I have always wanted to do a the comprehensive financial planning but was thwarted by the cost of doing one. The first person I came across who offered fee-based financial planning is Wilfred Ling. While I have not engaged his services before and do not know him personally, I do admire him for doing things that is different from the market.
The last time I was thinking of doing it was probably around 5 years ago as I reviewed my investment portfolio. Since then, it did not occur to me again until I came across a promo by MoneyOwl on Comprehensive Financial Planning recently. For a limited period, they are providing a 100% fees rebate of $535 for going through the full financial planning process! Since it’s free, I decided to give it a go and hear what they think and offer.
The Process
The process is pretty straightforward. I just needed to key in the necessary information on their website and after which I booked an appointment with the financial advisor. I received the report a few days before the appointment and had an hour of video conferencing to go through the report.
The Report
At 30 pages thick, the report included current financial health, insurance coverage and projection of retirement income.
Financial Health
The usual measures on emergency funds, savings ratio, debt servicing ratio etc. On 31 May, Sunday times published an article with similar checks. There were some discussions at InvestingNote after Spinning_Top and Turtle_Investor shared about it.
I ran through the numbers myself and the above report confirmed my own calculation. I am not concern about that my saving ratio and non-mortgage debt servicing ratio are in the unhealthy region. This is largely attributed to my lower pay this year due to work adjustment and my car loan. Given that my car loan will end in 2 1/2 years time and I have a good buffer in my emergency fund, this is a non-issue.
Excessive emergency fund is a good problem to have. Being the breadwinner at the moment, I believe in having at least a 12 months buffer. The other 9 months of fund are meant as opportunity fund for investment. I do not segregate my cash and aim to hold at any one time 25%-30% of my current asset in cash including the emergency fund.
Insurance Coverage
As seen, my focus is on Hospitalisation and Critical Illness plans. While I fall short on most coverages, I reckon that my total asset (including CPF) and current asset are sufficient to cover each of the highlighted shortfall.
So again, I have no concern on my insurance coverages.
Projection of Retirement Income
This is what I am most interested in. Since I have been doing my retirement planning on my own, I would like to know if I am on the right track to be financial independence by 50. I like MoneyOwl’s approach of simply looking why I have at the moment and project these forward so that I know what I am likely to have in the future.
I am pleasantly surprise that based on their tools, I will be able to have an income of 7k from 50 to 80 years old which is higher than my target of 5-6k. During the VC, I got to know that the projection is based on a 6.5% annual return from my current investment until 50, and investing CPF-OA/SA excess of retirement sum at age 55 in a global balanced fund with a projected annual return of 5.1%. What I did not find out was if the model transfers my personal investment to the global balanced fund. If so, then I would not have the monthly 1k from dividend, hence the income would drop to 6k.
What probably differs is the amount of money I would have left at age 80. The system projects based on a 30-year time frame, so the worst case scenario is probably this retirement sum will be depleted and I am left with CPF Life from age 80. The financial advisor did say that there will probably be some money left but it’s hard to commit to a figure as it depends on the market’s performance.
As for my personal plan, there are three phases. Phase 1 is from age 51 to 55 in which I aim to get a 3% dividend yield from my portfolio and set aside a lump sum by 50 for my expenses. Phase 2 is from age 56 to 65 in which I continue to aim to get a 3% yield from my portfolio and I will draw down from my CPF-O. And finally for phase 3 which is from 66 onwards, CPF Life will kick in and I continue to aim for a 3% yield from portfolio. If I am able to obtain an annual return of 6% from my investment through these years, then even at 80, my principal sum should remain intact.
On paper, things look good at the moment but I probably need to buffer in at least a 20% contingency if thing does not work out as expected. Of course things could turn out better than expected and I will be more than happy if that happens.
Would I recommend the Service?
Since it is free for the moment, I think it’s great to have another person to look at the plan. However, be prepared that you might be drawn to purchase some of the products even though based on my experience, there was no hard-selling.
Would I pay $535 for it? Or for Wilfred’s service which is priced at $4888? As Wilfred has written under the terms and conditions, “This package is more suitable for those who have very little investments”.
Towards Financial Independence 