Sunday, October 01, 2023

Does nobody want to provide financial services to the mass market anymore?

Now that the furore has died down, I'm sharing some thoughts about today's sad state of the finance industry. 

Here is a little background on where I stand: quite early in my ERM course, my students are often stuck with ILPs and endowments they bought some time ago and getting suboptimal returns from them. But I need the license to tell them what to do with these investments. My solution was introducing them to a salaried advisor from Money Owl, the only source of salaried advisors with the license to get them to drop the plans. Otherwise, my students are on their own and need to develop their confidence with dividends investing before they can pull the plug.

I did this introduction for no fee initially, but subsequently, MoneyOwl would send me $20 food vouchers for each introduction I made. This would have been a derisory sum if not for the positive feedback I got from my students about their excellent service. In one case, we even got a student to go through the FIDREC process and won a better deal from financial institutions that missold these products to my student.

( Today, FAs meet my student and actually run away from her. She won a case with FIDREC! Who says my job is all about the money? )

I suspect this is the essence of what went wrong with MoneyOwl. 

Someone always pays in this business. In the case of commissioned salespeople, it is the client. In the case of MoneyOwl, I suspect the advisor has to contend with a fixed monthly salary and the allies who have scant incentives to introduce customers to them. All this while commissioned advisors are getting wined and dined for the ILPs they shove into the masses' throats by hooking up with them on Tinder or using LED balloons to traumatise their kids. No amount of virtue signalling that you are the good guy will beat the almighty dollar paid to introducers and marketers. Case in point, I have had a very profitable arrangement with iFast Global Markets over the past few years.

So, we have the industry in this sad state today. Everybody wants to serve the rich. People need help finding a way to profitably serve the masses. 

  • Even the might of the NTUC Social Enterprise has decided to sound the retreat for Money Owl. I can attest that Money Owl gave excellent service to the masses. Sadly, it was simply not sustainable.
  • Major robo-advisors here are running on VC funding and are yet to be profitable, no matter how cocky they are or the beautiful people they put on ads. It's no fun placing money on them to find them consolidated with a stronger player a few years later.
  • You need about $350,000 to qualify for the fee-based advisor here. They are virtually a monopoly in this space and prefer investors who are "stewards of their wealth" and not those searching for investment alpha. 
  • TD Ameritrade wants to do something other than serve retail customers in favour of Accredited investors. 
  • Even in my line of work, raising the fees of my courses to a four-figure sum has given me more attentive students and a better class of people to serve. 
The sad state of affairs is that for the bulk of the masses, the only people who can serve them now are commissioned salespersons who are legally allowed to call themselves financial advisors, with all the conflicts of interest inherent in this current arrangement.

Do I have a profitable solution for financial advisory for the masses? I don't. But there are smarter people looking at the problem, and I have a reasonable expectation as a member of the public that this an issue that needs to be addressed. 

The government agencies need to reflect on their strategy that believes that some kind of technological innovation will eventually solve the problem of financial inclusion while subjecting the middle class to being cattle for commissioned salespeople to feed on. I have said in an earlier article that with tax loss harvesting, robo-advisors will see the kind of adoption in places like the US.

My ideal outcome should be a total ban on the commissions' regime, favouring a system similar to the UK. But the first step is to apply pressure to restart a review of the commissioned regime in 2013 by MAS. Voters and citizens need to support MAS to give them the backbone to fight back the industry lobby, I believe they will threaten to leave this market and generate a lot of unemployment. But in reality, societies without commissioned advisors do exist! Skills Future will allow unemployed commissioned salespeople to join the healthcare industry.

At a personal level, if we are limited to a fee-based regime in Singapore, I will jump into the fray and get licensed to do the work myself. If I can compete on investment performance and knowledge sharing, I should find a way to survive, maybe even thrive in this new regime.

If I have to go on Tinder to catfish single women or traumatise kids by taking back LED balloons for new clients, I won't stand a chance in this profession.

