to raise their retirement and re-employment ages earlier

• Green finance is an important enabler for sustainability efforts • Government to issue green bonds on select public infrastructure projects • Catalyse flow of capital towards sustainable development in Singapore and Asia • Identified up to $19 billion of public sector green projects as a start

Lower-Income Families • Expand ComLink to a nationwide programme to eventually cover 14,000 families with children over the next 2 years to provide holistic support for lowincome families staying in rental housing

Children With Special Needs • Pilot Inclusive Support Programme to allow more children with developmental needs to be more meaningfully engaged alongside other children

Based on information available as of 16 February 2021

Supporting One Another Charitable Giving • Extend 250% tax deduction for donations to IPCs for another two years, until end-2023 • Extend Tote Board’s Enhanced Fund-Raising Programme by one year with dollar-for-dollar matching on eligible donations • Extend ComChest’s SHARE as One matching grant period to FY2023 • $20 million Change for Charity Grant for businesses to do more to facilitate spontaneous acts of daily giving

Volunteerism • Extend Business and IPC Partnership Scheme for two years, until the end of 2023, to support corporate volunteerism • CDCs’ $50 million Care and Innovation Fund to support bottom-up, innovative initiatives which address the needs of the community

Financial Planning –­ Relief, Recovery, Reform • Page 5

Singapore Budget 2021

A Kinder Look at Budget 2021 by Solomon Lim, Editor of The Pride Singapore Kindness Movement

Budget 2021: Three ways this year’s Budget is making us a kinder society

Extract: As Singapore moves ahead in a post-Covid normal, the announcement of the $11 billion Covid-19 Resilience Package brings cheer to many. Here are some ways Budget 2021 is helping needy Singaporeans. Every year, the Budget announcement is usually highly anticipated by industry leaders and policy planners, but often just whizzes over the heads of the man in the street. Not so last year when the government committed nearly $100 billion through five Budgets, dipping into our past reserves to support Singaporeans, help businesses tide over the lean times and keep everyone safe during the Covid-19 crisis. Suddenly, with Covid-19 lurking and economic hardship looming, Singaporeans were looking forward to the announcement of any help we can get. It was testament to our sense of national unity

that many Singaporeans still felt generous enough to donate their individual $600 Solidarity payments1 at the time. This year, we may have weathered the Covid-19 health fears, with our frontliners already receiving their first jabs and mass vaccinations starting for the elderly on Feb 222. But the economic repercussions of a global pandemic still resonate. Which is why it is great to see how the government is moving from simply surviving a pandemic to planning how we can emerge stronger in a post-Covid world. In his Budget 2021 speech on Feb 16, Deputy Prime Minister and Finance Minister Heng Swee Keat said that the government’s aim is to build a green and sustainable Singapore that is economically vibrant, socially cohesive, and has the fiscal and social reserves to enable continued stability and progress.

While you can read the full text of his speech here3, three things jumped out at me from the $11 billion Covid-19 Resilience package: Boost for charities, arts and culture and sports Charities and social service agencies have been an integral part of helping Singaporeans tide over the loneliness and isolation of the circuit breaker and social distancing measures. Sites like giving. sg4 have seen a rise in Singaporeans sharing their generosity5. Similarly, we have seen a blossoming of ground-up movements. Groups like #KampungKakis6, founded by a Covid-19 survivor, migrant worker advocates like itsrainingraincoats7 and homelessness community partnerships like New Hope Community Services8 and Homeless Hearts of Singapore9 have flourished as a result of Singaporeans’ drive to help others. Yet organisations in the social service sector have suffered from a drop in fund-raising as traditional methods like appreciation dinners and physical donation drives have taken a backseat last year. That’s why it’s great to see the government encourage public donations, not to mention set up a new $20 million Change for Charity Grant10 to facilitate spontaneous acts of daily giving. Similarly, the $45 million set aside for the arts and culture, and sports sectors to encourage the community to deepen skills, go digital, and transform business models is a welcome fillip to those already hurting as a result of our social distancing measures.

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Help for fellow Singaporeans

Care for environment

For the man in the street, Mr Heng introduced a new $900 million Household Support Package to provide relief to all Singaporean families11, with a focus on lower and middle income households and those with kids.

In an encouraging sign to many who are concerned about our

Lower- and middle-income households will get a one-off GST Voucher special payment of $200 cash and a special GST Voucher U-Save payment of between $120 and $200. And those living in HDB flats will also get extensions to their conservancy charges rebates. Families with kids will get an additional top-up of $200 for each Singaporean child under the age of 21. Something new this time round is the $100 Community Development Council Vouchers that will be distributed to about 1.3 million Singaporean households. These vouchers can be used at participating heartland shops and hawker centres. If you don’t really need these vouchers, consider paying it forward by using them to purchase meals, products or even services for the needy. Here’s a useful link12 that gives some suggestions. Another encouraging sign is the government’s focus on helping lower-wage earners, including older workers and people with disabilities13. There are already several avenues for our silver generation to find new ways of earning an income14, but new ways of supporting them are always welcome. Similarly, additional help for people with disabilities to boost their employment opportunities is a step in the right direction. And on the right path too is the piloting of an Inclusive Support Programme for special-needs kids, integrating early intervention and early childhood education to allow them to be more meaningfully engaged alongside other children.

environmental future15, Mr Heng was clear in his speech. He said: “Climate change is real and urgent. We must act now.” Unfortunately, this might be the hardest part of the Budget to be enthusiastic about. Even though there are good signs in the 2030 Green Plan16, it comes with some challenges. While going for a car-lite society is integral to the goal of net zero emissions “in the second half of the century”, drivers did not welcome the hike in petrol prices, which rose immediately after the announcement17. Proponents would argue that this is to be expected and that the new road tax rebates and additional help for cabbies and privatehire drivers would help cushion the blow. But it’s still a bitter pill to swallow for some. Grab driver Raymond Leong told CNA that the news was too sudden18. “I can understand and appreciate the argument (of going green) but it felt too abrupt even with the rebates,” he said, adding that this new measure, as compared to the upcoming GST hike, is “really unfair”. There is some excitement over the possibility of more electric cars on our roads, but even that is going to take some time to implement19. And it was also unfortunate that on the same day we talked about “bringing more greenery to our island home”, it was reported that a contractor mistakenly cleared large swathes of the 70 hectare Kranji woodland area, sparking shock and disappointment from nature advocates20. Nevertheless, the 2030 Green Plan is still a very ambitious view21 to look towards creating a sustainable future for our children and a laudable goal to aim for. As Singapore and Singaporeans prepare for a year of recovery in our new post-Covid normal, it is gratifying to see that we are headed in the same direction, together. As Mr Heng said, there is no textbook answer to deal with a system shock like a global pandemic. But he noted that “everyone has been doing his or her part, to observe precautions, however inconvenient, to keep each other safe.” “The past year showed that our values as a people matter – the values of unity, resilience, solidarity, and fortitude. The values of care and partnership, of adaptability and action, of working together. Our whole-of-society response is greater than the sum of its parts.”

Image source: Ministry of Finance 1 2 3 4 5 6 7 8 9 10 11 12 13

https://pride.kindness.sg/donate-your-solidarity-payment/ https://www.straitstimes.com/singapore/seniors-across-singapore-to-start-gettingvaccinated-from-feb-22-pm-lee https://www.mof.gov.sg/singaporebudget/budget-speech https://www.giving.sg/ https://www.straitstimes.com/singapore/givingsg-sees-record-136m-in-donationsfrom-april-1-to-19 https://pride.kindness.sg/covid-19-survivor-helping-others-through-tough-times/ https://www.facebook.com/itsrainingraincoats/ https://pride.kindness.sg/homeless-in-singapore-covid-19/ https://homeless.sg/ https://www.straitstimes.com/singapore/budget-2021-20-million-fund-to-matchcomchest-donations-raised-through-spontaneous-acts-of https://www.straitstimes.com/singapore/budget-2021-singapore-households-toreceive-900m-financial-support-package-including-100 https://blog.seedly.sg/community-development-council-cdc-vouchers/ https://www.channelnewsasia.com/news/singapore/budget-2021-support-for-lowwage-workers-lower-income-families-14208612

14 15 16 17 18 19 20 21

https://pride.kindness.sg/seniors-elderly-freelance-caregiver/ https://pride.kindness.sg/we-owe-earth-a-debt-on-resources-and-our-children-tofix-that/ https://www.channelnewsasia.com/news/singapore/singapore-green-plan-2030targets-10-years-14161356 https://www.todayonline.com/singapore/budget-2021-petrol-duty-hiked-23singapore-takes-fresh-steps-combat-climate-change https://www.channelnewsasia.com/news/singapore/delivery-ride-hailing-driverspetrol-duty-hike-budget-2021-14218020 https://www.channelnewsasia.com/news/singapore/obstacles-remain-electricvehicle-despite-incentives-transport-14225616 https://www.channelnewsasia.com/news/singapore/kranji-woodland-forestclearance-error-jtc-nature-groups-14226580 https://www.todayonline.com/singapore/experts-laud-ambitious-spore-green-plan2030-some-urge-more-climate-change-education

Financial Planning –­ Relief, Recovery, Reform • Page 7

IFPHK Asserts Financial Literacy is Key Component for the School Curriculum in Education Bureau Consultation by Dennis Lau, Chief Executive Officer Institute of Financial Planners of Hong Kong (IFPHK)

“In a general consultation on the review of the school curriculum in June, we reiterated the importance of ensuring financial literacy in primary and secondary school students so that Hong Kong falls in line with international recommendations and standards,” says the IFPHK’s Chief Executive Officer Dennis Lau. The Education Bureau (EDB) issued a broad-spectrum consultation paper in June to review the school curricula so that they are optimized for the preparation of our future generations. As a staunch advocate of financial literacy and financial education, the IFPHK has always called for elements of financial education to be incorporated into the current school curricula. We also work closely with the

government and regulators, such as the Investor and Financial Education Council (formerly the Investor Education Centre (IEC)), and always actively engage in related consultations. For the latest EDB consultation, the IFPHK has based its submissions on three core principles: first, that it is vital to enhance consumer protection by promoting financial literacy; second, that it is equally vital to advocate the importance of financial planning; and third, that Hong Kong must align itself with international best practices. Furthermore, we cannot stress enough the value of instilling financial concepts and ideas early, and there is no better avenue for this than including financial literacy as part of the school curricula, drawing from international experience in the process.

