A new digital way for Financial Planning, something better (with Cherie Wang, Planner Bee)
In episode #58, we explore the future of financial planning, where one day an app can do it all for us. Cherie, founder of Planner Bee is on with us to explore the arcane practices of financial planning, how she is going to disrupt it, and honest thoughts on where financial planning fits into your modern life.
Reggie: Good day guys! I know many of you have experienced like seriously awkward situations with financial planners and I’m no exception. I’m sure most of us are pretty apprehensive about connecting with them. So our guest today, I’ve approached her with a lot of mixed feelings, but I think we’re in good hands and she’s a licensed financial planner, but more importantly, she and her team is creating this new app called Planner Bee, which will hopefully change the experience of most of us when we go through a financial plan or journey. So today, she’s coming on the show to share with us how her app is going to be better to evolve our experience and her tips and tricks in financial planning.
So, let’s welcome Miss Cherie Wang!
Reggie: Okay. Welcome on the show. How has the startup journey been for you?
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Cherie: Because I’ve been running a business from the start, because I started off as a financial planner, and then I moved into a firm with my boss, which we co-own now, it’s a traditional business, so running a startup isn’t quite new for me. But a tech startup is very new because there’s so many things that I don’t know.
I realized I don’t really know how to use my phone or my laptop.
There’s so much going on in the tech scene that I’m not aware of.
You know what I mean?
Reggie: It’s okay, it’s okay. I totally felt that way like when I first started recording and we had to do like post production. And then I had to do like email this, and then we have to care for all these kinds of new softwares in the market, right? I was like, “What’s going on! This is so much to do.”
Cherie: Exactly. And getting MailChimp to work is already a pain. I don’t know if you use MailChimp.
Reggie: I use ConvertKit and it’s even more complex. MailChimp is a simple one.
Cherie: Yeah. It is not simple at all. So yeah.
Reggie: And I tried to build my own website.
Cherie: Oh Yeah.
Reggie: Wow. That’s crazy. Yeah.
Cherie: Yeah, we did it too and it’s ooh, it was so hard.
Reggie: Did you guys build from scratch?
Cherie: No, we use a provider called Squarespace right now.
But there are grants that you can use now to make your own website.
Reggie: Really? You can share that with me later.
Cherie: Yeah. I don’t know if my vendor’s going to be good, but they’re applying for the grant now. It’s about 10 grand and then you pay only 2. It’s not bad.
Reggie: That’s interesting.
Cherie: Yeah, but there are so many things you have to do for a tech start up and then you get people copying you any time so you have to be aware of that too. Unlike traditional businesses that have proven their ways of growth if you do certain things have been done before.
Reggie: Yeah, but I think in the tech space, for people that can copy you, if we tell to themselves, that’s a whole different set of skill sets to be able to copy you.
Cherie: That’s true.
Reggie: But it’s just that you’re more visible.
Cherie: While we were doing it, we realized, okay, actually, it’s not that hard to copy. It’s easy to copy the front, but the back end is quite hard to copy. So we’re like, okay, I guess this is a good thing.
Reggie: Yeah, because you’re in the finance space in some ways, right?
So there’s a lot of legislation around.
Cherie: That aside, there are a lot of problems in the system that people outside are not aware of. So for example, the cleanliness of the data that we get, how much bad data we get that we have to clean up, that we have to account for, because the system’s not going to be able to react like a human being to tell you, “Hey, we’re missing this comma inside this number, what are we going to do next?”
So, we had to do a lot of the cleaning for the data that we bring in for the app to work. And I think for most people who would like to copy that, they won’t be able to know how to match the data.
Reggie: On that ground, does that affect the algorithm? If the data comes back…
Cherie: It does, we had a lot of problems with that.
And then when we were fixing it, we’re like, okay, it’s not that easy to copy. We know the problems. We managed to fix it with proprietary knowledge. That is, I think would be a safeguard for us, thankfully. Yeah. But every day, there’s so many problems that can
Reggie: Cause some challenges.
Cherie: Like imagine if your hosting stops working and then your podcasts can’t play.
Reggie: Oh my God.
Cherie: And then you’re like, “Hmm, but you can’t do much about it, but wait.”
Reggie: Yeah. I get that a lot. From that view, how is it different switching from your traditional way to this whole startup way of life, right? I think the way people do traditional business very differently. And day in day out, you’re bothered about different sets of things. Are you climatized to that?