Anyway, I will miss Money Owl. Fortunately, I already have a great relationship with iFast Global Markets and will find a way to continue working with the excellent MoneyOwl Alumni there. 

I know that commissioned FAs are exulting over their recent victory. 

But they've yet to win the war, and I hope to see their regime crushed one day. 

Tuesday, September 26, 2023

On Istanbul


I touched down in Singapore yesterday morning and just recovered from jet lag. I enjoyed my trip immensely even though I faced some physical difficulties throughout my trip - I had a lingering cough from a flu bug two weeks ago. After I recovered, I overstrained my right kneecap and had difficulties climbing stairs. Nevertheless, we clocked over 10km of distance each day as Istanbul is excellent as a walking tour. I also had exotic food experiences like the kokorec I had above - some kind of kway chap kebab dish which probably will never find its way to Singapore.

While I'm not a seasoned traveller, I witnessed the power of the Revolut card in action, and I enjoyed shifting Turkish lira in real-time to some pals who paid with a credit card for all the meals. Withdrawing cash from ATMs is less fun as some terminals let you do it for free, but some others can charge up to 8% for cash withdrawn.

As I'm not a big shopper, most of my money was spent on museums and eateries, and I only spent about $2,000 SGD during my entire week there, not counting flight and hotel expenses. 

At the back of my head at the beginning of my trip, I wanted to know whether Turkey could be an economic role model for countries like Malaysia as they are quite progressive and moderate. Immediately, I was proven wrong by actual statistics. Malaysia has a GDP per capita of about 10-20% higher than Turkey.

Of course, I assess what life will be like as an expat in Istanbul. A single person will expect to spend about 15k Turkish Lira living here and about 20k Lira renting in the city centre, meaning you can live comfortably close to SGD 1,750 a month. We give some slack for spending and apply the 4% withdrawal rate. An SGD 600,000 portfolio of REITs and blue chips in SGX can generate enough investment income of $2,000 per month to support an expat lifestyle without working there.

You can look at more granular data here.

Of course, this research does not account for the difficulties of getting a pass for a long-term stay. It also needs to account for the vast cultural differences between Istanbul and Singapore. 

Finally, we can't really have a helpful discussion on Istanbul without talking about Turkey's ridiculous inflation levels. Turkish inflation is forecast to reach 58% in 2023. We only managed to catch two small glimpses of this on the ground. 

Firstly, some of the foreign workers in Istanbul are Indonesians and even the Turkish bath I had was performed by Indonesian women. We chatted with a waitress from Bali, and she expressed a desire to get out of Istanbul quickly as the money was not enough. She hopes to move to Serbia soon.

Secondly, we had one of our most unexciting meals in an eatery near our hotel because the meat in the bun was almost laughably non-existent. My guess is that it is probably a result of shrink-inflation. Too bad we did not have a photo of this. 

All in all, I enjoyed myself immensely, and I would recommend you folks visit Istanbul for a holiday.

Thursday, September 14, 2023

Next week : Istanbul


After this round of training, I've decided to take a break and travel with some old friends to Turkiye. I will be flying off to Istanbul on Sunday morning. This is only the first trip in 2023. I will be heading to Osaka with my family in October. 

Just a couple of points for the curious :

  • The disparity between money changers and Revolut is enormous. I converted SGD 500 to 8500 Turkish Lira with a local money changer. When I used Revolut, I got 9843 for the same amount. I guess the trick is to minimise the amount of cash you must carry when travelling. 
  • There's almost zero probability that my group would not get scammed. Some tips I got include picking things that belong to someone other than you on the ground, even if it seems like you are helping somebody else. Taxis can drive halfway and then claim that their meters are broken. Shopkeepers wrap up stuff for you when you are making enquiries on prices. 
  • If the price is not too unreasonable, you should close the deal and move on without much drama. I will focus on buying as little as I reasonably can since I'm not a shopper anyway. 

