Category: Behavioural Finance

3 Non-Financial Matters of Retirement Planning That You Must Not Ignore

From advertisement run by insurance company, investment company to banks, and even the likes of private pension and pension fund, the idea of retirement planning is central on the need to plan early so that we can have adequate savings that sustain our golden years.

That being said, most (if not all) messages revolving around the concept of retirement is more often than not about “whether you prepared enough money for your retirement”.

Imagine people who have been working diligently and save very hard to prepare for this eventual phase of life called retirement for the past three decades. When they finally retire from their full-time work, does this now mean they will have a very good retirement?

I believe that a good retirement is determined not by what product we use to prepare for it, but how we invest our retirement money. In fact, there are three non-financial sides that we should not ignore.

Time

“What we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.”

One of the biggest differences between before and after retirement is not just about our main income will come to a stop, but rather, we will now have all the time available to ourselves.

So, what we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.

There is a saying that sound like this, “Growing old with lots of money is no longer the goal. Dying rich cannot compete with living rich, and making a living does not measure up to making a life.”

This implies that while we may be rich financially, if we are not rich in life, then those money may not carry any significant meaning beyond fulfilling our basic need.

There are 24 hours a day and this means we will have 168 hours every week now. Before we stop working completely, assuming we spend eight hours a day for our work, and we work 22 days a month, we will now have an additional 160 hours available to us!

So, how are you planning to use this new found 160 hours of your life? Having an idea for this is crucial because how we use our time will determine how our money will be used.

Of course, we will have some ideas about what we want to do when we no longer have to wake up to clock in for work. Maybe we can go shopping, hi-tea with friends, travel and do some of our hobbies. This is such a good thing and it will surely be liberating for us to indulge in these activities. However, do we see ourselves constantly doing this to fill up the 160 additional hours for years or decades? Could we come to a point that these activities that look attractive to us now may then become boring in future (after enough repetition)?

Meaning

“When we do not find life interesting, we may start to lose a sense of what is worth living for.”

Another key factor for people not retiring well is boredom. When we do not find life interesting, we may start to lose a sense of what is worth living for. It may also lead to us seeking new excitement with the retirement funds we have and in certain extreme situations, the person may even squander away their retirement savings.

On the other hand, people who have retired well and happy in their golden years usually have a few things in common. One such trait is living their life with a purpose. This can include volunteering at certain organisations with a cause they believe in. It may also be work that allows them to use their talents or experience to help the younger generations, such as a mentoring program.

Money is not the main motivator for getting involved in such projects or activities, but rather living a life that is ‘rich’ in meaning and purpose. If we look around, there are many people that can already afford to retire, but yet they are still actively pursuing a certain cause.

Speaking with them to understand their mentality may also help in seeing a different perspective.

Health

“No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.”

Think about your retirement as having three phases. In early retirement, you hopefully have the time, resources, and fitness to lead an active life. In the middle of retirement, your level of activity will probably start to slow down. And in the third phase, most retirees begin to settle into their homes and prioritise their wellbeing.

It is in the third phase that health care costs can increase dramatically depending on your needs and your personal support network. This is also potentially one blind spot that most people have not come to realise.

Some retirees who anticipate assisted living or in-home nursing purchase medical insurance with very high coverage. But these products only can do so much, i.e. it only pays for our hospitalisation bills and some post-hospitalisation. Other things that require money but not a hospital stay are not covered (yet). Hence, there is still a need to plan for additional funds that cater to these situations and having a back-up fund that we can dip into is crucial.

A more sensible way is to plan and accumulate our retirement savings, while also planning how to keep ourselves healthy and fit so that we enter our retirement with reasonable health.

Sadly, too many seniors put off making these difficult decisions until they are dealing with a major health or financial crisis. Planning ahead puts folks in a much better position to choose how and where they are cared for on their own terms.

No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.

Retirement Planning Is Never Just About Numbers

Back to those advertisement messages we are bombarded daily, those are messages about how financial products can help us prepare for retirement. But it is not preparing for a full retirement as money is just part of the picture.

In order to plan holistically for a retirement that really has meaning, you will have to engage in deeper conversation that helps you in understanding yourself better, discovering your personal values, identifying how you envision your retirement life to be, and how are you going to fill up your 168 hours a week, before looking at the numbers.

Real retirement planning should be a process that integrate numbers, and your life. Because eventually, it is the person (you) that gives meaning to the number, not the other way around.

About the Author

Kevin is a NextGen Money Mentor and founder of NextGen Independent Advisors. He works with people to transform their relationship with money and be brave in their pursuit to live a meaningful life with their money. He is a CFP professional, a certified member of Financial Planning Association Malaysia (FPAM). Kevin can be contacted at www.kevinneoh.my.

June 29, 2022
Meeting With Your Financial Planner For The First Time?
Congratulations! You have decided to take control of your financial life. You have researched your options, asked a lot of questions, and found the right licensed financial planner professional to help you plan for your financial future.

