Ep 2: “FIRE is overrated! Manage your finances to live your best life.” – Christopher Tan from Providend

“FIRE is overrated! Manage your finances to live your best life.” – Christopher Tan from Providend

In episode #2 of Chills w TFC, we bring on a powerhouse in Singapore’s Financial Planning space. He took off against the tide to run Singapore’s 1st Fee-only financial planning firm, meaning he does not make a commission off his recommendations. Everyone has their “Ideal life” and in that process, we seek to set up our finances to fulfill the life we love, but he thinks many are taking things to the extreme and may unknowingly be spending too much in this pursuit.

Join me as I chill with Christopher Tan from Providend to dig his brains into how he thinks about managing life alongside finances and help you figure better strategies on your journey.

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podcast Transcript

Reggie: Welcome to another Chills with TFC session! In this series, we hope to bring on interesting, relevant people to help us better learn from various perspectives. Life is not always about learning from people that you already agree with. Perspectives shape a rounder thinker in our pursuit of the life we love while managing our finances well.

Our guest for today runs Singapore’s first fee-only financial planning firm. You probably have already heard of him. Like, he’s very popular la, huh. But we got him on to go head on into the practices in the financial planning space, how to get more value out of financial planning for yourself, and honest opinions on some products in this space.

So, yep. Welcome Mr. Christopher Tan from Providend. Like what you guys are doing in the financial viewers. It’s interesting, right. Because, the whole, like fee-based only kind of thing. So…

Chris: It’s sad that we are still unique, honestly, after 20 years.

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Reggie: Exactly, right. So the whole fee-based… you know, what do you call that? Like, the fee-based financial planning , even from reading your blog, there were differences, like commission-based fee-based, and fee-only, and there’s like, I don’t know, man. Just, being in finance, I’ve been in personal finance for a while. It just feels like every term has a slight… seems like slight difference, but it’s a lot of difference, right.

Like, just change a little bit only, but it’s like a world of difference there. So can, can you just kinda help me understand there, what is the difference?

Chris: So actually, I mean, these three terms, they are only familiar to people in the industry, right? Consumers, they will not hear much about it la. 

So commission-based, I think everybody knows what commission-based is. Well, basically you go to say a financial advisor and a person say that, you know, I’m going to advise you for “free,” but it can’t be. There is no free lunch out there. And to be fair, these people has to be paid somehow la. So how are they paid? They only get paid when a product is transacted. And because of that product transaction, they are paid a commission, right?

Sometimes consumer think, “But it’s fine what, you know, I don’t pay the commissions. It’s the product  manufacturer, the company that pays the commission.” No, it’s not true. You pay the commission, right? So like when you buy an insurance policy, the financial advisors, they get a cut of your first year, second year, third year premium. It comes from you, right? Because otherwise hundred percent of your premium will so-called be invested, but no, they take a cut. So that’s commission-based, simple. Everybody understand that. 

The other extreme is actually us. We are fee-only. Fee-only means that we don’t take commissions at all. Zero. So the client is the one that actually pay us for the work that is to be done. And if there are any product transactions and as a result of that, if there are commissions that are paid. We rebate the commissions back to the client a hundred percent. We try to look for products that has no commission. So that’s easy. But if there are, then we rebate the commissions a hundred percent to the client.

So that’s fee-only, and then there is the in-between, which is fee-based. Fee-based means, “I charge you a fee, and if you transact the product, I get the commission as well.” Now fee-based advisor can say that I charge you a fee, okay. And if you buy lots of products from us, I waive the fee. So these are the three models and there are problems associated with these models because the commission-based obviously has the greatest conflict of interest.

The fee-only has the least conflict of interest. Fee-based is kind of like an in-between. Yeah. 

Reggie: Don’t you find that fee-based can be even more conflict of interest? [laughs]

Chris: It can be. 

Reggie: It feels like, it feels like, you know , Yeah, man, it feels like it can be even worse. 

Chris: You are absolutely right. It can be. I used to write a newspaper article and I said that the fee-based model is the “I really actually want to sell you the product” model. [laughs]

So usually for a fee-based model, the fee is very low. They charge you like $100-150, you know? But I actually really want to sell you the product and if I get you buy the product, I’ll tell you that I will waive the fee, but that’s because the commission can be a few thousand bucks.

Reggie: Damn. Okay, okay. So that there’s going to be a lot of juice coming out. We’re going to talk about all this then. Why did you guys choose to go towards the fee-only? And it’s amazing how you are still “the unique  guys,” right?. 

Chris: Yeah. Well , I hope I can be so noble to say that well, it’s because of the client interest hundred per cent. Well, initially I would say it wasn’t. Initially the whole motivation behind was that we wanted to be unique.

We wanted to differentiate ourselves. So we decided to go a hundred percent fee and I thought it was a fantastic model. I mean, I thought that, you know , people would understand this model and then we will have a lot… I will have a long queue outside my door, everybody looking for us to do business with them.

