Money Matters is a short series of articles written by Ho Khin Wai, a Diploma in Banking and Financial Services student, in an effort to raise the level of financial literacy among NYP students. He will cover various relevant topics on personal finance for teenagers in Singapore, and strives to make these articles fun and easy to understand.
Your Assets. Your Income. Your Expenses. Your Money. There should be no one other than YOURSELF who should understand your financial needs best. If you think that there is no need to worry about how you are going to manage your money in the future, think again, because someone else might do the management (or MIS-management) for you.
Remember the Lehman Brothers collapse in 2008 whereby almost 10,000 people in Singapore were were affected? YOU take charge of YOUR OWN financial future.
Today’s article will explain the roles of financial advisers and consultants. What I would like you to take away from reading this article is to think critically (and think again) before taking any financial advice.
For the non-financial savvy readers, financial advisers are people who you usually turn to for recommendations on specific products (such as choosing the best insurance policy for your needs) or general advice on what you should do with your finances. A financial adviser should, and must, offer good and appropriate advice to clients to meet their goals.
Beware of financial advisors who may just be SALESPEOPLE.
In an increasingly competitive banking and financial industry in Singapore, banks and finance companies set high sales targets for their staff. This pressure may lead to financial advisers and consultants having to recommend pricier products to you, in an effort to meet their quotas. Their tactful marketing strategies will convince you that “this” product is useful, and so, many people happily put their money into it.
Now, it all boils down to YOU. You need to ensure that your financial adviser is one who is truly concerned about you, your financial needs and your interests at heart.They should ensure that the products they recommend best suit YOUR needs.
How do you ensure that your financial adviser is managing your money well? Here are 3 steps to help you to have peace of mind.
1.Have a solid financial planKnow what you want before you get advice. Many people come to advisers with nothing but some cash, not knowing what they want and allowing the advisers to plan their financial route for them. What is worse, they believe there is no need to worry about their future as the plan was thought out by an adviser. Your adviser is not you.
Even if you only have the slightest idea, say, you want to be able to fund your children’s education if you happen to not have a job in the next 30 years; it is still a plan. With a plan in mind, you will be able to think through whatever advice is given and see if it helps you to achieve your goal.
2.Know your adviser well
Here are 3 things to know about your adviser: their commission structure, character and style.
Commission structure – ask if they have a sales quota to meet, or what percentage they are making on every advice you take.
Character – Observe your adviser. If he to be trusted? Does he use big, cheery words and is ever-so-positive and enthusiastic about every product? Or does he point out certain risks and is more down-to-earth?
Last but not least, Style – Does he manage so many accounts that he tends to give less attention to your needs? Are the products recommended always those having a risky nature, or does the adviser include products with a “safer” nature?Does your adviser take into account your risk appetite and state of finances before recommending a product?
3.Be knowledgeable about money
In fact, before you sign on the dotted line, take some time off (maybe a day or two) to consider the products.
I am not saying that all financial advisers are bad. What I do recommend is, if you need help properly managing your money, you may want to consider looking for a trustworthy financial adviser. And before you do so, it is important to build up your own financial literacy first.
Photo Credits: Jim Linwood, Victor1558, www.geograph.org.uk, www.lacrosselibrary.org