MAY 2018

FINANCIAL

PLANNING

CONVERSATION WITH CPF CEO SINGAPORE BUDGET 2018 INAUGURAL

FINANCIAL PLANNER AWARDS

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CONTENTS

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On the cover Known for its loyalty, a dog is often said to be a man’s best friend, especially in the case where a blind man trusts his guide dog to help him cross the road. Trust is a theme in this bumper edition as we explore probate & estate and LPA issues. We also celebrate the inaugural Financial Planner Awards where advisers are trusted to do their best for their clients.

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EDITORIAL BOARD

3 President’s Message 4 Chief Editor’s Message

CHAIRMAN Mr Alfred Chia, CFP®

practitioners

CHIEF EDITOR Ms Yash Mishra, CFP®

5 Conversation with Mr Ng Chee Peng, CEO of CPF Board 9 Cowries to Cryptos: Evolution of Money 13 About En Bloc Property 14 Probate & Estate Administration “Are We There Yet?”

MEMBERS

consumers 16 Tying the Financial Protection Loose Ends with LPA 18 Singapore Budget 2018: Future Ready 20 Book Review: Industries of the Future, Alec Ross 22 My Insurance Policy, My Responsibility 25 Guest Writer: Investing in Volatile Times

members’ events 28 FPAS Graduation Ceremony 2017 30 FPAS Tea Time Talks 31 FPAS Members’ Networking Night 32 2018 Calendar of Events

FP awards 33 Financial Planner Awards 2018

Ms Kee Siew Poh, CFP® Mr Joseph Paul Kennedy, CFP® Mr Adrian Tong, CFP® Mr Lawrence Chow, CFP® Mr Tan Hwee Heng, CFP® Mr Tan Kheng Lai, CFP® Mr John Sim, CFP® CONTRIBUTORS Mr Alfred Chia, CFP® Ms Yash Mishra, CFP® Mr Joseph Paul Kennedy, CFP® Mr Lawrence Chow, CFP® Mr Tan Hwee Heng, CFP® GUEST WRITER Mr Deepak Khanna, Head of Wealth Development, HSBC Bank (Singapore) Limited

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FPAS’ VISION The FPAS vision is to ensure that all Singaporeans have access to responsible and appropriate financial planning advice, by raising the professional standards of the industry through education and shared code of ethics. In support of this vision, FPAS provides a range of services to consumers and to member individuals and organisations. In particular, FPAS aims to: • Educate and inform the public of the need for objective professional advice in making secure financial decisions. • Ensure sufficient professional and ethical standards to maintain the confidence and trust of existing and prospective customers. • To provide members with education, training and information to enhance their provision of objective professional financial advice. • Develop and maintain high ethical standards for members. • Represent the industry and its members to ensure an operating environment which is conducive to providing high quality financial advice. Financial Planning Association of Singapore 112 Robinson Road #07-02, Singapore 068902 Tel: (65) 6372 1030 Fax: (65) 6372 0121 Email: [email protected] Website: www.fpas.org.sg

CFP®, CERTIFIED FINANCIAL PLANNER™ and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd (FPSB). Financial Planning Association of Singapore is the marks licensing authority for the CFP marks in Singapore, through agreement with the FPSB. AFPCM, AWPCM, ASSOCIATE FINANCIAL PLANNER, ASSOCIATE WEALTH PLANNER are registered certification marks of the Financial Planning Association of Singapore. Financial Planning is edited, designed and printed by Ray Communications (www.RayCommunications.sg) and published by the Financial Planning Association of Singapore. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this publication, neither the Financial Planning Association of Singapore, Ray Communications nor the magazine’s contributors shall be held liable for any errors, inaccuracies and/or omissions and no liabilities shall be attached thereto. Copyright of the materials contained in this magazine belongs to the Financial Planning Association of Singapore. Nothing in here shall be reproduced in whole or in part without prior written consent of the publisher. All rights reserved.

MCI (P) 017/11/2017

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Joseph Kwok, CFP® President, FPAS

Dear Members, 2018 is set to be an exciting year for FPAS with quite a few major events happening throughout the Year of the Dog. The inaugural Financial Planner Competition and Awards Night was held on 20th April at the Singapore Marriot Tang Plaza and it was a resounding success. It brought together practitioners from all sectors in the finance industry and also saw quality financial plans being submitted and presented. There was strong support from banks, insurance companies and financial advisory firms through their sponsorship efforts and nomination of employees. Our panel of judges also gave credibility to the competition given their level of seniority in the industry. Congratulations to all the winners of the competition and we look forward to working together in achieving the common goal of raising the professional standards of the financial planning industry. The winners will be involved in FPAS’ Financial Planning Conference where they will be sharing with practitioners and the public how a good financial plan should look like. This is part of FPAS’ drive in public awareness of the importance of financial literacy and the Financial Planning Conference seeks to achieve this through public education.

2018 is coincidently FPAS’s 20th Anniversary and we celebrated this at the Awards Night with a bang. This marks two decades of FPAS’ commitment in raising the level of professionalism within the industry and ensuring that all Singaporeans have access to responsible and appropriate financial advice. We continue to be committed in driving home this message through more engagement with both the practitioners and the general public. One of the FPAS’s mission is to increase the awareness of financial literacy of Singaporeans and in order to reach out to the public, we have launched a Public Membership on 1st March. Public members will be able to learn more about financial planning by attending talks and events organised by FPAS. Another piece of good news is that we are very close to finalising the partnership with an established publisher to produce Version 3 of the Study Guides that will provide quality content to students taking the CFP program. We look forward to completion of the new guides by 2018 if there are no unexpected delays. 2018 will soon be halfway through and I hope you had a good first half of the year and I wish you well for the rest of the year.

The Conference will be held in the first week of October to coincide with the World Investor Week and also FPSB’s Financial Planning Day on 3rd October. It will be a two-day affair with a day dedicated to practitioners and another to the general public.

www.fpas.org.sg

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chief editor’s message

Dear Members, Yash Mishra, CFP® Chief Editor

Welcome to the Lunar Year of the Dog! Singapore unveils its Budget 2018 that continues to steer itself to keep pace of the transformation required into a vibrant innovative economy which is a smart, green liveable city that fosters a cohesive society and the key initiatives are summarised in the budget article. About En-bloc Property discusses the topical issue of Property as a local favourite among asset classes and we share Expert insights on the CPF Board’s endeavour to ensure a sound retirement with an interview section with the CPF Board CEO. As technology continues to drive innovation we take a peek at the industries of the future in our book feature by innovation expert Alec Ross’ book that explores the next waves of innovation in robotics, genetics, coding and big data and how they will affect our world. We also share with our readers the Evolution of Money, tracing its form and usage through history. We celebrate financial planning excellence with a special feature on the event and the winners of the first Financial Planner Awards night in all its glitz. Hope you enjoy the read!

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May 2018 Financial Planning Association of Singapore

practitioners

Conversation with

Mr Ng Chee Peng CEO of CPF Board

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INTRODUCTION The Central Provident Fund (CPF) is a very important resource for Singaporeans and Permanent Residents to finance their housing, healthcare and retirement needs. It must be challenging for CPF Board to educate and engage its members, given its big membership base and the many different schemes it handles. Yet, we’ve seen great improvements in perception in recent years after the Board visibly stepped up its engagement efforts. We ask its Chief Executive Officer, Mr Ng Chee Peng, to share his thoughts on how CPF Board tackles the challenges and how financial planners can help.

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practitioners

Conversation

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What are the challenges in the outreach to CPF members?

Thank you for inviting me to share my thoughts. As CPF plays a critical role in enabling Singaporeans to have a secure retirement, the Board has embarked on a concerted engagement effort to help our members better understand the CPF system, so that they can make informed decisions on the use of their CPF across their life-stages. A key challenge in our outreach lies in the very wide scope of the CPF system. Over the past 63 years, the CPF system has evolved to meet the changing needs of members. Today, our schemes cater to diverse groups of members at different stages of life, and support a variety of needs ranging from housing, healthcare to retirement. We therefore appreciate the challenge a member faces to know all the details of our schemes. Our approach is to proactively reach out to our members with information that is timely and relevant for their needs at their particular life stages, like starting work or buying a house, so that they can use the information to make better decisions. Another key challenge we face is the prevalence of DRUMS (Distortions, Rumours, Untruths, Misinformation and Smears) on the CPF, especially in the social media. While social media provides easy access to information, it also means that misleading and inaccurate information about CPF can be easily circulated, and this can cause confusion. We therefore try our best to address these DRUMS as soon as they surface, and ensure that the correct information is readily accessible and pushed out through different touch points.

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What has been done to address the challenges?