The Financial Literacy Journeys of Other Jurisdictions Mainland China

Canada

Perhaps due to the country’s rapid economic growth, financial literacy has lagged behind. In particular, the general population has little knowledge and remains unaware of the risks involved in the cost of borrowing. The authorities realize that this has to be remedied, and the China Securities Regulatory Commission announced plans in April this year to introduce financial literacy into the curricula of primary and secondary schools, and to improve and scale up this financial literacy drive. Because of the shift in Mainland China’s economic paradigm, the authorities hope to better prepare future generations by making financial literacy a core skill.

The Task Force on Financial Literacy found in 2010 that 31% of Canadians were struggling to meet their bills, and urged that financial literacy is more than “a nice-to-have” skill. Since then, authorities in Canada, notably the Financial Consumer Agency, have spearheaded efforts in advancing financial literacy in the population. As a result, financial literacy is entrenched in the school curricula of the majority of Canadian provinces and territories, although the breadth and depth of financial education do vary.

United States A staggering 40% of US adults cannot cover an amount as low as USD400 for emergencies, the Federal Reserve Board found. Two years ago, the Center for Financial Literacy at Champlain College conducted financial literacy research that yielded revealing results: of the 50 states in the US, only five received a Grade A, with 27 receiving a Grade C or below. Different states have differing policies on their push for financial literacy in young people, with several recently making financial literacy class a priority before students enter the workforce, and others making it a graduation requirement.

Financial Planning ­– Relief, Recovery, Reform • Page 8

United Kingdom The Financial Capability Board is the main body that promotes financial literacy. As there is evidence that by the age of seven children’s attitudes about money are already well developed, the Board also pushes for financial education to start early. This sentiment is echoed by UK parents, who think that schools do not do enough to arm students with personal financial skills, as shown in a poll by MyBnk and global bank MUFG. The poll also found that parents preferred schools to teach financial literacy over other subjects such as family and relationships, with half of them agreeing that schools should spend more time teaching personal finance, and wanting the national curriculum to allot more time to lessons about budgeting and avoiding debt.

The Financial Literacy Journeys of Other Jurisdictions Apart from setting out the international movement in financial literacy which is gaining pace, the IFPHK has also expressed the following views in its submissions to the EDB: • The IFPHK is deeply disappointed that financial education or measures to raise financial literacy have not been put forward in the proposals in the EDB consultation paper. • Despite the EDB’s proposals having referenced recommendations of the Organisation for Economic Cooperation and Development (OECD), a leading champion of financial education, the proposed changes have completely omitted financial education. • Financial education must start early, and it is essential to foster financial literacy in schools, as is recommended by the OECD. • Both the Financial Planning Standards Board in the US and the IFPHK consider financial literacy a core life skill in an increasingly complex world. Children will eventually need to take charge of their own financial future.

In addition, we have submitted the following recommendations to the EDB that are consistent with our proposals in consultation sessions for the government’s yearly Policy Address: 1. The school curricula should teach students skills that equip them for society’s future challenges The EDB consultation paper proposes to give considerable weight to life planning education, but financial literacy is a component that is woefully missing. As life events are inevitably intertwined with personal finance, the IFPHK recommends for financial literacy to be rightfully acknowledged as a crucial part of life planning, as being financially-smart is the catalyst that accelerates the wholepersonal development and value education of young people. 2. Direct engagement of the IFEC in formulating and revising the school curricula Since the establishment of the IFEC, the promotion of financial literacy in Hong Kong has become more systematic, with the Hong Kong Strategy for Financial Literacy being formulated and implemented. However, the territory-wide spending on promoting financial literacy remains extremely low, with the IFEC stating in its 2018-2019 annual report that its spending on education programmes is just HKD38 million, a tiny fraction of Hong Kong’s GDP. To give the IFEC a more efficient and influential role in promoting financial literacy, the IFPHK recommends for the IFEC to lead the EDB in financial education in schools, and to be directly involved in formulating and reviewing the new school curricula. 3. A Financial Education Foundation Fund should be set up To pool together the resources and expertise of various professional bodies, corporates and NGOs, the IFPHK recommends that a Financial Education Foundation Fund should be established and financed wholly or partly from levies collected by different financial regulators. The Fund can be used to support different financial education initiatives that are consistent with the Hong Kong Strategy for Financial Literacy, and to enable different stakeholders to collaborate more effectively.

IFPHK’s Efforts to Drive Financial Literacy Aside from our core mission of advancing the standards of the financial planning industry, the IFPHK has constantly strived to promote financial literacy in every segment of society through various means, whether through our own initiative, or through partnering with relevant parties. We also commend individuals and corporations for their financial education efforts through the annual Financial Education Leadership Awards. The learning of all vital skills must start as early as possible, and we sincerely look forward to Hong Kong schools embracing financial literacy as an indispensable part of our youngsters’ education.

Financial Planning –­ Relief, Recovery, Reform • Page 9

Setting Your Financial Life Goals by Irene Yee

With 2020 behind us and a brand new year ahead, there is no better time than now to set your financial goals for the new year and beyond. One obvious thing which 2020 — with all its twists and turns — taught us is the importance of having contingency plans, especially in the area of personal finance. As a wealth manager who has helped clients and their families manage and plan their personal and family finances, I would highlight two areas for setting your financial life goals: Estate or legacy planning and retirement planning.

Estate planning Plan for incapacity. While many focus on their young and elderly dependents when they think of estate planning, I would suggest that incapacity planning for oneself should take a higher priority. Mental incapacity planning involves setting up arrangements or structures such as trusts to prepare for any unfortunate event of mental incapacitation. When dementia or Alzheimer’s strikes, your pre-designated decision makers will kick in and take over the management of your finances. This type of planning involves drawing up a Lasting Power of Attorney (LPA) while you are still healthy. You may also appoint a corporate trustee as your professional LPA done to ensure the proper usage of funds for your living needs when you are mentally and physically incapacitated. When you have a trust that is triggered only in the event of your incapacity, your trustee can access your financial resources for your benefit. Think of it this way: If you have to be in intensive care or a long-term care facility, who will pay for your bills and manage your assets? When you fund your trust, the trustee can do that. Without such a trustee, your family would have to turn to the courts to appoint a professional to oversee your assets. This is a lengthy process and could cost you more than $5,000. For many business owners and investors, delays or an inability to enter into legal contracts may disrupt your business or investments.

Providing for dependents when you are no longer around This is another important area of estate planning is leaving at least enough for your loved ones when you pass on. To do so, estimate the amount each dependent would need in his or her lifetime. Ensure that your estate — which is made up of the assets you leave behind — is sufficient to provide for each dependent. Include non-day-to-day expenses such as educational expenses for your young dependents and potentially large medical bills for all of your dependents. Remember also caregiving expenses and ageing-related expenditure for your older dependents, such as home-nursing or nursing-home costs. If you have family members with special needs, you should also supplement your SNTC Trust (which you may have had set up with the Special Needs Trust Company) with a suitable private trust.

Financial Planning ­– Relief, Recovery, Reform • Page 10

I have found that insurance solutions are probably one of the most costeffective ways to provide the estate amount that your dependents would need to carry on with their lives with as little lifestyle disruption as possible. Life insurance creates an immediate estate when you, as the insured, pass on. Depending on the type of insurance and coverage structure, this can result in a deceased’s estate valuing a few times more than his net worth while he is alive. Discuss these protection options with an experienced and reliable Certified Financial Planner who provides you with access to different insurers.

