One of the key challenges for advisers is that they have to juggle communicating with their clients, yet not boring them with too much of the financial planning details. 

Communicating with clients is just as important with the financial figures behind. If you do not do well with the former, you do not get the business. If the plan, which constitute of the figures, is not fundamentally sound, then over the long run, your clients will one day see the lack of sophistication in engaging you to help plan their finances.

Recently, someone from Goalsmapper contacted me to review their software. I was wondering why the heck would I want to do something like when I am not even a financial adviser (which is the main purpose of this tool). Eventually, I relented after numerous persuasion.

The person explained to me, then I try out the tool for myself, and I realize they have a compelling product. 

Goalsmapper is a subscription based software as a service (SAAS) that financial planners can use to work with their clients to come up with a coherent financial plan. The idea with financial planning is to come up with a good financial plan so that their clients can achieve their goals. 

Goalsmapper is able to 

1. collect the client’s personal balance sheet
2. collect the client’s personal cash flow statement
3. existing insurance and investment plans that the client have
4. what are some of the short term, medium term and long term goals of the family
5. simulate how real life scenarios like death, disability and helping out other family members can affect your retirement plan

Goalsmapper is rather polish, but it is a shame I cannot show more of it to you. The owners are rather secretive about it. If you are an adviser, and I don’t show you more, you will be less converted.

So I am going to show you why I think it is good, without showing you much. 

I used Goalsmapper to simulate my own financial situation. And Goalsmapper was able to show me a few ways my financial situation and life could change. 

And the result can be rather startling. It basically showed that I might be able to live without touching my wealth portfolio for a long time. This is pretty surprising. 

Visualizing how your future Wealth, Net Worth and Cash Flow will Panned Out Year by Year

One of the main advantage of Goalsmapper is that the adviser can match the things that excite the client. These are the numbers and Goalsmapper is able to quickly, visually show the client how will their financial life be altered.

Goalsmapper Chart

The adviser will work with the client to come up with their assets, liabilities, income streams and expenses. All these information will be aggregated into the Goalsmapper chart above. There are also a few charts such as the Cash Flow chart, Net Worth chart, and Insurance Benefit chart.

A very colorful chart like this aggregate the numerous positive and negative cash flows. 

In this example, the client is myself. 

The blue bars show the active income I earn from 38 years old to 45 years old, which is what I put as my official retirement age. So my net cash flow from job after expenses grow from $44k to $234k.

The yellow bars show that, in the event I do not have passive income, Goalsmapper will tap the cash that I have built up ($234k) for living expenses.

The green bars show my passive income. That is currently from 65 to 99 years old, which is my CPF Life Full Retirement Sum, which I specified is what I chose in the asset section.

The red color bars show my shortfall. So the red color bars is what will grip clients attention how long the money will last. In my case it is 88 years old.

There is a black line that goes up and down. That is the Cash Savings. It shows the changes in my cash savings over time (this excludes investments). The big spike is due to the excess out of my CPF Full Retirement Sum that I can get out at age 55 years old.

Cash Flow Chart

The Cashflow Chart shows the client’s cash inflow (on top) and her cash outflow (below). The black line shows the direction of the client’s cash flow.

At any point, you can move your mouse over and Goalsmapper shows you the cash flow profile. In this example, at age 73, I have a passive income of $27k (from CPF life) and expense that grew to $41k.

Net Worth Chart

The Net Worth chart shows the client’s net worth over time. If you mouse over each bar you can see the net worth snapshot at that point.

There is something wrong with this picture if my investments is $16 mil at age 87 and I am about to run out of money!

The three charts above I feel, is very good to visualize the numbers for the clients. The adviser was able to show clients their financial life up to now and whether they can reach their goal. 

In my case I fell short and would run out of money.

Adding Life/Financial Goals to your Current Net Wealth Situation

The biggest advantage of Goalsmapper is that, given my net worth and Goalsmapper chart of my current situation, let us see how some of my goals will impact these charts.

Goalsmapper is very flexible in that it allows you to specify goals that 

1. increases or decreases the income
2. increases or decreases the expenses
3. increases or decreases the asset
4. increases or decreases the liabilities

And that is what goals are, they should translate to some money value.