We use a multi-channel engagement approach with several levels of outreach - mass, group and one-toone outreach. For mass outreach, we leverage on the mass media channels to raise awareness and share the benefits of the CPF system. An example is our Big ‘R’ Chat campaign, where ‘R’ refers to retirement. Since its inception, the campaign has evolved from getting the conversation about retirement planning started, to showing the holistic role that CPF plays through a member’s life journey, to encouraging members to take simple steps for a better retirement. Complementing the mass media channels is a series of CPF roadshows across the island, using direct outreach to make retirement planning and the role CPF plays more top-of-mind. Beyond the mass level, we also tailor our approaches to reach out to our different groups of members. While having many diverse groups of members at different life stages is a challenge,we also see these life events as timely teachable moments – unique opportunities, if you will—to reach out to the different groups using targeted approaches that would better resonate with them. An example is our New Members Programme, which aims to connect with millennial CPF members just entering the workforce, and help them appreciate the role CPF plays in their lives. We use a nest egg as a simple but endearing image to anchor our collaterals and connect with the younger generation; and also provide an award-winning CPF Starter mobile application as that is their preferred mode of communication. We adopt a “different strokes for different folks” approach to cater to the diverse spectrum of our membership base.

May 2018 Financial Planning Association of Singapore

practitioners with Mr Ng Chee Peng, CEO of CPF Board To enhance the online experience of our more IT-savvy members, we recently incorporated a visual representation of members’ CPF savings in the my cpf online profile page of our e-Services. Complementing this is the refreshed my cpf mobile application with an enhanced user interface to provide easy access to personal CPF information on the go. While we also use social media platforms like Facebook, Instagram and Youtube to engage the younger generation and the young-at-heart, we continue to reach out actively through conventional channels like TV, radio and mailers, so that there’s a touchpoint for everyone. At the personalised level, we reach out to individual members on a one-to-one basis to help them optimise their CPF savings. An example of our one-to-one level of personalised service is the CPF Retirement Planning Service (CRPS). For CRPS, our customer service executives use personalised materials to help members understand the various CPF options specifically available to them when they turn 55. We also set up CPF Mobile Service Centres in Community Clubs and libraries across the island, in partnership with the People’s Association and the National Library Board, so as to make our services more accessible. All members receive their individual CPF Yearly Statement of Account. To help them have a better understanding of their CPF accounts at a glance, the statement was revamped to provide each CPF member with a personalised illustrated summary, showing them the various sources of contributions to their CPF savings and how they have used their CPF savings for their housing, healthcare and retirement needs. Earlier this year, we also introduced the beta version of a new feature which allows members to create a video using selected information from their Yearly Statement of Account. The richness of a video platform allows us to convey relevant information, using a storytelling technique, to better help members learn about the options they have to make the most of their CPF savings. We have started using behavioural insights to enhance our messages across our outreach efforts. You would have seen signs of it used in the New Members Programme. Another example is our ‘#ICanAdult’ Instagram campaign. ‘Adulting’ is a term used to describe the struggles of those starting to take on adult responsibilities. Drawing upon this insight, we wanted to turn the conversation around, from www.fpas.org.sg

avoiding adult responsibilities to ‘#ICanAdult’, by creating a movement to help young Singaporeans make responsible, well informed financial decisions to ease their transition into adulthood. I spoke earlier about the need to address DRUMS. We have to be quick and nimble-footed in countering DRUMS. One example was the circulation on social media that the default CPF Nomination mode is not cash, but a transfer to the nominee’s CPF Medisave Account. Let me assure you that this is totally untrue, but it did lead to a spike in queries across our service channels. To address these queries and quell further speculation, we quickly clarified and put out the correct information across various touchpoints, including social media platforms such as Gov.sg and the Board’s Facebook page. The effort was reinforced when mainstream online media and the Sunday Times picked up on it and shared the clarifications. The Board also organised a talk on CPF nominations within two weeks of the DRUMS, to directly engage the public on this issue. These timely efforts helped counter this DRUMS and clarify the matter with the public.

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How can Financial Planners contribute to that outreach?

There are about 3.84 million CPF members. Despite our efforts, it would be difficult for us to engage every single one of our members regularly just by ourselves. We believe that Financial Planners can be our partners, by helping us share accurate CPF information through your engagements with your clients, and by helping them appreciate the important role that their CPF savings play in their financial plans. We are happy to see that more and more Financial Planners are indeed doing so. On our end, the CPF Board will continue to support Financial Planners with the necessary CPF information through briefings and clarifications on the CPF schemes. We have also started a Train-the-Trainers (TTT) programme where we exchange in-depth information with leaders and trainers in the industry, who can then cascade the information to their trainees, teams and members of the public. We will further build on these efforts, and welcome your ideas and suggestions too.

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practitioners

Evolution of Money

By Yash Mishra, CFP®

Money is one of the significant inventions of civilisation which was essential to the development of trade without which it was limited to personal relationship between people for barter of one good for another or a service. All primitive societies invested certain things with a special value—particularly livestock, and items of rarity or beauty. The possession of large numbers of cattle or pigs was clear evidence of wealth and prestige. But these objects are not money in our sense, capable of easy use in everyday transactions. The most often quoted example of primitive money is shells – a small cowrie shell, originally from the Maldive Islands in the Indian Ocean, was a treasured item in the civilisations of China and India from very early times. These were then carried along the trade routes to Africa. Similarly, the American Indians used a small white cylindrical shell for ceremonial gifts, embroidered on to decorated belts or other ornaments. Europeans who colonised these countries gave it the name ‘wampum’. Both wampum and cowries eventually become a market currency, in the conventional

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sense, but only after the arrival of Europeans who needed to establish a medium to facilitate the exchange of goods. The earliest currency used in commercial transactions appeared in Egypt and Mesopotamia by the third millennium BC. It consisted of gold bars which needed to be weighed to establish their value each time they were exchanged. Later they are supplemented by gold rings for smaller sums. In about 2500 BC an extensive trade, at Ebla in modern Syria, was based on currency of this kind in silver and gold. Gold rings and ornaments, which can be worn for safe keeping as well as display, approach the ideal of a portable currency and even today many poor women in India today still wear their limited wealth in this way, even when working in the fields or on the roads. The Temples: The first idea of a central bank

In early civilisations, a temple was considered the safest refuge; it was a solid building, constantly attended, with a sacred character which itself may deter thieves. In Egypt and Mesopotamia gold was deposited in temples for safekeeping. But it laid idle there, while others in the trading community or in government had need of it. In Babylon, at the time of Hammurabi, in the 18th century BC, there were records of loans made by the priests of the temple. The concept of banking had arrived. The First Mint: 7th century BC

The earliest known coins in the western world come from the city of Ephesus in Ionia, Turkey in about 650 BC. The metal used is electrum, a natural alloy of gold and silver

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found locally and the coins are bean shaped with the distinguishing mark of the image of a lion on one side. The underlying purpose is to ensure a stable value in this variable metal of exchange, previously traded by weight alone. The state mint adds silver to the alloy to guarantee a mix of 55% gold to 45% silver. Greek cities, to the west of Lydia, and the great Persian empire to the east were quick to adopt the useful new technique of metal currency. By the end of the 6th century coinage was common throughout the region. Bronze Coins in China: 7th – 3rd century BC

At about the same period when the craftsmen of Ephesus were striking coins in Asia Minor, the skilled casters of China were making coins by a different method—pouring molten bronze into moulds. The results looked very different. The Chinese bronze-casters were accustomed to turning out elaborate shapes for ritual vessels. Greek and Roman Financiers: from the 4th century BC

In Greece, beyond temples, private individuals took deposits, made loans, changed mosney from one currency to another and test coins for weight and purity. They even engaged in book transactions. Moneylenders would accept payment in one Greek city and arrange for credit in another, avoiding the need to transport large number of coins. Rome, with its genius for administration, adopted and regularised the banking practices of Greece. By the 2nd century AD a debt could officially be discharged by paying the appropriate sum into a bank, and public notaries were appointed to register such transactions. Origins of Today’s Currencies: 7th – 16th century

Many of the units of currency in use today are derived from versions of the Roman coins minted during the Middle Ages.

(penny:shilling:pound) which prevailed in much of Europe until the decimalising innovations of the French Revolution, and in Britain until 1971. At first the silver penny was the only local currency of the three. The shilling was a Byzantine gold coin used as a yardstick of value, while the pound was a measure of weight. Shillings and pounds later became European coins in their own right. Paper Money in China: 10th – 15th century

Paper money was first experimented with in China during the Five Dynasties period. It was a familiar currency by the end of the century under the Song dynasty. Another three centuries later it was one of the things about China which most astonished Marco Polo who described in great detail how the notes were authenticated, and then unwittingly touched on the danger lurking within the delightful freedom to print money. He said that the emperor of China made so many notes each year that he could buy the whole treasure of the world, ‘though it costs him nothing’. By the early 15th century inflation had become such a problem that paper currency was abolished in the Ming empire. Bank Notes in Europe: 1661–1821

Paper Currency in Europe made its first appearance in the 17th century. In 1656 Johan Palmstruch established the Stockholm Banco in Sweden—a private bank with strong links to the state (half its profits were payable to the royal exchequer). In 1661, in consultation with the government, Palmstruch issued credit notes which could be exchanged, on presentation to his bank, for a stated number of silver coins. Palmstruch’s notes were impressive-looking pieces of printed paper with eight hand-written signatures on each. If enough people trusted them, these notes are genuine currency; they could be used to purchase goods in the market place if each holder of a note remained confident that he could indeed exchange it for conventional coins at the bank.