But unfortunately there was not how we started. It was really tough because people didn’t understand what paying a fee means. They didn’t understand that when they pay commissions, it’s really from them. But then in the first year we started getting a lot more traction over the months, more and more people came.

And when people came, they actually told us that, you know, I really like you guys doing this model. I read your story, I liked your story, you know, I believe in you. And then after I realized that, oh my goodness , we were like getting a lot of clients whom actually place a lot of trust in us. And then it became a calling.

So it didn’t start like that. It started with us just wanting to be unique. But after a while we realized that this is not funny, because actually people come and they actually really trust you. They give us your hard earned money to manage. They say they like us and trust us because we are conflict-free.

Yeah. So I’ll say maybe 6 months, 12 months into starting the business, we realized that it became a passion. It became a calling. Yeah. We felt that this is the best way to actually give financial advice. 

Reggie: Mm. So when you say conflict-free, you’re actually coming from the ground of like, you know, you guys prioritizing other people, your client’s interests.

Chris: Yeah. I mean, absolutely right. Because I mean, if the financial advisors, they are paid by commission — I’m not saying that all commission, all commission based advisors are unscrupulous. They are bad, they’ll cheat your money, it’s not right. I mean, there are advisors and there are advisors. There are black sheep in every industry, but the problem with commission is that you are conflicted, you are tempted. You would be right? Because if I’ve got product A that pays me this much commission and product B that pays me 10 times lesser, when I want to advise you, I’m conflicted. So if I yield to the temptation, I end up recommending you something that is really expensive, that pays a lot of commission, but might not be necessarily best in the interest of the client.

Yeah. So that’s what I mean by being conflicted. Whereas for fee, I charge you a flat fee. I don’t care what products you buy. If you need to buy. If you don’t need to buy, I don’t even want to sell you because I’m not making a cent out from it. But if you really need to buy and you buy it, I’ll give you back the commissions, if there is.

And so that, you know, it’s nothing to do with the product having a very high commission, it’s just purely because this is what is best for you. 

Reggie: Okay, and in that sense, do you guys objectively make less? 

Chris: Yes, definitely a lot less, especially the initial years. It was very tough.

I’ll just give you an example, right. If you come to me and let’s say you buy an insurance product that is $5,000 premiums. I will make $5,000 commission, if I’m commission-based, from you, maybe not over one year, but maybe over three to six years, depending on how the product is structured, but I will make $5,000. And the first year is the most. I can make about half of 5,000, 2500.

But today, if I’m a fee-only and objectively, I know that a much lower premium plan is better for you. And I sell you a plan that gives you similar or higher coverage insurance, I may only make  $500 or even lesser from you. So just insurance alone, you can see the difference . Investments as well, right? So Providend, actually, we don’t do a lot of insurance. In fact, 85% of our revenue comes from investment. We are really more an investment firm, right. But because of clients need, we also do insurance. But investment alone, for example, if an advisor come, and a lot of advisors like to sell investment-linked products and they charge you a front end sales charge of 2%.

Well, they make that 2%, right? Yeah, but we don’t say we don’t charge the sales charge, so we make a lot less. So when you go on fee, definitely you make a lesser, but it is a more sustainable business model in the long run, I feel. Yeah, I mean, we have been running this about 200 — ah, 20 years [laughs] what am I thinking?

Well, that is a prophecy. We’re gonna run this run for the next 200 years [laughs]. Yeah, but we’ve been running for 20 years and now we have reached a stage whereby our income is very stable. We are managing about $500 million of our client’s money. So yeah, we’ve gone through the tough times and it’s more sustainable because when clients’ interests are taken care of , they reap the benefits. They stay with you longer. 

Reggie: And you were talking about like, ILP. And that is like, I don’t know, it’s quite…

Chris: ILP is toxic! [laughs]

Reggie: I didn’t want to use the word la, right, but so… can you just kind of help us understand, like, why you think ILP is toxic? 

Chris: Well, ILP stands for investment-linked policy. There’s absolutely no sense buying an ILP. Every premium that you pay to an insurance company. Now, technically this is what happens, right? Every $1 premium that you pay to an insurance company to buy an ILP, a certain percentage goes to buy the insurance portion for protection. So let’s say 10 cents is used to buy the insurance that you need.

The remaining 90 cents get invested into unit trust. The unit trust can be managed by the insurance company, or they outsource it to a fund manager. Now over time as you get older, the insurance portion actually starts to go up, but you’re still paying $1 premium. And therefore the investment portion starts to come down.

So over time you’re actually investing lesser and lesser and lesser. Of course there are ILPs today that are a hundred percent for investment. That means to say zero or very little of the $1 goes to the protection. Most of the money actually go to investment. So that’s how ILP is structured. 

So why is the ILP not so good? Well the biggest problem I would say is cost because ILP is very expensive. The underlying unit trust, the management fee, the total expense ratio. They’re very expensive. 