For this trip, I may have overplanned, reading one travel guide and then giving myself a crash course on the history of Istanbul from the classical Greek era as the town of Byzantion to modern Istanbul. 

I'll catch you guys on this blog when I return!

Saturday, September 09, 2023

Letter to Batch 31 of the Early Retirement Masterclass

Dear Students of Batch 31,

It's been a great honour and privilege to conduct a 5-Day Early Retirement Workshop for you.

First, I would like to apologise to the class for the lack of energy for my delivery.

Batch 31 concludes possibly one of the most challenging classes I ever taught. I started getting muscle aches and a sore throat from Day 1 of the class. I even visited the doctor that morning, but despite every medical precaution, my throat and cough kept progressively worsening. On the last day of training, I was literally on over ten kinds of drugs to mitigate my cold symptoms, my diabetic control and my hyperactive thyroid. 

Despite all this, we could still build a reasonably attractive portfolio that generated about 6.5% yields. And to do this when our equity risk premium is over 6%. This portends well for the portfolio's future – but you need holding power.

It would help if you held onto the portfolio until the time interest rates are seen to stop rising, which can happen soon before the end of this year. After that,  you can experience an upside when favourable circumstances arise. One possible scenario is when China uses the “bazooka” to stimulate their economy. Another is when some hope of peace appears in the Ukraine.

In the meantime, as you build your portfolio, expect some short-term pain as REITs continue underperforming against the STI index. Find solace in dividend payouts and see every downtrend as a bargaining opportunity whenever possible. Our stock selections in this batch do not contain much controversy, and I look forward to investing in your picks as soon as I find the liquidity to do so.

Lastly, I hope Batch 31 will participate actively in the FB group. I look forward to seeing you in the following community seminar slated for Sep/Oct 2023.

Hope to see you then!


Christopher Ng Wai Chung

Tuesday, August 29, 2023

Tan Kin Lian's results are consequential in this Presidential Elections


I am confident that Tharman will win the elections on Friday. 

Still, more importantly, Tan Kin Lian's results will be more consequential thanks to the attempts by significant opposition members to politicise this election. Even after TKL's dismal showing, I'm still receiving some reports that he will have diehard supporters because he sounds more like them than the other two candidates.

If you had only been in the echo chamber of PMETs, TKL is expected to lose its deposit, but if you have been following global trends that led to Trump's election and Brexit, you should refrain from writing off TKL's results so readily.

The book Head Hand Heart by David Goodhart may already influence our 4G leadership. The idea is that modern societies reward the cognitive elite too much, ignoring the needs of the people who rely on manual labour ( hand ) and the caring professions ( heart ). After being sidelined for many decades, folks who are not in the cognitive elite, namely non-degree holders, joined by private degree holders in our case, develop so much pent-up anger that they will vote for any cause that will destroy modern society as we know it. 

This is a problem we have known as RPG players for a while. If we invent a game where wizards are more powerful than fighters and clerics, the game will not be popular because it lacks game balance. Calls will be made to beef up fighters/clerics and nerf the wizards. 

Sadly, the book was able to define the problem but does not delve into possible solutions. If anything, Singapore is already ahead of the curve - SIT does not look like a research university but an attempt to build a lucrative industrial apprenticeship program for polytechnic students. Skillsfuture also enables folks to qualify for new careers within a lifetime. We need to give Lawrence Wong time to rebalance the different work-collars.

We need to relook at the consequences of too much emphasis on the cognitive elite if Tan Kin Lian scores more than 20% after this Friday. I can think of examples where some policies are so complicated that folks with average IQ may need help to grasp them well. 

The elected presidency is one such policy. Last night, we witnessed that even a presidential candidate, a student of RI and an actuarial scientist need to comprehend the limits of a President's power and be reminded by the moderator what the role of a President is all about.