During this period, the Frankish king Pepin III introduced a silver denarius, or penny, which became the standard medieval coin in western Europe.

Predictably, the curse of paper money sank the project. Palmstruch issued more notes than his bank could afford to redeem with silver. By 1667 he was in disgrace, facing a death penalty for fraud.

Later kings of the Carolingian dynasty standardised the penny, decreeing that 240 were to be struck from a pound of silver. It was subsequently established that twelve silver pennies were to be considered the equivalent of the Byzantine gold solidus or shilling.

Another half century passed before the next bank notes were issued in Europe again, by John Law, founder of the Banque Générale in Paris in 1716. Public confidence in the system was inevitably shaken when a government decree, in May 1720, halved the value of this paper currency.

Thus, there evolved a monetary scale of 1:12:20

Throughout 18th century there were further experiments with

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May 2018 Financial Planning Association of Singapore

practitioners bank notes—deriving from a recognised need to expand the currency supply beyond the availability of precious metals. Gradually public confidence in these pieces of paper increased, particularly when they were issued by national banks with the backing of government reserves. In these circumstances it even became acceptable that a government should impose a temporary ban on the rights of the holder of a note to exchange it for silver. This limitation was successfully imposed in Britain during the Napoleonic wars. The socalled Restriction Period lasted from 1797 to 1821. With governments issuing the bank notes, the inherent danger was no longer bankruptcy but inflation. When the Restriction Period ended, the British government took the precaution of introducing the gold standard.

HISTORY OF MONEY

Over its vast history, money has been central to developing our modern interntional trade network. However, new research has revealed that history is coming full circle, with 80% of people admitting to bartering with a business rather than using money.

9000 BC

Early man would barter goods they had in surplus for ones they lacked. Grain and cattle were popular goods to barter. Bartering was first recorded in Egypt.

600 BC The first official currency was minted by King Alyattes of Lydia in modern day Turkey. A standardised coinage allowed trade to floursih across the Mediterranean world.

In both regions the result was massive inflation. The Europeans, realising that they had the power to flood the market with shells, inevitably debased the currency.

1661 AD ...however paper money didn’t catch on for quite some time with the first bank notes being printed in Sweden. 1946 AD

CREDIT CARD

John Biggins invented the ‘Charg-It’ card, the first credit card.

1999 AD European banks began offering mobile banking with primitive smart phones. The Euro began to circulate in 2002.

2014 AD With a constant demand for ways to ensure business can trade easily, new innovations are constantly being introduced and refined.

In America the colonists in the 18th century invented a machine which could manufacture white shell beads accepted as ‘wampum’ by the Native Indian trading partners.

Barclaycard trialled ‘wearable contactless’ wristbands.

The African market was even more easily flooded with shell currency. Cowries, previously brought with difficulty to India and then overland through Africa, were

Bitcoins entered the mainstream, the first fully implemented decentralised cryptocurrency.

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1250 AD The Florin, a gold coin minted in Florence, was widely accepted across Europe, encouraging international commerce.

1290 AD The travels of Marco Polo to China introduced the idea of paper money to Europeans...

Minting Shells: 16th –18th century

The age of European exploration, from the 16th century, led to interesting encounters between traders accustomed to a cash economy and traditional tribes valuing shells (cowries in Africa, wampum in America) as precious objects used primarily for ceremonial purposes. The Europeans, eager to trade in regions where there was no established coinage, made use of the value attached to these shells - and in doing so transformed them, for a while, into conventional currency.

1100 BC

In China, people started using small replicas of goods cast from bronze. Largely for practical reasons, these developed into rounded ‘coins’. Coastal regions around the Indian Ocean saw the use of cowrie shells in trade as early as 1200BC.

Paper money was great for business because it could be mass produced without relying on raw metals like gold and silver.

1860 AD Industry giants, Western Union, spearheaded e-money with electronic fund transfer via telegram.

2008 AD Contactless payment cards were issued in the UK for the first time. History comes full circle with Bartercard offering a platform for businesses to barter surplus goods and services worldwide. ApplePay was announced for iPhone users to enable them to pay for things with their handsets.

Adapted from original infographic compiled by Bartercard

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practitioners now imported in shiploads by Dutch and British ships calling at the Maldives on their way back from the far east. They became a standard part of the price for slaves in west Africa. It had been calculated that during the 18th century more than 10,000 tons of these shells were brought round the Cape. By 1770 the price of a single slave was about 150,000 cowries. 19th – 20th Century Innovations: The electronic transfer of money

The industry led by Western union spearheaded the electronic fund transfer via the telegram. In 1946 John Biggins invented the first ‘Charg-it’ card which was deemed to be the first Credit card and soon by 1999 the European and American banks began to offer the first rudimentary mobile banking services.

21st Century Innovation: The future of money

The 2000’s had seen the contactless payment cards that were issued and now mobile wallets with Apple Pay and Alipay. The next wave of innovation is on the anvils. A crypto currency is any kind of peer to peer digital a money powered by the Block Chain Technology. Since Bitcoins’ appearance in 2009, hundreds of new cryptocurrencies (often referred to as ‘altcoins’) have been created, all of which offer different advantages and disadvantages compared to Bitcoin. The blockchain itself is based on the principles of cryptography and hence the term ‘cryptocurrencies’. There has always been innovation through the centuries on how humans have evolved the medium of exchange they refer to as ‘money’ and changes will certainly continue, at a much faster pace.

References:

i) www.telegraph.co.uk/finance/businessclub/money/11174013/The-history-of-money-from-barter-to-bitcoin.html ii) www.historyworld.net/wrldhis/PlainTextHistories.asp?historyid=ab14#ixzz56roabEs0 iii)www.bcb.gov.br/ingles/origevoli.asp iv) Book Title ‘ The History of Money’ by Jack weatherford v) Galbraith, John K., A Short History of Financial Euphoria, New York: Penguin Books, 1990. vi) Galbraith, John K., Money: Whence it Came, Where it Went, Boston: Houghton Mifflin, 1995. vii) Phalle, Thibaut de Saint, The Federal Reserve: An Intentional Mystery, New York: Praeger, 1985 viii) Hixson, William F., Triumph of the Bankers: Money and Banking in the Eighteenth and Nineteenth Centuries, London: Praeger, 1993. x) www.cointelegraph.com/tags/cryptocurrencies

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About

En Bloc Property By Alfred Chia, CFP®

Can you rely on ‘property en bloc’ for retirement planning? It was estimated that there were more than 30 projects which were successfully en bloc with total value more than $8 billion in 2017. In Singapore context, en bloc or collective sale is equivalent to striking lottery. More than 4,000 home owners were estimated to have hit the jackpot in 2017. While en bloc can potentially turn neighbours into enemies, there are more positive factors which make it compelling for many property owners to look forward to. First, it provides existing owners to sell their property at a much higher price collectively than if they do it by themselves individually. It enables owners to cash out from their property for other financial goals such as retirement. Second, it provides the opportunities for urban rejuvenation where new and higher density development can replace the old development. This is even more necessary for old and poorly maintained projects. It is extremely important for land scarce Singapore. Third, existing owners will have to find replacement property and reinvest the funds they received. Furthermore, new developments will mean more construction and related activities. All these activities will further boost the economy. Fourth, it contributes to government’s revenue from the various stamp duties, development charges and tax income. While it is a win-win arrangement for most of the stakeholders, they need to address the needs of the owners who may not www.fpas.org.sg

win from the collective sale and the possible excessive price hike from such exercise. The en bloc effect is certainly another big draw to invest in Singapore property. However, it will be unrealistic to think that every project will be able to en bloc. Broadly speaking, the following factors need to be in place for en bloc to take place: 1. Singapore economy growth need to be in healthy state 2. Strong employments so that there is real strong demand for property 3. Plot ratio of the project need to enable for further development enhancement 4. The project need to be in a good location 5. Consensus and realistic selling price from existing owners As such, there are many factors for en bloc to take place. Especially for point five, it is always the deal breaker. Even for the recent en bloc fever, there are more than 10 projects which have gotten owners approval but fail to sell at the asking price. In conclusion, it will be unrealistic for property owners to pin their hope for en bloc for retirement planning. While it is always good to have hope, hope is not really a strategy. It is still fundamental to focus on financial planning by paying off all mortgages latest by age 65. If your property does get en bloc, that would be the bonus payout for you to splurge on for your loved ones or contribute to the needy of the society.

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practitioners

Probate & Estate

Administration

“Are we there yet?”