Reggie: What’s a ballpark? 

Chris: Well, it’s about close to 2%, depending on the kind of funds, of course, I’m talking about equities funds, which is closer to 2%. It’s going to be very difficult for you to make money if your annual charges before you even make money is about 2%, right?

So cost is one. And the second thing is this. I mean, if you really want to invest your money, why do you go through an ILP? Because if you don’t like that particular fund, the only thing you can do is okay, of course you can sell out. But if you want to switch, you can only switch the funds within the insurance company.

So let’s say you buy from AIA. You can only switch from AIA, right? Why do you tie  your hands? When there are so many other options out there that are actually better, lower cost. Why do you tie your hands with the insurance company? 

Reggie: Exactly. It’s like, it’s like, there’s this fascination with like 2-in-1, 3-in-1. I don’t know if it is a Singaporean thing or is it like all around kind of… It’s like, people love this idea if bundle, but when I look at it, when I buy insurance, I’m trying to pay a fixed fee to mitigate the risk. So that is, that is the interest. When I invest, I want to see my money compound, so actually they have conflicting interests. 

Chris: Yeah, exactly. 

Reggie: So when you bundle two things that are conflicting interest. It’s like putting Coke and coffee together, right. It’s like, very strange 

Chris: Yeah. It doesn’t work. I mean, I think consumer needs to know that whenever products are bundled, it just means it’s more expensive. Right, because there’ll be layer of fees that are hidden. And, you know, you just touched on a very important point, which is we should really separate investment with insurance. They are for different purpose. 

As you said, insurance is for protection, investment is actually for accumulation. And when it comes to insurance, our belief is you really don’t want to use it. It is a risk management tool. It is a contingency plan. And therefore you should spend as little as possible on what you hope that you will not use. I will use the illustration of, say, if today, you want to renovate your house and you got a hundred thousand dollars budget to renovate your house, can you imagine this: You spent $80,000 buying fire extinguishers, and then only 20,000 to renovate your house. Right? And then on housewarming day, you invite your friends and your friends come and they walk around, look at your houses, it’s so badly done. And you use very cheap material. You know, they’ll ask you Reggie, how much do you spend on renovation?

And you said a hundred thousand. Hmm, but it doesn’t look like a hundred thousand dollars renovation. Then you say, no wait, wait, come let me show you. And then you bring them to the room and you open up that room and sprawling all over the floors, you see fire extinguishers of different size, different type, and then your friends are like, why, what is this say?

And you say, because I’m so afraid that you know, the fire will consume my house and therefore I spent $80,000 buying fire extinguisher. I mean, it’s like ridiculous, right? It’s just totally ridiculous because you should have spent more money using better materials for renovation, right. Nobody spends most of their money buying a contingency plan and insurance is like that.

Insurance, it’s a contingency plan. So spend as little as you can on that contingency plan. Buy as much as you need so that if it happens, you are protected, but most of the time, it’s not going to happen. Most of the time it’s not going to happen, you will be able to live a long life most of the time. And therefore you must have enough money to save towards that eventuality.

If you spend so much money buying insurance, the only way you can reach your plan is you die. You better die young. 

Reggie: Exactly, exactly. You know, ’cause I keep hearing things like, you know, “I buy this insurance so that if something happened then I got this lump sum that comes up,” I’m like, dude, you know, that… 

Chris: That’s not your main plan!

Reggie: Owning the insurance is not going to reduce your risk of getting that thing or whatever thing. It’s, it’s the same. By piling so much money in, then you are banking on yourself getting that shit, right? 

Chris: Yeah. I mean, we have to keep the main thing, the main thing, right? The main cast is actually your accumulation plan.

Your insurance plan is your supporting class, is the minor. So we must major on the major, not major on a minor. When you spend so much money buying insurance, you are majoring on the minor. So I think we need to understand that.

Reggie: Do you come across… okay, I don’t know because I’m not in this space per se, but it feels like a lot of people are over-insured, broadly speaking. So I don’t know. Based on your cumulative understanding, do you feel like Singaporeans are generally over-insured, they’re buying too much insurance? 

Chris: Okay, so this is the thing, right? The thing is most Singaporeans are spending too much money on insurance premiums, but they are under-insured. Because they are buying very expensive whole life plans that cost a lot to buy, but the coverage is actually very low. Yeah. 

So I’ve seen many senior executives. They spend like 20-30,000 per year on insurance policies. But they’re still under-covered. So that’s the situation in Singapore. I mean, it has improved over the years, but the fact is — and don’t take my word for it, you can actually go and Google it, MAS has a survey on it — most Singaporeans are still under-insured but yet they’re spending a lot of money on premiums already. 

Reggie: Mm. Yeah. I have some friends who literally just went on, you know, the insurance platform, and just buy on their own, right. They’re routing out the middle man. And they’re getting much cheaper premium for much more coverage. 