Write a will or set up a testamentary or living trust Suppose you have not written a will or have written one without including at least a substitute Executor and a substitute group of beneficiaries. It is time then, to write your will or rewrite one that includes these substitutes. An estate with a valid will but without an executor is deemed a “Letter of Administration” case. The court would need to select an administrator to handle your estate. This process delays estate distribution and involves legal fees that easily amount to a few thousand dollars. If you have young or elderly dependents, staggered rather than lump sum distributions of inheritance is advisable. Use testamentary trusts or living trusts, depending on the circumstances. Discuss the suitability of these in your estate plan with a qualified estate planning financial advisor who has practical and professional experience with both wills and trusts. Doing this would safeguard your young vulnerable dependents from financial predators and investment scams, or their own reckless spending. Instalment distributions can help them avoid spending the whole sum immediately and as a result develop irresponsible money habits during their less-mature life phase. A special note to business owners: Put in place a succession plan and structures for your business to carry on without you. Alternatively, prepare arrangements for you to exit your business in the event of your disability or passing. Involve experienced, qualified professionals such as financial advisers who specialise in estate planning and trust managers in the process. Many well-known business families fail to do so and pay the price. These include Singapore’s one-time iconic Teochew restaurant Swatow and Hong Kong’s famous roast goose specialist Yung Kee Restaurant. These families have seen their family wealth decimated either by distressed sale of business assets or by bitter feuds among family members.

Retirement or financial independence planning This will help manage unexpected large expenses such as medical expenses. However, a crucial element in retirement planning is the anticipation of potentially large expenses such as medical expenses so that your retirement plans do not get derailed. In Singapore, a practical solution is to get yourself covered by a private hospitalisation and surgery shield plan. Part of the premium for such a plan can be paid with your CPF Medisave. Another area in which CPF Medisave can facilitate your retirement planning is long-term care protection. Disability — defined as a person’s inability to perform activities of daily living such as mobility and feeding — is typically related to ageing. Its resulting incapacity and need for personalised care and medical attention result in higher expenses in one’s retirement years. As such, it is prudent to put in place financial solutions such as ElderShield or CareShield Life before you retire. You should also create a “back-up” financial resource in case of chronic illness. The use of optimally-priced critical-illness insurance plans to cover chronic illnesses such as stroke, cancer and heart attacks is important. Such

plans will help prevent your retirement resources from being prematurely depleted by loss of income, loss of business and/or hefty medical bills when critical illness hits. Having said that, critical-illness insurance plans in the market are not all equal. Before you buy one, make sure to discuss your needs with a financial adviser who can offer you choices of coverage from various insurance companies. Different insurers have their unique strengths in their types of protection. A financial adviser who has access to a comprehensive suite of products will be able to advise you the best-of-category solutions for your needs.

Set up guaranteed retirement cash flow plans Calculate your “retirement number” by working out your average monthly expenses and removing expenses that will not likely occur during your golden years. The latter include children’s pre-tertiary education expenses as your children may have grown up and become financially independent by the time you retire. You should also supplement your CPF Life cash flows. Work out recurring expenses you expect to have during each month of retirement. These would include daily meals, utility bills, mobile phone bills and transport expenses. Such expenses form the foundational layer of your expenditure that should ideally be covered by guaranteed monthly cash flow plans on top of your monthly payouts from CPF Life. Since monthly cash flow from CPF Life is about $1,400 per month, supplementary retirement cash flow plans are needed to supplement the monthly payouts from CPF Life. With these strategies for your financial goal-setting for the new year, you and your family will be future ready. At the very least, you will enter the new year with greater peace of mind.

Irene Yee, a Certified Financial Planner, is an award-winning estate planning financial advisory consultant with Phillip Securities (a member of PhillipCapital).

Reproduced by permission of The Edge Publishing Ltd., Copyright © 2021 The Edge Publishing Pte Ltd. All Rights Reserved Worldwide.

Financial Planning –­ Relief, Recovery, Reform • Page 11

Repositioning Your Retirement Plan to Retire with Peace of Mind by Kee Siew Poh, CFP®

During the 2008 global financial crisis, a retiree I met told me that he lost 70% of his retirement funds which were predominantly in stocks and he slipped into depression. A friend who was supposed to retire in April 2020 when the Covid-19 pandemic hit decided to continue working for another 2 years to make up for losses in stock market. Last month, a friend who just turned 60 shared with me that he made more than 100% returns in bitcoin and cryptocurrency just within months, only to lose them all because of a very unexpected fraud and hacking. If this happens to you, would you be able to retire with peace of mind?

Drawdown Risk Drawdown risk is the measure of how long it takes for an investment to recoup its losses after it falls from previous high. When you are in the phase of Wealth Accumulation or growing your assets (1st Half planning), drastic falls in the value of your investment can be dealt with as you’re likely to have many years for your portfolio to recover. But when you are in the phase of Wealth Distribution or requiring income for retirement (2nd Half planning), if your investments suffer drastic falls, this may put you in a very uneasy and worrying situation. Do you cut your investment losses and turn into around into cash to avoid greater drawdown risk or do you buy more at a lower price? In a situation of a 50% drawdown as seen during the 2008 global financial crisis, it requires a whopping 100% increase to recover to the former peak. A loss of money during the 5 years before you retire and the 5 years after you retire will have a devastating impact on your retirement. This is the phase where you do not want to lose any money to be assured that you can retire with peace of mind. Thus it is important to incorporate the following 2 Strategies especially in the 2nd Half planning, in the years before retirement.

1. Pay-Cheque Income

Purpose of Pay-Cheque Income The purpose of Pay-Cheque income is to cover at least the monthly Basic Living Expenses so that we can have a decent lifestyle without any worry about the economic situation. This will address the concern of running out of money or to remove the fear of outliving our money.

Importance of Pay-Cheque Income Singaporeans are living longer. In fact, 1 in 2 Singaporeans aged 65 today will live beyond 85 while 1 in 3 will live beyond 90! How do you feel if you are in a situation where you run out of money before you run out of breath? Living too long compounds all other risks that we face. This is because the longer we live, the more likely we will experience market crash, the greater the risk of inflation eroding the value of money, and the higher the risks of extended health care costs. Stocks cannot remove longevity risks off the table, neither can bonds, unit trusts or even your broker/banker. Having a secure Pay-Cheque Income is important because while you can outlive your assets in the form of stock/bonds and even your spouse, you cannot outlive this lifetime income and you will have sufficient funds to pay for all your Basic Living Expenses.

Pay-Cheque Income Defined In the past, it is not uncommon for people who have worked in the public sector for many years to be rewarded with a Guaranteed Pay-Cheque for Life in the form of a Pension or Lifetime Annuity Income. Today, for most of us, we will only receive a pay as long as we work. Once we stop working, we will no longer receive a pay. Thus, it is important to plan such that we continue to receive a ‘pay’ in the form of Pay-Cheque Income even when we are no longer in employment. This Pay-Cheque Income refers a predictable income stream that will come in every month as long as we live.

Financial Planning ­– Relief, Recovery, Reform • Page 12

2. Play-Cheque Income Play-Cheque Defined With Pay-Cheque Planning, we hope to receive a predictable monthly income stream that is not dependent on market movements or economic conditions for a lifetime. Play-Cheque Planning on the other hand, allows us to capture the upside of the market (eg stock market or property market) and to capitalize on the growth potential. If market continues to perform well, this will more than take care of inflation risk and add a boost to

Description

Pay-Cheque

Play-Cheque

Purpose

Basic Living Expenses (Needs)

Fun & Leisure (Wants)

Example

Food, housing, transport

Hobbies, holidays, experiences

Payout

Paid out on a monthly or annual basis

Can be drawndown in Lump Sum or monthly

Instrument

Annuity-based instruments or Retirement Income Instruments

Stocks Unit Trusts Property

Characteristic

Predictable Income Stream, can be for a lifetime • Should not be marketdependent Eg Equity/ property market • Takes care of Longevity

Allows for upside potential in stock market & property market • Has growth potential • Hedge against Inflation

Diversification of Instruments & Strategies

our retirement income. Play-Cheque income can come in the form of a dividend yielding stock portfolio or property rental income.

Purpose of Play-Cheque Beyond the Basic Living Expenses, Play-Cheque income is used for Fun & Leisure. It allows us to live out our dreams, enjoy little luxuries and to have various life experiences. This could mean being able to being able to travel more extensively, with various unique experiences, having the funds to start certain business ventures or simply learning a new hobby which requires certain amount of financial resources.

It may not be ideal to have all the Pay-Cheque or Play-Cheque Income coming from just one source. Pay-Cheque Income can be in the form of annuity-based Lifetime Income or Retirement Income instruments which pays out during the Active Retirement Years, and this can be from various financial providers. Some may even incorporate long term care benefits such that one receives an Additional Monthly Income in the even of disability during the retirement years. For Play-Cheque instruments such as stocks or mutual funds, consider diversifying across different countries/regions, sectors, asset class (bonds/ equities). Strategies used in 1st Half Planning may need to be reviewed to ensure that should there be a market drawdown, risk is mitigated or managed. Ultimately what you want is a portfolio which is able to withstand market shocks and still give you a decent return. You have worked hard and when you retire, you want to have the peace of mind and to be able to sleep like a baby without having to worry about money.