Another policy is CPF Life. To make an informed choice between the Basic, Standard and Escalating plan, a citizen needs to understand the concept of an annuity and forecast his lifespan to minimise regret. Do we need three flavours of CPF Life? If you are an Oxford PPE, you can deal with 27 flavours of CPF Life, but even three flavours may be too much for ordinary citizens. 

Suppose you look specifically at what makes Singapore successful. In that case, the scholarship system that allows the PAP to cherry-pick the best for their own ranks is one factor that keeps government expenses, corruption, and inflation lower than in other OECD countries. 

If I were an opposition supporter, dismantling this scholarship system would be one of the surest ways to level the political field, more consequential than dismantling the GRC system because this is like the supply line that feeds the PAP army. The opposition can manipulate Hands and Hearts to vote for them to make this happen because they have been sidelined for so long. Tell me this: Has anyone ever celebrated when you parachute an army general into the C-Suite of a GLC?

Goodhart's book influenced Lawrence Wong because he has alluded to the head, hand and heart triad before in his speeches, but I'm afraid that Singapore may not have done enough.

A non-degree holder PAP MP has not existed for quite a while. The last was Charles Chong. Discrimination against non-degree holders in politics is current and more egregious than race or gender. If Tan Kin Lian wins big this Friday, we may need to reserve one seat for a non-degree MP in a GRC to ensure their views are heard. 

Imagine a country where none of our Ministers have children studying in our Polytechnics or ITE.

Whenever a policy recommendation is made, it will always be one made for "other people's children".

Anyway, I might be wrong, and TKL loses his deposit on Friday, but I think we should still heed Goodhart's warning and bring balance to the head, hand and heart triad before angry Singaporeans start to vote to merge with Malaysia. 

Like we learn from the West, when you spurn the heartlands, they may stop voting based on their best interests and start voting based on your worst.

There will be no dividends for me to collect after that.

Saturday, August 26, 2023

Financial Lessons from Presidential Candidate Ng Kok Song


My vote for this upcoming presidential election is obvious - I will vote for Tharman. It's essential to send out a message that in a multi-racial society, an ethnic Chinese citizen can vote for an Indian leader regardless of what the ruling party says about Singapore not being ready for a minority PM. I'm also a realist who believes that India's economy will be very dynamic compared to that of China, which has been mismanaged by an autocratic Communist Party, and having a symbol that is ethnically Indian is for the greater good of Singapore as we build further commercial inroads into India. ( A Suzhou Industrial Park in India? )

But while my head is with Tharman, my heart goes to Ng Kok Song, who has not only tried his best to bring dignity and environmental friendliness into his campaign but has given so much down-to-earth financial advice to folks following his campaign. My wife has signalled her intention to vote for Ng, and I fully support her decision.

I will probably write a lengthier article on Dr Wealth Blog elaborating on this advice, but I will list what has been shared here and grow this dynamically as I get more snippets of wisdom from Ng. 

Here goes :

  • Points out that public speaking and communication skills are the most important to develop and may need to improve in schools. This is closely followed by financial literacy.
  • Family finances can be managed well if run just like a professional portfolio.
  • Sharply identifies saving money as the most critical skill in personal finance. 
  • The way to invest is to prefer a diversified portfolio of assets across different asset classes.
  • Your time horizon needs to be extended for investment to bear fruit.
  • The expected returns for a diversified portfolio are a nominal 7-8% for decades.
  • You need to keep expenses low, hinting that ETFs are the best way to go ahead for retail investors. ( FAs will never admit this ! )
  • The whole point about managing finances is "optionality", the power to leave a boss who is terrible to you. 
  • Alluding to the duality of wealth generation in Singapore. You must do well in your investment portfolio and supplement it with residential property. 

Readers are free to chip in if I miss out on anything.

Of course, any discussion on Ng must discuss Sybil Lau, his fiance, who attracts much attention because she is 30 years his junior. My favourite quote from her is this :

" For lack of a better word, I'm financially independent. "

Folks tell me that some auntie networks say Sybil is a gold-digger who wishes to marry a 75-year-old fund manager. If you dig into her background, she is much wealthier than him. This reflects the power of a financially independent woman. Ng is eloquent and very much an intellectual, so Sybil has found a soul mate.

