April 25, 2017

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Authors Posts by Ryan Ong

Ryan Ong

Ryan Ong
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by Ryan Ong

A LOT of Singaporeans think Financial Advisers (FA) only sell insurance, but that isn’t all they do in this day and age. While insurance is part of the financial planning they do, most FAs take a holistic long-term view. Many prefer to work at building lifelong relationships, helping their clients all the way to retirement; and that means they need to do more than sell policies. Here are some other things you can get them to do for you:
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What exactly is a Financial Adviser (FA)?

In Singapore, FAs are licensed by the Monetary Authority of Singapore (MAS) under the Financial Advisers Act.  Depending on the qualifications they’ve received (FAs do plenty of tests and exams to qualify), different FAs are authorised to offer different types of financial products, and dispense different types of financial advice. Insurance policies are just one aspect of their work.

Most FAs can also do the following:


1. Compare insurance products to give you the best s
olution for your needs

It might surprise you to learn that some FAs don’t just sell products from one insurer. Because insurance is just one facet of what they do for you, some FAs are willing to compare different policies for you depending on your lifestyle needs and affordability to suit your needs and get a better deal.

Some Manulife FAs, for example, will compare different insurance policies to make sure you get the right products within your budget. They can end up recommending or selling policies from other insurers, if they feel it’s a better fit for your portfolio*.

This isn’t to say FAs who work with specific insurers are bad; they are just more focused on helping certain demographics. But if you’d feel better with an adviser who will compare across the industry for you, know that there are many who will.

(*That’s why a lot of new FAs, who often seek to help families and friends as their first clients, tend to end up with the Manulife Financial Advisers; it lets them pick from a wider range of options, to deal with the individual cases that they’re intimately familiar with).

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2. Help with your retirement planning

For most Singaporeans, retirement planning is quite straightforward (just decide who gets the house, the car, and nominate someone to get your remaining CPF monies).

However, FAs would be around to help if your legacy planning is more complicated. For example, if you pass away unexpectedly and your 15-year-old child is to inherit the house. Or if you own a business, which is to be inherited by two or more children; and you want to establish rules on whether and when that business can be broken up and sold.

Most FAs know the proper safeguards when handling retirement planning, and can at least refer you to the most appropriate and cost-effective experts to help.

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3. Check up on other investments you’re considering

Different FAs will, depending on their network and qualifications, offer different depths of service. However, all of them understand how to build your portfolio for retirement or other purposes. They will know the right level of risk, and whether a given asset fits your portfolio.

This makes FAs a useful source of advice, if you are considering different investment opportunities. For example, if you want to invest money to help your children open their own café, your FA can determine how this will impact your portfolio, and make changes accordingly (or frankly advise you against it, if that’s what must be done).

FAs can also research alternative investments you’re considering, such as gold exchange-traded funds or property investments, and determine if they are viable additions to your portfolio.

Due to their extensive involvement in the finance industry, FAs are also more aware of potential scams, or entities on the MAS watch list (these entities often rebrand themselves to confuse the public).

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4. Continuously rebalance your portfolio to fit life’s changing circumstances

Proper retirement planning is not done in a single session. You’ll need to rebalance your portfolio (the various assets that make up your wealth) on a regular basis.

One example of this is age: As you get older, your portfolio should shift from growing your wealth to protecting it. This means exchanging riskier, high return assets, such as equities, to safer assets like Singapore Savings Bonds, or even simple fixed deposits.

Also, your changing financial situation can require quick, drastic changes. If you’re suddenly retrenched, for example, you may need to change your insurance policy to something with lower premiums.

You can get your FA to do formulaic and calendar based rebalancing, to deal with these.

Formulaic rebalancing means your FA can recommend changes to the assets in your portfolio, when they no longer meet a planned asset allocation (this happens as a result of changing values among various assets, from stocks to cash).

Calendar based rebalancing is often done annually or semi-annually. Your FA will rebalance your portfolio, will deal with your changing age, along with new needs such as sending your children to university, or buying a new house.


5. O
ne-stop value-added information source

What are the implications to your housing loan when the American Federal Reserve imposes an interest rate hike? What does it mean for Singapore Savings Bonds when the Singapore Government Securities Yield falls?

If you don’t have the time to find out, your FA is a quick source. Besides being able to explain how current events are going to impact your portfolio (or your wallet), FAs are the most common intermediary between the finance industry and the lay person. They’re a good way to get smart about fluctuations in the market, and to better understand the financial world.

