I answer questions from clients, prospects and online 'PMs' about Early Critical Illness Insurance vs Multipay, why I Beat the Market and others.
I’m surprised you met Christopher Tan.
Yes, and it turned out he was in fact not a monster trying to destroy the livelihood of commissioned based agents everywhere (although Christopher Ng is). An eye opener.
I remember attending my first Seedly event last year and thinking ‘Wow I really hope this guy doesn’t go because I’ll end up saying a whole bunch of nasty things to him about what he’s written and said’.
I like to think that both of us being Christian had something to do with the good timing – I matured enough to not do something so irrationally rash and prayed before our encounter. To be honest, I had expected it to be much more confrontational. Especially me being me.
You’ve mentioned that you can invest aggressively above 6% annualized a year, but instead of buying Term [Early Critical Illness Insurance] you bought whole life. Isn’t that hypocritical?
Not really, for two reasons.
The first reason is that I wasn’t as capable at investing as I am now when I bought it.
The second reason is that it’s dangerous for me to assume that I will be as capable as I currently am forever. I’ve met a trader who went blind, and there are obvious repercussions for that.
It’s an excellent, automated hedge that gives me 6% if I decide to surrender it, and serves its function extremely well compared to its Term counterpart. Plus, I don't have to spend 40 years paying for it.
But you also acknowledge that US Fund Managers underperform the benchmark 99% of the time, but you still support active management?
Well firstly the underperformance ranges between 80 -95% (and only one year, one category where it was 99%). The distinction is important. It also depends which category specifically [e.g. large cap growth, mid-cap value, etc].
It’s also important to note that US Emerging Market funds are nothing like the domestic funds in those areas and local currency (SGD) tends to do better than USD in these areas, so I’ve taken the context into account.
Ultimately, two things are true about the US market now:
1) Passive outperforms Active most of the time in most categories, even gross of fees. There are a few exceptions which I reserve for my clients.
2) So what?
Someone who invests using a tradable instrument has an equal, if not greater chance of underperforming the market anyway [between 90 – 95%]. Your probability of having a career, not a job, is also significantly lower than that.
If only 3 in 100 become doctors – do you automatically stop aiming to be a doctor? Why should low probability stop you from aiming high?
You want to lose small, I want my clients to win big. And they can, with careful measures in place.
What do you think of Robo Advisors?
I’ve had a tiff with Financial Horse recently, but he’s still a lawyer-genius and has done excellent write ups on Robos already, which you can read here. He is still not in the Financial Industry, though.
Ultimately, I’m not particularly impressed by them, despite their low fee proposal. They could never hope to outperform the SNP500, so you may as well invest in that directly instead if you’re young – it’s not like the SNP500 has as much risk as a single sector or an emerging market fund.
What do you think of banks that keep structuring their financial products so that they can keep money? Insurance companies tend to do the same.
That doesn’t make any sense. And anyone who believes this has never been a salesperson or a business owner before.
Either that, or they’re trying to be politically correct to boost their PR.
Take insurance for example – insurance fraud has gone on for over 2 centuries. In its first iterations, you could buy a policy on someone, nominate yourself and get someone to kill them.
Does that seem like a fair financial product to all parties involved?
The structure is to protect everyone – the servicer and the servicee, or insurance becomes a business that isn’t sustainable (Google: ObamaCare). And the more creative criminals get (especially with the help of technology), the more complex the structure.
No salesman enjoys selling a complex product. Not a single one. It’s extremely difficult. No consumer enjoys BUYING a complex product. It feels unnecessarily troublesome.
So no, it’s not to ‘keep money.’ If banks could keep it short and sweet and leverage off their reputation (which for some reason is much better than the reputation of a Financial Consultant despite equal, if not higher attrition rates), they absolutely would.
I’ll acknowledge that MAS regulation is much better now than it was in the past (though it does make my job a little harder), so I can see why some people might mistakenly believe that from hearsay.
What do you think of iQuadrant?
I wouldn’t comment on the risk and returns because I’m not too familiar with them, but I doubt they have the potential to outperform my equity markets.
At the very least, the founders are marketing geniuses.
Owning 34 properties is a cool thing.
You know what’s even cooler – I currently own hundreds of the best companies in the world. This includes Facebook, Apple, Google, Alibaba, Samsung. I also own the largest banks in Singapore.
Reality: I own a bunch of funds with those stocks. And my yields are probably still higher for a lot less trouble., and I get to make all the executive decisions without anyone complaining.
Talk about positioning.
Amazing, though. And they deserve all the success they get, because they’re delivering on the service they promised to provide.
I’m a big fan of any business poised to succeed, even if I disagree (e.g. Seedly) because I have a huge respect for business owners. So best of luck to them, but I’d stay cautiously cynical.
Don’t you worry about alienating your clients, or future clients?
Well I had the audacity to call myself ‘Money Maverick’ in a manner similar to people who would call themselves ‘Dr Wealth’ or ‘Budget Babe’.
These titles imply intelligence, beauty and appeal in some form or manner, and they have a lot to live up to. Similarly, I recognize I have a lot to live up to as well.
And not only do I have to live up to my brand, but if I live up to my brand it risks alienating people. Isn’t that odd? And yet it’s kind of works. Kind of.
You can name yourself whatever you want, but no one will call you that until they see it as truth. And because I tell the truth regardless of consequence, I’ve been earning my Maverick status.
But no, I’m actually very good to my clients. I will still be brutally honest with them, but they are extremely clear on all the benefits I provide. Any client who has paid me for my service gets VIP treatment, especially my first-year clients.
What do you think: Early Critical Illness Insurance or Multi-pay Critical Illness Insurance?
I’m a big believer in One-Times Good One, as the army fondly taught me.
You can get more Early Critical Illness Insurance for the same amount of money and take that claimed lump sum to knock out all the things necessary before it gets worse.
People often underestimate the expenses that come with having a critical illness. It isn’t just limited to income replacement – you’ll need to spend money on plenty of things that require cash only.
1) Specialized medication
2) Appropriate equipment like protecting a child with a low immune system – masks, private transport (more cabs).
3) An overall increase in expenses [compared to what you were spending when you were working 9 hours a day and didn’t have TIME to spend that money] following recovery and adjusting to normal
While recurring illness is growing, I don’t think the numbers justify purchasing this insurance yet. I’d rather not put so much money into it for the idea that I may get a multiple payout. There’s an even lower probability for getting recurring but you’re paying more for it.
Hard for me to sell it on that basis.
Still, there’s obviously a demand for it, especially for people with extenuating circumstances or family history.
I’m really trying to be unbiased here, but y’know. It’s your money.
But I wouldn’t have insurance after that.
Yeah, that’s certainly a problem.
If only you had a licensed Financial Consultant who:
1) Could give you advice on uses for the lump sum payout;
2) Which he was also responsible for securing for you in the first place as you focused on getting well, as well as;
3) Providing alternative strategies and solutions [GIO insurance, self insurance, etc];
4) For free.
Well not entirely out of altruism, because I’m guessing your family and friends would be so impressed they couldn’t wait to employ me as their servicing Financial Consultant.