Stuff Your Financial Planner Will Not Tell You

Not all financial planners are created equal. And they may be hiding stuff from you.

1. I am not qualified for the job.
Although Singapore requires all the licensed insurance agents to take the CMFAS papers, the papers are only the beginning of understanding insurance products. They do not cover how to develop a proper financial plan. It requires further pursuit of CFP or ChFC qualifications and continuous upgrading of new developments.

2. Your interest is not my top priority.
The remuneration system is commission based, which means that if no product is sold, the agent is providing free service. Hence, the top priority would be to sell something. This creates a serious conflict of interest.

3. I only look at insurance.
A comprehensive financial plan includes looking at estate planning, taxes, budgeting and risk management. However, most financial planners come from insurance company and only have insurance products available. Hence, they are narrowly focused will use only what they are able to sell to solve everything. And further, they can only be compensated through the sale of products and not advice.

4. I only understand what I sell.
In addition, as most financial planners come from a single insurance company, they only understand they company product and not what is available in the market. Perhaps, even if they do know, they choose to advise to avoid it. For example, ILPs versus purely investing in unit trust directly.

5. I cannot beat the market.
Many have the impression that financial planners are the experts to give super returns. They are bought in by their unrealistic projections of returns without questioning if it is reasonably achievable or is there better alternatives. True financial planning is to manage risk, investing suitability with the right asset allocation for the risk profile and not to take unnecessary risk to time markets to achieve high returns.

6. I will not be able to service you after the sale.
Being paid solely by commission, the agent has to sought after new business to feed himself. Unless you can endlessly purchase a new plan every meeting, do not expect the agent to provide excellent after sales service during claims.

Well, do look out for these points when meeting a financial planner or insurance agent.

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Hyflux Preference Shares

I suppose by now every other finance blogger would have already posted about this share issue.

Judging by the strong response, market is hungry for higher returns. And allowing this issue to be CPF approved, the expected response is going to be over-whelming. As a result, even though I ain't too optimistic about the prospects of Hyflux, it would be an opportunity to make a quick buck.

There seems to be a lot of noise about its developments in middle east, a director selling off his shares, the outlook for future projects and if the company can maintain profitability with the rising cost of material after bidding so low for the projects that they have won.

Consideration:

The downside is the price tanks, then I'll be holding the preference shares for the potential 6%.
The upside is the price opens high and I can sell it off for a quick profit.

Well, looks like a risk reward that is worth a shot. Anyway, it is still anybody's guess if I'll be awarded for my bid to even have a chance at this gamble.

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Tough Times For SGD Unit Trusts

MAS has recently announced to re-center the SGD currency band to allow the pace of appreciation to continue given the rate of inflation.

As a result, unit trusts denominated in SGD and investing in markets overseas whose local currency may not appreciate as much compared to the SGD will see their returns badly affected.

2 ways to minimize this foreseeable risk is to invest only in the Singapore market; Or select funds that have a SGD- Hedged version. This is to ensure any possible returns achieved by the fund will not be eroded away by forex conversions.

This is especially so for fixed income funds where the volatility of the forex market has overshadowed the returns from these funds in recent years.

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