In personal finance, bad decisions often come from a lack of understanding; FAs explain situations, which reduces drastic mistakes like selling off your assets in a panic.

If something in the news alarms you, be sure to call them before you react.

 

This is an editorial series done in partnership with Manulife Financial Advisers.

 

Featured image by Sean Chong.

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By Ryan Ong

ALTHOUGH they’ll never admit it, a large part of the finance industry aim to convince you that what they do is very complicated, and impossible to understand for anyone short of a NASA scientist (that’s why you better pay them to manage your money for you). Over the past two decades, one of their secrets has been the ETF – a straightforward financial product that makes them look like geniuses, while actually proving the opposite. You should at least have a basic grasp of the concept:

By Ryan Ong

NEW private home sales (excluding Executive Condominiums) more than doubled in February 2017, to 977 sales from 382 in January. If you think that’s dramatic, wait till you compare it to February 2016 – there were only 303 new private home sales at the time. That marks an increase of over 222 per cent over the same time last year. In fact, February 2017 sales volume was so good, it was the highest ever recorded for a February since 2012, just before the last property peak in 2013:

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by Ryan Ong

AFTER two World Wars and several centuries of armoured men trying to stab each other to death, you’d think Europe could finally be unified. It was kind of on its way to doing just that; then in 2016, UK Prime Minister David Cameron held a referendum on whether the UK should leave the European Union (EU). It was to prove some point or other, which nobody now nor ever will care about. Now, current UK Prime Minister Theresa May had exercised Article 50, which will bring the UK out of the EU, and have longstanding repercussions:

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by Ryan Ong

BUSINESS Times just published a report on how Singapore may be experiencing a two-speed economy. By that, it means our entire economy is not operating at the same pace; one side of it is doing very well, and the other side is about to grow its hair long and drop out of school. The divergence seems to be between export oriented businesses, which mainly make money from customers abroad, and domestic businesses that rely on a local customer base. Here’s what it all means:

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by Ryan Ong 

LATEST tweaks to property rules are not going to cause prices to shoot up again. There, everyone can relax now. Contrary to the rumours you’ve heard, the cooling measures are not lifted, banks are not giving out loans like door prizes, and you are not going to get a mortgage by replacing your income statement with a pinky swear. The changes will have a positive effect on property prices, but nowhere close to the sudden surge we saw between 2009 to 2013.

by Ryan Ong

EMPLOYMENT regulations have come a long way in Singapore. Earlier in our history, this was a country with a strict “no-strike” policy and a lot of power vested in employers; all part of an early-days survival method. But with the step into first world status, Singapore’s employment scene has become more progressive by the year:

 

1. TAFEP and the Fair Consideration Framework

In 2006, the Tripartite Alliance for Fair Employment Practices (TAFEP) was set up to promote responsible employment practices. The “tripartite” element refers to co-operation between employers, unions, and the Singapore government to further this goal.

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One result of having TAFEP is the Fair Consideration Framework (FCF). The FCF ensures that hirers stick to merit-based hiring, using competence as the deciding factor instead of elements such as age, gender, and nationality.

One example of this is the Jobs Bank. Before hiring an Employment Pass (EP) holder, a company must* advertise the job on Jobs Bank for at least 14 days, making it available to Singaporeans. Only after this period can the company apply for an EP.

This ensures that companies cannot show an unfair preference for hiring foreigners. They must show they tried to hire a Singaporean first.

(*Some exceptions exist, such as if the company has fewer than 25 employees, or only needs to fill a temporary position for no more than one month. You can see the list of exceptions here.)

In addition, anyone can report to the Ministry of Manpower (MOM) if they see a discriminatory job advertisement. An example would be an ad that says “only foreigners”, or imposes restrictions irrelevant to the job (e.g. requiring a worker to have certain religious beliefs, for an accounting position).

Furthermore, TAFEP has an online system for complaints about workplace discrimination. Employees who feel they are treated poorly, or penalised for non-work related issues (e.g. age, gender, religion, political views, sexuality) can raise a complaint (their confidentiality is protected).

 

2. The Human Capital Partnership Programme, to encourage good workplace practices

The Human Capital Partnership (HCP) programme is an initiative open to companies with a good track record in employment and workplace practices. Companies that are part of the HCP (called Human Capital Partners) commit to investing in the development of Singaporean employees across all levels.

In return, Human Capital Partners enjoy priority access when having work passes processed, and have a dedicated hotline for transactions with MOM. Human Capital Partners will have privileged access to government support and resources, and have the right to display the “Human Capital Partner” mark, which helps to attract needed employees.