Chris: Unfortunately, the downside is that there is a limit to what you can buy from one insurer, right? If my memory serves me correctly, I think the max you can buy from one insurer is like $400,000. A lot of people need more than that, especially if you are just married, you have young children. You probably need about $800,000 to a million dollar coverage. So you have to go like different insurer to buy and not everyone is like your friend. They’re not savvy enough. Cause you don’t get advice. You go in there, you must already decide what you want and all that.

So yeah, not everybody will be able to do that on their own. 

Reggie: And in that sense, what do you guys do to kind of help these people to be more aware in that sense? 

Chris: Yeah. So, I mean, for our clients, so Providend, we serve mainly the affluent clients. So for our clients, well, they just come, yeah, they come. Usually when they come, they just bring their whole stack of insurance policies that they have bought over the years. And then we clean them up big time. Yeah, we take a look at it. We read every contract. We will tell them that, you know, these things, you don’t need it anymore. Get rid of them, you’re wasting money.

Keep those, they are still good enough. And if you are still short, we actually buy for them. We actually advocate a lot of term insurance, which is pure coverage, no investment. The premium is like 10 times cheaper as compared to if you buy a whole life. So for clients, that’s what we do. I mean, we write quite a bit on media, mainstream, social media, we conduct a lot of talks to advocate how a person should do insurance. Yeah. So, I mean, we try our best, but we cannot fight the power of the industry. 

Reggie: Yeah. I get it. Then, for our listeners’ sake, right. Could you just kind of share with us the difference between term and life? There’s this  endless debate out there [laughs]. 

Chris: Yeah. So term insurance means temporary insurance. You buy until the age that you need it, or you buy it until the age that you don’t need it, right. For whole life, as the name implies, it just covers you whole life. So that’s one difference between term and whole life.

The other difference between term and whole life is that term has no investment component. So you just pay for pure protection. For whole life, just like ILP, which I’ve explained earlier, for every $1 premium that you pay to the insurance company for a whole life plan, say they’ll take 20 cents to go and buy the insurance that you need.

And the remaining 80 cents, they actually invest it for you. Now, for those of us who have bought whole life plans, you will see all the benefit illustration saying that well, the projected return is between 3.25 to 4.75%. Now that 3.25 to 4.75% is not on the $1. It is on the, in my example here that 80 cents that insurance company actually set aside to invest for you.

And what that means is that even if the insurance company can hit 4.75%, which they don’t, but even if they can hit the 4.75% for you, you are never going to get 4.7, 5% off the $1. You’re just getting 80% of the 4.75 because only 80 cents is invested, right. So that’s the whole life plan. So that’s the difference between term and whole life.

Reggie: That’s a lot of confidence: “which they don’t”. It never hits the upper limit from your experience. 

Chris: I mean, you buy a whole life plan. After 20 over years, I’ve seen actual numbers. I mean, it doesn’t matter what they promise you, but well, actual numbers is that if you can get about 3% after 25 years, 30 years, of buying a whole life plan, count yourself lucky.

Reggie: Really? 

Chris: Yeah. It’s just 3%. That’s already very good. 

Reggie: Okay. So based on what you just said, right. Then there is a predominant narrative out there, you know, of selling ILPs, of selling life plans. A lot of these kind of compound products are being peddled out there, bundle products, not compound products. Why is that the case?

Chris: Well, I hate to say it, it just pays better. I didn’t start out in my career doing what I’m doing right now. I mean, when I first came into the industry in 1998, there was no such thing as a financial advisory industry. The financial advisory industry only came about in Singapore in October 2002, because that’s when the Financial Advisors Act was implemented.

So when I first started in 1998, if you want to give financial advice, you either join the insurance companies, the banks, or the stock broking firm. So I chose to join an insurance company. In the first year, I was number two new adviser in the insurance company. I was very successful. I was making lots of money.

Why? Because I was selling a lot of whole life plans and ILPs. So, you know, when I go out there and I tell people, don’t buy whole life plan and don’t buy ILP, I speak with conviction because I’m guilty of it. I have to go back to all my clients and my clients said, you sold me that. I did. Yeah, but that was wrong.

So, I spent three years in the insurance industry, by the end of the third year, just before I leave, I was top 25. I was making, and that was 2001, I was making like $200,000. 

Reggie: Wow. 

Chris: And that was like 20 years ago. So you can imagine even for today, $200,000 is good money, right? Can you imagine, 20 years ago, that’s even more, right? Yeah. So I sold a lot of all these very expensive product. And back in those days, nobody sell term products. Nobody. 

Reggie: But it was already there. Nobody sells it. 

