…long long ago, an out-of-town visitor to New York was admiring the elegant vessels harboured off the Financial District; “Those are the bankers’ and brokers’ yachts!” exclaimed the guide. “But where are the customers’ yachts?” questioned the naïve visitor in response…

  • Where Are the Customers’ Yachts – Fred Schwed

Personal Financial Advisor – Do You Need One?

Many Singapore investors were asking the same question in 2008 after their portfolios lost value: “Where are my investment portfolio gains?” The famous parody of Wall Street as a zero-sum game in which Wall Street professionals become richer and the customers poorer still provides a timely lesson today. How do you plan for your financial future while making sure that you, too, can buy a yacht?

Investors now seek more than a stockbroker or mutual fund adviser. They want a financial plan that is going to help them grow and protect their wealth in good times and bad. An independent personal financial advisor can help ensure that your financial services – from investments to insurance and estate planning – work for you.

Benefits of a Personal Financial Planner

Independence and Objectivity – After 2008 losses from alternative investments – such as emerging market mutual funds and real estate investment trusts (REITS) – more investors are choosing a wealth advisor independent of their bank, mutual funds and other financial services. Agents from these firms are often under pressure to sell specific products that may not be the best option for you.

Fee Based – Wealth advisors are moving away from commission- and transaction-based services, which put more pressure on selling and less emphasis on portfolio diversification. A few caveats on fee structure. Be cautious of finance planners who:

Work on Commission – This is the stockbroker model. Fees are changed for each transaction, such as stocks, bonds, insurance and mortgage products. These advisors have an incentive to do lots of transactions to increase their income.

Charge a Percent of Assets – Or you may pay a percent of assets under management, say 1% a year, incentivising the planner to take higher risks to grow your assets.  Besides the higher risk, the economists now tell us that higher commissions and bonuses do not improve performance, but intrinsic motivation and social pressure – such as a recommendation to others – does.

Take Cuts From Financial Services Providers – This financial planner only gets paid if he sells you XYZ’s products. Even though another mortgage provider is cheaper and provides better terms, he may still push his partner’s mortgage services on you.

Diversification and Choice – Personal financial advisors have a broad pipeline of relationships enabling them to recommend the best financial services products and pricing while helping you create a balanced diversified portfolio.

Wealth Advisor Tips

Experience and Knowledge – The fast growing wealth management business in prosperous Singapore is stretching to find talent and train new wealth management advisors. The population of high net worth individuals in Singapore is growing at 35.6% per annum versus 18.9% globally, reports Markets and Markets. Financial firms are drawing talent from as far away as the UK and poaching from Hong Kong. Clients want to know that their wealth had grown.

Reputation – Reputation is the most important consideration when choosing a wealth advisor, according to an SEI study. Advisors are most often chosen from recommendations of family and friends, and through personal research.

Expensive Fees – Cost is the second consideration. Many individual investors wrongly believe they cannot afford a wealth advisor. Since the independent wealth advisor is not under pressure to sell the products of her financial firm, she should be recommending the best investment vehicles for you, thereby increasing your returns. She may also get discounts on fees based on relationships with financial services providers, which she should be able to pass on to you (To ensure you receive fair pricing, make note of our caveats on Fee Structure).

Choosing a Personal Financial Advisor

A financial planner can provide advice over a broad range of financial products, from mutual funds to insurance. A professional financial planner advisor is a financial planner who is certified by the Board. They are educated in financial products, planning and ethics and must pursue continuous education. A financial advisor has a fiduciary responsibility to act in the client’s best interest.

As wealth advisory services become more tailored they are providing more value to clients.  Savvy niches carved out by advisors range from young millennials to upper income clients in mid-life who have lost their jobs.

A growing trend is for wealth advisory to be approached as a family. One of the fastest expanding areas of wealth management advisory is family offices – private companies that manage investments, trusts and philanthropic activities for single wealthy families. Credited with smoothing intergenerational transfers of wealth, local wealth advisors are tailoring their services to meet the specific needs of Singaporean families.

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C.E.O @ The New Savvy
Anna Haotanto is passionate about finance, education, women empowerment and children’s issues. Anna has been featured in CNBC, Forbes, The Straits Times, Business Insider, INC and The Peak Singapore. She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen). Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).