FIRE Is Overrated!

Manage Your Finances To Live Your Best Life

Financial experts Christopher Tan dive into the complicated world of personal finance, who runs Singapore’s first fee-only financial planning firm Providend, shares candid insights into why most insurance agents provide subpar investment advice and how consumers can better protect their hard earned money.

Guest: Christopher Tan
Expertise: Fee-only financial planning, investment, and insurance

As the owner of Providend for over 20 years, Christopher has seen firsthand how industry incentives often lead insurance agents astray. “The commissions are just too lucrative,” Christopher admits. By only offering fee-based plans with no commissions, Christopher faces an uphill battle attracting clients accustomed to “free” advice bundled with high-commission products.

Yet Christopher remains committed to prioritising client interests over profits. As he explains, “Initially we just wanted to be unique, but we realised people genuinely trust us because we’re conflict-free.” This trust is hard-won but vital for addressing nagging financial issues faced by many Singaporeans.

Top 5 Red Flags That Your Insurance Agent’s Advice May Be Off

  1. They focus solely on insurance without discussing investments
  2. Products come with high fees upwards of 2%
  3. Options are limited to one provider with no easy switching
  4. Coverage amounts seem too low given premium costs
  5. Commission structures create clear conflicts of interest

Understanding the Financial Planning Models:

The discussion begins by addressing the confusion surrounding the various financial planning models. Tan explains that these terms, such as commission-based, fee-based, and fee-only, may not be familiar to consumers but hold significant importance within the industry.

Commission-based Financial Planning:

Tan describes commission-based financial planning as a model where advisors are compensated through commissions earned from product transactions. He emphasises that clients ultimately bear the cost of these commissions, as they are deducted from their premiums or investments.

Fee-Only Financial Planning:

In contrast, fee-only financial planning, the model adopted by Tan’s firm, eliminates commissions entirely. Clients pay a fee for the services provided, and any commissions generated from product transactions are fully rebated back to the client. Tan highlights that fee-only planning minimises conflicts of interest and ensures that advisors prioritise the client’s best interests.

Fee-Based Financial Planning:

Fee-based financial planning falls between commission-based and fee-only models. Advisors charge a fee for their services but may also receive commissions from product transactions. Tan acknowledges that fee-based planning can potentially create conflicts of interest, as advisors might be tempted to recommend products with higher commissions.

The Journey to Fee-Only Financial Planning:

Tan shares the motivation behind establishing a fee-only financial planning firm. Initially, the goal was to differentiate themselves in the industry, but over time, they realised the significance of prioritising client interests. Clients began placing their trust in Tan’s firm, cementing their belief in the fee-only model.

The Conflict-Free Advantage:

Christopher emphasises that fee-only financial planners can provide objective advice because they do not depend on product commissions for their earnings. Their focus is solely on what is best for the client, irrespective of commission rates. While fee-only advisors may earn less per deal compared to commission-based counterparts, Tan believes that the long-term benefits of building trust and delivering unbiased advice outweigh the financial trade-offs.

During the discussion, Christopher drops several knowledge bombs on why most insurance advice goes wrong and the costs consumers often don’t realise they’re paying:

  • “The commissions are just too lucrative. Selling term means $200 commissions while expensive whole life policies bring in thousands. No wonder the attractive products get pushed.”
  • On popular investments like ILPs, Christopher warns “Costs are very high at close to 2% annually before you even make money. That’s almost impossible to overcome.”
  • He adds most Singaporeans are “spending too much on premiums for policies with low coverage, so they’re overpaying but underinsured. Advisors get paid either way so there’s no incentive to optimise.”
  • For unconflicted advice, Christopher recommends fee-only planners who put clients first or DIY options. But he acknowledges not all feel confident investing on their own due to the “limited range of options most agents actually understand.”

Through rigorous product analysis and an unwavering client-first ethos, Christopher and Providend continue championing financial literacy in Singapore. Their frank evaluations provide a clearer view of how to cut through industry noise and truly protect hard-earned savings.

You can check their full interview on Chills with TFC, Episode 2 on Spotify for the candid wisdom in navigating housing challenges with clarity, partnership and care for one another’s experiences in both relationships and finances.

For our upcoming March 2024 event, we are helping you level up your Financial Wellness stats with emphasis on Retirement and on Couples managing money together. Join us to learn how you can leverage on you, and your partner to make better financial decisions. We hope to see you at our event!

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