Chris: It was there. I mean, you don’t have so many, but it was there already. I remember ed, I asked my manager, this product is actually very good. Why nobody sells it? And I always remember him telling me, in half jest, “Chris, you sell this, you’re not going to be a MDRT.” So nobody sells it because, well, the premium size is so small and therefore the absolute commission that you take, it’s going to be very small. It’s just going to be like $100-200 commission. Whereas when you sell whole life plan, or you sell an ILP, you make a few thousand dollars. Back in those days to be a million dollar round table, you need to hit like $70,000-80,000 first-year commission. How are you going to hit $70,000, 80,000 for your commission if you’re only selling a product that makes you $200. Very difficult, all right? So I know, I know how the industry works. The industry rewards advisor s when they are MDRT or called to the table or top of the table, you are put on the podium when your sales numbers are good. 

Reggie: Yeah, exactly. It doesn’t mean you are a great advisor. I’m trying to understand this thing.

Chris: It doesn’t mean you are a great advisor at all. 

Reggie: It just means you sell a lot, wah. 

Chris: Yeah. So you are recognized that way. You go for incentive trips based on the volume of sales. So if you look at the motivation, everything is wrong, right? Everything is wrong, there’s nothing to do with advice. And so I’m not gonna say that all advisors sell whole life and ILP because they all want to make a lot money.

It’s back to what I’ve said earlier. The attraction is just too strong. It’s not easy to fight it. It’s not just the money you make. It’s the environment, right? If you are doing all the right thing, but making very little and not making MDRT. Nobody’s going to notice you, nobody is going to come to you and say, Reggie, wah you did a great job.

Nobody’s going to invite you for speeches. Nobody’s going to tell you, nobody is going to ask you to talk about your success. You have no success story to tell because you’re just not making the sales figures. You are not going to… you’re just going to go to the airport and send your friends off for their incentive trip.

You’re not going to go for the incentive trip. So it’s difficult. It’s not that there are no good advisors. It’s just… so kudos to those commissions-based advisers who are actually really ethical. I salute them because it is just so tough to be able to go against the grain. 

Reggie: Sounds crazy. And when you guys are trying to do what you do, which is like fee-only. Do you find it difficult to attract talent? 

Chris: Difficult, very difficult. Over the years we have tried. Yeah. So we find that if you want to recruit from the industry, it’s very tough because firstly, so suddenly to give up commission, or they can’t take it la yeah, because they’d be addicted to it. So not easy. 

Reggie: I mean from 2500 to like 500. There’s like a 20% difference. 

Chris: Tough. And the industry, most of the advisors out there mostly very good at insurance, but very bad in investments. And like I say, we are predominantly a investment management firm. We don’t… we give advice in insurance, but we don’t execute it.

We actually refer out to our sister company, MoneyOwl, to execute it. We don’t make a single cent from insurance. We are mainly doing investments, right? So when we get all this people, they are weak in investment. They can’t advise in investment. So you are right. It’s not easy. Firstly, not willing to give up commission. Secondly, don’t have the investment skills and knowledge. Thirdly, a lot of them, I would say, not all, but a lot of them are serving the mass market, while we serve the effluent. So not easy to be able to have that ability to serve the affluent. Not everyone. 

Reggie: When you say that the general people out there, right. Because what I’m sensing is you’re telling me that generally insurance agents out there, they’re more insurance focused. They’re not as investment-focused. So can I say that broadly speaking, the investment advice that come up from insurance agents is substandard? I mean, we’re not trying to blanket everyone, but we’re talking about like probability. If some insurance agent come and give you some sort investment advice, the tendency is… 

Chris: I would say generally speaking, yes. Yeah, of course, there are advisors out there who are strong in investments. I’ve not seen many. 

Reggie: I’m not seeing many, too. 

Chris: And that’s also because of the limited range of products that they have. I mean, there are many problems with this, right. Now if you say, okay, like for us, when we do investment products, we charge annual management fee.

Okay. So the annual management fee from a bond portfolio can be, just say 0.5%, say. So if a client invest, say a hundred thousand, and you charge a fee of 0.5% first year, I mean, how much is that? It’s 500 bucks. So now if you take a hundred thousand dollars and you see an advisor, it is quite unlikely this guy will sell you an investment product. It is quite likely that this guy will actually recommend an insurance product, because the compensation is higher. 

Reggie: Once again, back to compensation.

Chris: Back to compensation. And because of that dominant thought, right, every day you are just doing insurance and insurance. So you end up being advisors who are probably very knowledgeable about insurance, but when it comes to investment, not so much because that’s not your key focus. 

Reggie: And from what I understand, right? A lot of people don’t recognize. I hope you can share with us more. Like, actually a lot of these insurance agents that you meet, right? All your wealth planners are, whatever they call themselves, they are actually resellers. They’re distributing from the OG company, which is a wealth manager or original insurance company. 

Chris: We call them product manufacturer. 

Reggie: Okay, so the product manufacturer, and then there is the reseller, right, the distributor. And then from a client’s viewpoint, right? How do I then manage this multi facet interest? 

You know, like, I want to go direct, but they don’t want to entertain me. Then I go here. 