Cherie: I think in the beginning it was, in a traditional business at least, you deal with people a lot. It’s relationship-based. You set things up and then people get going and they do. Everybody does a part of the work. When you go into a tech space, you have to set up the systems..
In a good way, it’s more consistent But, in bad ways when things are broken, you really have to just wait for the provider to get their shit done.Yeah. And because the startup scene is, we know the story about WeWork. And when I started looking into the tech scene, I was very confused by the financial projections that they do.
So, I couldn’t reconcile with the fact that they project such numbers. That’s from the sky actually. So, it took me a lot before I actually bought myself out of that picture again. And I’m like, okay, I’m going to run a tech startup not in the startup way that people know.
So, I’m not going to aim to just fluff up the numbers just so that someone else would invest, and then eventually IPO, and then the retail investors buy, pretty much, a shit company that doesn’t make money. Yeah. So I then decided that, okay, I’m going to apply the traditional growth rate on a new type of business.
So, which is why we are very lean. We’re not going to just hire people because we need to get like 50,000 downloads that doesn’t make money, but costs you like half a million dollars a year to run.
Reggie: Okay, that’s interesting. It’s definitely, I think a new way of running startups. It’s becoming more and more of a thing.
Cherie: I hope so. It wasn’t that startups, a long time ago when they were called, when they were traditional businesses, right?
Reggie: Everyone was just flooding money, right? All the investors were coming in to flood a lot of money. But as investors become more sophisticated in this space because this is relatively a new thing.
Cherie: Yeah, it is.
Reggie: Investors become better and smarter how to spend money in a startup, how to observe a successful startup. I think the palate starts to change.
Cherie: I hope so, yeah.
Reggie: That’s good. But, from your ground, because you’re not transiting out of what you’re familiar with.
You’re just transiting into a very much different model, different softwares, different way of engaging the customers that you are familiar to engage from a more personal ground. So I’m curious in this way, where do you see the financial planning sector going forward?
Because you are indirectly giving your own sector a swing.
Cherie: Yes exactly.
Reggie: So where do you see the financial planning field?
Cherie: Well, I think people ask me a lot. But I think financial advisers will still stay. But, there will be two things that will happen. One area would be replaced by technology for things that are simpler to do. For example, years ago, we didn’t have travel insurance online.
We bought our air tickets through agents.These things are much simpler to us for two reasons. One is technology and the other is literacy. So with literacy, we will be able to make those decisions ourselves for the simpler products. So, there will be situations where people run into confusing and difficult financial problems, and that will require a human being, I would think.
So where financial advisers will stay, they will stay if they’re more competent. They exude more value than technology can replace.
Reggie: Okay. Interesting. So what are some of these complex issues that you’ve observed that you feel still meet human intervention?
Because inevitably, it becomes like a cat and mouse, right? Things are complex, but technology keeps catching up. So, where are some of these fields that you think still required a human support in terms of a financial planning experience for most of our guys?
Cherie: Hmm, what the technology could replace would be for things that are more common.
So common things like health insurance, these are quite standard. These things can be easily replaced by technology. You could probably buy it online if you are interested to understand it. But for complex issues, such as, if for example, I have an ex husband, or I am looking togo through a divorce, these are situations where technology will find it hard to cater to because there are quite unique situations.
So when it’s not common, it’s not the mainstream way of treating a subject, then you will need a human being to come in to do the calculations. On the brightest side, for example, if you’re looking to upgrade your property and you’re looking to reduce taxes in the midst of it and reduce transactional cost, the permutations may be too many for a regular online calculator to help you with. So then you need someone who is knowledgeable in that field to help you find the best balance between cost and growth for your situation.
Reggie: So I presume you agree with me on looking for a specialist? Because in one of our episodes, we talked about that, right? It’s like, look, we’re specialists, because these guys, they have the relevant experience. They have the relevant connections in the space. They know what they’re doing, rather than chapalang kind everything also just do a bit kind.
Cherie: Yeah. I don’t know if you’re familiar with the financial planning scene in the U.S. But how it works is people go to a firm and they have one, what you call probably an R. That person takes the lead in the planning.
But for every department, for every section of the financial plan, they have a specialist. So you have a team of, say, five people helping one client and the client belongs to the firm indirectly, to some extent, brought in by that first RM. So, when you have so many specialists, the good thing is that you get really customized expert advice for each segment of your work plan.