As you prepare for your first meeting as a client, it is likely you have even more questions, and if so, you are not alone. Many clients of financial planners are not sure what to expect, how much to divulge, or even what documents to bring to their first official meeting.

While every financial planner and firm are different, most follow a common general framework based on the six-step financial planning process. The first step often involves something called a ‘discovery’ meeting, in which the financial planner and the client form a basis for their relationship.

It is an opportunity to build trust, understand problems and priorities, and establish a roadmap for progress toward the client’s financial and life goals.

Licensed financial planners, CFP professionals, and their firms often have an established process that includes providing a checklist of required documents and information they need to get an accurate picture of a client’s financial situation. While it may seem a bit overwhelming to share your most important financial details with someone you do not know well, it is really no different than consulting with a physician about your health.

When you engage a CFP professional, you are working with someone who has pledged to place your interests first.

The Big Picture

When financial planners conduct a discovery meeting, many will ask questions not only about their clients’ financial situation, but also about their personal interests, family and lifestyle. Often, a person’s interests, family or lifestyle can influence their financial goals and decision-making, so having a good understanding of the client’s background may help the CFP professional understand their willingness to take on risk, or the triggers that will make them excited or spark their concern.

The goal is to help clients create a plan that will serve them well in good times or bad, so they always feel confident about reaching their goals.

Thorough financial planners have a process to securely gather their clients’ information, analyse it, and synthesise their findings into a set of recommendations. After receiving and discussing the recommendations from the financial planner, the client and financial planner plan how to implement these, and the role each will play in carrying out the plan.

The more honest and direct clients are at the beginning of the relationship, the better the financial planner can help them create a sound, actionable plan to help them reach their goals. Although some clients might be hesitant to discuss embarrassing financial mistakes they have made in the past, it is important for them to share those so the CFP professional can address any consequences of those decisions.

Prepare For Your First Meeting

Before attending your discovery meeting with a CFP professional, take an hour or two to prepare yourself with answers to these potential questions:

Identify Your Goals
- What do you want your money to do for you? (Would you like a comfortable retirement, or a college education for yourself or your children? Would you like to start a business or buy a home? Contribute significantly to a favorite cause?)
- What are your professional goals?
- What goals do you have for your loved ones?
- What legacy would you ultimately like to leave for your family and the world?
Understand Your Attitude Toward Money
- Do you consider yourself to be a spender or a saver?
- What drives your decision to spend or save money?
- What scares you about money? What makes you excited?
Process
- How much would you like to be involved in managing your finances?
- How comfortable are you in using technology to access online statements, performance reports, tax returns or other documents?
- What do you expect from your relationship with your financial planner?
Get Organised

Your financial planner may also ask you to bring certain documents to your first meeting. Those could include:
- Bank statements from the past year
- Other financial statements, such as loan documents
- Insurance policies
- Tax returns
- Pension or retirement savings account information
- Estate planning documents, such as a will or a trust
- Brokerage statements
Some firms provide a checklist with secure links to enable clients to upload their information prior to the meeting, but you may also bring the actual documents with you, depending on your comfort level. Whichever option you choose, be sure to label your documents and clarify any information that could be confusing.

A Relationship For Life

Although it may seem like a significant time investment or an emotionally taxing experience, being well- prepared for your first meeting sets the tone for a successful, trusting, long-term relationship with your financial planner. The more your financial planner knows about your history, your family, your interests and your financial situation, the better he or she can help you achieve the financial well-being you and your loved ones deserve.

This article is courtesy of Financial Planning Standards Board Ltd (FPSB).
June 28, 2022
How Does The Greater Fool Theory Apply To Crypto Investing?

You may have heard of crypto investors being labelled as ‘fools’. Business figures such as Jim Cramer, host of CNBC, and Bill Gates, founder of Microsoft have made such comments. Asian regulators such as Felipe Medalla, incoming governor of the Philippine Central Bank, and Raghuram Rajan, former governor of the Reserve Bank of India, have warned the public about crypto investing.

What And Who Is The Greater Fool?

According to the Greater Fool Theory, investors buy a digital asset not because they believe that it is worth the price, but rather they believe that they are able to sell it later to someone else at a higher price. The original investor is a ‘fool’ and hopes he or she can sell it to a ‘greater fool’ out there. The theory is about investor psychology and not a name-calling insult.

Let’s say you are thinking about buying an NFT (Non-Fungible Token) of a cute animal that costs 1 ETH. You know it’s just a cartoon image on a JPEG file. It doesn’t cost much to produce. You don’t even own the copyright to it and the NFT creator can reproduce other copies for sale.

But you want to buy it anyway because you are confident of selling it (or ‘flipping’ as they say) for 2 ETH. You are influenced by Youtubers and TikTokers who claim to have made a lot of money doing so.

What should you do then? Always, always ask this question – Is there a ‘greater fool’ than you out there who will eagerly pay a higher price than you did for the NFT? If none of your immediate circle of families and friends are willing to do so, then you are the ‘only fool’ you know!

First, you need to be sure there exists a ‘greater fool’ that will buy the NFT from you – before you buy it yourself. If you are not convinced that there is a ready market out there, then you shouldn’t buy it at all.