Chris: Yeah, there are many ways you can go direct nowadays. Not that there aren’t. If you talk about insurance , you can go straight to the insurance company, which you mentioned some of your friends did. Those are called DPI products, direct purchase insurance products.

The downside with that is you got to do some… 

Reggie: Studying? Not some, I think, quite a lot. You’ve got to learn. 

Chris: Yeah, no advice, right? Alternatively, I mean, and I have to declare I’m being biased here because I have a joint venture company called MoneyOwl. You can actually go to MoneyOwl website, they put up the insurance companies that they represent.

You can go and compare the products up there. And if you decide to buy, there is actually an advisor that will advise you, right. Now the thing is that MoneyOwl still take commissions. It’s just that they take 50% commission, the 50% they rebate it to you. So they still take comms, but the advisors are all salaried, right.

So you can still go direct in that way. For investments, I mean, today you can go to robo-advisors. You want to go direct, of course you can also just buy ETF from the exchange. You just set up a stockbroking account, and you can just trade the ETF yourself, but not — again, not everybody’s like that, right?

Because investments is not just about buying and selling. You might need advice and in that case, and you should not go direct, but there are channels today that you can go direct. Yeah. 

Reggie: And I think when I read your, one of your articles, right. About wealth managing, which is what we talking about, you talk about how, like, wealth managers focus a lot on speculative themes. I mean, honestly la, there’s a whole media sector around this, MSNBC, Bloomberg, everyday… everyday must have some reason wan. Stock market move must have  some reason wan. 

Chris: US election…

Reggie: Yeah, must  have some reason, cannot be just, it just move lor. 

Chris: It’s entertainment.

Reggie: Right. So, so even in the wealth management field, you feel that there is this kind of speculative themes going on? 

Chris: Yeah, I mean, I think the industry has propagated this whole belief that investment is like a gamble and there are people out there whom has a crystal ball to know how the market will move tomorrow, next week, next month , next year.

And the whole industry is built on that. The media industry is built on that, because otherwise if every day you wake up and you turn on the financial pages and it says, stay invested for the long term, don’t worry about about the short term. I mean, nobody’s going to read, right. 

Reggie: There’ll be no sector [laughs], 

Chris: It’ll be no fun. People like to read that, okay, so, well, the US election is going to go this way. If Trump wins, gonna be like that, if Biden wins it’s is going to be like that, well, they’re going to talk about, well, we are going to a pandemic and the economy is going to be very bad over the next six months or so, you know, you should hedge yourself against this by buying gold. People like that, they like prediction. But what is the truth?

The truth is, evidence — and again, don’t take my word for it, you can just go and Google SPIVA, and there are many evidence — scores of evidence have shown that most investors who’ve tried to do that and beat the market, they fail. Most people actually fail to do that. And because of all these guessings, managers who are doing all these guessings, they charge a much higher fee.

Again, it’s down to compensation. Whereas for managers who don’t try to guess the market, they actually charge lower fees. So again, at the end it’s compensation that drives behavior. Yeah. 

Reggie: Okay. So fundamentally it still comes back to lower fees, you know, more longer term strategies, and then you will just naturally perform aligned with the market.

Chris: Yeah. I mean, in investing, actually it’s not rocket science at all. I mean, for those people who study finance and you are listening, you study finance, you understand what I’m saying, right? 

There is one main thing that drives the return of stock market, the long-term return of the stock market. And that is earnings or profitability. What drives earnings or profitability? Demand for goods and services drives earnings. What drives demand? Population growth. So we’ve gotta ask ourselves, is the world population growing? It is. Are there gonna be demand for goods and services going forward? There will be, because population growth. And simply because of that, most companies are going to be profitable.

Of course, some companies will collapse. But most companies are going to be profitable. And that is why — again, factually — you see the stock market always going up in the long run. In the short run, there will be a lot of noise. There will be a lot of irrational behavior that cause the stock market to go up, to go up and down.

But it’s very hard to catch that. So if we look at the stock market over the last almost a hundred years, The major markets S&P 500, MSCI world index, MSCI all world index, emerging market index. The longest of course S&P, Dow Jones, the one thing remains consistent and that is it always, always, always go up, the stock market.

Reggie: Yeah. I mean, indexes, there’s a general fallout, right? If the companies don’t perform, they will fall out of it. They get kicked out of the index, then they bring the next big company that’s performing. So there’s already a self auto-correction mechanism built into indexes. When funds mimic that then generally it’s uptrend la.

Chris: Yeah, exactly. So the hardest part is kind of investing is you’ve got to manage your behavior in the short term, which is not easy. 

Reggie: Okay. So about the stock market, essentially what you’re saying is, for lack of a better way to put it, what nobody likes to hear. Objectively the numbers shows, right, index investing, or, you know, if you’ve used this kind of very long-term strategy, ultimately it builds up, right.

Ultimately it gets you there, right. But in the short term, it’s very boring. And you know, young people, you know, it’s… we’re young, you were young before, right. You want the like, you know… 

Chris: Must excitement. 