Danger of building Play-Cheque Income without any Pay-Cheque Income The danger is that many choose to focus on Play-Cheque for its excitement before even having the Pay-Cheque in place.

i) Market volatility & cycles are harder to predict Market correction can erode a substantial portion of our income and compromise our lifestyle. This can lead to fear and panic as we watch the decline in property values and stock market. The 2008 global financial crisis serves as an example where no one asset class was immune from sell-off. The strategy of building a Pay-Cheque Income first therefore act as a safety net and a ‘life-boat’ during difficult times, ensuring that some of our nest egg will not lose value if the markets turn down. This is especially important during the 5 years before you retire and the 5 years after you retire

ii) Mismanagement of money Many would have heard of the story of the widow who received a payout of $1m from insurance and donations from the public after her husband was killed in a freak accident while working at Changi Airport Budget Terminal. Within a year, that $1m was all gone. Having a large sum of money may expose a person to various error of judgement eg a business venture that did not work out, temptation of instant gratification/ indulging on family or even gambling. What may start off as a good intention with good faith that things will work out eg business investment may unexpectedly fail.

Financial Planning –­ Relief, Recovery, Reform • Page 13

Single Parent's Guide – Looking Forward by Joanna Leng, CFP®

2020 was not an easy year, is an understatement for many. Particularly to those who had been working part-time, or even taking up odd jobs, 2nd jobs to meet ends meet. The lockdown would have hit you very hard. I can say this because I used to work full time: 6 days a week from 9am to 7pm, and yet it was still not enough to rid those overdue letters. Fast forward to today, life does get better, and while you may belong to the ones that got hit, the silver lining is, living in Singapore, safety is the least of your and my concern, when it comes to everything else. Being born a Singaporean, I feel blessed to be here. It was not because I did extra good deeds, or worked hard, it was pure luck. If life were to be giving you a check box to tick off, I would tick off safety as one, by being here.

It is during events like this, it gives us the wake-up call. To force ourselves to look at where we are again, and what we could have done better and wished we had not procrastinated. Now, ask yourself when how many times have you bought something through the introduction of a friend, who excitedly tell you how good a certain skin care is and only to not get the result they say it would. How many times have you watched a demo video and felt you could do the same benefit only to realise one out of the two or both that not only did it not work, but the quality was also far from what was advertised. If you have any of those experience, is this also the same way you would plan for your future? To listen to a friend and plan your finances and only to realise more than half the time it is not for you, and when it does not work as intended as how your friend had describe, you cannot ask for compensation of anything. The responsibility lies in you for no one placed you at gunpoint on making the decision. It was your choice. Now you have lived through the lockdown, it is time to look forward and work upwards. In Singapore, consumers are lucky because financial advice is given free. You as a consumer can

Financial Planning ­– Relief, Recovery, Reform • Page 14

speak to as many advisors as you wish to before deciding, unlike some countries where advise comes with a fee, like seeing a doctor or a lawyer, you start paying once you are seated right in front of one. Make use of it, but also have open ears to listen what they tell you. In my opinion, there is no best product, no best investment, no best of anything, because there is always more than one way to Rome, and financial planning is a long haul, where there is also no one off advice and you are set for life, just like how Rome is not built in one day, your long-term finances should not be settled in one time. I wrote an article once on “What Is Your Ratio”, it is about finding out what is the ratio of your income that goes into a certain category of your life. Each one of us, have a different ratio despite how similar two people can be, the end number will still be different. Thus, figure out your ratio, and work towards your ideal ratio. If you need help, look for a professional. Having gone through my share of bad and worst days, one of the habits that I still practice is, I do my own financial review every year march, during my income tax filing. I look at my plan for last year, ask myself on the hits and misses, the reasons behind, and a plan again moving forward. What goes into my yearly review is my past year expenditure. Have I been spending more? Which area, do I need to scale down and was it necessary spending? Will the same pattern continue this year? Or should I adjust it. I review my protection plans, and because I do it every year, it does not mean I buy or cancel insurance policies in March. It means I plan for it to happen in the next 12 months. Example: we already knew care shield will be available in October 2020, hence, my upgrade was to put in place in 2021/2021 Thus, I focus my risk management planning on the other areas, like critical illness, accidental, and even relook at my investment portfolio. My priorities in 2020 was to increase my death cover as my 2

children are in their pre-teens now and would need lots of monies for education and I was behind my target in saving for their education. Having an increased in death cover is the least I could do, compared to not doing anything. In 2019, my priority was critical illness as we all know illness policies are not exactly the most affordable policies in the whole spectrum, and I focused a lot on early critical illness because I want to make sure I have enough monies to fund for my recovery, giving me the best chance of recovery so I can continue to be around my children. This year, after many years of strict adherent to my financial plans, I am very satisfied with my own protection planning and the focus for 2021 will be on making my monies work harder and continue to check my insurance plans. My focus would be on the mid- and long-term investments and do an annual review on my preferred asset allocation. Make this also a habit, do it on a yearly basis. The recommended type of financial planning would be a board-based approach where it covers items that goes beyond unit trust and insurance. Plan for its long term in steps, then break it down into smaller steps. You can even gamify it to make it fun, which I do. Yes, I allow myself a certain budget to buy things that I want to have once I have achieved certain milestones. To simplify, can find an advisor who is willing to go through the following steps with you. 1. Look for an advisor that can do a board-base planning – the broad-base planning approach can help you to prevent deadlock of overcommitment to a certain financial product that can prove costly to unwind because your financial needs for 7 years later were not taken into consideration and you overestimated your budget. 2. Find out your ratios - Finding out your ratios can be interesting and very useful. This gives you an easy indication if you are overspending, being overly conversative by having more emergency funds than you would potentially need, low investment return. 3. Agree on follow up meetings - you do it with your advisor every year for the initial years, or even once every 6 months if you must. Let your advisor know, you will need more meetings during the initial years, and that is alright. It is important to help you align your numbers and adjust them during the first few years because the first 2 years are most crucial. Many people do not have an advisor to stick with them beyond 3 years, and planning does not mean committing into more financial products each time. 4. Review and adjust your numbers and make sure you are comfortable with the change and get your advisor to guide you.

Once you can achieve that, your foundation would have been solid, and even when another pandemic like covid were to hit, you can be more resilient than you would have been without the basics. I always tell my clients, never be afraid to ask, never be afraid to call to see me again if you do not feel good on your number, because it is your number, your life. While you take charge, my role is to guide you.

5. Change – making changing for the better a habit, and it is always okay to not be on track, but always have an opened-mind and welcome changes.

Financial Planning –­ Relief, Recovery, Reform • Page 15

Importance of Long-Term Care Planning by Kee Siew Poh, CFP®

Physical Independence beyond Financial Independence As we approach our halftime, it is very important that we have Financially Independence, as that gives us the option where we work because we choose to and not because we have to. However, as we grow older and enter into our twilight or sunset years, beyond just Financial Independence, the goal would be for continuous Physical Independence. Simple Activities of Daily Living (ADL) such as walking, transferring, feeding, toileting can be of tremendous challenge not just Physically but also Financially if one is not able to do this independently and require some form of nursing care.

Importance of Long-Term Care Planning Did you know that?

1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime, and may need long-term care.

It is therefore important that we plan early for our future long-term care needs, so that we do not put unnecessary burden on our families and caregivers.

Financial Planning ­– Relief, Recovery, Reform • Page 16

About 3 in 10 could remain in severe disability for 10 years or more.

Defining Long-Term Care & Government Schemes in Singapore Long Term Care refers to the personal and medical care needed if one becomes disabled due to age (eg dementia), worsening of chronic conditions (eg diabetes) or other sudden/adverse health conditions (eg stroke, spinal cord injuries or accidents). For certain conditions such as stroke, it can happen suddenly and to anyone (even among younger people below age of 50), and the effects can be devastating. In fact, stroke is the leading cause of disability worldwide.

ElderShield

CareShield Life

ElderShield was introduced in 2002 as a basic long-term care insurance scheme targeted at severe disability, especially during old age. It was introduced to those age 40 and above and provided payouts of $300/month for up to 5 years upon severe disability. It was subsequently reviewed in 2007 to provide higher benefits of $400/month for up to 6 years.

Under Care Shield Life, younger cohorts are enrolled when they turn 30. Payout starts at $600/mth, for as long as one remains severely disabled, and payout will also increase over time (eg at 2% pa fr 2020 to 2025).

These are the long-term care insurance schemes that provides basic financial support should Singaporeans become severely disabled, and need personal and medical care for a prolonged duration. There is a monthly benefit payout when one is unable to perform the 3 out of 6 Activities of Daily Living (ADL) such as washing, dressing, feeding, toileting, walking/moving around and transferring.

Long-Term Care Options & Costs There are various options in terms of disability rehabilitation and this includes:

1. Home-Based Care • This includes hiring a nurse or helper to assist with daily personal care in your home. • A helper may cost around $600 to $1,200 per month, while a nurse would cost much more. • Day care centre for rehabilitation could be incorporated to allow for social engagement opportunities.