I wish for Ng to continue engaging with the public even after his campaign for the Presidency is over. Of course, I'm interested in more than just his views on finance. I'd like his views on love and relationships as well. Remember this - He's loyal to his first wife until the end.

Of course, BBFAs and Useless caste members are probably tempted to vote for that THIRD GUY. Now, it is made more popular because of the statement issued by AWARE.

It's your vote and your right to spend it as you wish. But INCELS could learn something from Ng because he's found love even when he's about to get into his 70s, which many INCELS can't even smell in the prime of their lives.

Monday, August 21, 2023

Are Dividends the best form of Mental Wellness ?

Thanks to a face-to-face Dr Wealth event last Saturday, I've forgotten how much I enjoyed speaking to a big crowd. Talking to an audience gives me a "high", and sometimes I get "high" and disable my filters. So occasionally, I make utterances that might be highly controversial or offensive. For those utterances, I hope that history will never remember them, but sometimes my words resonate with the audience, and I get a spontaneous ovation. 

One utterance that worked well with the crowd is that "Getting dividends is mental wellness." I had a crowd of Millenials, Gen X and Baby Boomers, so out of the blue, I simply decided to critique Gen Z's obsession with mental wellness because Gen Z's obsession with mental wellness distinguishes Gen Z from older folks. There are very few Gen Zs to offend in an investment talk on a Saturday afternoon. When discussing mental wellness, I suddenly uttered that getting dividends is a form of mental wellness, and the crowd erupted in applause. 

This is all unscripted because it was a spontaneous Q&A, and I've since calmed down, so it's time to critically examine this idea. 

For a while, I've always been very amused with how Buddhism entered the West. It did not arrive as a religion but as a psychology because white people, who were becoming more individualistic and less religious, began to discard religious dogma for the inner tranquillity of meditation. 

Similarly, I can imagine what Gen Z have to deal with today. Social media is full of falsehoods like "girl maths" and weirdoes proclaiming that dividends investing is dangerous. If Gen Z wishes to approach investing as a field of study and means of wealth accumulation, like my students, they would have to deal with quite a lot of information. For example, they need to know what a standard deviation is. As I've discussed with many groups, this will always benefit INTJs and ISTJs more than any other personality type. 

From the quantitative perspective, dividends investing has many competitors. Even AUM-based advisors want to wean you off dividends for their mean-variance-optimised ETF portfolios. If you use maximum drawdown over March 2020, dividends investing is dangerous. If you use Beta, it's safer than some market indices. Dividend investing cannot win in every part of the market cycle. 

But from a self-help perspective, dividends rule. 

Dividends put money in your bank account even if you are in a coma or have negligible emotional intelligence. When I was pretty "high" on Saturday, I read many self-help books over the years, like How to Win Friends and Influence People, and the Power of Positive Thinking. Still, only when I started getting dividends was I able to attain the peace of mind and happiness I craved because I had the freedom to FIRE a toxic employer.

Of course, every idea has its limits. 

I hope I don't come across as dismissive of some Gen Zs who really have clinical mental issues, dividends can't solve a mental illness directly, but they can pay for therapy and medication. Also, many Gen Z struggles with regular employment as they are young, so their first dividend is still quite far away.

For Gen Z, we need to develop something more relatable. 

I play Baldur's Gate 3 on GeForce Now and pay about $9 monthly for 10 hours of priority gaming. If you visit any page on the Straits Times Index ETF the current dividend yield is 4.13%. 

We take $9 x 12 months and divide by 0.0413. We get $2,615. By setting aside $2,615 to buy Singapore's largest blue chip companies, you effectively get a perpetually "free" essential subscription to GeForce Now, which is covered by dividends payouts. 

I'm glad face-to-face seminars are finally back. 

Hope to see more readers at our next event.