Reggie: Yeah, excitement. I want to do it faster. And that’s why, that’s why so many people fall prey to a lot of these got online programs also, right. But, but that’s the story for another day. But when we bring it back to the general theme today, right. Which is like how… you know, you wrote about it on your website also. About YOLO, about FIRE, you know, and you have quite some concerns about these themes and you actually call them extremes.

So I want to hear your thoughts and what do you think of from a holistic financial viewpoint. 

Chris: Yeah. So I definitely understand YOLO, right. My son is 22 and my daughter is 18, right. So… 

Reggie: Are you more concerned about young daughter? 

Chris: No, I’m not. [Laughs]

Reggie: Okay. That’s cool. That’s cool dad. 

Chris: Yeah. Yeah. I started my daughter drinking alcohol when she was in primary school. So she has drank every alcohol out there, all sorts. 

Reggie:  Well-trained [laughs]. 

Chris: Nobody can make her drunk, so I’m okay. Yeah, but so YOLO, right? I mean, we all know YOLO, which is you only live once. And a person who adopts this kind of ideology believes that you never know when you are going to die. So just spend and enjoy life. Eat, drink, and be merry, for tomorrow, which we do not know when is tomorrow, tomorrow we die. Don’t leave the enjoyment until much later. That is YOLO. 

The problem  with the YOLO philosophy is that if you adopt it, what if you don’t die? And you live a long time? You are not going to have enough saved up for tomorrow. So that’s the downside. And we all know that. 

Now the other extreme of course is this new, not so new, but pretty new in Singapore, movement called FIRE, which means Financial Independence, Retire Early. It is an ideology that came from the West. A lot of young people, they like this.

Reggie: Most ideology come from the West.

Chris: YOLO as well. 

Reggie: YOLO also came from the West because the Western media is so prominent, right. 

Chris: So the FIRE ideology is extreme in the way, whereby totally opposite of YOLO, right. I scrimp and I save, you know, so that I can achieve financial independence as early as forty years old. So I basically deny myself from all the luxuries, you know, and all that. But again, the problem with this ideology is that, well, we think we have a contract with God. We think that we will never die. So we will study very hard, work very hard, retire and enjoy life until 85 years old, let’s say. But life is not like that as well. Death can take you away tomorrow, you don’t know. And if you overdo it and you scrimp and you save, then you don’t get to live life today.

And there are many things that are time sensitive. You cannot wait for the future to do it. If you’re a parent, you definitely understand what I mean, right. I mean, if you have young children, they grow up very fast and monies must be used to build memories with them when, you know, they are still with you. Our parents, they grew old, they will die one day.

And sometimes we need to spend money to build memories for them. Living a purposeful life sometimes require money, right. And we cannot say that, well, I will wait until I’m 60 years old, I’m 50 years old and I do it. ‘Cause you might never have a chance to do it. So I think these two ideologies are extreme and I think we all need to, like, in all things in life, we all need to have that balance, right.

I mean, we need to be able to set aside a certain amount of our surpluses, intentionally doing something that is purposeful, doing something that if you die today, you at least will tell yourself you’ve done it. Yeah, but not overdoing it such a way that you don’t leave anything behind for  the future.

Reggie: So then in the case where, you know, you think YOLO and FIRE are extreme… honestly, I think that they are extremes also, right. For short period of time, I subscribed to FIRE, you know, but after a while, when I have attained it in some ways, and I feel like this is kind of stupid because you know, it’s just nothing to do. There’s so much, so much aspects of life that you choose to cut, just so you can attain the FIRE. 

Chris: Yeah. So, I mean, I’ve been there before, not FIRE, but I have lived a life as if I was on fire. I mean, what do I mean, right. As an entrepreneur, I spent, you know, the earlier days of my entrepreneurship working very, very hard. I wasn’t doing it for FIRE. I was just doing it for the business. I was working very hard. And as a result, I didn’t spend enough time with my family, with my kids. I don’t like to go for holidays.

You know, if I go for holiday, after five days, I want to come back. And even in that five days, I will bring my laptop. I work all the time and I’ll go for very short holidays. I wouldn’t go anywhere far. Southeast Asian countries. Yeah. But little did I realize that actually I was depriving my children, depriving my family for spending time.

The wake up call came in 2009. Yeah. I mean, it’s a long story, I wouldn’t go into telling that story, but when 2009 came, I realized that, well, actually my kids are really growing up and I’m depriving them. Yeah, so that was the change. And since 2009, I’ve been taking my family every year for a long holiday.

And now that my kids are 22 and 18, the truth is, they don’t really like to go for holidays as much with us like before. They want to go with their friends and they have been going with their friends to Korea and all their own, and all that. But then now when they look back, they remember these memories that we have built together. So I think these are important things in life. And I think we need to know that money at the end of the day is an enabler. We can have a lot of money in the bank and not happy. I’m sure, people know that. 