And for the financial adviser, you don’t feel like you’re going too thin trying to do everything, but really, can you really do everything so well? Yeah, I really don’t think so. At least I can’t, I’m often telling my clients, you know, I invest this way. You can tell me how you would like to invest and I would transact for you, but you can’t tell me to be a broker. I’m not a stock broker.
I’m also not an investment banker. I’m not going to be able to tell you, “Hey, you know, the tech stocks that recently rose by 300%.” I wouldn’t know of such things. So,I am going to look at your big picture and we can allocate money for your present, your future, and for bad situations. But I’m not going to be able to do the very minute detailed stuff such as find you the best stock.
Yeah. That’s not my job.
Reggie: Okay. I’m enjoying what I’m hearing because honestly, I think we all have very bad experiences working with financial planners.
Cherie: I am so sorry.
Reggie: Okay. I just want to put it out there. Not all.
Cherie: Yes, definitely.
Reggie: But, there must be a predominant experience that has resonated with a lot of people.
Reggie: That’s why people get very scared. Eh, your friend joined insurance. They’re very scared. Don’t want to meet them. Oh my God, oh I’m going to see still far away from you. And, I think exactly like what you just said, it’s really about competence and really about the process of engaging clients.
So what you guys are trying to do better, the engagement process. Because now you use apps, people are more familiar with that. And we’ll come back to that, but I want to double down on the question of competency. Where do you think our financial planners can be more competent in Singapore?
Because honestly, It’s pretty toxic in my view. A lot of people, I think they’re not good enough,
Reggie: Where do you think we can raise this competency factor so that we all can be happier connecting with our financial planners
Cherie: I know, I think this is a very complex problem that has existed for a very long time.
It has improved. It used to be, I think when I joined, O’ Levels would get me into the job. Now, I think it’s a diploma and advanced diploma. I think for a start, we need to increase that first, because the barriers to entry are too low. When you get very low barriers to entry, you get two things. You get all sorts of people joining without thinking. They don’t realize that there is a huge commitment that they need to put in before they can be good at the job.
So I think barriers to entry has to be raised. They have to be more aware of the job before they get into it. Not just the pros, but everything on the job once they get in. We do advise people to be under apprenticeship.
I think a year is actually a much better time than three appointments. Oh, that is the common practice.
Reggie: Wait, three appointments are common practice.
Cherie: Yeah, and actually from MAS’ standpoint, you just need to pass five papers.
Reggie: I have a friend who just recently passed after two months of studying. It was like, “I just study lah! I passed, I get a license, and I can start.”
Cherie: Yeah, exactly. And if you get someone that’s really book-smart, two weeks is done. Can you imagine in two weeks, you can start selling financial products that you don’t actually understand?
Reggie: I can’t imagine, I’m sure many of us can imagine that experience. Damn jialat lah, this person. There’s a lot of selling, a lot of very emotional hard selling, a lot of sales strategy, but they don’t really know what they’re doing.
Cherie: Yeah. So, I mean, we can’t blame the new people from not understanding what they’re selling because they’re new. So what would be good is for them to be under supervision for a year, at least someone else is responsible for the sales and choices that that people sign on.
But for consumers that are listening to this, I think you need to start being more hardworking to understand what you’re actually buying. Don’t just sign on the papers because you think your boyfriend bought this plan or your adviser is your friend and you think that what suits them suits you, because you are essentially a different person, right?
Reggie: Exactly. And I want to double down on that.
It’s like for you guys are listening. You trust your friend to be a friend. Cool. But, you cannot trust a friend to be a financial planner. If they are new, they have no experience in the space. They don’t know what they’re doing. They can be your good friend. Okay, you can trust that he can be a good friend, but you know, maybe not the financial part.
So, I totally agree. I get that. And I think there is a very high turnover rate in the space.
Cherie: Yeah, because of the barriers to entry being so low. You get like a hundred people coming in, the attrition rate is high as 90%. Most people don’t stay past three years. If we could bring this down a little bit more because there are more considerations before people join, there will be fewer people left without an agent after one, two years.
Reggie: Yeah. Okay. Very sensitive ah… A lot of the talking points today kena very big ones. But these are very real experiences. I’m sure you guys listen to you, you get it. Like we have all these friends that come and go, right?