2. Nursing Homes • The cost of nursing homes can be high and this can cause a burden on family members if there are no other means of funding the cost. • Average price of nursing homes such as Orange Valley, NTUC Health, Apex Harmony, Econ Medicare Centre can be in the range of $2,000 to $4,000 per month before any form of subsidy. The amount of government subsidy one can qualify for will depend on means testing.

The above costs are incurred monthly and this has not taken into account the costs of monthly or ad-hoc Medication and Treatment. With increasing cost of long-term care and medical inflation, the monthly payout of $400 from ElderShield or $600 from CareShield Life may not be adequate and Supplements can be purchased from the private insurers in order to have higher coverage/benefits.

How to be Financially Protected 2 ways of transferring this risk

1. Long Term Care Plan / Supplement fr private insurer, with option to i. increase the coverage/benefit level up to $5,000/mth for lifetime or ii. Widen the scope of coverage to include inability to perform just 2 out of 6 ADLs

2. Retirement Income Planning, bundled with Long-Term Care Benefits i. It is possible for Retirement Income Plan which pays out a Monthly Income in Retirement Years to provide some form of long-term care benefits. This translates to Additional Monthly Income in Retirement Years, in event one is disabled. ii. For those with existing health issues who are unable to qualify for long-term care plan/supplement, the benefit of bundling is that there is no medical underwriting for the disability benefit (pre-existing conditions excluded).

In conclusion, an expensive long-term care event could derail an otherwise well-built retirement plan. This problem is growing as people are living longer, since it becomes more likely that care will be needed longer as well. With lower birth rate, older individuals may have fewer children who are in the position to provide for them as well. Hence, with Singaporeans living longer and the risk of disability being higher in old age, the importance of long-term care planning cannot be undermined. Reference : Planning Ahead (careshieldlife.gov.sg)

Financial Planning –­ Relief, Recovery, Reform • Page 17

No Storm Lasts Forever – Boost your Financial Resilience by Lorna Tan, Head of Financial Planning Literacy Consumer Banking Group, DBS Bank

Amid encouraging signs of a post-pandemic recovery, the financial health of most Singapore residents has improved by the end of 2020. But the lower income group (earning salary of S$2,999 and below) – which experienced a significant income decline (more than 10%) – continue to struggle and were depleting their savings in the last quarter of 2020. These are some of the valuable insights we can cull from this crisis to help us plan for a more secure financial future. As economic conditions improve, so will people’s financial situations. Yet, DBS’s analysis over the past year has shown that while some segments of the society have made concerted efforts in financial planning, there were many who have not been able to do so. For the less prepared, though policy support will be helpful in closing the gaps in times of crisis, it should never be a cure-all or a permanent solution. To better prepare for a sustainable financial future, rigorous and prudent financial planning should be a way of life for everyone going forward. Macroeconomic data does not reflect the full impact of the Covid-19 crisis on people’s income, savings and spending. To ascertain that, DBS analysed anonymised and aggregated data insights from 1.2 million retail customers to examine the effects of the pandemic on individuals’ financial wellness. This second report No Storm Lasts Forever, which is based on data collated at end of 2020, is part of DBS NAV Financial Health Series.

Here are 6 key highlights and financial planning tips from the second report. 1. Financial health of Singapore residents has improved across the board: The share of customers who experienced a significant decline in income fell to 19% in December 2020, a 7-percentage points improvement as compared to 26% in May 2020. This reflects an improvement in the financial wellness of Singapore residents amid the recovery from the crisis. Among those affected, the extent of impact has also moderated. 29.2% 29.7% 28.5% 28.4% 28.5% 28.7%

30

$2

26.0%

25 21.0% 19.4% 19.0%

20 15

15.0%

$5

$7

$1

3. Middle-aged workers still feeling the squeeze

10 5 0

$3

Tips: To save more, increase income via secondary jobs or side hustles while reducing discretionary/unnecessary spend. Set up a realistic budget to gain more clarity on your saving and spend patterns. Be more discerning between needs and wants and adopt a more frugal lifestyle. This will help you save more when your pay goes up over the years.

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Dec

Tips: Set up a robust and holistic financial plan to help you navigate through the uncertainties ahead and achieve wellness. Besides having adequate emergency savings to tide through rainy days and financial difficulties resulting from potential retrenchments and income losses, start accumulating wealth early, build passive income streams and/or continue to upskill to expand income opportunities via career progression and side hustles.

2. Sustainable support for lower-income group needed The lower-income group remained the worst hit, accounting for about half (49%) of customers who experienced income degradation. That said, the share of low-income earners who experienced severe income loss (more than 50% income decline) improved significantly by 9-percentage points to 42%, up from 51% previously. a. Notwithstanding a turnaround in employment prospects, targeted policy support (e.g. mortgage deferment schemes) has played a crucial role in helping this group of customers reduce their monthly financial stress. b. However, there are signs that this group will continue to dip into their savings to meet their monthly financial obligations. It will remain crucial for policy efforts to support this vulnerable group, especially in helping them improve their employment prospects.

Financial Planning ­– Relief, Recovery, Reform • Page 18

Middle-aged workers still accounted for the majority share of those who experienced income deterioration. In fact, almost half of those in this age group experienced income decline of more than 30%, though compared to the other age groups, middle-aged workers made the most significant progress during the economic recovery. A persistent increase was also observed in the unemployment rate of middle-aged workers. These findings suggest that this group will continue to face challenges, and therefore require sustained policy support. Tips: The middle-age group, especially those who are fall in the sandwich class category, will require more help in their financial planning since they would have multiple financial responsibilities toward their children, parents and own retirement. Ensure you have adequate insurance protection and a sound estate plan so that dependants can continue with their lifestyle should something untoward happen to you. Invest wisely with positive cashflows in suitable investments to achieve both short and long-term financial goals.

4. Pandemic prompted customers to save more Emergency savings of all income groups rose amid the crisis and reached peak levels in June 2020, before tapering off gradually as economic conditions improved. For example, the emergency funds of customers who earn more than S$10,000 peaked at an amount equivalent to 4 months’ worth of salary. a. However, the savings situation of those who suffered income decline appears to have worsened. As of December 2020, almost half of

customers (47%) who experienced a significant fall in income had less than a month of emergency funds, up from 42% in May 2020. b. The lack of sufficient savings appears to be more pronounced in the lower-income group, as they are most likely to have dipped into their savings to weather the crisis. Policy measures aimed at helping this vulnerable group will remain crucial this year. Tips: It is recommended that you set aside enough emergency funds to cover at least 3 to 6 months of expenses, and more if you have dependants. Doing so will enable you and your family to tide over rough patches and avoid the need to liquidate your investments at an unfavourable time and price. In addition, it is prudent to monitor your discretionary expenses and pay your bills in full promptly every month to avoid incurring additional fees.

5. Spending varied at different stages of pandemic As the pandemic situation improved, so did the propensity to spend. From August to December 2020, spending steadily rose for all income groups. Expenditure in December across all income groups was significantly higher than that in April. More specifically, discretionary spending has picked up compared with spending on essential items as economic prospects improve. This growth in spending could be due to several factors, such as a higher propensity to spend during the school holidays and Christmas period. After months of perceived gloom, there was pent-up demand for goods as consumers rewarded themselves. The year-end spike in cash outflows could also be due to top-ups to Central Provident Fund (CPF) accounts and the Supplementary Retirement Scheme to qualify for personal income tax reliefs. Indeed, the CPF Board saw a 40% y-o-y increase in CPF top-ups to S$3bn under the Retirement Sum Topping-Up Scheme in 2020. In the last three months of 2020 alone, the Board saw a substantial increase in top-ups of S$1.2bn.

loans to enjoy savings j) Doing without gym membership, a car, or a domestic helper. CPF members are encouraged to top up their CPF Special or Retirement Account each year in January rather than in December to start earning interest earlier and reap the benefits of compounding. By doing so, you could earn 20% more interest on your savings in 10 years. For example, by topping up S$7,000 annually in January for 10 years, you will get S$17,100 in interest, compared with S$14,000 if you made top-ups in December.

