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Why Financial Planners Cannot Plan the Life That You Want

Few days ago, I sat in a product presentation on a software-as-a-service (SAAS) that helps financial planners.

This SAAS seeks to help the planners and their clients visualize how adding different life goals to their lives affects their wealth accumulation outcomes. 

It seeks more for the planners to be able to communicate how complex our lives can be.

And when we tie our money to it, it makes it important that you should divert adequate resources to these goals. 

If not you will not be able to reach them. (If you read my wealthy formula, you would know that the 2 things that has the greatest impact to your wealth, is also within your control. They are to build wealth early, and contribute more from your human capital)

The SAAS product is damn good. 

As a person trained in school to write software long time ago, if I were to code something, this one would be very close to the final product how I want it to be.

But there is something very subtle that I couldn’t spot.

Only more experience planners would be able to articulate it to me. And then I realize the issue. 

The SAAS starts the planning by defining the client’s age, and family dependents. 

Then there was this portion where they will ask the clients:

How much out of their disposable income, would they want to use in their planning?

This is seriously odd to me. 

They have a few ways to specify this:

  1. Fixed amount
  2. Percentage amount
  3. Opportunistic amount. This means above your expenses, you would use this amount to be part of planning

The odd thing is this.

If you read enough of my stuff, you would realize that we are always working with 100% of what we earned today.

If I bring home $65,000/yr in disposable income, I want to find a way to deploy this amount so that I:

  1. Live a modest, yet good life now
  2. So that I can plan for a modest, yet good life in the future

Every dollar that I earn, should be deployed either to bring value to my life today , or tomorrow.

However, in this case, as part of the work flow, the SAAS asked the client, out of $65,000, how much would you consider to do planning.

The only reason why the software is designed this way, is because of real customer requirement. 

The customer here is the financial planning firms.

And this is part of how they do their prospecting.

This means that…. Clients usually do not disclose how much they want the money to be manipulated by the adviser.

Essentially, the financial planning firms giving their feedback have let the requirements gatherer in the SAAS know that clients usually don’t tell them all their financial stuff.

You might encounter yourself doing that.

I do it myself in the past.

Whenever you meet an adviser, the adviser usually is commission based. You have no idea the integrity of the adviser. You have no idea the level of sophistication of the adviser.

So you would only tell them the amount of cash flow that you are willing to be manipulated by them.

This is a big problem for you but there is nothing much you can do about it

I have readers email me their financial life in the past. Their net worth, their income, their expenses. Rough figures. 

And I could give people a few trajectories how they could tweak their financial situation, and lives so that they can have a life that they prefer. 

If you are sophisticated, you can do a pretty good job and likely you will take a holistic look at your financial life and plan with your entire $65,000:

  1. Try your best to bring down that $40,000/yr expense to $35,000/yr
  2. Better deploy the $30,000 in the best risk adjusted way so that you have a good buffer 15 years down the road

You would only disclose a portion of your cash flow, or willing to purchase a product using a portion because you have no trust in the adviser

If I have absolute trust in my adviser, if I have $30,000, I will funnel all the $30,000 to him.

Next year if my income rises and I have $34,000, I will funnel the excess $4,000 to him.

He would do the best job to give me a good life in the future.

So if you cannot trust your adviser you cannot have a well calibrated financial life.

And one of the main reasons is incentives. And planning competency.

Almost all in Singapore are commission based planners. If they do not sell, they do not eat. There is a strong economic incentives to sell, even if that is not the right product.

How many planners out there have the competency to plan well for you?

There is a good reason you do not trust them. 

And this is the problem that we have to live with. The planners would probably win if they sell well. 

For you, unless you get competent yourself, you always loses.

It gets crazy that they are designing this inappropriate way of planning into the software

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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



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Wednesday 15th of May 2019

Not surprising as this financial planning saas is spec'ed by & for financial sales benefit. Afterall FA companies, banks & insurers are the ones paying to use the saas and hence they are its end customers.

Financial planners (including banks & insurers) are taught to sell based on what the customers can afford. This is the only way to maximise profits from each prospect. Because the key requirements of adequate insurance & sound diversified investment plan is actually low cost & low profits. The industry cannot earn good profits if they can't get clients to buy the high margin packaged & processed products.

For example, just to ensure adequate insurance for life, TPD, CI, H&S, mortgage, LTC --- probably just need 3% of a person's salary. FP industry will eat grass if that's all clients are going to spend.

The more ethical salesmen or planners will ensure adequate coverage is still achieved. But more often than not, the end result of selling by planners is a plan full of expensive products that cannot fully meet coverage. They will tell the client "Need annual or semi-annual followups to address shortfall & ensure your plans are on track".

In other words, make sure you're still paying premiums, and hopefully you got pay raise or bonus to buy some more! LOL!!


Friday 17th of May 2019

Hi Sinkie, that is the sad reality.

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