By Tan Hwee Heng, CFP®

In a 2005 comedy movie with this same name, this famous line was repeated throughout the movie by two children on a trip, causing much mayhem and stress. In a way, this line can reflect the frustrations of family members handling the estates of their deceased family members. In May 2016, Madam Tan Teck Soon sued in court to claim the HDB flat that her son had passed onto her granddaughters upon his death. She claimed that she paid for the monthly mortgages for the house and miscellaneous expenses, which included upgrading costs. Unfortunately, her son died from a heart attack without leaving behind any share of the property to her. When a person dies intestate and if this person has children, the deceased’s parents will not receive any share of the estate. In such cases, in our Asian families, this probably does not reflect the values of our society. The elderly is still revered and, in many cases, dependent on their adult children to help them out in their retirement. In the unfortunate cases when their adult children pass on before they do, conflicts will arise as the grandparent suddenly realised that because their adult child have passed away without a Will (intestate), they are not entitled to any shares of the estate. In Mdm Tan’s case, her granddaughters were adamant that their father paid for the house and one of the granddaughters said, “I am not working at the moment. I’m expecting my second child. I’m not taking the money to go and enjoy myself.”

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In Singapore, there are many families where the contributions to the family home are from various sources that are unrecorded. One of the children may have contributed some monies before she got married. Another may have contributed during the upgrading exercise. Due to the HDB ownership rules, the title deed may not truly reflect the sources of contribution to the house. Hence, when a person passes away, disputes arise quickly among family members as family members look into reclaiming their deemed contributions or unrecorded “loans” . In a separate case in 2009, Mr Franklin Heng passed away in a botched liposuction procedure. In his case, although he had a Will and appointed his friends as executors of the estate, they both subsequently renounced their executorship. The appointed executors found the situation to be stressful and complicated. This is because the executors have to in the name of the estate, and for the benefit of the beneficiaries, sue the clinic and doctors for for compensation, for malpractice and gross negligence. On realising the onerous demands, they chose to relinquish their roles and with the agreement of the beneficiaries appointed a Professional Trustee company to handle the estate administration. In a case of “Are we there yet?”, Mr Heng passed away in 2009, while the lawsuit started in 2011, and only ended in 2016, after appeals in High Court were completed. A total of seven years had passed. By then, the daughter was already 20 years old, studying for her degree. When her father passed away, she was only about 13 years old, probably just entered secondary school then. Considering that the mother had to look after two young children then, she would have been too overwhelmed to handle the estate administration, which included a complicated and demanding law suit. May 2018 Financial Planning Association of Singapore

practitioners In estate administration cases, the executors are often faced probably still resonates within the family homes till the actual with doubts and anxiety to do their best for the beneficiaries. monies have been transferred to the rightful beneficiaries. The beneficiaries can exert undue influences and stress on the executors, who often have to take time off from their According to the latest United Nation’s 2017 World work to handle their parents, spouse or siblings’ estates. population report, Singapore has an ageing population For example, they have to decide which property agents to problem. The rate of wealth transfer and wealth distribution appoint to sell the house, what the “correct” selling price is will rise as a result. A Will is a very important tool in estate and even the timing of the sale of the house. In some cases, planning. if they have sold the assets at the wrong timing like during the Global Financial Crisis, they can carry the guilt or blame Within the Will itself, the appointment of suitable executors for a very long period of time, even though it WHO SURVIVES YOU WHO GETS was no fault of theirs. Spouse only (no parent/issue) Spouse - whole estate In 2015, in another family inheritance dispute Issue - whole state Issue only (no parent/spouse) involving a HDB flat, the beneficiaries’ families Spouse & Parents (fully to parents Spouse - half sued the executors of Madam Ching Choong if no spouse/issue) Parents - half Hwa’s estate for not paying them the proceeds Spouse & Issue (fully to issue if no spouse) Spouse - half from the Estate. The executors’ defence was - half Issue labelled by the Court Judge as “a pack of lies.” and the judge decided the defendants had Brother & Sister Brother & Sister -100% (no spouse, issue & parents)* committed “gross misfeasance”. In this shocking case, the two executors sold the HDB for about Grandparents Grandparents -100% $540,000 and divided the monies among (no spouse, issue, parents. brother & sister) themselves, even though the Will said the estate Uncles & Aunts Uncles & Aunts -100% was to be distributed to four families. (no spouse, issue, parents, brother, sister and grandparents) Despite winning the case, a representative of the None of the above Government 100% beneficiary family, Mr Peh said, “We are very happy to have won the case, but very sad that they still won’t pay us our share of the estate as • Issue: includes legitimate children, the descendants of children and legally adopted children. • Spouse: Husband and wife they have already spent it.” • Parent: Natural mother or father of a child or the lawful mother or father of a child. *

Children of deceased brother or sister are substituted

Considering that Madam Ching had passed away in 2011, and the court case was completed in 2015, it was another case where the estate administration took a long journey. Sadly, the testator’s (Mdm Ching) intention and wishes were not fulfilled because the executors had kept the monies to themselves. In a more recent court case that was completed in 2017, the executors sued their own brother for pocketing more than $1 million from their deceased father’s estate. Mr Ong Kim Nang died in 2010, and willed his bank accounts to his wife. His wife, Madam Tan Ai Cheng, later passed away in 2013. The younger brother was accused of withdrawing the monies by banking $1.13 million dollars of cheques signed by their father three days before his death. This was discovered in 2011, and the court case was brought up in June 2016. The judgement was then given in May 2017, almost a year later. The executor had persistently pursued the case to resolve the matter for the estate for more than six years. Though some of the above-mentioned court cases have been decided, the question of “Are we there yet?” www.fpas.org.sg

is crucial to ensure the intentions are carried out. In some cases, the role of the executors can be very heavy as they represent the estates to get the best results for the beneficiaries. It could be a car crash or industrial accident in which external parties are responsible, resulting that the executor may have to perform the role over a long period of time. In such cases, during family gatherings, the mutterings and questioning of “Are we there yet?” (meaning “When are we going to get our monies?”) can cause conflicts that will stress or even break family bonds. Due to these conflicts, future generations may lose the family values and bonds that the deceased had treasured and painstakingly built up over decades. When doing up a Will, testators should always consider appointing a professional trustee firm to be the executor for the Will. It may be one of the most valuable and most rewarding actions for the family in the long run.

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consumers

TYING

FINANCIAL PROTECTION LOOSE ENDS WITH

LPA

By Lawrence Chow, CFP® ® ®

Imagine this: Mr Tan, aged 50, was a successful banker and the sole breadwinner of the family with two young children. One month ago, he suffered a stroke at work and it resulted in him having difficulty moving one side of his body, hence unable to go back to work. While his loss of mobility was obvious to the eye, Mrs Tan noticed that he had lost his ability to think and was even unable to make simple decisions like choosing the clothes to wear or even remembering what he did the previous night. It was then their attending physician determined that Mr Tan had suffered from mental incapacity as an aftermath of his stroke.

plans have been supposedly implemented to ensure their financial wellness through insurances.

Mr Tan’s financial adviser had professionally arranged a comprehensive coverage for him as his income was critical to the family’s day-to-day expenses. The coverage included disability coverage like disability income, as well as Eldershield, which pays a monthly income as Mr Tan has met the conditions of the claim.

While stroke is one of the causes of mental incapacity, other causes may be due to a car accident resulting in the person being in a coma, severe depression from stress related causes or dementia due to old age.

Mrs Tan should have been happy that the disability insurance payout is sufficient to cover some of the expenses for the family and Mr Tan’s medical expenses. However, as Mrs Tan received the payout, she was unable to access the funds after banking in the cheques since they did not share a joint account. As the family’s savings are depleting and awaiting for the court’s decision for the right to make decisions for Mr Tan, they are placed in an uncomfortable situation even though

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What could Mr Tan have done better to avoid this situation? REALITY CHECK According to statistics by the Ministry of Health, stroke is the largest cause of long-term physical disability in Singapore and with a rapidly ageing population, the burden of stroke is expected to increase exponentially in years to come. Although older people are usually more susceptible to suffering from a stroke, one in 10 patients in Singapore is under 50 years old. Some of the leading causes of stroke include common medical conditions like high blood pressure or high cholesterol, which has an incident rate of one in four and one in five respectively among adults aged 18 to 69.

