In my attempt to behave myself whilst my reference check is being conducted, I've simply been doing business preparatory work. Being without a license to conduct investment and insurance business is really weird. I had a brief little identity crisis for a couple of days and spent some of that duration reading up on things I had been buried in. Sometimes, Financial Consultants lose credibility because they have to position themselves as Financial experts - but may not have a solid opinion on ongoing Financial News. To be fair, there is a LOT of Financial News and Information and frankly, almost all of it is pretty crappy. But it should be good to at least be in the loop, and to have developed enough experience to sift through the mud.
Here's a couple of gems I picked up while catching up on Financial News (from the months I wasn't reading whilst doing Consultancy).
CoAssets is - or was, a P2P lending platform not too different from Funding Societies or SeedIn, which might be a bit more familiar to Seedly readers. I am hopeful that they are aware of this news so they understand much more.
The news broke out a while back, and it was bad. In summary, CoAssets screwed up and lost a lot of money. Former clients are now in the midst of a class action lawsuit. It's all very rough, but very exciting too.
Joel from Seedly actually did a pretty good, understandable article here.
Implications:
The CoAssets news was something a lot more small and quiet initially, but I had been getting messages from people who suddenly checked in with me after ghosting me.
I'm not going to deny that there was a certain sense of perverse satisfaction on my end, but realistically some people had even put in a significant portion of their life's savings. There have been some clear ideas on what went wrong, but what should bother people are the following:
a) How did it get to a point that people thought that it was a good idea to invest so much money into a peer-to-peer structure with no guarantees?
Default risk is a much more severe risk than market risk (generally). You'd have to ask yourself what kind of information is on the internet and what kind of hearsay resulted in such a situation.
b) Isn't it MAS-regulated?
ILPs have been MAS regulated for years and people have been critical about them, yet many of those same people used MAS as a reason to take considerably higher risk than necessary.
I also looked through the original P2P structure Co-Assets utilized which was reasonably good.
Some people have been critical of the Promissory Note structure or simply the legal promise of collateral. But this is actually pretty standard in most business transactions: in fact, its actually NOT VERY EASY to carry out amongst much smaller businesses or businesses who have maxed out their business loans.
...of course, CoAssets changed it up a bunch and completely failed to deliver later, but the general idea is currently taking a lot more heat than it should.
Ultimately, it's really important for consumers to firstly - understand the extent of what it means for something to be MAS-approved: and secondly, to understand that the product risk isn't mitigated simply due to said approval.
Gobear was a comparison fintech company that originally started out comparing plans of insurance companies. Actually I liked it, and was sad to hear it closed, because the name is cute.
If you're not familiar with the model, perhaps you've heard of MoneySmart. Almost kind of the same thing. In their heyday, they were reasonably popular in this country and even had tie ups with popular finance bloggers like Budget Babe to spread the good word.
In any case, they packed it up and called it a day.
Implications:
I continue to have no real idea how startups in this space can compete with much bigger players in order to turn a profit or pay investors back.
It's not like I don't sympathize with how it's like to have a business fail in some aspects, but these guys literally burnt up $17million of investor money. Especially since I've had experience in venture cap, I'd be pretty pissed.
Once it turns out that you actually need profits to run a business, most models don't have enough influence to move towards the more profitable areas: often eventually compromising on the original purpose they set out to achieve.
To be fair, I don't think GoBear really compromised themselves, compared to some start ups which claim to be unbiased.
So GoBear has to close, leaving all the consumers brought on from its startup money lost in translation.
It's very frustrating. If you're a personal finance advocate for the last few years who does the usual - looking up cheap brokerages and credit cards and insurance comparisons - you should have realized the consequences of such things by now. I've had plenty of clients who had, after years of putting me off. You often find that the source has told you one thing and did another, or changed their minds entirely about it years down the road (for profit). Maybe you signed up for a long term account with an endowment plan for the additional interest only to have it get cut this year.
Maybe you hopped onto a finance site for unbiased news only to have it basically announce that it was going to be selectively funded by the government so it could be interviewed for CPF's Youtube.
There's nothing wrong with free, but free has always been unreliable.
It's a standard that's been applied against consultancy and it shouldn't surprise anyone that something free online can end up the same.
Still, I guess there are other sites and sources that will do the job in its absence, so personal finance pundits won't be terribly affected after a few weeks of adaptation.
3) Singapore Market EOY Report Loo Cheng Chuan contributed to Dollars and Sense on why the Singapore market flubbed so spectacularly last year, further reinforcing two things:
a) He really cannot stop promoting his 1M65, or 4M65 (It'll probably get higher as we go). If I had such a popular movement like his as an Financial Consultant, it would probably just be leveraged against me to gut my license like a fish.
I recently swung by his telegram group and had to mute it due to the insane amount of conversation there, and it's not all surprisingly nonsense (just that the level is a little low) but I was surprised at how much is relevant and useful for laymen. Maybe he should figure out a pet name for his followers like how K-Pop stars do. This is not a slam on him, by the way.
I think he's a freaking genius and I'm insanely jealous.
b) That Singapore stocks, as well as Singapore growth, and Singapore concentration (the act of over-fondness in investing in Singapore stocks alone) are basically dead in the water - it took some reading of his to remind me of that. Some stubborn people who had already lost a ton of capital and dividends last year had the audacity to private message me after I commented that I felt January would be a sideways month, showing me their double digit returns for last few weeks.
This is a stark contrast to people who like to discuss it on my post instead. Naturally, there was a dip immediately later in the month and the one year return is still embarrassingly negative.
Some of my clients and I already made over 100% returns in 2020, so having a slightly smaller amount YTD instead of losing 20%+ like the STI stocks is fine.
Implications:
1M65 continues to remain a genius. He's not been wrong about anything major yet, which is absolutely impressive in the personal finance space. Even Money Maverick has been publicly embarrassed a few times for inaccuracies in the last 4 years.
He makes a serious point about dividends - I've written about it before, but a factor I missed was about how profits reinvested are usually ultimately used in development of the business.
In fact, that's kind of the purpose of why a company would sell its shares in the first place.
Aside from the reasons why a high dividend can be unsustainable as written above, it stands to reason that a company has to keep developing at the rate of its profit payout - or it starts to go into major decline.
In other words, a stock that pays out high dividends often compromises growth to a certain degree.
It is quite unreasonable for investors to expect both High Growth AND High Dividends. That's likely why not a lot of stocks - including REITs, have succeeded in paying out high dividends over a 5 - 10 year period without having some kind of growth kick in the face.
Investors need to realize there really are no shortcuts in life: diversify your passive sources of income and investment growth, or face the inevitability of stagnancy.
Money Maverick