It feels like they’re taking a bus and you know what, one stop, they come in. Suddenly, all your friends become insurance agents. Then, three months, six months later, then, quieten down a year later, then change of field already.
Cherie: Yeah, exactly.
Reggie: That is a big problem. And happy to hear from someone in the field that is trying to change it as experience. Be very objective about your viewpoint, right?
Because that must be one of the main reasons to create that app.
Cherie: Yeah, exactly. I think to be fair to people, you have the choice to change your career too. But from a consumer, you want to be taken care of. So, what is more sustainable than having a system? As well as a company to take care of you.
Not just one person, because if you’re dependent on just one adviser, that person might die too, before you, right? So, you still need to know what you have, and if you have the assistance of, of a tool to help you understand better to keep track. At the same time, you’re not just facing one adviser for your advice, you’re facing a tool and a team of people who can be there, like a customer service center, then you’re more likely to be taken care of, whoever dies.
You’re not just having all your plans and information just die with that one person which is quite dangerous actually.
Reggie: So, what are some of these bottlenecks that you are trying to solve,as the journey of a customer experience. Most of us, our experience very awkward right?
Someone very long never talk to you and then come and talk to you, and then arrange to meet. If they’re open, they will tell you that they joined the industry and they want to present you, whatever their agency has taught them what to do. There’s a whole financial planning process.
They will ask you all the questions and, and yada, yada, and then you sit down at a coffee shop for two hours, right. And at the end you get bombarded with a lot of questions. It gets pretty uncomfortable. Yeah. I think that is at least for a lot of the younger guys that just started work, this is the kind of experience for most.
I’m sure as you move up, when you have more capital, you have more wealth, the financial planning experience is very different, right? We’re talking about most of our audience, young grads, 20 to 30s. So that’s the very, very sour experience I think most people get. I’m sure some don’t. How do you use your app to solve some of these bottlenecks?
Cherie: Great question. Yeah. We found that at least for Asians, I think people are very afraid to share their details. You know, anything from your age to your weight.
Reggie: Why ask so much? Cannot ask! Age is a secret thing, cannot say!
Cherie: Yeah. These numbers are so secretive and, and it’s actually your own.
It’s a huge problem if you don’t reveal your full financial picture to someone that’s trying to help you. I mean, the quality of the financial advice aside, if you don’t show the look at the entire picture, you’re not going to know what’s the problem. And facing a human being sometimes can be embarrassing. Yeah, I understand that we have clients that find it hard to tell us certain details about their health, because if you buy insurance, you need to declare a health, plastic surgeries, things like that.
Even how much money they spend every month. So when we, what we try to do is to give them a platform that is not embarrassing, no judgment, because it’s just your mobile app, you know? Just key in the details. Nobody’s going to judge you. The algorithm will just run the numbers for you and tell you, “Hey, you know, these are the problems.”
And then you look for the solutions. Yeah. So, we hope that at least people will not stop themselves from getting proper advice or fix their financial problems just because they’re embarrassed.
Reggie: Yeah. And indirectly, what Cherie is trying to tell us is that you really got to be honest with your financial planner.
They need to know the full picture before they can help you to really plan it. And if you cannot be comfortable to reveal everything to your planner, then maybe you want to choose someone.
Reggie: Right? Until you find maybe that right, or a platform, or an individual that you trust and only then that the process can be comfortable and accurate in that sense right?
Cherie: Exactly, and if I can add, because most of the time your adviser would be a friend and then you’ll be like, “Oh, if I tell you that I’m doing this, spending this much money on drinks and alcohol, for example, every month, are you going to judge me and tell our friends?”
Of course, I’m sure most advisers know that they can’t do that, but, there’s always this fear and then you end up not telling your adviser the truth. And then you’re wondering, where did that additional $1,000 go every month? We don’t know. Yeah
Reggie: So that is the relationship nuances, right?
Like, you know, it’s the same with having friends from work. You know those kinds of stuff, right? So when different relationship status kind of intermingle, then, those relationships become pretty complex, but yeah, that’s for another day.
Reggie: So other than sharing information being a very sensitive thing that can affect the financial planning process, what other things do you think that you guys are trying to solve?
In the first phase of your app, I’m sure second phase third phase, you will bring more and more things, but what are other things you are trying to solve? What are you trying to improve?