It is unimaginable how life might be like to lose the ability to make decisions for ourselves when we are used to making thousands of decisions, simple or complex, every day. When one suffers from mental incapacitation, disability insurances would usually be paying the benefits. However, what practical challenges do the family meet with in such a situation? WHAT CONSTITUTES MENTAL INCAPACITY? If at a particular point in time, the person is unable to make a decision for himself due to an impairment of the brain May 2018 Financial Planning Association of Singapore

consumers due to an illness or accident, he is considered to have a loss of mental capacity. Broadly speaking, this includes the understanding of information, weighing the information to make this decision, and communicating the decision to others. The situation of mental incapacity can be either permanent or temporary. CHALLENGES When a person suffers from mental incapacity, the family is unable to make decisions for both the personal and financial welfare of that individual. Specifically, on finances, they will be unable to access his bank account and/or decide on what to do with his property and other assets. The family may result in financial distress due to this. In order to access the finances, the family members will have to apply to the court for the right to be a deputy to make decisions on his behalf. This is a lengthy and tedious process. It may take a couple of months before the court grants access. In addition, the cost of applying to the court for deputy rights is approximately $5,000 to $10,000, inclusive of lawyer fees and court fees. MAKING LPA A PART OF YOUR ADVISORY FOR FINANCIAL PROTECTION As most financial advisory professionals would recommend disability insurances as part of the implementation process to cover their clients’ protection needs, we have assured them that there will be ready cash-flow available for their families upon situations such as mental incapacity as a result of an illness or accident. However, the implementation process would have been incomplete if the family would not readily benefit from the payout due to the inability to access the funds. Administered by the Office of Public Guardian, The Mental Capacity Act allows individuals to voluntarily appoint one or more persons to decide and act on their behalf in the event of mental incapacity through a legal document, the Lasting Power of Attorney (LPA). This scheme began since 2010 and to date, an estimate of 35,000 people have appointed an individual to make decision on their behalf. This would mean that a large number of our clients and their families are still vulnerable to the risk of having a loved one falling into a mental incapacity situation. LPA allows one to grant general powers for all your personal welfare and/or property and affairs. LPA Form 1 is the form most commonly used by 98% of Singaporeans. However, if your situation is more complex and you only wish to grant

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specific powers, then you would use LPA form 2, which would then require a lawyer to draft the LPA for you. The process of making a LPA appointment is easily done by completing the form and having an accredited professional, usually doctors or psychiatrists, to certify that the individual is currently mentally capable to appoint someone. The certification fee is a one-time cost in the range of $80 to $150, depending on the professional’s charges. The charges for making a LPA by a Singaporean has been waived by Office of Public Guardian till 31 August 2018 for Form 1. After which, a charge of $75 is applicable for Singaporeans. Singapore Permanent Residents and foreigners are currently charged at $100 and $250 respectively. In the event of an individual suffering from mental incapacity (termed as the donor), the appointed individual, known as the donee, can almost immediately exercise his role as the decision maker on the donor’s behalf once the LPA is produced. This is more cost and time effective than paying the court and lawyer fees if a LPA is not made. CONCLUSION LPA is still a relatively new legal aspect in our financial planning process in Singapore and many individuals have yet to make an appointment. In order to make our financial planning process comprehensive, it is important to constantly review our clients’ circumstances and advise them on how they may leverage on these government schemes to ensure their financial well-being is taken care of.

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consumers

SINGAPORE BUDGET 2018: Future Ready by Yash Mishra, CFP®

The Singapore Budget 2018 was presented on the theme of being strategic in nature comprising an integrated plan to position Singapore economy and society for the future. The Singapore Budget 2018 had a surprise budget surplus of S$9.6B versus the estimated S$1.9B. Singapore GDP grew by 3.6% in 2017, up from 2.4% in 2016. Productivity growth was 4.5%. The three major shifts that Singapore needs to prepare for that was addressed in the Budget 2018 were as follows: i) Shift in global economic weight towards Asia; ii) Emergence of robotics and digital technologies and iii) Ageing population. Some of the key strategic initiatives that will pave the way forward are outlined below:

Individual Tax and Others The personal income tax rates remain unchanged, ranging from 0% to 22%. • Insurance premium subsidies for Elder Shield will be provided to lower- and middle-income Singaporeans. • The Proximity Housing Grant (PHG) for families buying a resale flat to live with their parents or children will be increased to $30,000. Singles who buy a resale flat to live with their parents will receive an enhanced PHG of $15,000. Singles who buy a resale flat near their parents (i.e. within 4 km) will receive a PHG of $10,000. • Eligible HDB households will receive 1.5 to 3.5 months of rebate on their Service and Conservancy Charges. • The monthly concessionary levy rate for foreign domestic worker (FDW) is unchanged at $60. For the first and second FDW employed without levy concession, the monthly levy will be raised from $265 to $300 and $450 respectively. Social-related and health-related services for seniors will be consolidated under the Ministry of Health. • A one-off SG Bonus (Hong Bao) of $300, 200 or $100 will be given to all Singaporeans aged 21 and above in 2018, depending on their income.

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May 2018 Financial Planning Association of Singapore

consumers Goods and Services Tax • Increase GST rate from 7% to 9% sometime between 2021 and 2025. • Overseas vendors providing digital services have to register for GST with effect from 1 Jan 2020 if their global turnover is more than $1 million annually and their online sales to Singapore consumers exceed $100,000. • Introduce reverse charge on services imported by GST exempt entities and Non-GST registered entities with effect from 1 January 2020.

Corporate Tax • Enhance corporate tax rebate for year of Assessment (YA) 2018 to 40% of tax payable, capped at $15,000. The rebate will be extended to YA 2019 at 20% of tax payable capped at $10,000. • Adjust Partial tax exemption and Start up Tax exemption Schemes. • Grant 250% tax deduction for qualifying expenditure on qualifying research and development (R&D) projects performed in Singapore. • Grant 200% tax deductions for the first 100,000 of qualifying IP registration cost and qualifying IP licensing costs • Extend the Business and Institutions of Public Characters Partnership scheme and the 250% tax deduction for qualifying donations to 31 December 2021. • Extend the Investment Allowance Scheme to include qualifying investments in submarine cable systems landing in Singapore. • Increase expenditure cap for claims not requiring prior approval from IE Singapore or Singapore tourism board to $150,000 per YA under the Double Taxation Deduction for internationalisation scheme. • Initiatives to strengthen competitiveness of the financial sector, including: a. Extend the section 13x Enhanced Tier Fund Scheme to all forms of fund vehicles Introduce a tax framework for Singapore variable capital companies. b. Extend the tax transparency treatment currently given to Singapore listed Real Estate Investment Trust to Singapore-listed Real Estate Investment Trusts Exchange Traded Funds. c. Extend tax incentive schemes to 31 December 2023: QDS, Approved Special Purpose vehicle for asset securitisation, financial sector incentive, insurance business development areas as insurance broking business and tax exemption for primary dealers trading in Singapore Government securities. d. Extend the section 141 tax deduction for banks and qualifying finance companies to YA 2024 or YA 2025 depending on the entity’s financial year end. e. Rationalise withholding tax exemptions for the financial sector.

Other Changes: • Increase the top marginal Buyer’s Stamp Duty rate to 4% applicable on the value of residential properties exceeding $1 million. • Introduce Carbon tax of $5 per tonne of greenhouse gas emissions from 2019 to 2023. It strikes a balance between the need to be responsive in a rapidly changing world where technology changes will drive both economic and societal norms. It achieved its goals of being a strategic planning road map that is both fiscally prudent and socially inclusive. It focuses on helping companies to grow, while creating an environment which continues to be attractive to inward investment.

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consumers practitioners

BOOK REVIEW:

The Industries of the Future Alec Ross

By Yash Mishra, CFP®

Innovation expert Alec Ross served as adviser to Hillary Clinton when she was Secretary of State. His book The Industries of the Future is a good exposition on the five big industries of the future that are likely to have the most impact: 1. Robotics 2. Advanced Life Sciences 3. Codification of money 4. Cybersecurity 5. Big Data Spurred by Artificial Intelligence and machine learning, robots will shape the world of work and even our careers. Humans will need to learn to adapt to the advent of the next wave of automation. Advanced life sciences will enable us to live longer. When combined with the power of Big Data, cyber security and the power of code, these innovations will transform our lives at work and at home and we can already see some glimpses of it in the driverless cars that are being test driven in Ubi! This is referred to as the third wave of automation, where we move beyond the bean counters of assembly lines into powerful predictive data analytics. The Innovations that are discussed in the book have the potential for tremendous positive advantages with the consequences being potentially profound. This is particularly true for Robotics where improvements in cognition and even creativity has the potential to disrupt jobs as we know them today.

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Just as the debate in the previous century was all about an ideological debate between the communist or capitalist framework, the debate for the 21st century is all about where each country is on that continuum of being open versus closed. It is not a West versus East debate. Many countries in the West are surprisingly closed when it comes to data or talent and very conservative when it comes to laws regarding venture capital. People leverage the hyper-connected world to bypass these limitations. Today, people are not bound by geography and anyone can use the Internet to find jobs or learn or showcase their talent. The book examines the pros and cons of an increasingly digital world economy that allowed a nation like Rwanda to go directly from an agrarian society to one of the world’s most advanced post-industrial economies, by skipping analog communications networks and going straight to cellular, with digital transfers of money. Or the Estonia model of Government as a service. The author also explores the medical advances made in human genome mapping, the ability to grow human organs, human organ replacement and the ethics of it. This is a recommended read that will get you thinking about how advances in science are going to shape digital societies in the future.

May 2018 Financial Planning Association of Singapore

practitioners

Heartiest congratulations to our Wealth Managers who

made it to the finals of FPAS Financial Planner Awards 2018. We at Phillip empower our Wealth Managers so that they can provide holistic financial planning can meet clients needs.