To further illustrate this theory, here is a real-life case study close to home. Last year, a Malaysian-based businessman Sina Estavi made headlines around the world after buying an NFT of a tweet for US$2.9 million. In April this year, he put it up for sale via an auction and started the bid at US$48 million. However, as Bloomberg reported, the auction for the NFT closed with only seven offers ranging from US$6 to US$280!

You read that correctly, this is close to the cost price – but minus four big zeroes! It is almost a complete write-off. There were just no ‘greater fools’ in the market for this deal.

Are All Crypto Investors Fools?

The Greater Fool Theory has been used to criticise the investment thesis of bitcoin back in its early days, when it was in the sub-US$10K levels. Since then, crypto has become a lot more mainstream. Wall Street is accumulating bitcoins, and even some governments and pension funds are doing the same. Are they all ‘fools’ writ large?

The critique had gone quiet for some time but recently surfaced again due to the NFT mania and ‘degen’ culture. The word ‘degen’ is a shorthand for ‘degenerate’ and refers to crypto investors who go after risky digital assets like NFTs without doing their own research. Crypto ‘degens’ have become the new punching bag in this current bear market with the Greater Fool Theory as its punchline.

For some, the theory is an investment strategy to profit from ‘fools’ – specifically when there is a high degree of price uncertainty and herd mentality in the market. This works for certain assets like art and real estate where there is no objective price reference. The founder of modern macroeconomics, John Maynard Keynes explained this with an example of a beauty pageant, where judges are rewarded for selecting the contestant whom all judges think is the most beautiful, instead of the one they personally find the most attractive.

One can observe similar behaviour in the NFT market. Investors don’t value an NFT based on what they think it’s fundamentally worth, but what everyone else thinks the value of the NFT is. Some investors know how to use this to their advantage, though many fail as well, no doubt. It ends up being a zero-sum game, you either fool others or be fooled yourself.

Disclaimer: Contents above shall not be considered financial advice.

About the Author

Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. He is also the resident consultant for GLT Law, a multi-award-winning legal practice with specialisation in digital assets.

June 28, 2022
Malaysians And Inflation: Are We Going To Feel The Pinch, Pinch-ier?

In April 2022, our national inflation rose to 2.3%, which exceeded the average inflation of 1.9% in Malaysia from the period April 2011 to April 2022. And just recently, it was reported that inflation rose to 2.8% in May against consensus of 2.7%. A vast development indeed. In addition, US Federal Reserve’s (Fed) move to raise the interest rate hike by 75 bps on 15 June 2022 had alarmed all quarters over the world on what could possibly be coming next – big inflation. However, what does all these means? Especially to the people out there?

Generally, if most people do not understand what the numbers above mean, they do know one thing – they are feeling the pinch from the price hike of basic necessities, which has begun trickling the wallets of every household. From there, they knew and sensed that the inflation period is here. Not very surprising but not pleasant either, inflation is to stay persistent this time around.

In concurrence with the recent development, Mr Jason Wong, Research Manager of FSMOne Malaysia commented: “On one hand, inflation is reducing the purchasing power of consumers. On the other hand, rising interest rates means that consumers are “forced” to absorb these rising borrowing costs. These are double whammies for consumers which would lead to dwindling disposable income while wages and salaries are hardly changed.”

“Nevertheless, Bank Negara Malaysia’s move through its raise of Overnight Policy Rate (OPR) in May 2022 by 25 bps to 2.00% is commendable as the central bank is being proactive to stave off rising inflation in the country. At the same time, we believe this move will cushion some of the negative impact on the Malaysian Ringgit caused by the Fed’s recent aggressive interest rate hikes.”

“The Research Team at FSMOne foresees that the central bank will make another 3 more 25 bps hikes to the interest rate during the remaining Monetary Policy Committee Meetings (MPCs) that are set to take place this year. We believe the central bank does not wish to make the mistake like Fed did, by hiking rates too slowly and letting inflation to spiral out of control. Hence, BNM stays abreast on this matter,” said Mr Jason Wong.

Translating this to the current daily living of majority of people, Jason further elaborated that the current economic situation has led to Hobson’s choice moves by the Government. “Government has started the removal of subsidies moderately. As the pandemic came along with the Ukraine-Russia war recently, where supply chains were disrupted and shortages increased, many household commodities prices have been soaring up. China’s lockdown at certain provinces also affected major productions of industrial parts that they supply to Malaysia and other countries. Domino effect took place and subsequently, our local production is delayed resulted from this and affected end users as well.”

“All factors combined and ramped up, these contributed to the increasing inflation in the country. Malaysian Government is now challenged to cope with the increasing cost of many commodities,” added Mr Jason Wong.

By 1 July, the prices of eggs and chicken are expected to increase from the current price, RM8.90 per kg. The Prime Minister recently announced that the new ceiling price for chicken will be announced by Agriculture and Food Industries Ministry (MAFI) soon. The price ceiling for bottled cooking oil weighing 2kg, 3kg and 5kg will also be removed on 1 July.