Cherie: So efficiency is a huge problem in this sector. Be it for consumers or for advisers, everything is very, very manual. So, the first step for financial planning, essentially, is really looking at the picture of where you are right now. It’s as good as stepping on the scales just after Christmas or the New Year.
Reggie: Who wants to step on the scales after Christmas or the New Year!
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Cherie: It’s as good as stepping on the scales just after Christmas or New Year.
Reggie: Who wants to step on the scales after New Year!
Cherie: You’re scared, right? Because shit, but you have to do it.
Reggie: I’m good. I hide the scale don’t know where you know. It’s like eh, why the scale all break down already ah? Chinese New Year cleaning all. The scale also gone.
Cherie: So you need that reality check, right? And what if I tell you that scale is not digital? I like the weighing scale and you’re just using the one or those Chinese things we have to balance. And it’s so hard to use. You don’t even know how. That’s essentially how we’re doing things.
We use Excel sheets to do the calculations from an adviser’s standpoint. But for a consumer, you’re not going to know how to do these math. And they are very simple from my point of view. So we decided that, “Hey, you know, why do we do this in a difficult way where we can just automize it once”. And people could just use this weighing scale to figure out where their status is before they go on to figure out, “Hey, I think these are problems in my financial health and I want to fix these problems.”
So we automize at this point, figuring out exactly what your financial status is. So, you just have to really just sync your portals and your financial accounts. And in a few minutes, you see where you are. It’s scary. It’s very instant, like the weighing scale.
Reggie: Okay. But essentially what you’re trying to tell us is that we definitely have to do regular check on our finances, right? Not like every other week lah, 不要 (bù yào) lame.
Cherie: Yeah, exactly.
Reggie: But periodic, at least once a year when I want to update. And sometimes this process is very inefficient for both the planner and yourself, like you got to book everybody’s time and then go through the whole process and one time do everything, it’s pretty crazy.
Reggie: So with what you guys are trying to do, you’re trying to connect all the backend, all the financial accounts that an individual has? And then in that sense, you can periodically just give them update and they wonder what’s going on.
Cherie: Yeah. And it’s just an app giving you an update.
So don’t feel judged if they say, “Hey, it looks like we’re spending more this year than last year.”
Reggie: Sometimes I feel judged lah, when Apple tells me this week, your usage went up 7%. I was like, “I got use so much meh?”
Cherie: Yeah, or like they tell you to get up and walk because you’re not walking enough.
Reggie: Oh, but that’s good.
That’s a good thing to solve.
Cherie: Yeah. And even then, if you have an adviser, you need to pull out all of their statements from all over the place. It’s hard for you to first go find them. So instead of finding these statements that could be outdated already, what we thought was a better solution is just to pull the real data right now.
And then you update it. You have an idea of how your history was and what it is now.
Reggie: Okay. That’s really cool. I like that. Yeah. I’ll definitely download and use. Okay. I downloaded ready, and haven’t sign up, but anyway soon, okay! Based on all these, you shared information about how you got to be honest with your planner and how you got to be efficient in this process of consistently checking in and stuff.
So, what are some of these things that for, let’s say young graduates or young adults, what are some of these elements of financial planning that they need to do? We all need to be really honest with ourselves for some stuff, and I’m sure everybody has different things that they feel we should talk about.
So what about yourself? What do you think are some of these things that people need to be very honest about with themselves on financial planning?
Cherie: Hmm, I think they, they need to be very honest about how much they’re spending. I think there are three things you need to know how much you earn, which is not very hard.
Reggie: Yeah, everyday you look at your pay check. Wah, 我的 (wǒ de) boss 几时要给我 (jǐ shí yào gěi wǒ) pay increment? When am I going to get this promotion?
Cherie: Yeah you are very aware of it because you have no control on your income. To some extent you don’t, but you have full control over your expenses. So I think people need to be very honest with themselves on how much they’re spending.
And if those numbers are in line with their financial goals. Yeah. I mean, I think for most people they are looking to have a comfortable life and, and that’s just primitive, right? If you look at your expenses now and ask yourself, “is that sustainable?” If it’s not. You have to relook at what is sustainable. If your expenditure at this point is going to provide you with a way to your financial goals in the future.
And if it doesn’t, then you’ve got to be honest.
Reggie: So what are some of these spending things that you view people are doing a little too much of that’s not helping them to meet their goals? What do you think?