Goalsmapper provides some custom goals that the adviser can use to specify in an easier manner:

1. Buy a property
2. Having a child
3. Buy a vehicle
4. Children education
5. Getting married
6. Further studies
7. Starting a business
8. Holiday

No doubt, this is a feature request after listening to some of their client’s needs, where Goalsmapper originally fell short of.

In my example, suppose I am interested to

1. thinking of buying a 3 room HDB flat somewhere at 41 years old and renting it out 5 years later
2. help fund a relative’s university plan

We add a 3 Room HDB Flat purchased at 41 years old but I can only rented out at age 46.

In the first goal, I specified my intention to purchase a 3 room HDB flat that is around my age. Goalsmapper allows me to specify the “goal balance sheet and cash flow” changes. The nice thing about the way Goalsmapper is built is that we can feel the code base is elegant and favors future expansion and flexibility.

I would only be able to rent out 5 years later at a conservative $1,500/mth estimate. 

The other goal is to see whether if I were to help to fund a relative’s future university fee, will it impact my finances. The only peeve here is that I have to manually calculate how much is the annual tuition fee for the young relative 20 years from now and there isn’t a mechanism to do that. That kind of granularity can be refined over time. 

The Goalsmapper chart, after factoring the new HDB rental and university spending expense 20 years later

Now, after inputting these two goals, we can see the change to our Goalsmapper chart. Recall that previously, I would have ran out of money at 88 years old. With these two there are no more red bars, which indicates this would improve my plan! I have a better plan going forward.

So you can see at 41 years old, there is a spike up. That is due to the increase in HDB equity. I will not be showing it here but in the cash flow chart, you will observe that we have corresponding cash inflow from rentals only at 46 years old and increase in mortgage expenses at 41 years old. You can see these two reflected here where my passive income (green bars) now start at 46 years old, and grow much more. My cash holdings (black line) start declining at 41 years old.

The $18k per year at 58 years old looks to be sustainable.

Notice that at the Goals there are 2 check boxes. This means that anytime, you can uncheck and check these goals to show your clients how their plan changes.

Throwing Life Scenarios into the Mix

Other than Goals, an adviser can make use of Goalsmapper to model a few life what if scenarios.

For example, one of the spouse passes away at a particular age. With that, there may be

1. a loss of income
2. a payout from an insurance policy
3. a reduction in some expenses.

Or there could be a disability event. That would mean

1. loss of income
2. increase in expenses
3. a payout from a policy for a duration till 65 years old

Here are some of the template scenarios:

1. Disability
2. Death
3. Early stage critical illness
4. Advanced stage critical illness
5. Change of career
6. Promotion
7. Sabbatical leave
8. Retirement
9. Retrenchments
10. Liquidating Investments
11. Redeem Loans
12. Refinance Loans
13. Rent out property
14. Sell property

With the way Goalsmapper is coded, you can choose not to rely on these custom scenario templates but to key in your own. This is because when one of these scenario hits, it is a modification of your assets, liabilities, cash flow. Goalsmapper is flexible enough to take in a whole list of expenses, income and change in asset that comes with the scenario.

The power lies in the competency of the adviser.

I have coverage for an Aviva Disability Income insurance. I would like to see what if, I cannot work in my profession for an extended period of time. How would my cash flow plan be like at the end of 100 years old?

Each of these template goals will involve different degree of changes to the personal balance sheet and net worth. Thus Goalsmapper provides enough instructions what you need to think about when setting this scenario.

Goalsmapper was able to list out the protection policies I have, so that I can quickly choose ideal protection plan to cash flow from.

What is not shown is that due to the disability, I have stopped the income earned. But the income disruption only took place for a total of 4 years. However, the disability income, if claimable could last till 65 years old. This actually make the future cash flow picture looked much better.

Some Downsides or Areas of Improvement

GoalsMapper is not without its flaws. 

The extent of integration with CPF and Government Regulations. I think the team did a tremendous job on the templates to factor in a lot of what if scenarios. If your CPF is not enough it automatically flows to cash for mortgage payment. However, there is still a limit to the current government rules. 

The adviser needs to be competent enough to compute them. For example, I tried to put in whether I can purchase a home worth $900,000 and a mortgage of $810,000 (Ok, maybe I cannot have only a 10% downpayment) but this configuration surely will make me burst the TDSR or MSR. Apparently, GoalsMapper still shows that I can purchase the home.

The adviser would need to know the regulations well to spot that.