6. Potential “cliff effect” from the mortgage deferment scheme not a major concern According to the bank’s data, only 8% of existing customers under the mortgage deferment scheme required a relief extension. This potentially alludes to a better-than-expected cash flow situation for most households, where the reduced monthly instalments are expected to cover interest and partial principal repayments for most individuals. Nonetheless, continual support for the vulnerable group – comprising individuals who experienced a bigger income degradation or lost their jobs due to the pandemic – remains imperative. Furthermore, different groups of individuals have responded to the mortgage deferment scheme differently. While some individuals (~31%) have tapped on the scheme arising from real financial need (i.e., reduced or loss of income, cash flow difficulties during COVID-19), others may have been more savvy (~17%) in tapping the scheme to free up cash to put into investments. The remaining ~52% customers do not invest and have mixed characteristics; most of the customers have positive cashflow or a few months of emergency funds. As of December 2020

31% 52% 17%

Tips: Our experience of living within the constraints of social distancing due to the pandemic last year has taught us that it is possible to reduce discretionary spend when the need arises. Use the digital financial and retirement advisory tool DBS NAV Planner to help you keep track of your spending in different categories, make realistic adjustments, and set up a financial plan to achieve financial wellness. It is timely to use this period to inculcate a thrifty habit and learn to defer gratification for bigger future financial rewards. Some of the challenges in transitioning pandemic-savings habits to the post pandemic world include the person’s money mind-set or attitude to money, exuberance, positive consumer sentiment and the perceived need to reward himself or herself after months of austerity. Below are several saving strategies adopted during the crisis that can become long-term habits over time. This is partly because the new normal will see more people working from home for longer periods of time compared with previously. They include a) Cooking and eating at home b) Home entertainment c) Bulk buys for household items d) Cheaper brands d) Group tuition e) Self-care f) Less consumption on cosmetics, apparel, and sun-care items g) Online shopping h) Restructure insurance such that you get same coverage at lower premiums i) Restructure home

Tips: Affordability is key when it comes to buying a big-ticket item like property. So do your sums carefully and find out if you can commit to the mortgage payments over time, before signing on the dotted line. Lenders will assess your monthly income, debt, credit score and a variety of other factors to determine how much you can afford. For instance, financial institutions use the TDSR and MSR measures to ascertain your ability to repay the home loans, as well as an indication of your financial health. It is also prudent to do your due diligence and empower yourself with information on government subsidy schemes and suitable mortgage packages that can offer savings. For those who have deferred their home loans, do note that interest will continue to accrue on the principal amount deferred, equating to a larger sum to be repaid, which places additional pressure on you when the moratorium ends. Consider how you can resume repayments when the relief measures end. Some tips include reducing other debt obligations such as non-essential insurance payments and credit card loans to enhance your financial position. Approach your bank early for help if you have payment issues especially those who saw >25% income impact. Ask your lender for mortgage extension relief. In the light of the low interest rate environment, you can also consider refinancing your home loan to potentially enjoy some savings. Do a cost benefit analysis and consider if you may be subject to penalties, subsidy claw back, legal cost, administration fees and a lock-in period. The writer is Head of Financial Planning Literacy at DBS Bank.

Financial Planning –­ Relief, Recovery, Reform • Page 19

by Adrian Tong CFP®

Today we are looking at Digital Crypto Currencies, so I think we can try to understand them from 3 basic aspects. 1. What are they? 2. Are they a good investment? 3. Will they replace our conventional fiat currencies, and finally, the closely related central bank digital currencies.

So, what are Digital Cryptocurrencies? Well, they a new kind of online money that is fully digital, and is verified using a peer-to-peer decoding system to collectively govern all it’s transitions, hence the term “Crypto”. It basically has the below attributes. 1: Bitcoin is the first one, but there are a few others now, such as Ethereum, Litecoin, Dogecoin, and so on. 2: It is scarcity by design, that is, there is an upper cap on the numbers of units of the currency, and this is to mimic the nature of precious metals. 3: It is almost impossible to hack or counterfeit. Due to being Peer-to-Peer, that means, it has no centralized system, and use a network of all users to do all the calculation required to maintain the currency’s existence. 4: New unit of the currency will be released into the user base, usually by someone with a powerful computer who helps to do all the peer-to-peer calculations to allow the currency to be passed around, until all the units are released, or what they usually called mined. The first Cryptocurrency, Bitcoin was designed to be a sort of “digital gold”, to challenge the normal, central bank backed “Fiat Currency”, which is the normal money most of us use day to day. At the start, Bitcoin cost just about nothing, however, after a few years, the price of Bitcoin exploded until one single unit was worth thousands of dollars. This caused an interest in the currency, causing it to further increase in price, until today it’s close to USD $60,000. This also leads to the raise of many other similar digital currencies, most which are minor variations of bitcoin.

So, the first question we would like to ask is, are they a good form of investments? Should we buy some of these digital currencies as part of our portfolio? Or maybe even buy a gaming PC to do currency mining? Well, the answer is rather complex. Digital currencies have price without having an intrinsic value, and without a centralized bank or other regulations, prices can fluctuate extremely volatile, and the movements are hard to predict, just within a month, it’s price

Financial Planning ­– Relief, Recovery, Reform • Page 20

can either double or drop by half. While it is reasonable possible to raise in value over an extended period of time, based on the trend of Bitcoin from its IPO until today, we must understand anything could happen, as the currencies are all neither backed by a government physical asset, nor a profit making company. It is very similar to collectables investments, such as automatic Swiss watches, Antiquities, Stamps and Rare Baseball cards, only in digital form. One whom wishes to invest or speculate in such a virtual asset, might want to limit themselves to trading only the major ones, such as Bitcoin, Ethereum, Litecoin and Dogecoin. As well as refrains from mining, since for many such currencies, to get any new units of it you would need to invest in very, very expensive and powerful hardware. Studying the charts, as well as joining online trading committees to learn is the key to earning some money from these currencies.

So, the next question is, will they achieve their original intended purpose of challenging, or even replacing, fiat currencies. Well, most likely, impossible. As mentioned before, these currencies are, at least for now, all scarcity by design, and are by design intended to hold and even increase in value over the time. This means, if it were to become a currency, it would almost surely be a highly deflationary one, which mean, it cannot support a growing economy with an increasing population and increase in wealth due to technological innovation. As of today, around 2% of Bitcoin account controls 95% of all units, for comparison, the top 5% of USD owners only owns 65% of the dollar. The entire reason why the world gave up on using precious metals after 1933 and abolish all remnants of the gold standard in 1973, is because it was an outdated idea that ceased to be relevant in modern economy, this is because a stable or even deflationary currency worked in the older days where technology progression was slow and the biggest luxury for most people was good food. In today’s world, we have more people, and we also have factories making new gadgets every single second, we need to print more money to pay all these workers making all these gadgets, right? Also, unlike the actual precious metals they were designed to mimic, Digital Currencies do not have a physical form. You cannot make a ring or bracelet out of Ethereum and put a Bitcoin gem on it. Also, gold is now an Industrial Raw Material used in manufacturing of electronics, and even in some medical treatments. Unlike gold and other precious metals, digital currencies are not valuable natural resources that have certain irreplaceability. And finally, compared to central banks’ fiat currencies, there is no one forcing us to use any of these digital currencies, and anyone

can just IPO their own new currencies if they find the existing ones too expensive and do not want to invest in mining equipment, stores can decide if they want to accept a digital currency or not, and you cannot force them to do so. On the other hand, the only way you can create a new fiat currency is to fight a war with your current government and build your own nation. Any business operating in a certain nation is forced by the government to accept it’s state fiat currency. Try say, opening a café in City Hall and tell your customers you do not accept our SGD and ask them to pay you in say, MYR or Bitcoin instead, I am sure our friendly policeman would like to invite you to their police station FOC café for a nice chat about your views on our dollar.

So, this brings us to the next question, would nations move towards using a similar system? China is trying to start its own central bank backed digital currency, and some other countries, such as England, Sweden and Spain had also express similar intention.

Paylah. Most transitions between companies today and done digitally via their banks. Most of us, are already slowly transiting to a digital currency, it is just that it is also a fiat digital currency.

Moving forward, we would expect Central Banks of the worlds to work with the banks and the varies payment gateway to further streamline and optimized all our digital online transition. We would most likely see the role of cash to be slowly phased out. And it is rather likely that our smart phones will be our wallets very soon. Just like how people in China in the past 5 years had been using WeChat Wallet and AliPay to pay for everything from buying groceries to taking a cab. Just do not expect the governments of the world to allow the control to be taken away from their central banks. While it is not fully impossible, the chances really don’t seem good.

But the fact is, our present-day banking system is already highly digitalized. Think of it, a “Central bank digital currency” is basically, digital fiat currency. How they digitized it, and what technology will the central bank use to manage the currency and prevent counterfeits, is not really important. The important thing is, our spending pattern today had already been greatly digitalized. We buy things online using our Credit Cards, we pay for stuffs using Apple Pay, Google Pay, Grab Pay, Razor Pay, and now

Financial Planning –­ Relief, Recovery, Reform • Page 21

Advice in the Streaming Age by David Haintz, CFP® Australia

It was only a decade or so ago that families on a Saturday night would trundle up to the local Blockbuster Video store and try to find a movie to rent. Remember those days? There were stand-up arguments in the store, as Dad gravitated toward the action section, Mum had her heart set on a Julia Roberts drama, teenage daughter hankered for Johnny Depp and younger brother wanted Lord of the Rings. Even after intense diplomatic efforts and the family somehow wrangling a compromise, they would discover the movie was already out. A hasty second choice would then be settled upon, except no-one ended watching it and the late fee kicked in. These days, each member of the family is on their own devices at home, served movies geared to their own tastes and preferences and on demand. No parking hassles, no queuing, no late fees, no arguments, and all for about $15 a month.