Cherie: So for at least the first 10 years of your career, for new grads I think,
Your income is expanding every year. It’s probably going to be at the highest growth rate ever. Earning more money, if you’re not careful, you fall into a trap of spending a lot more. So what I often see with time is these younger folks are surviving with first a thousand dollars when they graduate.
And somehow in five years, they can’t live without $5,000, but they didn’t buy a house. They didn’t buy anything. What I mean is they didn’t buy an asset that they’re paying off. So they’re just basically consuming a lot more. Often from initially you could settle with the $5 lunch and now you go for Omakases every Friday, you know, a hundred dollars.
These things do creep up and in 5, 10 years, they wonder why they earn 10 times more, but they don’t save anything. So I’m often reminding them that the lifestyle inflation is a real problem. They need to do two things. One is to prevent themselves from falling into that trap. And if they already are in that trap, then try to correct that rate of increase of their expenses, because it’s very hard for people to downgrade their lifestyle.
It’s a little bit easier if they are aware and they try to maintain it, while the good thing is their incomes’ still increasing.
Reggie: Yeah. I actually agree with that. You know, like sometimes I sit down on a train station and I asked myself, “Why last time I can enjoy my life with like $400 a month. It’s like when you were a kid, it’s like hundred dollar a month, or like a hundred dollars a week in school.
And I was like, “Oh, it’s so okay what, enough what.” And you can do everything. And life is amazing. And you just hang out with friends and stuff. And then now it’s like I’m making like at least 10 folds more, but it’s like, 为什么很像 (wèi shé me hěn xiàng) not enough ah? Like always not enough.
Cherie: Besides inflation, but yeah, you just need more, you consume more, you demand better experience, so you need like a nice 300 year old wooden table to eat on.
Reggie: well I’m on a graphite table now.
But yeah, I get it. And I think there is a difference between rewarding yourself when meet your goals and rewarding yourself for working. I think a lot of people fall into the trap of rewarding yourself just because you worked. I worked hard mah!
Reggie: Right? I worked hard so on weekend, I must go for Omakase.
Or I worked very hard, today very tiring, eh let’s go get a drink downstairs, gossip with your boss. You go to CBD, right, you walk down the street, all the bars are filled with gossips. “Wah you know ah, HSBC that guy ah… blah blah blah. You know StanChart that guy… you know. “
Cherie: True true, yeah!
Reggie: I think a lot of people need to recognize the difference between rewarding yourself when you achieve a goal and rewarding for hard work. And hard work should not be something that you reward.
It should be something that you commend yourself. Okay. I put in the effort. Good. That’s it, let’s move on.
Reggie: And very easily, somehow you become very rich one. It’s like, really? Somehow, if you maintain your lifestyle, your Uni level lifestyle, I mean like because now you live in town or you work in town, you no longer work…
Cherie: Things are more expensive.
Reggie: Things are more expensive, realistically. You know we spend a bit more because we are in town, okay. But as long as you can keep the lean aspect of life, you know that you have done so in the University. Uni kids very buay 可怜 (kě lián), right? You got to do so many things but you got not much left, right? So, you do all that, continue your lifestyle for three or five years. Suddenly, you just go make simple calculations. Easily you are at $100,000.
Reggie: $100,000 or $200,000 you can easily pay off your mortgage. You can pay off all of these different things that you want to pay off.
Cherie: Part of the down payment as well.
Reggie: It’s going to be really simple from that ground.
Cherie: Yeah. And I think we need to really go back to basics and understand what makes us happy. I mean, this is an entire different topic, but…
Reggie: I love this topic, but continue!
Cherie: Yeah, it’s just like a weight loss tool. Do you reward yourself with more food because you lost weight and then you gain the weight back?
It’s a toxic behavior that we have these days where we earn money, and then we worked so hard for the money, but then we think we need to reward ourselves by buying something expensive, but that’s kind of silly because you worked really hard for the money and then you just pretty much just lost it by buying something that you don’t exactly want. So you really need to be conscious about your wants. What really makes you happy? This whole Marie Kondo thing. I do subscribe to it, but not at that level.
Reggie: Marie Kondo came out.
Cherie: Yeah. I wrote about this on our blog a while ago. Because I really think there’s a huge link to buying only what you really, really want. I mean, talking to it is another, but do only accumulate things that bring you joy. It’s what she is saying. So, you end up buying things that you really, really want, instead of just like rewarding yourself for a hard day of work.