Human Capital Partners, for example, have account managers assigned to them from HCP to cultivate good workplace practices. This ensures that the concept of fair employment cannot just be a temporary front.

This is in stark contrast with old-school methods; traditional systems of employee protection just use penalties and fines as threats, which places the burden of fair employment on government regulators.

HCP instead provides positive incentives for companies, to encourage the hirers themselves to maintain good practices.

 

3. Skills Transfer Initiatives

One of the HCP’s goals is to turn foreign workers into a complement to our workforce, instead of competition. The formula is:

1/3 + 2/3 > 1.

That refers to how one-third of our workforce is composed of foreigners, and two-thirds are Singaporeans. By having the two complement each other, we develop synergy and results that are greater than the sum of our parts.

One example of this is skill transfer programmes that HCP encourages. 3M, the manufacturer of the famous Post-It notes, is engaged with this initiative. The manufacturer has several programmes in which foreign workers can teach or transfer skills to local employees (and vice versa). This ensures that each worker is more versatile, and can be moved into new roles quickly. The result is a more nimble and adaptable company.

Endorsing skills transfers is a progressive take; rather than set up an adversarial relationship between locals and foreigners (the old “they’ll eat our lunch” argument), Singaporean employers are instead encouraged to merge the two, to make our companies more competitive.

A more competitive company means better wages, more room for career advancement, and greater job security.

 

Building the workforce for the new era
The Singaporean worker today is, by and large, no longer an easily replaced resource. As we see more talented programmers, engineers, managers, and salespeople, it is clear the dynamics of the workplace will change.

No longer are employees wholly dependent on the whims of their employer; rather, the reverse is often true. Many companies are now dependent on the skills and talents of their workers, who have no shortage of options when it comes to finding work elsewhere.

In light of this, any adversarial relationship between employer and employee will be a tremendous disruption to local business (and by extension, the wider economy). It’s time we discard outmoded notions of “worker versus employer”, lest all of us fall behind.

The simplest way to do that is not with over-regulation and fines, but to ensure that companies themselves see the value of treating employees right.

 

This article is part of a series on employment in partnership with the Ministry of Manpower.

 

Featured image by Sean Chong.

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by Ryan Ong

SINGAPORE has had an expansionary budget two years in a row now, so it’s not surprising the budget surplus will shrink a little. Most of it is caused by an urgent (read: expensive) need to upgrade our workforce; as we head into a future of further automation and digital trade, it’s unlikely that Singaporeans can manage first world costs of living by being an assembly worker or cleaner. But where does this money come from, what are the Net Investment Returns that supposedly fund it?

by Ryan Ong

BUSINESS survival is usually measured on a sliding scale of how many bad cheques your boss writes you. Once you get three in a row, you know the corporate vision of a DIY vasectomy kit in every home is doomed. You see, no matter how smart a business idea seems, or how much it could pay off in the long run, it’s the near-term support that matters for everyday survival:

by Ryan Ong

BUDGET 2017 doesn’t have much of a theme, beyond upgrade yourself really quick. There’s a huge sense of urgency in this budget, and it’s not hard to see why. The events of 2016, which range from Brexit to the election of Donald Trump to China’s growing assertiveness, won’t be good for us. And the only way forward is, ironically, to look backward:

 

New budget, old strategy

Budget 2017 is out, and it’s all about forward progress in the industry. But in another sense, it’s also about looking backward, and returning to the root of what made Singapore successful in the first place.

When Singapore (unwillingly) gained its independence in 1965, the situation it faced was quite similiar to today. There was tension in South East Asia, and a sense that the future was a total unknown. In order to run our economy, we focused on producing a highly skilled and educated workforce. Singapore powered through its first decades on the back of that principle: That the Singaporean worker was more productive, more driven, and worth a higher salary than neighbouring counterparts.

But over the last decade, we’ve begun to lose steam. Not too long ago in 2015, for example, Minister for Trade and Industry Lim Hng Kiang pointed out that some industries had to restructure quickly, as productivity goals were not being hit.

Budget 2017 seems to be going back to an old formula. In the face of growing uncertainty, all we can do is rely on the Singaporean worker being better. Better skilled, better adapted, and hopefully better paid for it. That’s not an easy thing to ask, because our success in the mid-60s can be attributed to us being South East Asia’s (arguably) best workforce at the time. But our neighbours have had a lot of time to catch up since then.

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Here are the three harsh things that the budget implies:

 

1. Get with the programme or get left behind

Over $80 million will be spent on helping on Small to Medium Enterprises (SMEs) go digital, under the Go Digital Programme.