Based on these factors, it is foreseen that Malaysians will be facing greater food security issues as food items, even eating out, will be more expensive. In addition, food supplies could be tighter than before which may lead to limited quantity to be sold to consumers.

Besides food security, majority of Malaysians are challenged with job security in terms of disposable income, as basic items are getting more expensive and possibly overall wholesale, retail and trade sales would drop as an effect to this. Malaysians may have no other choice but to start cutting off expenses and tighten their budget to match with their monthly income.

Not to mention commodities and energy prices are also increasing higher than ever. RON97’s price is now lifted to RM4.84 per litre from RM3.94, which was last recorded on 11 May 2022. Although the price of RON95 has not changed from RM2.05 per litre, but it is foreseen that the price of RON95 may follow suit RON97 at certain point of time. It is just a matter of sooner or later. However, the water and electricity tariff maintain in Peninsular Malaysia.

What does this mean to all Malaysians? Are we expecting recession in the near future?

We are living in the bubble of protection from the Government today, with the lifting of fuel subsidies, like a balloon, as the air pressure increases internally, it’s only a matter of time, the rubber material gives way and pops.

About FSMOne Malaysia and iFAST Capital Sdn. Bhd.

FSMOne Malaysia (previously known as Fundsupermart.com Malaysia) is a Multi-Asset Investment Platform under iFAST Capital Sdn. Bhd. (“iFAST Capital”), established in Malaysia since 2008.

iFAST Capital is a holder of a Capital Markets Services Licence (CMSL) and is licensed by the Securities Commission to deal in securities (includes Stocks & ETFs, unit trusts and OTC bonds), dealing in private retirement scheme, offer investment advisory services, financial planning services and fund management services in relation to portfolio management.

iFAST Capital is a Federation of Investment Managers Malaysia (FiMM) registered Institutional Unit Trust Adviser (IUTA) and Institutional Private Retirement Scheme Adviser (IPRA). It is also an approved Financial Adviser licensed by the Central Bank of Malaysia to conduct financial advisory business and also a Participating Organisation of Bursa Malaysia Securities Berhad.

iFAST Capital is a subsidiary of iFAST Malaysia Sdn. Bhd. which is wholly owned by iFAST Corporation Ltd. (“iFAST Corporation”). iFAST Corporation is headquartered in Singapore and the iFAST group of companies are also present in Hong Kong, Malaysia and China. The company was incorporated in Singapore on 10 January 2000.

iFAST Corporation was listed on the Singapore Exchange Mainboard in December 2014.

June 28, 2022
7 Rights As A Financial Planning Client That You Should Know

Working with a financial planner can be an extremely rewarding and valuable experience for you and your family. If you’ve decided to work with a financial planner, it’s important to understand your rights in the professional relationship. By knowing your rights and what to expect from a financial planner, you can take an active role in shaping your financial future.

1. You have the right to a planner who has integrity

Trust between you and your financial planner is central to a successful financial planning relationship. You rely on your planner’s honesty, professionalism and abilities to achieve your financial and life goals.

When you know that your financial planner takes his or her professional obligations seriously, placing principles over personal gain, you can develop the type of partnership that is crucial to the success of any professional relationship.

2. You have the right to objective advice

Your needs should be at the heart of all recommendations made by your financial planner. Your financial planner should use his or her experience and judgment to carefully consider your situation, and provide you with advice that best meets your goals.

Sometimes, this objectivity may require your financial planner to explain that your goals are unrealistic given your current resources and financial commitments. He or she may then suggest alternative goals or priorities.

3. You have the right to be treated fairly

Your financial planner should treat you the same way he or she would like to be treated in a professional relationship. This involves clearly stating what services will be provided and at what price. Your financial planner should also explain the risks associated with his or her financial recommendations and any potential conflicts of interest.

For example, does her or she gain personally or financially from your purchase of a particular product, or from the outcome of a suggested strategy?

4. You have the right to a planner who is professional

Your financial planner should not provide investment advice or stock brokerage or insurance services unless he or she is properly qualified and licensed to do so. If your situation requires expertise that your financial planner does not have, he or she
should suggest other professionals who may assist you.

5. You have the right to a planner who is competent

You have the right to expect your financial planner to demonstrate an appropriate level of knowledge to offer financial planning advice, such as the attainment of CERTIFIED FINANCIAL PLANNER certification, the standard of excellence in financial planning.
Your financial planner should complete continuing education courses as part of his or her ongoing commitment to competency.

6. You have the right to privacy

To get the best results from your financial planning relationship, you need to divulge relevant personal and financial information to your financial planner on a regular basis. Your financial planner should keep this information in confidence, only sharing it with others to conduct business on your behalf, at your consent, or when required to do so by court order.

7. You have the right to a planner who is diligent

Your financial planner should discuss your goals and objectives with you and explain what you can expect from the relationship before engaging you as a client. Once the financial planner has determined that he or she (or his or her staff and/or network of related professionals) can assist you and has gathered sufficient information, the financial planner should make – and, if appropriate, implement – recommendations that are suitable for you.