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consumers

INSURANCE,

RESPONSIBILITY By Joseph Paul Kennedy, CFP®

Insurance policies are something all Singaporeans and Permanent Residents have. In many cases, multiple policies are part of the protection you have built over the years. From the first day you considered taking a policy, you likely engaged either an insurance agent, banker or financial consultant to assist you in determining the scope of the plan to meet your specific objective. What happens after you have taken the plan? What role do you play? A recent case I witnessed provides an example of what can go wrong. An individual, John Lim, not his real name, purchased an Integrated Shield Plan from a private insurer nearly 10 years ago. He had taken a main plan that provided cover for private and restructured hospital expenses. He also had purchased riders that passed the risk for any future payment of the deductible and co-payment during a hospital stay to the insurer. Years went by. Medisave paid for the main plan and his credit card had been used to pay for the riders. Other than an insurance agent asking for updated credit card details each time the card expired, all went smoothly. However, one day he received a WhatsApp message from his agent stating that he needed to pay a small amount immediately in cash now that the Medisave cap was insufficient to pay the full premium. This will happen as one ages and is placed in the higher age bands. At the point of agent communication the policy was overdue by more than three months. John quickly made payment and thought everything was fine. Well, it wasn’t. The premium due date

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had come and gone…and so had the grace period. The late premium that he paid was returned by the insurer. Now, he had to prove his health once again as he had done when he first took the plan. Unfortunately, his health had deteriorated and the insurer would not reinstate the policy. The 10-year policy was gone. What went wrong? John had been informed via letters mailed to his current address. He hadn’t read them or hadn’t fully understood the action that was required to keep the policy active. In the past, he had successfully relied on the nudging from his agent when action was required such as the credit card updating. This situation is unfortunate and can happen to anyone. Here is my suggested list of critical steps that everyone who is thinking about buying or who already owns an insurance policy should take at each of the four stages of the insurance ownership cycle. Stage 1: Selecting a Plan to Transfer Risk to Insurer • Evaluate your current needs and the needs you may have in the near future. Work with an adviser to better understand the risks and the level of coverage suitable to protect you and your loved ones. • Have a vision of future needs. Insurance is not like many other items you purchase. Good health is often a requirement for acceptance and current health does not predict your future health. • Understand the recommendations and ask questions until you are clear of the benefits and how the selected insurance solutions meet your needs. May 2018 Financial Planning Association of Singapore

consumers Stage 2: The Ongoing Commitment • Make it a high priority to open letters, read them and act upon the instructions before the stated deadline. If unsure of the letter’s content, seek further clarification from your adviser or insurance company. • Move all payment modes to GIRO if possible. You will no longer need to update the insurer with credit card details. The insurer will still notify you if the GIRO attempt is unsuccessful. • Keep insurance companies and advisers updated on any change of address, email and contact numbers. • Review your current policies regularly. Have your coverage summarised in a document so a quick glance can provide the details of the policies. Ask for a copy of the summary. Needs change and a regular review can highlight the need to increase or even reduce current coverage. • If a nomination of beneficiary has been lodged with the insurer, add those details to your insurance summary too. The passing of time is especially good at erasing our memories of these details and to see the names regularly in black and white will help to prompt you to make changes if you wish to modify to a different beneficiary. • As part of caring for older family members, have a discussion with them to ensure their premiums can be paid on time. If you are able to afford to assist, you may ask them if it is okay for you to arrange with the insurer to make payment for their plans.

cash value. You may decide to downgrade a plan with rising premiums due to affordability issues—a hospitalisation plan is an example. Understand the potential consequences of such an action. If you seek guidance from friends and family take note—a neighbour’s solution might be best for them, but seeking independent advice with experience may provide a preferred outcome. We are likely to see changes in the modes of communication insurers use and hope that with technological advances, additional means of communication to supplement hardcopy letters will be offered. Some insurers do take additional steps such as to call clients when premiums have not been paid. Some send text messages to communicate. This is an ongoing challenge for the insurers. Phone numbers must be correct and individuals must answer the call. The bottom line is that each of us is ultimately responsible for our policies and there is more to staying current with your insurance portfolio than just paying premiums regularly. Working with someone on an ongoing basis can help you fulfil your responsibilities at each stage. There may be a strong relationship between policy owner and insurance agent, though certain actions can only be done by the owner. It’s your policy. Take good care of it so it remains relevant and available when you need it!

Stage 3: Claiming • If an unfortunate event happens, stay in touch with your adviser. It is possible you have coverage to reduce the financial burden. The event could be related to your health or your physical property. Water damage to your home for some can be claimable. • Involve your adviser during claims if you need assistance. He can help guide you through the process, provide the correct forms, interpret insurance jargon and answer any questions you have. Stage 4: Ending a Policy • Make careful decisions before terminating, surrendering or downgrading a policy. Speak to an adviser for their input and experience. A policy may have a natural ending with the passing of an individual or claiming of a critical illness. However, there may be other times you have choices to surrender with a www.fpas.org.sg

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consumers

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consumers

INVESTING

in times Focus on long-term investing, asset allocation and review By Deepak Khanna, Head, Wealth Development, HSBC Bank (Singapore) Limited

Investing for the long term Volatility is measure of dispersion of returns from its historical mean. This range of dispersion can be very different depending on the time horizon one is looking at. Usually, the returns fluctuate widely from its mean in shorter time periods but get narrower as one remains invested for a longer time period. Also the probability of negative returns are more pronounced in shorter time periods versus longer time period. Chart 1 shows the performance of the world equity market over different time frames. If you look at the “1Y” bar, it shows that during the period from 1999 to 2015, the return of an investment with a oneyear horizon ranged from a low of -37% to a high of 65%. However, if the investment horizon is extended to ten years, the return ranged between -11% and 194%. While historical data does not guarantee future performance, this concept of long-term investing has a powerful message. For the investors who can afford to invest for the long term, they are likely to have a less uneven ride as compared to short-term investing. So why don’t investors invest for the long term? When there is bad news, there tends to be overreaction leading to a sell off to cash. Investors often make the mistake of cashing out when markets turn volatile. Since it is impossible to predict market ups and downs accurately, it is difficult to time when is best to reenter the market leading to missing out on some of the best days of the market returns. Missing only a few

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CHART 1

*Source: HSBC, Bloomberg. The world equity market is represented by the MSCI AC World Daily Total Return Index. Data are for the period from 1 January 1999 to 31 December 2015, calculated by rolling returns in USD within 1-year, 3-year, 5-year and 10-year timeframes.

of the best days in the market could lead to an adverse effect on performance. An analysis of the MSCI AC world daily index measured over 10 years from Sep 2005 to 2015 shows that the equity returns can drop by 82% (from fully invested person would have earned an annualised return of 6.15% while someone who missed just the 10 best days would have earned only 1.13% annualised return and for someone who missed the best 20 days would have earned a negative -1.98% annualised return) Smart investors who remain calm when others are fearful will be able to avoid losses or keep them to a minimum. If you only hold cash over the long term, you may lose purchasing power from inflation. Investing in a mix of cash, fixed income and equity can help you maintain your savings in the long run.

Asset allocation

Asset allocation principle is at the core of a portfolio design. Just the way one cannot find the best days to buy or sell, it is difficult to predict winner and loser asset classes for the future. By choosing an appropriate mix of assets

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consumers practitioners

CHART 2 Return and risk for different composition of a Fixed income vs Equity asset class allocation Fixed income vs Equity Returns Risk Sharpe

10:90 30:70 50:50 70:30 80:20 90:10 6.1% 8.2% 10.4% 12.5% 13.6% 14.7% 4.9% 4.2% 5.9% 8.5% 10.0% 11.4% 1.24 1.95 1.76 1.47 1.36 1.29 The correlations, returns and risk analysis is based on the monthly data of indices between the period 2009-2015. The data is sourced from Bloomberg and the returns and risk are the averages taken for 1 year period between 2009-2015. For Equity – MSCI Daily Total Return Net USA and Fixed income – Bloomberg EFFAS Bond Indices. Risk is measured using standard deviation.

that are less correlated i.e. likely to perform differently in the same market conditions, an investor can bring down the overall risk of a portfolio. Since all assets in a wellconstructed portfolio do not go up and down at the same time, there is a normalisation of both the returns and risk in comparison to a single asset portfolio. It is important to ensure appropriate weightings of the asset classes to have the optimal risk versus return tailored to the investors. As evident from the above Chart 2, by varying the mix between fixed income and equity, the return to risk ratio (called Sharpe ratio) changes and is often low when the allocation is skewed towards a single asset class. A widely published study has shown that more than 90% of portfolio variance is attributed to asset allocation, while factors like individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return. One of the key outcomes of an optimised portfolio is to offer the highest expected return for a defined level of risk. The specific level of risk is determined using an individual’s risk profile and financial goal.

Portfolio review

Contrary to human instincts, rebalancing is the process selling overexposed assets (due to increase in value) to acquire assets where the value is down. Usually, investors

go panic selling shortly after market falls, thereby reducing their exposure to such assets and posing them to the risk of missing out on the potentially good days of a market recovery. Historically, over the longer term, financial markets have risen despite short-term fluctuations. Though markets do not always follow the same recovery paths, periods aftermarket corrections are often critical times to be exposed to the markets. Rebalancing also helps to bring down the level of risk for the portfolio. As market goes up and down, keeping investors updated through a portfolio review will help to take decisions related to rebalancing more rationally. Since re-balancing has a cost attached it needs to be done with a systematic approach rather than on ad-hoc manner. Rebalancing needs constant reviewing but it does not necessarily mean that rebalancing has to be done. In summary, the three pillars of successful investment: • a long-term investment horizon • diversified asset allocation • regular portfolio review will help to tide away the crucial time of market volatility and helps to set the portfolio for future direction of the market.