And then you throw it away a few months later, or you don’t even know why you bought it because at that point, you need it to reward yourself with the money that you worked really hard.
Reggie: I cannot… Marie Kondo is in my head now. I keep thinking of her. Marie Kondo, you can take your leave now. But yeah, I actually agree that a lot. Like we really got to go back and question what really empowers us and what we actually enjoy, right? It’s the concept of frugality and being frugal doesn’t mean you don’t spend. Just means you spend on things that matter to you, right? It’s about maximizing satisfaction.
And not about not spending. I think we talked about it extensively on the podcast. So that’s, that’s really nice. And I think spending is only one part of our whole financial planning process. And I’ve seen through a little bit of what you guys are trying to do. And I see different calculators.
Reggie: Like investment calculator, insurance calculator, and emergency fund, retirement, all those kinds of stuff. So let’s just zoom in on insurance. A lot of people ask recently on the app, recently on the telegram group, a lot of people asking about insurance questions. Right. So, I’m not a super geek on insurance.
So I want to spend some time talking about that. What are some parts of the calculator that you guys are very confident of, in terms of how much insurance to buy?
Cherie: Yeah, okay. So I often get as an adviser, “Oh, you know, someone told me that I need to be covered for $1 million.”
And I’m like, “Where did that number come from?” Like,
Reggie: 1 million appears in everything. Everything must have 1 million one. Na si wa uh cit pah barn. Every single thing in our social context has that 1 million. These days have 1 billion also. Okay, but yeah.
Reggie: Magical number.
Cherie: I don’t know, why don’t they say 10? But my reply to them is always, “Everybody’s different.” Again, you need to understand the concept of insurance. So the concept is very misunderstood because of the way it’s been sold over the last few decades.
But I think people understand this a lot more with the help of the media, the government’s pushing a lot more information for people to understand. So they now know that insurance is important, but then the next question is how much? How much is hard to determine, right?
Reggie: Before we go into how much, can you just help us elaborate, let’s say today, I don’t know what’s the concept of insurance? What is the idea of insuring?
Cherie: Insurance is basically an exchange of risk for a premium that you pay that’s much smaller than the risk that you are outsourcing. So when you, when you think about an insurance, think about why.
And the why would be the risk. So for example, a risk would be unforeseen medical bills. “How big can that be?” would be the next question. Oh, it could be, say $300,000 for cancer treatment. Do you want to keep that risk on yourself? Or do you want to outsource it to someone else? And that someone else is not going to be a friend, of course.
So then it’s going to be an insurance company, they would say, “Okay, the odds of a person like you getting cancer or getting dengue, for example that is common now, is X percentage. And based on that, we’re going to charge you a fee of $10 in exchange for a million dollars a year coverage.
So then you decide, “okay, is this $10 worth paying for outsourcing that risk?” And I would say yes, when there’s such a huge multiplier, if you do have $1 million, are you going to keep it in the bank and do nothing just in case? Or are you going to say, “Hey, I’m going to invest the remaining $999,990 and just use $10 to pay for that outsourcing of risk.”
Yeah, because that’s more efficient use of your money. Immediately, you have almost $2 million. Yeah, so that’s the concept of insurance. So I mean, people might beg to differ. I don’t subscribe to the idea of outsourcing every risk. So in Singapore, if you want to buy insurance for your mobile phone screen.
Reggie: Wait, there’s something like that mah?
Reggie: iPhone also can?
Cherie: Yeah, you can. I think they added this onto my… Um, I wouldn’t say which provider, cause it was a little bit unscrupulous. They just added it on. It’s $10 a month!
Reggie: Wow. Okay. Anyway, insurance is a very good business, objectively, right, because it’s a pooled together kind of thing.
So every big guy wants to be in the risks absorbing business in some ways. So that’s that. Amazing that mobile guys are doing that also. So what are some of these risks? You know, because I also don’t subscribe to buying insurance for everything. What are some of these risks that you think are good to outsource?
Cherie: Oh, big ones. So big risks, like medical bills I said, the unlikely incidents of your house getting on fire, yeah. It’s very, very unlikely, which is why they charge you very, very little for a very high amount of coverage if something bad happens. This is why we are mandated by the government to buy car insurance, because our cars are really, really expensive.