A diligent financial planner reasonably investigates the products or services he or she recommends. A diligent financial planner also closely supervises any staff working with you.

This article is courtesy of Financial Planning Standards Board Ltd (FPSB).

June 15, 2022
Will Your Mother be Kicked Out from Your House?
Question:

Hi, my name is Ed. I’m happily married to Pei Pei, my wife and together, we’ve been blessed with two daughters namely, Cindy and Mandy aged 5 and 3. As I write, we reside together with my mother in a bungalow located in Penang.

The property has been a family home since my childhood and its ownership was bequeathed to me by my late father who passed away three years ago. Presently, the bungalow has been fully paid off and is valued at RM2 mil.

If I pass on prematurely, I wish to bequeath this property equally to my wife and two daughters via a will. But, I have the following questions and concerns:

a. Will my mother be allowed to continue to live in the bungalow?

b. What will happen if my wife and two children wish to sell off the bungalow?

c. Is it possible to only bequeath the title deed when my daughters attain the age of 25?

Answer:

Lets say, you have a simple will written for the purpose stated above.

If you pass on, the title deed to your bungalow shall be transferred to your wife and two children by your appointed executor. If Pei Pei is the executor, she then shall hold onto your daughters’ stake in the property until they turn 18, the age when they are legally entitled to inherit and hold onto assets.

This means, if your children are minors, Pei Pei shall have full autonomy to hold onto and manage the bungalow as she sees fit upon your passing.

Your wife has the authority to decide who shall reside in the property, apply for loan facilities by offering the property as a collateral and to dispose of the bungalow to a new prospective buyer based on her agreeable price.

Sadly, this could also mean that Pei Pei:
1. Has the authority to ask your mother to vacate the bungalow.
2. Can sell the bungalow, let’s say at RM3 mil, and pocket the full proceeds into her bank account without needing to share her gains with your mother and… your two children.
3. Can obtain a loan facility from the bank via refinancing for the purpose of setting up a new business. The venture may fail which could cause Pei Pei to lose her ability to repay the mortgage and thus, leading to a possibility that the bungalow could be auctioned off by the bank.
4. Can remarry and enjoy her new life with her husband, your two daughters and maybe, her children with her new husband in the bungalow bequeathed to her. Your bungalow or a portion of it could be bequeathed to the new husband and their children via Pei Pei’s written will. OMG!
But My Wife Is Not That Bad…

Of course, your wife is of noble and virtuous character. How could it be possible for your wife to do any of the above mentioned?

I understand. Here, the purpose is to highlight the various possibilities open to your wife legally after having received the title deed to the property if you pass on prematurely and especially if your daughters are still minors.

Thus, bequeathing the bungalow to your wife and two daughters does not offer an ironclad guarantee of your mother’s livelihood upon your passing. This could potentially lead to conflict, strife and bitterness to your loved ones namely your mother, wife, and two children.

So, What Can Ed Do About It?

The answer is simple. Ed could include a testamentary trust in his written will in order to have a say in how the bungalow is to be managed upon his passing.

A testamentary trust is a trust that kicks in effectively only upon Ed’s passing for the trust is embedded within Ed’s written will. Here is how it works:
1. Ed could set up a testamentary trust where he would engage a licensed trustee firm to be his trustee and name Pei Pei, Cindy and Mandy as his beneficiaries of the testamentary trust.
2. Ed could decide when is best for Cindy and Mandy to inherit their stake in the bungalow. Here, let’s say, Ed wishes for his two daughters to only receive their stake when Mandy, his younger daughter, reaches the age of 25.
3. Ed could name his mother to be the living tenant of the bungalow. This means his mother is entitled to reside in the property for as long as she lives. The property could not be sold to a buyer as its title deed shall be held by the trustee.
4. Upon Ed’s passing, the bungalow’s title deed will first be transferred to the testamentary trust. The trustee shall hold onto it for Pei Pei, Cindy, and Mandy.
5. The property’s title deed shall only be bequeathed to Pei Pei, Cindy and Mandy after fulfillment of two conditions in the Testamentary Trust:
  
  a. Ed’s mother has passed on.
  b. Mandy is 25 years old.
Conclusion

Ed could protect the interest of his mother, wife and two daughters by having a testamentary trust included in his will and appointing a licensed trustee firm to administer his estate upon his passing.

His mother is guaranteed a place to stay and thus, securing her livelihood in her golden years. His wife and children shall be guaranteed of inheriting their stakes in Ed’s bungalow for as long as they live past Ed’s mother. This helps to maintain harmony among Ed’s family members.

About the Author

Jocelline Chee is the founder of WG Legacy, a leading professional estate planning firm. You can download a Strategy Report at wglegacy.com/report to find out how she preserved her family’s financial future via a combination of insurance, will and trust and how you can do the same for your loved ones too.
June 15, 2022
Getting Financially Organised Is Your First Step Towards A Better Financial Future

This is a story about Andy and Amy (not their real names). Andy is an enthusiastic entrepreneur with a reputable position
in his industry. A successful man and earning a good income, however, his expenses were high as well.