Netflix of Advice While financial advice is obviously a world away from movie rentals, the fact is technology and consumer demands are changing at such a pace it’s worth asking whether your business will look more like Blockbuster Video or Netflix in future. The ‘Netflixisation’ of financial advice, long talked about, is now seriously emerging as a prospect in the industry. Indeed, management consultancy McKinsey, in a recent report, named it as one of six major trends likely to shape the industry in the next decade. While the McKinsey report ‘On the Cusp of Change’, focused on the possible state of the North American wealth management sector by 2030, many of the same forces and influences are already evident in the Australian and New Zealand markets. Number one on the McKinsey list is the Netflix effect. The report predicts up to 80 per cent of new clients by 2030 will want to access advice in the streaming model – in other words data-driven, hyper-personalised, continuous and via subscription. “For wealth managers, continuous access and automatic hyper-personalisation could change the terms of success,” the report says. “Advisers can embark on the journey now by using data and technology on a more frequent and consistent basis.”

The Fitbit of Advice The second trend is more in keeping with what is happening with the personal health and fitness sector. In recent years, fitness trackers have taken hold, providing consumers with real-time assessments of their sleep, exercise and diet. McKinsey predicts that this trend will be manifested in the

Financial Planning ­– Relief, Recovery, Reform • Page 22

advice industry through the increasing adoption of granular goal-tracking for clients, spanning not only long-term retirement objectives but shorter-term saving, education and broader wellness goals.

What has changed is the sophistication of the technology and the demands of an increasingly discerning market that wants the ease of service and the choice they are now familiar with in other industries such as entertainment and travel.

To achieve this, advisers will need to deploy digital monitoring and tracking tools that provide real-time incentives for clients and that aid motivation.

Don’t get me wrong. High-margin, specialist face-to-face advice is not going away anytime soon. But the successful firms of the future will have to be more agile and adaptable – thinking and acting more like technology firms but with an advice hat on.

“To bring goals-based advice to life, and make it practical, intuitive, and actionable, advisers need to leverage behavioural economics techniques such as gamification and communitybased competitive measures,” the report says.

Tech Takeover? The third trend, and one that is sparking fear for many in our industry, is the prospect of the big technology firms capturing a larger share of the market through the provision of core technology infrastructure such as analytics and cloud services. The big question is whether the big tech firms like Google have ambitions to go into the advice service itself or whether they are content to be service providers. And, of course, the regulators may have some bearing on that outcome as well. As to what happens to advisers amid all this change, McKinsey sees three trends emerging – fewer advisers overall and those remaining focused more on coaching than on investment solutions; changing demographics in the industry as younger people, women and more minorities take up advice; and the growth of user ratings.

The challenge is a substantial one. But so is the opportunity.

David Haintz is a CFP and a past director of the Financial Planning Association of Australia (FPA), in which time he was instrumental in the push for professionalism. He has had a 26-year career with his own firm, and subsequently became a founding director of Shadforth Financial Group, with over 100 advisers; which was taken over in 2014 for $670m - at the time $13b FUM, $165m revenue, and $58m EBIT. Having departed Shadforth in 2015, he has established Global Adviser Alpha – a B2B consultancy helping leading global advice businesses become world class and achieve outstanding result for all stakeholders. David Haintz Global Adviser Alpha Pty Ltd www.globaladviseralpha.com

“Advisers will gradually shed their role as investment managers and become more like ‘integrated life/wealth coaches’ who advise clients on investments, banking, healthcare, protection, taxes, estate, and financial wellness needs more broadly,” McKinsey says. This in turn will require firms to rethink their hiring and training programs as the industry transforms into one that offers more holistic above-the-line services.

Holistic Advice The picture that emerges will be familiar to those who have been following my columns over the years. Greater personalisation, customisation, transparency and breadth of service beyond pure investment have been on the cards for a while.

Financial Planning –­ Relief, Recovery, Reform • Page 23

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CPF Nomination vs a Living Trust by Tan Hwee Heng, CFP®

For Estate Planning purposes, there are various sets of instruments that can help clients distribute their assets to their intended beneficiaries. These instruments include Will, CPF Nominations, Insurance Nominations, holding assets under Joint names (Joint Tenancy or Joint Bank Accounts), and setting up Living Trusts for the beneficiaries. Many are familiar with the various nomination schemes and regulations in Singapore and many resources are available online as well. Today we shall compare the CPF nomination scheme versus using a Living Trust to expand everyone’s understanding.

When are Nominations used? Nominations are used for CPF Monies. Nominations are easy to make, revise and revoke through the CPF website via a person’s account. For CPF Monies, CPF Members can nominate their choice of beneficiaries in the nomination form. There is no requirement for the beneficiaries to be related in any manner to the CPF member.

What are key challenges for the CPF nomination scheme? One of the key challenges for the various nomination scheme is that if the beneficiaries predecease the CPF member, then the nomination • may fail totally or • the other beneficiaries may receive a larger share than intended. There is no mechanism for a choice of substitute beneficiaries for the deceased beneficiary’s share outside the original list of beneficiaries.

What if there are surviving beneficiaries? If there are surviving beneficiaries, the default for CPF nomination scheme is that the surviving beneficiaries will receive the remaining shares proportionally. For estate planning purposes, there might be situations where the intentions will not be to give to any of the surviving beneficiaries or in the proportions accordingly. In such situations, CPF nomination scheme is not able to provide for such planning. For CPF Monies, in a common disaster situation for both spouses, the situation is very complex as the younger spouse will receive the older spouse’s CPF monies into their estate but the younger spouse’s CPF monies will be distributed to • the surviving beneficiaries, if there is any or • under the intestate law, if there is none.

This leads to a very uncertain outcome where one will not know if the member and spouse’s combined CPF end up with their own family (if deemed dying last) or their spouse’s family (if deemed dying first), depending on who can be determined to have died first.

Any other challenges for CPF monies nomination? For CPF monies nomination, the distribution options available posed some further challenges. The options available are: 1.) to distribute in cash to the intended beneficiaries or 2.) the CPF Member can choose to nominate under the Enhanced Nomination scheme. For the Enhanced Nomination Scheme, the CPF monies pay out will put the monies into the beneficiaries’ CPF account. Hence the beneficiary can reasonably only be expected to be able to utilise the monies during retirement. In such case, then the monies cannot be used to maintain a minor child since it is in the CPF account of the child. For the cash payout option (1), CPF Nomination scheme will pay out to the beneficiaries as long as the beneficiary is 18 years and above old. This may result in an unsettling situation where a beneficiary who at this age is not mature enough to handle the monies, receiving tens or even a couple of hundreds of thousands of dollars. The payout may also go out to adult beneficiaries who have poor financial habits like gambling and spendthrifts or married to a difficult spouse. There will also be situations when the nomination is made when the beneficiaries are mentally capable but at the point of death of the CPF member many years later, the beneficiaries have become vulnerable or subsequently fall under undue influence. For example, an elderly surviving spouse may be influenced to give up the CPF monies to a domineering child.

What happens when a CPF nomination beneficiary is a Minor? There is a challenge when the nominated beneficiaries are below the age of 18. The Public Trustee has stated that under Sections 68 and 70 of the Women’s Charter that it is the duty of the surviving parent or guardian of the child to support the children. The monies left via nomination for the minor beneficiary shall be meant to be given to the beneficiary upon reaching 18. Only in exceptional hardship cases will the family/guardian can apply to use the CPF monies to maintain the minor beneficiary. Hence, the CPF monies are usually there but cannot be used for the care of the minor.

Corporate trustee and • state that the purpose of the monies can be used to maintain the minor • setting conditions and manner the funds can be disbursed The nomination is enhanced by nominating a Trust as the beneficiary of the monies. In this manner, a Living Trust will be much more flexible. For example, the Living Trust can stipulate a regular maintenance amount is paid by the Trustee to the surviving parent or guardian to take care of the minor. There is no need to prove hardship is suffered by the parent or guardian in maintaining the child, as in cases where the Public Trustee is holding the monies. In a Living Trust, the person who set up the Trust (Settlor) can also prepare the various scenarios of beneficiaries predeceasing them or did not survive for long enough for funds to be exhausted. Hence substitute beneficiaries receiving in different proportions or a different set of beneficiaries can be named.

Who can be Trustee for the CPF monies and insurance monies? The CPF Member and/or policy owner can also choose either a trusted person as their Trustee or a Corporate Trustee. In choosing a trusted person as their Trustee, one can note that they need not appoint the guardian or surviving parent as the trustee. The reason being the person who takes care of the minor child may not be as good in handling the monies or prefers not to handle the monies. If there are no suitable candidates for the trustee role, then one can choose to appoint a corporate trustee. A corporate trustee has a perpetual lifespan, professional in handling beneficiaries with differing interests and most importantly able to account the monies systematically over a long period of time.

Nomination or Living Trust? In the current modern world where there are a lot more temptations and a lot more scammers, one must really consider if it is wise to pass on their monies to young or vulnerable beneficiaries in a single amount. Frequently these monies will not end up benefiting the beneficiaries for the intended duration. Setting a Living Trust is an affordable solution to supplement the CPF nomination scheme, where monies can be used for the beneficiaries in a structured way, lasting over a period of time.

