Tea with TheMinimalist: Selecting a good financial advisor.

I am happy to publish another guest blog by TheMinimalist and this time the focus is on how to select a good financial advisor:

In this guest blog, I want to talk about a topic that is close to the hearts of many readers here which is picking a good financial adviser to work with. 

Why is it important? The reason is that the majority of us are clueless when it comes to managing our money. That’s why we read blogs like ASSI, which, in my opinion, is one of the best places to start in educating ourselves on the topic of personal finance.

Seek to establish a lifetime relationship with your FAs.

It is unfortunate but from my regular interaction with financial advisers (FAs) in Singapore,  I notice that most of them have no freaking idea about financial planning. I notice that they like to forge transactional relationships with their clients. What this means is that they approach their prospects, present their sales script, address any possible objections and then close the prospects. Rinse and repeat.

I find this a very worrying situation in Singapore. 

Firstly, financial planning is all about systems and processes, NOT products. For example, how can one set up a disciplined system to save at least 10% of one’s income each month? The answer can be found in my previous guest blog. 80% of the financial advisers will not even bother to go through this with you. Why? They don’t earn a single cent, duh! (Take note that most FAs in Singapore are still commission-based, a terrible system if you ask me.)

Secondly, financial planning extends far beyond selling insurance products. An obvious area to bring up here is investment planning. I am seriously surprised by how most of the FAs are lacking in investing knowledge. Ask 80% them about fundamental/technical analysis and they simply give you a blank look. For those new to AK’s blog, fundamental analysis (FA) and technical analysis (TA) are the main due diligence processes before making an investment decision. FA tells you what to buy while TA tells you when to buy/sell off your investments. 

It’s not difficult to be financially literate so long as you are willing to put in the time and effort to pick it up.

Now, what do I consider is the million dollar question to put to your prospective financial adviser? Here’s the answer:

“Could you show me your financial plan?”

Huh? That’s it! Not education level? Not net worth? Not personality? Those are important questions but they are NOT the most important one.  Here, let me explain why.

Majority of Singaporeans do not have a written financial plan!

A financial plan (or financial blueprint) is the best piece of evidence to reflect the competency of a FA. Logically, you engage a FA to manage your finances for the long-term. If the FA cannot even plan out his own finances, how in the freaking world will you ever expect him or her to be capable of advising you on your finances? 

To give another example, you will not ask a designer to renovate your new house based on some arbitrary designs right? You will show designers the blueprint of your house, tell them what you would like installed in the living room, study room etc. You will talk through the plans with them; confirm that you are satisfied with everything first before starting renovations.

I previously mentioned that the FA industry is under-developed due to the commission-based system. This is mainly because the interests of the FA and the client can never be aligned. The FAs are focused on closing sales, selling high-premium products that can generate the highest % of commissions for themselves. Budgeting with the clients? Er...

Am I recommending a fee-based system then? My short answer is yes but this is not the best solution. This is because fee-based planning in Singapore is very expensive. A typical financial plan with a professional financial planner can cost upwards of S$4,000. (AK: Wow!)

What is the best system then? In my opinion, it is self-education through experts but I’ll leave this discussion for another day.

Since I like my blogs to be practical, here are some actionable items for you:

1. Find out what a financial plan is. Talk to a professional planner. If you can’t afford to engage one at the moment, do not worry. I’ll discuss constructing a DIY financial plan for yourself in future guest blogs.
2. If you are meeting financial advisers now or in the future, ask them to show you their financial plan. If they can’t produce one, please think TWICE about engaging them for their services. He or she is a financial salesperson, NOT a professional planner.

P.S If you have found my guest posts useful; please feel free to share it among your friends via FB or e-mail. J

Note from AK: 
I think I shall have to t-loan from SMOL his instant noodles cooking pot on behalf of TheMinimalist. Works quite well as a helmet.

Read other guest blogs by TheMinimalist: here.

OUE Limited: A nibble.

On 25 September, I wondered in a blog post if I might be given a chance to pay 50c for what was worth a dollar. I am referring to OUE Limited's stock, of course.

Twin Peaks.

Although already trading at a hefty discount to NAV back then, I was concerned about how its luxury condominium project, Twin Peaks, could be a drag on performance. Also, looking at the charts then, selling pressure showed no sign of weakening. So, I decided to wait.

Today, I became a shareholder of OUE Limited as my overnight buy order at $2.01 a share was filled.

As the NAV/share is $4.04, I have paid 50c for what is worth a dollar. My wish came true.

It is a very small long position as sentiments are still very bearish and if the $2.00 psychological support should give way, we could see lower prices.

Could we see $1.96 or even $1.92? It could happen but it might not. If it should happen, I suspect that it could be a slow slide downwards. So, I am not going to be too hasty or "show hand" as some readers would say.

If the stock should be well supported and if the support at $2.00 should hold, then, I could add more to my long position if a reversal should take place.

Related post:
OUE Limited: An asset play that could be cheaper?

Financial security: What good is the idea to us?

Sometimes, I wonder why people making lots of money at work are still complaining about not having enough money. Then, if we ask a few questions, we understand why.

Often, the reason is because they scaled up their consumption as they made more money.

Keep our lifestyle simple even as we make more money over time. That is a sure way to having enough money now and in the future.

Want some ice cream? We don't have to go to Swensen's.

Over the years, quite a few readers have written to me to say that they took action after reading my blog posts. I am happy that they feel less stressed up and more secure about their finances now.

Recently, I wrote this in reply to a reader:

"I am happy to sense a tone of determination and also a clarity of mind in your message. You have a plan now and you sound confident of your financial future."

I would have liked to share his story but he would rather not have his story shared. It would have been quite helpful to some, I thought, to read a real life account of how scaling up our consumption even as we make more money would set us back financially.

I will end with a Chinese saying:
师父领进门，修行在个人.

If we do not act upon a good idea, what good is the idea to us?

Related posts:
1. Are you sometimes forced to be extravagant?
2. The evil instalment schemes and their minions.
3. An essential habit to becoming richer.

Free "e-books" on financial security for Singaporeans: here.

ASSI reaches 6 million before Singapore.

Before Singapore hits 6 million in population, ASSI is going to hit 6 million pageviews first. Might happen in the next hour.

It has been almost 5 years since I started blogging. Lots of ups and downs and never did I think ASSI would come so far.

I think I will have to pop a bottle of oatmeal! Oatmeal?

Yes, champagne is too expensive but a picture? No problem. It is the thought that counts. LOL. ;p