After marrying Amy, he became stressed with his finances, which worsened with the birth of their first child. The pressure of the monthly deficit of approximately RM2,000 and worrying about the future expenses triggered the couple to engage our services. I was then able to we help them through with our holistic financial planning service.

Andy and Amy have different attitudes towards managing their personal finances. Andy is a very positive person who anticipates that good things will happen in life as long as he strives for it. “Tell me what I need to do and I’ll make it happen!” is his
favourite motto.

He applied this attitude to his finances, which often resulted in him committing to things he cannot afford today, but with the conviction that he will be able to grow his income and pay for it in the future.

Amy is almost the polar opposite when it comes to money. She’s cautious and prefers to plan ahead and be prepared for the worst situation. Indeed, the desire for a more secure future was amplified after having a child. A clear visual reality of their current
family’s financial situation was provided to them through our holistic financial planning process.

The hard facts and numbers seemed ruthless but it showed them the gap between their goals (purchasing a bigger home, tertiary education funding, retirement security, etc.) and their available resources.

In addition to the risk of not being able to achieve their desired goals, as a single income family with a child, there were other potential risks that needed to be addressed, such as Andy’s insufficient insurance coverage for the family’s income needs (should something untoward happen to him) and the lack of estate planning tools in place to safeguard his family.

We helped Andy and Amy tidy up their cashflow, focusing on their expenses as there were many loopholes and excesses that could be avoided or minimised with good budgeting. For example, we noticed the huge amount spent on dining out and impulse purchases. During the financial planning process, there were some unavoidable differences of opinions between the couple, but fortunately we were able to help them manage their expectations and bring them to work together towards their common goals.

The role of a financial planner is unique. We not only provide clients with relevant and timely financial advice, but we also take on the responsibility of educating them to cultivate good financial habits. In this case, tracking their monthly family budget and inculcating a habit of saving before spending were their immediate priorities.

Trust me when I say that financial planning is a long journey. We help clients understand their current financial situation and plan for their fi nancial future. But as circumstances change over the years, we also need to accompany them as they make major
financial decisions in their life, and keep them updated on the latest happenings along the way.

Although Andy and Amy are still striving to be more financially stable after their first year of engagement with our service, their progress have been remarkable as their finances are now more organised. They were able to address their immediate gaps and
started adopting good fi nancial habits.

These new habits will help them form a strong and healthy foundation as they work towards their goal of achieving financial freedom.

About the Author

Ocean Pon is a Licensed Financial Planner with Finwealth Management Sdn Bhd.

We at Smart Investor and Finwealth is committed to help you better manage your financials. Get a free consultation from an expert by filling in your details here: https://www.smartinvestor.com.my/SIxFinwealth

June 13, 2022
5 Factors To Consider When Choosing Your Financial Planner
It is very easy to get financial advice nowadays, especially with the boom of the internet and social media. If you visit financial related Facebook groups or forums, everyone is eager to give their opinion on the best ways to manage your money.

However, one downside of these free online advice is bypassing of important safeguards such as ensuring the person seeking advice is subject to a detailed financial health check and understanding their current financial position.

So, choosing your personal financial planner can be one of the most important decisions you can make. Your financial planner is your partner to guide you through many decisions about handling major financial and life decisions.

To find the best financial planner who is right for you, here are five important factors to keep in mind:

1. Make A List Of Financial Planners

Start by creating a list of potential financial planners. Ask your friends or family if they have engaged with any financial planners. Take the time to check if the planners have the required license from Securities Commission Malaysia’s database (). Then, call each financial planner to see if he or she is accepting new clients and arrange a meeting with the planner.

2. Research The Financial Planner’s Credentials And Experience

In Malaysia, most financial planners do not start their career as a financial planner. Some are trained lawyers and accountants. Knowing the background of the financial planner allows you to understand whether the financial planner has the resources to help you in your financial decisions. The more experience a planner has, the better your results are likely to be.

If you need a specific form of planning, such as the involvement of business or family offices, ask the financial planner if he or she has any experience handling the matter.

3. Evaluate The Financial Planner’s Communication Style

Choose a financial planner with whom you are comfortable talking to. Do you feel that the financial planner understands your situation? Find a planner who shows an interest in getting to know you and will respect your decision-making process.

Also think of the convenience of meeting your financial planner. In the beginning of the financial planning process, you may need to meet your financial planner several times in a month. Can you reach your planner online, especially during the COVID-19 pandemic?

4. Evaluate The Financial Planner’s Company/Team

Take the time to research the company and team behind the financial planner. Is the financial planner working alone? What are the credentials of the team behind the financial planner?

As finance is a very broad topic, a good financial planner usually specialises in a particular field and works with another financial planner or other professionals (such as lawyers and accountants) to handle other parts of the planning and solution implementation. Think of it like the case of a hospital, where a patient may get treatment from different specialists.

