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Tea with TheMinimalist: Selecting a good financial advisor.

Tuesday, October 14, 2014

I am happy to publish another guest blog by TheMinimalist and this time the focus is on how to select a good financial advisor:

In this guest blog, I want to talk about a topic that is close to the hearts of many readers here which is picking a good financial adviser to work with. 

Why is it important? The reason is that the majority of us are clueless when it comes to managing our money. That’s why we read blogs like ASSI, which, in my opinion, is one of the best places to start in educating ourselves on the topic of personal finance.

Seek to establish a lifetime relationship with your FAs.
It is unfortunate but from my regular interaction with financial advisers (FAs) in Singapore,  I notice that most of them have no freaking idea about financial planning. I notice that they like to forge transactional relationships with their clients. What this means is that they approach their prospects, present their sales script, address any possible objections and then close the prospects. Rinse and repeat.

I find this a very worrying situation in Singapore. 

Firstly, financial planning is all about systems and processes, NOT products. For example, how can one set up a disciplined system to save at least 10% of one’s income each month? The answer can be found in my previous guest blog. 80% of the financial advisers will not even bother to go through this with you. Why? They don’t earn a single cent, duh! (Take note that most FAs in Singapore are still commission-based, a terrible system if you ask me.)

Secondly, financial planning extends far beyond selling insurance products.
An obvious area to bring up here is investment planning. I am seriously surprised by how most of the FAs are lacking in investing knowledge. Ask 80% them about fundamental/technical analysis and they simply give you a blank look. For those new to AK’s blog, fundamental analysis (FA) and technical analysis (TA) are the main due diligence processes before making an investment decision. FA tells you what to buy while TA tells you when to buy/sell off your investments. 

It’s not difficult to be financially literate so long as you are willing to put in the time and effort to pick it up.

Now, what do I consider is the million dollar question to put to your prospective financial adviser? Here’s the answer:

“Could you show me your financial plan?”

Huh? That’s it! Not education level? Not net worth? Not personality? Those are important questions but they are NOT the most important one.  Here, let me explain why.

Majority of Singaporeans do not have a written financial plan!

A financial plan (or financial blueprint) is the best piece of evidence to reflect the competency of a FA. Logically, you engage a FA to manage your finances for the long-term. If the FA cannot even plan out his own finances, how in the freaking world will you ever expect him or her to be capable of advising you on your finances? 

To give another example, you will not ask a designer to renovate your new house based on some arbitrary designs right? You will show designers the blueprint of your house, tell them what you would like installed in the living room, study room etc. You will talk through the plans with them; confirm that you are satisfied with everything first before starting renovations.

I previously mentioned that the FA industry is under-developed due to the commission-based system. This is mainly because the interests of the FA and the client can never be aligned. The FAs are focused on closing sales, selling high-premium products that can generate the highest % of commissions for themselves. Budgeting with the clients? Er...

Am I recommending a fee-based system then? My short answer is yes but this is not the best solution. This is because fee-based planning in Singapore is very expensive. A typical financial plan with a professional financial planner can cost upwards of S$4,000. (AK: Wow!)

What is the best system then? In my opinion, it is self-education through experts but I’ll leave this discussion for another day.

Since I like my blogs to be practical, here are some actionable items for you:

  1. Find out what a financial plan is. Talk to a professional planner. If you can’t afford to engage one at the moment, do not worry. I’ll discuss constructing a DIY financial plan for yourself in future guest blogs.
  2. If you are meeting financial advisers now or in the future, ask them to show you their financial plan. If they can’t produce one, please think TWICE about engaging them for their services. He or she is a financial salesperson, NOT a professional planner.

P.S If you have found my guest posts useful; please feel free to share it among your friends via FB or e-mail. J

Note from AK: 
I think I shall have to t-loan from SMOL his instant noodles cooking pot on behalf of TheMinimalist. Works quite well as a helmet.

Read other guest blogs by TheMinimalist: here.


Singapore Man of Leisure said...


Take lah! No need to return.

This cheapo one from China - disposable kind. Give you :)

I've just upgraded to atas brand from France with teflon coating; its to bounce off the sticks and stones when I do my gig next Jan ;)

Ah! I see you now smarter!

Found a fighter to tank for you upfront ;)

pf said...

Aiyah...all these so call financial advisors hor. Bluff ppl de....mine was half decent but the only irritating thing is she keeps trying to sell insurance and funds to me. Her bread and butter of coz.

On the other hand, it depends on how i "use" or engage my financial advisor mah. Largely i hv no major issues to save for mid term (buy flat) and long term (retirement) and a bit of investment (or playing and learning w my money, sigh).

Anyways, each of my sessions with her is at least 2 to 3 hrs long. Sometimes 4. I discuss with her my financial worries, investment lessons learnt, new found investment philosophy, values which influences how i deploy my financial resources, etc.

She also shares her views and surface any gaps in my "ongoing" development of financial plan...which is not cast in stone and making it up as I go along.

Quite fun lor....i enjoy. Not sure how my financial advisor feels though. ...esp when i nv take up the new insurance policy she recommended.

Whahhaha :D

AK71 said...


Pots have disposable kind? Wah! I didn't know. I used my Zebra brand (Made in Thailand) for many years until dent here and there. Still never throw away wor. I thought yours is the WMF type. ;)

Aiyoh, simi smarter? Just lucky lah. When I go fishing, I don't use a line and a hook de. I use a line without a hook. Never starve to death, very lucky lah. ;p

AK71 said...

Hi pf,

My insurance agents generally don't call me liao. I told them if I need anything, I will call them. ;p

Our guest blogger here says that the best is to educate ourselves when it comes to insurance. I agree. :)

AK71 said...

Fong Tze Shee:
Any chance you can share how you were threatened with legal action?

AK: basically, i am not supposed to give any financial advice... To be honest, sometimes, i wonder if there will be some form of control imposed by the government on who can be a financial blogger in future... hmm.

Fong Tze Shee:
Maybe need to attend accreditation course before they allow bloggers to blog in the future...

very cham... i think i will stop blogging then... lazy to go school... haha

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