Not so Robust Drawdown Simulation. As a person that owns a portfolio of mainly self managed stocks and cash, I hope that there are some more realistic simulation of how I can cash flow the portfolio. 

You could either

1. Liquidate x% of your portfolio for one time
2. Drawdown a fixed sum
3. Drawdown over a fixed period

The #3 is very weird in that if your portfolio keeps growing, then wouldn’t you be short changing yourself by not spending more?

You can’t have an option to draw down X% of your investment portfolio a year. Or to do some form of flexible spending plan as I have explained in the past.

Overall Thoughts

As a client, I would really feel invigorated if I know that, by taking the financial steps, I would have accumulated enough wealth to fulfill my future goals in life. 

This year I went to a retirement presentation together with a co-worker. It was an invite by his friend, who is the adviser. One of the adviser’s client spoke about how the adviser was different from the rest. Instead of scaring him about how inadequate his current situation is, the adviser was able to make him excited about positive future possibilities. 

And I think SAAS such as Goalsmapper makes it much easier for the adviser to show these possibilities. 

The caveat I feel is that the adviser really needs to know what is going on. Goalsmapper is rather flexible and if you are not too competent you would be overwhelm by what you are suppose to key in. 

If you are interested to find out more, do find out more at Goalsmapper>> 

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

Last year around the same time, in early June, Azalea Capital issued their Astrea IV bond.

What was significant was that this was the first bond that Azalea Capital open a specific tranche that retail investors are able to purchase with smaller denomination. The reception for Azalea IV was very good.

And so now, 1 year later, Azalea Capital decide to release the Astrea V.

Currently, the Astrea V bond is in the order book building stage. It is kind of crazy this time round. As of now, I heard it is greater than US$4.3 billion! This means the demand for this bonds is a lot.

The final interest yield is as follows:

1. Class A-1 Bonds (available to retail investors): 3.85%
2. Class A-2 Bonds: 4.50%
3. Class B Bonds: 5.75%

I think it is likely that if you bid for it, you are not going to get a lot. You would have to buy from the open market when it starts listing on the stock exchange.

If you are a retail investor, and are interested in this, only the Class A-1 is available. You can subscribe in denomination of $1,000, with a minimum subscription of $2,000. I think this is very affordable to the public.

This structured bond, follows the same tradition as the Astrea IV. And there is not a lot of things new about this bond.

If there are some things different it is that the yield would likely be slightly more compressed and the underlying PE funds are different.

I still have that feeling that government is trying to create an environment that we can build wealth with different kind of financial instrument.

A few bond issues by government linked company, or blue chips company is happening:

• Astrea IV Bond
• Temasek 2023 Bond
• SIA Bond

So this adds to bonds issued by relatively well known institutions.

I think I will not wish to repeat a lot of things, and you would gain some benefits from reading my old article on Azalea IV which yields 4.35% to 6.75%, depending on which tranche you subscribed to.

If you want more in-depth easier to understand stuff, you do not find it in investment moats, It is better to turn to the experts at Seedly.

Here are some things to bear in mind about the Azalea V, if I wish to emphasize:

1. The issuer Astrea Capital V, belongs to Astrea Asset Management, which is a wholly owned company under Temasek Holdings
2. Only the Class A is rated, the rest are not. In terms of the ratings they are largely the same
3. There are a few safety mechanism build in place to ensure Class A-1 bonds have a greater chance of being redeemed 
   1. Credit Facility to smoothed the payout of the interest payment
   2. Reserves Account are proactively build from losses, divestment. These work towards funding the reserves account so that enough safe money to call back the bonds on the 5th year
   3. If the net asset value of the underlying funds fall, the reserves are also used to deleverage
4. That said, Astrea V is a structured bond but it is not a traditional bond. 
5. The underlying PE funds is likely leverage, and also so are the underlying companies within the PE funds. 
6. The very fact that the interest rate for a rated bond is higher than the Temasek 2023 bond and SIA Bond should tell you that this is not a straight forward asset

Time Table of Key Events

Here are the expected milestones for this structured bond issue:

The key milestones are that for the retail public, you can start applying on the 12th of Jun till 18th of Jun noon. That will give you 6 days to apply.

Some Risk Management Stuff in the Prospectus

The above graphic is how the issuer wishes to illustrate to you the priority of the payments.