5. Understand How The Financial Planner Is Getting Paid

There are 3 main types of fee-structure when it comes to financial planners:
- Commission only;
- Fee-based; and
- Fee-only.
In Malaysia, we usually see commission only and fee-based planners. Fee-only financial planners are extremely rare.

A financial planner that receives commissions only works great with someone that wants a product that they already have some idea in mind. The relationship is usually transactional in nature and heavily focused on advice with a product-based solution.

A fee-based financial planner earns a fee for developing a financial plan for you, while also earning a commission if you require him or her to service your insurance policies or investment portfolios.

Make sure that your financial planner is transparent on the fee for their services.

Summary

Just like when making any major purchases, it is important to do your homework when it comes to choosing your financial adviser. Not every financial planner has the same level of training or offer the same range of services. It is important to talk to several financial planners and choose someone that meets all the above-mentioned criteria.

Finally, it is important to understand that financial planning takes a long process. Find a financial planner that you feel comfortable talking to and feel he or she is helping you work through your problems.

About the Author

Marshall Wong is a financial planner holding licenses from the Securities Commission Malaysia and Bank Negara Malaysia. He can be contacted via email at Marshall@plannerd.io
June 10, 2022
Don’t Worry, It’s Okay To Spend!

In order to become financially independent, the need to track your net worth is a crucial step. And for our net worth to grow, we need to have good cash flow management where part of our income is retained and converted into financial assets. Can we spend or can we not?

However, when I say good cash flow management, this does not mean you have to track what you spend every day. Usually, people associate this with not spending money or cutting back on their lifestyle, which is inaccurate.

Rather than doing that, I believe that we should not suppress our urge to live our life the way we want it. We work so hard every day, so why shouldn’t we live the lifestyle that we would like to have?

Why it’s OK to spend?

I’m not here to tell you not spend money, and I’m not here to tell you that you should save x% of your income either. With our lives surrounded by advertisements that promote consumerism, it’s not easy to resist the temptation to spend. Instead, I’m here to tell you that it’s okay to spend money.

Generally, there are three types of spenders – which category do you belong to?

Type 1: Spend More Than You Earn

Despite enjoying and living on our own terms to the max as a Type 1 spender, it comes with consequences. Since the additional spending is funded by money that is not ours, there will be time when you will need to pay it back, and it will not be fun when that time comes.

Immediate gratification is common for Type 1 spenders, as their wants and needs get fulfilled. Over time, however, this may become a habit and if you are trying to adjust or change this habit later, it may already be too difficult, and the process may not be easy.

Type 2: Spend What You Earn

Those in this category are usually smart enough to avoid the painful journey of paying back what they owe the bank, and so they spend within their means. If they bring home RM1, they spend RM1. This seems slightly more attractive than the first type, as this is living in the present without having to worry about payback.

However, this has its downsides too.

The downside comes from you having to continuously earn an income to pay for the food and services you need. It means that you cannot stop working. The day you stop working is the day you stop earning an income, and you’ll then no longer be able to pay for what you need.

That said, this category isn’t entirely ideal either. On the flipside, if you are a salaried employee, you are automatically made to save at least 11% of your gross salary in anticipation of your golden age.

Interested to invest for your old days. Worth a read, Selecting The Right Investment Funds For Your Retirement Portfolio.

However, this can only be enjoyed after your retirement. What about the other life priorities and goals that you would like to pursue between now and when you retire? If we spend all that we take home now, we will never have the ability to pursue these life goals.

Type 3: Spend Not More Than 90% Of What You Earn

This type of spender acknowledges the irony of the need to spend and to save, and makes it a point to set aside part of their take-home income to prepare for their future.

While living in the present, they also prepare for the future. This group of spenders understand that it is better to prepare than to repair. With the goal of spending not more than 90% of the take-home income, they practice what is referred to as ‘pay-yourself-first’.

You can decide how to spend as you like, so long you keep the maximum available for spending at 90%. If you can lower that spending amount, you will have more control over your quest towards financial independence.

By doing so, you have choices for your future. You are not just saving money; you are giving yourself more flexibility and options.

Honest Self Review

So, which type of spender are you now? If it’s up to you, which type of spender would you want to be? If you are not there yet, what is stopping you from getting there?

Usually, people who have insufficient monies to spend every month would say that they have to spend all their monies because they are not making enough. For these people, their mantra is ‘I will start saving when my income increases”.

Do you have these same thoughts too? My advice to you is to not wait – we can start making an effort to not spend all your take-home income today.

Don’t forget your emergency funds!

Read here : 3 Tips to Building Your Emergency Fund in Malaysia

However, despite its benefits and advantages, just being a Type 3 spender is not going to promise you financial independence. Without managing the monies that you save in an efficient manner that supports your personal values, chances are you are not making full use of your financial muscles.

If you are unsure about your current spending behaviors and how to manage your personal finance, let’s chat.

Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my.

May 31, 2022
Uplifting Women’s Role In Family Finances

C: Women have inherent qualities that enable them to plan their own and their family’s finances

In my financial planning practice, I have observed that female clients, whether they be single career women or married with children, tend to face similar dilemmas and challenges when it comes to planning their personal finances.