About $100 million is for the Global Innovation Alliance and Leadership Development Initiative, which basically encourages Singaporeans to go abroad and work.

Some $26 million will go to the Lifelong Learning Endowment Fund and Skills Development Fund, to train workers in skills relevant to fast growing industries.

A recent comment I read on Facebook asked: Does this mean we want a painter to become a programmer? The answer is yes. Budget 2017 is part of a life raft the government is building for workers.

Remember that retrenchments were at a seven year high, within the first nine months of 2016. Many workers, whom we assumed to be highly trained, were precisely the ones who found themselves out of a job. When you have large layoffs despite a (in terms of paper qualifications) highly skilled workforce, that means workers lack relevant skills.

That’s due to the rising number of disruptive business models (e.g. Uber and its effects on the transport industry), which have forced companies to value different skill sets. It’s bad news for Singaporean workers in their 30s and 40s, who may find their qualifications – which they paid good money to learn – become useless.

Now consider the urgency with which the G is driving at this:

Budget 2017 allocates $1.4 billion to upgrading jobs and the economy. Prior to that, Budget 2016 and Budget 2015 saw the development of the SkillsFuture programme, and emphasised support for robotics and digital technologies. It’s pretty clear what the G’s rescue plan is:

They want Singaporeans to be the innovative ones who are doing the disrupting, not the ones losing jobs from the industries that are disrupted.  Singaporeans who refuse to take big risks, and won’t step out of their comfort zone to learn new skills, are shark bait. The G isn’t taking steps to protect dying industries, or playing at protectionist moves.

 

2. Businesses might pass on the water costs

Pass it on to you, the buyer, that is. The price of water is increasing by 30 per cent, starting in July 2017. It’s estimated that this will come to less less than $25 a month, for 75 per cent of businesses; although I’d contend we don’t know how many businesses there are, and 25 per cent of all businesses in the country is still a huge number of businesses.

It wouldn’t be unreasonable to guess that certain businesses – such as laundromats or restaurants – will be hit much harder by rising water costs than others. Now the purpose of the hike is to “raise awareness” of the importance of water, because without the government doing that none of us would know we’d die without it. But businesses tend to react to price hikes in two ways:

One, the G could have “raised awareness” of the importance of water, and businesses take steps to cut back. Or two, businesses could just factor the costs into their pricing. So we may see more places charging for water, higher prices at laundromats and car washes, higher costs on canned drinks, and so forth.

Now I’m not totally against the government’s intentions, by the way. I’m sure they just want us to waste less water, because over-consumption is the result of cheap supply. But it would be just as easy to set a water cap, and then impose a fine on over-consumption. And have some way to notify the household via text message when they’re nearing the water use limit.

Why punish those who have been conscientious about water use?

 

3. Carbon taxes can mean higher costs to consumers

I like to think most of you aren’t reading this from your ivory-backed chairs, while eating fried Pangolin and resting your rhinoceros-horn water on a coaster made from an endangered tortoise. Like most of you, I’m entirely for carbon taxes.

I’ll even say it’s an admirable and gutsy move: after the Trump election, I expected our pragmatic government to pivot in the other direction, and abandon environmentalism. We have financial inclination to do so, since Singapore has deep penetration into the oil and gas sector.

Nonetheless, from 2019 carbon emitters will be charged $10 to $20 per tonne of greenhouse gas. As with the water situation, businesses can go either way. Some might try to cut down on emissions, but some will try to pass on the costs to consumers. Knowing what big corporations are like, we’d better get realistic and plan to spend more.

On a related note, diesel will be taxed at 10 cents per litre. Cars pay $100 less annual diesel tax, and taxis pay $850 less. Diesel is more environmentally friendly than gasoline, so hopefully transport businesses will consider moving in this direction, rather than raising prices.

 

Budget 2017, along with the last two budgets, seem to be a polite way to remind us the clock is ticking.

Last year may have been the tipping point, in the way the global economy has changed. Stragglers who can’t adapt to the new economy are trying to fight back, by electing governments that impose protectionist measures.

But Singapore hasn’t got the luxury of doing that – we’re too small, and too vulnerable, to play the isolationist game. It’s clear we’re not catering to those who can’t adapt; that’s what all these expensive incentives are about. The clock is ticking, especially for those who refuse to re-skill and upgrade.

 

Read the first part, Economic Realities: 3 harsh takeaways from the Committee on the Future Economy, here.

 

Featured image by Pixabay user jarmoluk. (CC0 1.0)

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