Disclaimer: This document is intended for education purpose only, not an investment advice or recommendation; nor is it intended to sell investments or services or solicit purchases or subscriptions for them.

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May 2018 Financial Planning Association of Singapore

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members’ events

FPAS Graduation Ceremony 2017 Date: 6th October 2017 Time: 1.30pm to 4.30pm Venue: The Westin Singapore FPAS held its annual FPAS Graduation Ceremony on 6th October 2017 at The Westin Singapore. The certificants took the opportunity to celebrate this special day with their families and mingle with industry veterans and other CFP® professionals.

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May 2018 Financial Planning Association of Singapore

members’ events

www.fpas.org.sg

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members’ events

FPAS Tea Time Talks A series of Tea Time Talks was organised for our FPAS members throughout the year as part of FPAS Membership Benefit Initiatives. Our members gained valuable knowledge and tips towards their customer acquisition and investment opportunities. How to Boost your Retirement Planning with SRS (Supplementary Retirement Scheme) by Choe Kee Hong and Darius Foo Date: 11th October 2017 Time: 2.30pm to 5.00pm Venue: Thomson Reuters @ One Raffles Quay, Level 28 North Tower, Auditorium

3 key takeaways: • Understanding of Supplementary Retirement Scheme to enjoy tax relief for the income tax assessment. • Sharing on the current market outlook. • Perspective investment opportunities that clients can consider deploying their SRS monies towards meeting their retirement needs. Robo Advisors—Friend or Foe by Niti Guhathakur and Regine Lai Date: 15th November 2017 Time: 2.30pm to 5.00pm Venue: Thomson Reuters @ One Raffles Quay, Level 28 North Tower, Auditorium

3 key takeaways: • How to create possibilities of new business opportunities. • Understanding of “Global Adviser Community Connect" platform. • How to enhance lead generation and customer acquisition.

Market Outlook 2018 – How will it impact Financial Advisers? by Deepak Khanna, Regine Tan and Sam Phoen Date: 30th January 2018 Time: 2.30pm to 5.30pm Venue: SGX Auditorium

3 key takeaways: • Understand Portfolio Construction and Maximising Returns. • 2018 Market Outlook and Assessing Investment Opportunities. • How the various investment instruments help in understanding clients’ investment portfolio.

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May 2018 Financial Planning Association of Singapore

members’ events

FPAS Members’ Networking Night Date: 8th December 2017 Time: 6.00pm to 9.00pm Venue: “News & Gossip” @ 112 Robinson Road

Members had a great night catching up with fellow members during the FPAS Members’ Networking Night on 8th December 2017 at “News & Gossip” @ 112 Robinson Road. Thank you everyone for being part of it and making it a memorable night! Our Special Adviser, Ms Foo Mee Har, made a special appearance at the event.

www.fpas.org.sg

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members’ events

2018 Calendar of Events 30th January 2018

Tea Time Talk – Members’ Event “FPAS Market Outlook 2018: How will it impact Financial Advisers?” by Regine Tan, Schroders, Deepak Khanna, HSBC and Sam Phoen, SGX Academy

8th June 2018

Code of Ethics Workshop by John Sim, CFP® Tea Time Talk – Members’ Event

27th June 2018

Financial Planning Series 1 Tea Time Talk – Members’ Event

12th & 13th February 2018

Financial Planner Awards 2018 – Judging Panel

23th February 2018

25th July 2018

Financial Planning Series 2

CNY Celebration

28th February ­to12th March 2018 Financial Planner Awards 2018 – Oral Presentation

12th to 16th March 2018

21st September 2018

FPAS Graduation Ceremony 2018

5th October 2018

NTUC Financial Services Week

Financial Planning Conference 2018 (for Practitioners)

28th March 2018

6th October 2018

Tea Time Talk – Members’ Event "How To Have The Winning Mind of a Professional Investor" by Jay Chia, Phillip Securities

Financial Planning Conference 2018 (for Consumers)

9th November 2018

Code of Ethics Workshop by John Sim, CFP®

16th March 2018

30th November 2018

Code of Ethics Workshop by John Sim, CFP®

FPAS Members’ Networking Night 2018

14th & 15th April 2018

For the latest list of events, log on to www.fpas. org.sg/event-calendar/

Financial Wellness Carnival in partnership with Tsao Foundation

20th April 2018

FPAS Financial Planner Awards Night @ Singapore Marriott Tang Plaza Hotel

27th April 2018 FPAS AGM

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May 2018 Financial Planning Association of Singapore

FP awards

FINANCIAL PLANNER AWARDS 2018 20th April 2018 Singapore Marriott Tang Plaza Hotel

Guest-of-Honour

Mr Heng Chee How NTUC Deputy Secretary-General

FIRST INDUSTRY-WIDE competition by FPAS FINANCIAL PLANNERS IN SINGAPORE

For to be recognised for their financial planning excellence

BANKING, INSURANCE AND FINANCIAL ADVISORY sectors in

The FPAS Financial Planner Awards seek to recognise outstanding financial planners in the Banking, Insurance and Financial Advisory (FA) sectors in Singapore. The first industry-wide competition organised by FPAS in partnership with Mercer, domain Knowledge Partner, and a panel of prestigious judges from the Finance industry, regulatory bodies, esteemed institutions and practitioners, this award aims to recognise financial planners who excel in their professional knowledge, demonstrate financial planning skills at the highest level and uphold best practices in financial planning in Singapore. The objectives resonate with FPAS vision and mission, to ensure that all Singaporeans have access to responsible and appropriate financial planning advice, by raising the professional standards of the industry through education and a shared code of ethics. FPAS is committed to raise awareness of the importance of financial literacy for the benefit of all Singaporeans and encourage consumers to take positive planning action.

Uniqueness of the Awards It is the first competition by FPAS that assesses the financial planning acumen of practitioners from three major industry sectors in Singapore namely the Banking sector, the Insurance sector and the Financial Advisory (FA) sectors. The award aims to develop and maintain high ethical standards and high quality financial advice within the industry sectors.

www.fpas.org.sg

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FP awards

THE JUDGES Joseph Kwok, CFP® FPAS President Chairman of Judging Panel Joseph Kwok has been the President of FPAS since 2015. He aims to lift professionalism of financial advisers by accrediting them with the globally recognised CFP qualification and promote financial literacy to Singaporean. Joseph is presently the CEO of SooChow Securities Singapore, a licensed fund manager owned by SooChow Securities (75%) and China-Singapore Suzhou Industrial Park (25%). He is also the nonexecutive director of China Reform Overseas & China Reform SooChow Overseas. He is also an Independent Non-Executive Director of three SGX main-board listed companies. He has more than 18 years of experience in the financial services industry and had held senior roles in JP Morgan; UBS AG; Standard Chartered Bank. Joseph is a Fellow of SUSS and an adjunct lecturer with Kaplan. He is the President of UNSW Alumni Association and President of Australian Alumni in Singapore. Joseph is a CPA with CPA Australia and a CFP® holder.

Steven Seow Executive Director Singapore Consultancy With more than 16 years of working experience in banking and consulting, Steven has worked for Mercer, Citi Private Bank, IBM, PwC Consulting and Odyssey. Steven speaks at various wealth management industry forums in Singapore, Hong Kong and Asian countries. He also interviews regularly with the media and wrote in the Opinion and Editorial section of Business Times. He is a member of SATA CommHealth investment finance board committee and is also the Executive Director of Singapore Consultancy, a social enterprise that runs a panel of independent Consultants.

Rachie Hui Chief Operating Officer The Institute of Banking and Finance Singapore (IBF) Since joining IBF in 2004, Rachie provides policy advice to the CEO and supports the CEO in overseeing the strategic operations of Singapore. She also plays a key role in fostering partnerships with the financial industry, financial training providers and Institutes of Higher Learning so as to advance IBF’s mission of empowering practitioners with capabilities for a robust Asian financial industry. Rachie has over 25 years of experience in managing the training and education initiatives, including older worker training at NPB, vocational training at the Times Publishing, technical training at the SCI and advisery training at the AXA Life Insurance.

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May 2018 Financial Planning Association of Singapore

FP awards

Lynn Gaspar Senior Vice President Head of Client Development & Relationship Singapore Exchange Lynn joined SGX as Senior Vice President in July 2013. Her teams are responsible for driving marketing efforts and establishing new distribution channels and partnerships as well as engaging retail investors. She also owns the client development relationships with retail and institutional trading members, custodian banks, and depository agents. Lynn has 16 years’ experience with GE Capital, as Director of Finance and Integration in Brazil and Osaka, Japan, and General Manager, Client Development in Atlanta, US. She led the consumer banking businesses as Regional Director for Partnerships and Strategic Alliances at Citibank, Asia Pacific; and as Regional Senior Vice President at OCBC Group Lifestyle Finance.