But why is that happening to them? They should and they must have their roles in family finances.

Lack Of Time Due To Multiple Roles

There is no denying that the modern-day woman is highly adept at multi-tasking – from her job, her family, her children’s education to other social obligations and so forth. The downside of assuming so many roles and responsibilities is that it leaves hardly any time for herself at all.

Any precious moments of “me-time” that ladies can manage to squeeze out of their packed schedule goes towards rest and de-stressing to rejuvenate themselves. Financial planning issues will hardly be on their minds after a long day.

Tendency To Priorities Family Rather Than Themselves

Being selfless and filial are undoubtedly noble characteristics that every parent, husband or sibling would want their daughter, spouse or sister to have. However, when putting the interests of family members ahead of your own, more often than not, your own needs may be neglected.

A Senses Of Apprehension When It Comes To Managing Money

This can be real, imagined or selective. Numbers and calculations can be intimidating to certain individuals regardless of gender or age. Others tend to shy away from money matters because they find it too complicated and confusing, preferring to let their spouse handle it so that they can focus on other responsibilities.

My wife is happy to help our son with his algebra and trigonometry, but she claims to make no sense out of a financial spreadsheet.

Worth A Read : Financial Literacy & Financial Accountability Are Life Changing

Decision Making Guided By Sentiments And Emotion

Female clients sometimes base their decisions on how they “feel” about something. While having a keen financial gut instinct has made many billionaires, it is another thing when the heart overrides the mind in making investment decisions.

Examples would be putting money in investment plans because a friend “strongly recommended” it, or out of sympathy for your banker whom you known for ages and needs to meet his/her sales target.

Choosing To Save Rather Than Invest

Some individuals consciously decide to continue saving in cash, preferring to keep the bulk of their money in fixed deposits despite the dismal returns. They are in fact aware and reasonably well informed of their options but due to their position in the family (for example, being the only daughter or the only unmarried sibling), they feel a sense of duty or responsibility to have funds on hand to assist other family members should they require it urgently.

Read : How to Choose the Right Investment Vehicle for Yourself?

Taking on the status of the family’s “standby banker” no matter how well-meaning, denies some women the opportunity to plan for their own financial future. Instead of viewing these challenges as barriers, turn them into catalysts for your personal financial growth instead. There are many ways to empower oneself to take control and own your financial destiny.

Reprogramming The Mindset And Be Prepared

While you may currently have the luxury of someone else handling the household’s financial matters for you, i.e. your spouse, there may come a time when you need to take over or assist in those duties. If you are already prepared, well and good. If not, take time to increase your own financial literacy so that assuming the role of the home’s financial manager will be a comfortable transition.

Be Heard And Be More Involved

Suppose money matters are not exactly your cup of tea. It may be tempting to leave all the family finances to someone else, especially if things are running smoothly and the party handling it has the necessary expertise and experience and doesn’t seem to mind doing it. However, you may have insights and suggestions for improvements, so share your thoughts rather than keep them to yourself.

Make It A Learning Process

If your financial matters are currently delegated or outsourced to other parties, there is the danger that you may one day find yourself in a situation where this party is unable or unwilling to continue the responsibility. Thus, it is important to get yourself educated on how to handle your own personal finances rather than leaving such a crucial task entirely to someone else.

Leverage On Other People’s Time

If you find yourself already overwhelmed with work and other obligations, learning to put your personal financial matters in order from ground zero may seem like a mammoth task. Under these circumstances, a licensed financial planner would be able to work together with you and assist you through the entire process while ensuring your involvement every step of the way.

Individuals are not born with good personal financial skills, but everyone can learn how to be competent at it. Due to personal and family circumstances, women are often unable to take advantage of the opportunities present to improve their financial knowledge and be as hands-on in their personal financial matters as possible.

Nevertheless, women already have a natural advantage in taking on the role, thanks to two critical attributes that play a huge part in successful financial planning.

Firstly, regardless of age group, education level or social strata, almost all women are inclined toward a long-term mindset in whatever course of action is decided upon. This is usually more evident when it comes to buying a vehicle for example, or renovating a home or planning for the children’s education. Rarely are decisions made by women in the household without thinking two or more steps ahead about the effects and implications, contrasted with men like many of us who are more prone to “act first, think later”.

Secondly, women tend to err on the conservative side of men by questioning downside risks before taking action, which is actually a good thing. While profit and returns are typically top on the list of male investors, having a woman jointly involved in the investment decision would help to temper any hasty actions and mitigate potential financial risks.

As such, these inherent qualities in women make them suitable candidates to plan their own and their family’s finances. With guidance and financial education, they have the potential to surprise even themselves.

A household may have mixed styles of financial management as both men and women are good in personal finances in their own ways, therefore by complementing one another and learning from one another, amazing results can be achieved.

About the Author:

Felix Neoh CFP ^{CERT TM} is the Director of Financial Planning at Finwealth Management Sdn Bhd and is a certified member of FPAM. He can be contacted at enquiry@finwealth.com.my

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May 27, 2022