As a resident of Singapore, choosing the right financial advisor is a crucial decision. Your choice of a financial advisor will directly affect your financial position now and in the future. Hence, it’s not a decision that one should take lightly.
Before choosing a financial advisor in Singapore, we suggest you put to them the following 5 questions to ensure that they’re a good fit for your financial needs.
1 - What are your credentials and qualifications?
Financial advisers in Singapore providing advice on pensions and investments are required to be licensed under the Monetary Authority of Singapore. Not having this would deem his or her services illegal in accordance with the law of Singapore. Remember, this is the minimum qualification required, and many advisers have additional professional qualifications. So it is important to check that someone you’re thinking about working with is licensed to operate , and also to ask what other credentials and qualifications they have.
Furthermore, financial advisers are required to do ongoing training to ensure that they have the current knowledge and an up-to-date understanding of recent changes in laws as well as evolutions in the investment landscape. This requires continued education and consistent development.
Common credentials and memberships may include those from AWP, AFP, CFP and IBF.
It is possible that dealing with your particular situation requires that a financial advisor has some specialist qualifications, too, as in the case of US clients.
2 - What are your personal and firm values?
A shared sense of values helps foster meaningful relationships. Your financial advisor automatically has access to your most personal information, plans, and ambitions, so if your values align, it will not just make you feel more comfortable, but give you confidence to trust your financial adviser to manage your finances as you would want them to. Conversely, if their values are very different to yours, it can create friction and unease.
3 - What is your investment approach?
Financial health and the right investments go hand in hand. Every financial advisor has their strategies and preferred investments. Make sure your advisor employs an investment approach that you are comfortable with. This question will also let you know if your financial advisor has a clear, evidence-based strategy that can be communicated.
Some examples of investment approaches include:
• Concentrated positions
• Diversification
• Minimize fees and taxes
• Thematic investing in future trends
• Ethical (ESG) investing
4 - How do you communicate with your clients?
Communication is at the heart of any relationship, be it personal or professional. That is why it is essential to know the manner and ways in which your financial advisor prefers to communicate with their clients.
This question will allow you to get an understanding of their process, systems, communication style, and overall business operations. At this point, you can ask multiple follow-up questions to understand their system and working style. Some specific questions include:
• How does your financial planning process work?
• How often will you update me and meet with me?
• Are you flexible in terms of changing investment and priorities if my situation changes?
• How will you set up my financial plan?
5 - What is your fee structure?
One of the most important factors when choosing a financial advisor is understanding how they charge their fee. Many financial advisers lack transparency and do not communicate their fees properly, which can lead to problems in the relationship later.
Financial advisers in Singapore can get paid in multiple ways, and it’s important to understand how your financial advisor will get paid. Below are a few different free structures that financial advisers use. Make sure that you understand what the cost implications are for you in advance.
Fixed fee - Using this method will lead to a flat fee of x amount for a particular plan. For example, your financial advisor can charge you an annual fee for managing a portfolio.
Hourly fee - This is when the financial advisor gets paid for the number of hours that he has worked for a particular client. Per-hour rates vary from advisor to advisor.
Assets under management (AUM) - This payment system levies a percentage charge on you every year. The percentage is calculated based on the value of your assets that are being managed by the advisor. For example, the percentage can be 1% of the total asset being managed. So if the assets being managed are worth $1 million, the fee would be $10,000.
Commission - Advisers in Singapore can receive commissions on common financial products like annuities, mutual funds, insurance, and more if you buy them.
If your financial advisor has more than one fee structure, if possible choose one that compensates them for the quality of their advice rather than just their time.
Summing up
Asking the right questions to your financial advisor in Singapore in your first conversation sets a solid foundation for what will be a personal as well as professional relationship. These questions will not only inform you about the capabilities of your financial advisor, but they will also help you evaluate whether they are a person you trust and would like to work with. A good financial advisor will work in your best interest and put you on a path to a secure financial future and life. Singapore has some great financial advisers, but it is important that you carefully evaluate which is the right one for you.