Lorna Tan Invest Editor/Senior Correspondent The Straits Times Lorna is an award-winning Invest Editor and Senior Correspondent at The Straits Times. She helms the Invest section of The Sunday Times. She has won numerous awards for excellence in business reporting including the Investor Education 2016, the Financial Journalist of the Year 2017 and the Financial Story of the Year 2005. She was also recognised by FPAS for promoting financial literacy and raising awareness of industry developments in 2010. She is well sought after for her views on financial and retirement planning and as a moderator, panellist and speaker in events. She is the author of “Talk Money” and “More Talk Money” and has recently launched her third book, “Retire Smart: Financial Planning Made Easy”.

V Maheantharan Director Institute for Financial Literacy Maheantharan joined Singapore Polytechnic as a lecturer in 1982 and was promoted to the Director of School of Business in 1996. During his tenure, he has established the school to one of the top schools in the polytechnic sector. In 2010 he assumed the Directorship of Polytechnic’s Professional and Adult Continuing Education Academy and grew its revenue significantly. In 2014 he took up his current portfolio as Director of the Institute for Financial Literacy and had trained more than 100,000 participants through its workshops and talks in money matters. He is an accredited a mediator who volunteers at the State Courts and the Singapore Mediation Centre. He sits on the Management Committee of a Halfway House and also on the LKY Bi-lingual Education Committee.

www.fpas.org.sg

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FP awards Ben Fok, CFP® CEO Grandtag Financial Group An industry veteran with 30 years of experience in the financial industry, Ben’s wealth of experience has led him to write articles for financial journals and published three books. Ben is passionate to share his experience by lecturing at several institutions. He believes in continuous learning and giving back to the financial planning industry. As the CEO of Grandtag Financial, he has also served as the EXCO member of FPAS. Having obtained the CFP®, ChFC and STEP certification, Ben was also conferred the IBF Fellow Award in 2016, an award that recognises industry veterans who exemplify thought leadership and commitment to industry development.

Stanz Tan Head of Bancassurance DBS Bank Stanz is currently the SVP at DBS Bank and Head of Bancassurance, Consumer Banking Group, overseeing Life and General Insurance businesses for the bank. He has been in the Insurance/financial industry since 1990, serving collectively with two banks and four insurance companies. Over the last 27 years, he has held numerous positions, serving as insurance agent, channels management dealing with Bank and FAs/brokers, member of strategic planning team and managing product management to business growth.

James Tan Chief Executive Officer Tokio Marine Life Insurance Singapore Ltd. A seasoned industry leader with close to 20 years of experience in the insurance and banking industries, James has held leadership positions across Asia, Europe and the United States. He was previously director for several boards and an approved person by regulators in Singapore, Hong Kong, Malaysia, Isle of Man and Luxembourg. In 2017, James received the IBF Fellow Award in Life Insurance, in recognition of his thought leadership and commitment to advancing the insurance industry. Prior to joining TMLS, James was based in Hong Kong, where he was the Managing Director for FPI and was responsible for overseeing the company’s strategic growth and business development in Asia. James was also previously the Group Head for AIA’s Partner Distribution in Hong Kong and served as the Global Head of Bancassurance at Standard Chartered for seven years.

Luke Lim Managing Director Phillip Securities Pte Ltd Luke is currently the Managing Director of Phillip Securities Pte Ltd and he has undertaken diverse management leadership roles in PhillipCapital Group of companies since 2004. Besides overseeing Phillip Securities Singapore business and co-founding Poems Venture, he is also the Deputy Chairman of Securities Association of Singapore. Luke graduated from Imperial College London with a Bachelor of Electrical and Electronic of Engineering and obtained a Master’s degree in Business Administration from Nanyang Technological University.

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May 2018 Financial Planning Association of Singapore

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FINANCIAL PLANNER OF THE YEAR AWARDS 2018

WINNERS

Financial Advisory OPEN Winner

Roy Walker Simon Nexus Financial Services

Being passionate about the profession is the key motivation for me to participate in the Financial Planner Awards. I believe interpersonal skills, numerical skills and integrity are essential to being an outstanding financial adviser. I trust that the award will bring forth greater visibility of this profession and raise the credibility within the industry.

Financial planning is my passion and the complexity of the scenario excites me. I participated in this award because I would love to contribute to make financial planning matters to everyone. Being able to connect with your client, be honest and take responsibility on your recommendations to your clients are factors that make an adviser great. The award should go beyond the glamour and allow winners the opportunity to inspire others and raise the bar!

Insurance OPEN Winner

James Yang, CFP® Great Eastern Life

Financial Advisory RISING STAR Winner

Colin Lai Wai Lin Elpis Financial

I hope to share best practices in the industry so that society can benefit from better ideas and methodologies. An exceptional financial adviser should offer a full aspect of financial planning, not just in terms of insurance but also wealth accumulation, investing, cashflow and debt management. He or she should envision a good future for the client and help identify potential roadblocks before they hit the masterplan. I hope that the award will improve the quality of advice and send home the message that financial success is not only just a dream.

I joined the awards to stay competitive in my financial planning skills and to keep my service standards high. I also want to make Tokio Marine proud! Sincerity, consistency, product knowledge, staying abreast of industry news and current affairs concerning my clients are some of the ingredients I consider in a remarkable financial adviser. May the award raise the level of expertise and service standards and inspire young advisers to excel in this industry.

Insurance RISING STAR Winner

Goh Ming Shan Tokio Marine Life Insurance

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FP awards



FINANCIAL PLANNER OF THE YEAR AWARDS 2018

WINNERS

Thank you FPAS for organising the Financial Planner Awards. I am very heartened that through this award our profession will gain recognition. An excellent financial adviser must possess empathy and a listening ear to map out a sound financial plan that will help the client in his time of need. I hope that the award will encourage more people to understand the importance of financial planning and not shy away from a financial planner who is reaching out to them during roadshows.

Banking OPEN Winner Fion Ong Hui Ting DBS Bank

The key driver for me to participate in FPAS Financial Planner Awards is to earn a recognition in the banking industry and be motivated to do even better than before. To be an outstanding financial adviser, I believe one needs to show care and concern, build strong relationships with customers and help them achieve their financial goals! I hope the award can encourage more financial advisers to work towards developing and maintaining ethical standards and providing high quality financial advice.

Financial Advisory - Open Top 10 Finalists* WINNER Roy Walker Simon Nexus Financial Services Benjamin Tan, CFP® Manulife Financial Advisers

Joanne Lai Jiahui, CFP® IPP Financial Advisers

Calvin Bok, CFP® Financial Alliance

Joseph Kennedy, CFP® Finexis Advisory

Ernest Tan Hwee Huat IPP Financial Advisers

Koh Poo Kwee, CFP® AIA Financial Advisers

Jacky Ong Ze Qi, CFP® Finexis Advisory

Shawn Yap Khoon Juay, CFP® IPP Financial Advisers

Jerry Yeo Jin Chong, CFP® Professional Investment Advisory Services

Varghese Abraham Roy, CFP® iFAST Financial

Financial Advisory - Rising Star Top 3 Finalists WINNER Colin Lai Wai Lin Elpis Financial Julian Paul Bannigan Nexus Financial Services Khoo Yong Guan AIA Financial Advisers *Additional awards presented in view of the outstanding submissions received within this category.

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Banking RISING STAR Winner

Kaylyn Heng Wen Ling DBS Bank

Insurance – Open

Insurance - Rising Star Top 3 Finalists

WINNER James Yang Jiahao, CFP® Great Eastern Life

WINNER Goh Ming Shan Tokio Marine Life Insurance

RUNNER-UP

Chen Mo Cheng Prudential Assurance Company



Michelle Teo Bee Lian Tokio Marine Life Insurance

Mabel Tan Hui Shan Great Eastern Life

Banking - Open Top 10 Finalists*

Banking - Rising Star Top 5 Finalists*

WINNER Fion Ong Hui Ting DBS Bank

WINNER Kaylyn Heng Wen Ling DBS Bank

Benjamin Tan HSBC Bank

Alicia Dee Chiew Yong DBS Bank

Chua Sin Ying Naomi HSBC Bank

Kimi Yamada HSBC Bank

Ivy Liu HSBC Bank

Pamela Lau HSBC Bank

Joanne Ong Pee Wei DBS Bank

Shervin Chew Yang Xuan DBS Bank

Kenneth Kwan Zijian HSBC Bank

Yvonne Ng Yalin DBS Bank

Lim Hwee Seah United Overseas Bank Lim Yow Renn DBS Bank

Company Awards

Marcus Song HSBC Bank Marcus Tan HSBC Bank Rachel Yeo HSBC Bank

HSBC Bank

Banking

Shyane Chong HSBC Bank

Great Eastern Life

Insurance

IPP Financial Advisers

Financial Advisory

Financial Planner Awards 2018 Proudly sponsored by

Fintech Sponsor

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