Reggie: Yeah. Tons of people like that. 

Chris: Yeah, so use money to enable you to live the life that you want. Life doesn’t start 20 years later. Life starts today. 

Reggie: Mm. Yeah. And you talk about this thing called finishing well, right. As a motto that you propagate. So, you know, just kind of help us get it. You know, what does finishing well mean? 

Chris: Well, finishing well means that if at any point in time you are called to go home, you have lived out your purpose. 

Reggie: Called to go home you mean…

Chris: That means you die. 

Reggie: Okay. Very polite ah, very polite. [Laughs]

Chris: Called to go home. Well, last time people say, when you disappear from this world .

When you die, you have lived your purpose. It is a model that I develop in 2009. After going through a very difficult period of my life whereby I was just so workaholic, just spending time working and I developed the model to sort of like remind myself that I will not do it again.

So it starts from taking time to understand what is your purpose? What do you want your purpose to be? And once, you know your purpose, you align the five areas of your life to your purpose. Generally speaking, there are five broad areas of our lives. The first one would be your professional life, and then your family, and then if you have a faith, your spiritual life, and then if you have friends, all of us have, your social life. And then we are all part of a community. So our community life. And under each category of our lives, we have roles and responsibilities that goes along or that is under this category. So for example, under family, I have the role of a father, of a husband, of a son, son-in-law and with it our responsibilities, right?

So once I know these roles and responsibilities under these areas of our life, I try and align my life to the purpose, right. And after I’ve done that, I determine my goals, what I hope to achieve. I determine the activities that will help me achieve these goals. And so if I do that, actually every activity that I do on a daily basis, they are actually aligned to my purpose.

So the small little things I do each day, when I wake up, I take care of my kids, I drive my kids to school. I’m doing it in a purposeful manner because it’s aligned to my goals. The business that I’m doing, Providend, right. Every day when I’m seeing a client and I’m impacting lives, I am actually in alignment with my purpose. So if I do that on a daily basis, I’m actually living my purpose. I don’t have to wait until 20 years later or 30 years later to live my purpose. So that’s what essentially what finishing well is all about. And if I just summarize it, it is starting from your purpose and distilling your life to the day-to-day activities that are very purposeful.

Reggie: Mm, okay. So I think purpose is a, it’s a word that’s very complicated to understand, right? There’s a lot of layer, a lot of textures, but from what I’m getting from you, fundamentally it’s about alignment. It’s about doing things that you believe in living day to day, a life that you can, you can love and you believe in la, in that sense..

Chris: Purpose is about something that you hope to achieve that is more than yourself, right? It is usually about what you want to do that will impact life outside of yourself. Something that you find meaningful. And I think at the end of the day, we all are in search of a certain purpose. You didn’t do this podcast just to make money, right?

Surely something must have triggered you to want to do this podcast. Perhaps you do this podcast because you have seen enough shit happening and you want to go out there and tell people, right. Of course, along the way we need to make money.  I think if we live just making lots and lots of money but it’s not purposeful and you absolutely hate it, it’s not sustainable. Yeah. 

Reggie: Okay, thanks for sharing. Thanks for coming on the show. I’m sure a lot of good juice, you know, everybody learned a lot of good stuff. If they want to look for you, just head to providend.com you know, MoneyOwl, all this kind of stuff. Very popular la now these days, right. So, yeah. Thank you, thanks for coming. We’ll see you around. Thank you. Take care.

Chris: Thank you, Reggie.

Reggie: Hey, I hope you learned something useful today and truly appreciate that you took time off to better your life with the Financial Coconut. Knowledge is that much more powerful and interesting when shared, debated, and discussed. Join our community Telegram group. Follow us on our socials, sign up for our weekly newsletter, everything is in the description below. And if you love us and wanna help us grow, definitely share the podcast with your friends and on your socials. Also, if you have some interesting thoughts to share, and you know someone that you want us to talk to, reach out to us through hello@thefinancialcoconut.com. With that,  have a great day ahead, stay tuned next week, and always remember: personal finance can be chill, clear, and sustainable for all.

Okay. I hope you had fun listening to Chris, a very jovial, interesting person. Very blunt la, for lack of a better way to put it. So I had a lot of fun talking to him, and I’m sure you picked up a lot of good value while listening to our conversations. Next week, we have another great friend of ours, Kyith from Investment Moats.

So that’s one of the largest financial… should I call it financial planning? No, one of the largest stock platform, you know, stock block platform in Singapore? So investmentmoats.com, you can check it out. Kyith will be coming on to talk to us about this concept of, do you need to invest to retire?

Although he did invest, you know, he is one of the biggest guys in the retail space. And yeah. So I’m going to dig his brain into that perspective. How does he see investments? How does he see retirement, stock picking, and all this kind of stuff. But he did transit from an IT career, now he’s in a financial company. So that’s going to be fun. We’ll see you next week!

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