The underlying private equity funds from time to time, will make distributions or realized capital returns out of their funds. These will be the cash flows that are returned to you. 

What the above tries to illustrate is how they prioritize every dollar. 

It is pretty complicated and I am not going to admit I know all of it. 

The folks at Seedly and Financial Horse are better at explaining these stuff to you. My general understanding is that some of the expenses such as taxes & expenses, hedge fund payments and management fees will be paid first.

Subsequently, the interest payments are made to the Class A-1 bond, Class A-2 bond and Class B bond.

The cash flow will then flow to the reserve account in managed portions so that they are worked towards getting ready to call the Class A-1 bond in 5 years time. 

The Sponsors will get the excess money after all this.

The issuer sought to alleviate your concern about whether all these mumbo jumbo cash flow will work out by going through some simulations as well as go through some historical scenarios.

If you look at the above table, observe that they computed the expected probability of success which includes their ability to call the bond in 5 years for the various different classes and the ability to fully redeem the bonds in 10 years.

That looks pretty locked in. Of course, we have no idea what are the variables that they use. 

Reviewing the Astrea IV Performance

The Azalea IV appreciated in value from the start of trading. 

For those who are not aware, you can purchase the Astrea IV, issued last year on the SGX. It is listed on the SGX exchange and you can purchase it on the market just like a stock. If you choose to purchase the Azalea V, it can be sold to the market as well.

You would have to pay the necessary trading commission levied by your broker.

The Astrea IV Class A-1 was issued at 4.35%. Since then, it has compressed to 3.716% since then. This means that if you bid for the Astrea IV Class A-1 bond through your brokerage the yield to maturity is 3.716%. I suppose the yield to worst should specify the yield to call date of 2023. The yield to worst is the same as the yield to maturity. Typically there is a difference there. Not sure how that worked out.

If we look at Astrea V’s Class A-1 yield, it is very close to the yield of Astrea  IV Class A-1’s yield.

Somehow, the market is rather efficient there. If both structured bond’s risks are similar, and the duration are the same, then the yield should be pretty close to one another.

Notice the price appreciation at the initial few days. This shows you how popular the structured bond was during that period. Then it spiked again, likely due to the potential of interest payment 6 months later. I suppose another spike might be coming since the coupon payment would be soon.

Summary

I think this issue is not so different from the previous one. I wonder if the more that Astrea keeps issuing these bonds, and you keep seeing that there are no issues, whether you will be conditioned to think that these are normal bonds.

I strongly think that we would. 

And soon, we might be owning a lot of structured bonds. You might start seeing people deploying $20,000, $50,000 into these bonds.

And then acceptance to alternatives to unit trusts, property, fixed deposits and stocks would develop.

I have friends who are more well schooled in these stuff and voice various misgivings about these bonds. They might be right. It is just like me saying some of these retirement strategies would not work the way you think, in certain scenarios. When you go deeper and know more, you start seeing the realities, and knowing those realities will hinder you from investing in this seemingly safe thing. In most times it is good. 

But sometimes it can be bad. 

We have to ask ourselves how probable those scenarios will happen and the relative impact to your capital. 

My counter argument to that is that, the government might be enjoying this kind of PE returns in different ways, either through direct investing, or through bond or pseudo bond like investments for some time. 

And there are some of us who complained why this is not available to the public.

Now it is available to most of us. And yet there are negative murmurs to this. 

As I end of this post, I would leave you with a few of things:

1. To get a higher than expected return, there needs to be some form of risk premium. This is in the form of taking market risk, where your money is subjected to volatility, potential capital impairment. Or in the case of bonds, you take on credit risk. If the yield is good, there are some potential risks. Your job is to assess and see if a bond/stock has asymmetric returns profile (high return low risk)
2. And if all things are risky, that means that to protect yourself, or to assure yourself that things will not blow up, you got to look deeper into it with enough sophistication (or people with adequate sophistication)
3. If you want true safe things, the yield or total return profile will reflect that. If the total return is attractive to you, there is some risk (go back to #1)
4. Diversification solves a lot of problems. But there are some things that you should not rely on diversification. It is like the prevalent saying that you should eat a balance meal. I do not think you will add some rat poison to your daily meals just to eat a balance meal isn’t it?

For those that are interested, take note of the time table. You can apply the Astrea V at the ATM or through internet banking at the major banks. 

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free