What are the advantages of a Living Trust? To overcome such challenges, the CPF member can instead choose to create a Living Trust to receive the monies, hence • appointing their own individual Trustee or a

Financial Planning –­ Relief, Recovery, Reform • Page 25

Resetting Portfolio Strategy Post Pandemic by Ron Miura Ryutaro, CFP®

Everyone thinks Year 2020 was unprecedented and even unforgiving due to covid19 pandemic and health crisis. Some employees have faced income reduction, others lost their jobs. Business owners are not immune to the pandemic impacts as well. Widely hit industries include Food & Beverage, retail, tourism, hotels and aviation. Who could have imagined and predicted the pandemic impact i.e., most governments implementing the lockdowns and safe distancing measures? It seems that the pandemic is worse than World War II as we have fought against the unseen enemy: coronavirus. During the lockdown period, all shops and offices were shut down except for essential services, such as medical service, supermarket and banking / financial institutions. Moreover, financial advisers were not allowed to go outside for the meeting and had to adapt to the new normal by using digital platforms, such as Zoom and Webex. By using teleconferencing systems, financial advisers still can manage to communicate with either potential or existing clients without meeting face-to-face. The lockdown period allowed some people to have more free time and save more money as they cannot travel overseas due to travel restrictions. This pandemic changed people’s mindset and priority with more focus on their own health and well-being as well as long term wealth planning. Although the pandemic is an unfortunate event, it is now the time for people to reset their investment portfolio strategy post pandemic. In March 2020, S&P 500 plunged more than 20% within one month. Investors panicked and rushed to sell their assets due to coronavirus and uncertainties. Some financial news mentioned “it is the end of the longest bull run”. As there are rising unemployment and business closure, people thought that the bear market might be continued for the next few years. After the US Federal Reserve decided to offer massive stimulus packages; the stock market was quick to recover as if it was the shortest bear market and the fastest stock recovery in history. At the end of Year 2020, S&P500 achieved 16.3 % higher versus year 2019. Year 2020 produced mixed results: some investors lost hard-earned money within a short period, while others made more money during the pandemic. The technology and finance sector especially managed to achieve profits. What kind of investors could achieve higher investment return? What investment strategy did they use? The answer is simple yet profound. They are dollar cost averaging investors who continued to invest regularly in

Financial Planning ­– Relief, Recovery, Reform • Page 26

the global diversified portfolio in the longer term without timing the market. Although March 2020 had a stock market crash, it was the best timing to continue investing in the investment portfolio. They know the longer investment time horizon they have, the more chance they can achieve higher investment return. It is a matter of a longer time horizon. The pandemic period made us rethink health and life insurance policies and are also an emerging asset class. Why is health insurance considered as an asset class without any cash values? Indeed, we tend to take good health for granted until we fall sick. If we fall ill, we need to pay hefty medical bills which tend

to be expensive. Without sufficient medical coverage, people will have to use cash or liquidate their assets to settle expensive medical bills. This would be a big financial impact on their net worth. It would be unwise for investors to invest only for wealth accumulation without a wealth protection strategy. That is because when they have no cash or cash-equivalent assets, they might have to rush to liquidate other assets below market price and may incur loss. Therefore, investing in sufficient health insurance can be an emerging asset class for wealth protection strategy. Furthermore, it became evident that even the diversified global equity and bond investment portfolio might not work properly under the very low interest rate environment. The negative correlation between equity and bond used to work to hedge against sudden market volatility. As an alternative way, using a life insurance solution would be working properly for the purpose of wealth preservation strategy. That’s because the benefit is “predictable” no matter how bad the market situation is based on the written contract. Also, annuity products as the retirement planning can be a useful asset diversification to preserve their nest eggs. During their retirement period, they need to maintain their value and receive regular income stream. Life insurance solutions can be a new asset class to maintain their portfolio value although some experts may not believe life insurance solutions would work properly. To sum up, it was evident that the pandemic offered great investment buying opportunities. Although post-pandemic has changed business and investment landscapes, some investment principles have not been changed. When thinking of portfolio management, we must always think of the following as the part of the wealth planning process: 1: longer time horizon, 2: investment risk tolerance, 3: liquidity, 4: choice of investment currency, 5: asset class diversification. As the correlation between equity and fixed income is stronger, traditional equity and bond asset allocation strategy might stay less relevant to the post-pandemic era. It does not hedge effectively against market volatility well. We need to reset the whole portfolio strategy to adapt to the new post-pandemic era. As an emerging solution, adding health and life insurance products would be working for a new portfolio strategy to protect their own life and preserve their net worth. Due to the pandemic, it became evident that health was also a new asset class as well as life insurance products with the cash value. In case people have been diagnosed against coronavirus or any other critical illnesses, having sufficient medical coverage and critical illness benefits are a must to settle the medical bills and avoid rushing to sell their assets. To mitigate sudden market volatility and maintain their portfolio value, adding life insurance policies as a part of investment portfolio must work well especially during wealth preservation. Insurance solution is the new normal for post-pandemic portfolio management.

Financial Planning –­ Relief, Recovery, Reform • Page 27

HSBC Page

Book Review

by Yash Mishra, CFP®

Bill Gates: How to Avoid a Climate Disaster Of the many books that I read on the subject, given the backdrop of the pandemic and the vivid images of the California wildfires, Bill Gates: How to Avoid a Climate Disaster was one of the very informative narratives on why we are at a crucial moment in focusing on solving this challenge. The public, governments, policy makers and the companies are setting ambitious goals for reducing emissions and what is needed is a plan that turns all the momentum into coordinated practical action steps so that greenhouse gas emissions can be reduced and the world moves towards ‘Net Zero’. Bill Gates’ journey into climate change came in an indirect way, through that of the problem of energy poverty. The book shares some staggering numbers – about a billion people didn’t have access to electricity and that half of them lived in sub Saharan Africa and with that came solving for providing them access to energy but – a clean efficient option. The book, in a simple and very effective helps to address the 3 core questions: 1.) To avoid a climate disaster, we have to get to zero greenhouse gas emissions 2.) The need to deploy the tools we already have, like solar and wind, faster and smarter 3.) And the need to create and roll out breakthrough technologies that can take us the rest of the way The book explains why the only sensible course of action is ZERO. It lays out an actionable course of actions for governments and policy makers to take and tucked away in chapter 12, is what each one of us can do. So whether you are a government leader, an entrepreneur, a financial planner, a voter, an environmental champion with a busy life and too little free time, there are things you can do to help avoid a climate disaster. So let’s get started.

Financial Planning ­– Relief, Recovery, Reform • Page 30

Upcoming events calendar September 2021 - October 2021

27 April 2021

July 2021

FPAS 21st Annual General Meeting

2021 CPF Examinations (Cycle 3)

6 October 2021

October 2021

November 2021

World Financial Planning Day 2021

CFP Graduation 2021

2021 CPF Examinations (Cycle 4)

Financial Planner Awards 2021 (Submission of Plan)

* For information on the events visit www.fpas.org.sg - Events 210mmx148.5mm_mag ad(beans)_P.pdf

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Financial Planning –­ Relief, Recovery, Reform • Page 31

FPSB: Update from the Global Network by Financial Planning Standards Board Ltd. (FPSB)

The standards-setting body for the global financial planning profession and owner of the international CERTIFIED FINANCIAL PLANNER certification program outside the United States, reported steady growth in the number of CFP professionals worldwide last year, despite the challenges presented by the COVID-19 pandemic. With a net gain of 4,658 CFP professionals, FPSB and its global network of affiliate organizations grew the number of CFP professionals worldwide by 2.5 percent to a total of 192,762, as of 31 December 2020. “In 2020, as families faced the impact of job losses and furloughs, forced early retirement and health care challenges, the global financial planning profession stepped up to help people manage their finances

Financial Planning ­– Relief, Recovery, Reform • Page 32

and adapt their financial plans,” said Noel Maye, CEO of FPSB. “Through the COVID-19 pandemic, people relied on CFP professionals to help build their emergency savings, reconsider debt strategies, and stay on track with longer-term financial and life goals. At a time when the value of financial planning is more apparent than ever, I’m pleased to see thousands of practitioners join our global community of CFP professionals.” Overall, FPSB Affiliates in Asia experienced the largest growth rate by percentage, led by the Financial Planning Association of Taiwan with a rate of 17.3%, and the Financial Planning Association of Malaysia, with a growth rate of 15.8%.

As part of FPSB’s commitment to promote and grow the financial planning profession and CFP certification program globally, priorities for FPSB and the global FPSB network this year include: conducting global research to identify best practices and future proof

the profession; developing and supporting career paths to financial planning professionalism and CFP certification; and increasing public awareness of the value of financial planning and working with a CFP professional.

• CFP Certification: https://fpas.org.sg/cfp-certification • FPSB News: https://www.fpsb.org/news/number-of-certified-financial-planner-professionals-worldwide-tops-192000/

Financial Planning –­ Relief, Recovery, Reform • Page 33

2021 The industry-wide competition by FPAS for financial planners in Singapore to be recognized for their financial planning excellence in the banking, insurance and financial advisory sectors. SUBMISSION OF PLAN September — October 2021 ORAL PRESENTATION & MEET THE JUGDES February ­— March 2022 AWARDS NIGHT & GALA DINNER April 2022

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Financial Planning ­– Relief, Recovery, Reform • Page 34