So you don’t want to end up paying for someone else’s repair because of your negligence. You may not be able to afford it. Hence, you need to outsource that to insurance. Unfortunately, I would say in Singapore, it’s done by force. So when the risk is too small, you find that the exchange of cost, which is the premium, to the risk that you’re also outsourcing is not a lot of difference, you may not want to outsource that. For example, you’re covering $2,000 worth of bills for say $1,000 off premiums. Is that really worth it? Personally, I don’t think so, but some people would still think so.
Reggie: Yeah. So then that’s when the professional viewpoint comes in and evaluates.
Cherie: Yeah, but we can also only give you the numbers.
We can say this is $1 to two. But it’s your life choice if you decide that it’s worth it or not. Of course, there will be a tipping point like if it’s $1.90 cents to $2, then you’re off. We’ll tell you. I don’t think the insurer would even sell that because it’s not going to be approved by MAS.
Reggie: But does your app help with that? I think a lot of people hide behind objectivity, “Oh, I cannot tell you, this is your own decision. You’re gonna make it.” But sometimes people just want your view, like my view is do this or my view is don’t do this.
So how does the app help in this process? Because there, there is black and white in algorithms.
Cherie: So we tell you first through the calculator how much you need. But of course, for people who are going to try the calculator, you have to try to figure how much you spend first every month by either inputting the data, or syncing bank accounts. With that data only, we can do a calculation of how much insurance needs, because expenses differ from person to person.
We use the amount of expenses to determine how much insurance you need if you don’t work. So if you can see, the basics of the calculation is replacing your expenses, your income, if there is an unexpected illness, for example. So, we help you calculate that need. You take away what you already have because the app allows you to pull in the data of your existing insurance.
We simplify it in very basic English instead of the lingos that insurers use and tell you, “Hey, you know, this is what’s remaining.” If that sum is large enough, we will highlight to you that this is a goal that you need to do something about. And then you get redirected to looking at products.
But that’s something we have not touched on yet.
Reggie: Okay. That’s that’s. And recently I’ve gotten a question right in our telegram group. Is MediSave and MediShield enough??
Reggie: That is an ongoing question. I also think about it like I already got this, right? Why do I need more medical coverage?
What is your stand on this?
Cherie: No, it’s straight no.
Reggie: Okay. So you think it’s not enough?
Cherie: It’s not enough.
Reggie: Share with us more.
Cherie: Okay. So the reason why we have MediSave is because we are not a welfare state. So we have to, by force somewhat, be asked to put money aside for medical bills. But that sum of money, that wallet alone is not enough.
Hence you have MediShield Life, where it’s an insurance that covers you for a hundred thousand dollars a year of medical bills. That premium is paid from your MediSave account,so that indirectly you’re buying insurance. I mean, actually you’re buying insurance from the government.
That amount is based on an average. Because we’re not a welfare state, the kind of insurance policies that are imposed on us cannot be too high. It has to be affordable at least to the state or to the people who are paying for it. So they have to, in a way, give people a very minimal amount of insurance that they can afford to pay.
It’s not based on the medical bills that they’re going to incur. It’s based on how much premiums they can afford.
Reggie: So you’re telling me that there’s no objective study as to how much is the average medical bill of a Singaporean, and we are not benchmarking MediShield life based on the average medical bill of a Singaporean.
Cherie: They based the…
Reggie: They based it on the income level, the ability to pay premium?
Cherie: Yeah. They don’t want people to not be able to afford the premium. So based on that kind of premium levels, they provide you with a benefit. It’s the same goes for CPF Life, the CPF Life payout, based on the 30th percentile of an average median income of Singapore. How is 30 percentile going to be enough for someone that owns at the 90th percentile, right?
But, is it sustainable if you benchmark it against 90 for everyone? No. So the state has to make a decision based on affordability.
Reggie: Ah, that really clears up a lot. Yeah, okay now I get it. So because the benchmark level is at the 30th percentile, let’s say on average, let’s say we’re talking about affordability rather than reality.
But when we realistically look at it, most Singaporeans have a certain medical expected bill that you need to pay through your life. And then that would not meet the requirements of MediSave or MediShield
Cherie: No, but they tell you, “Hey you know, in order to make sure that socially it’s not going to be a mess”, they mandate that there will be MediShield Life in place. Everybody has it. You can’t pay, we pay for you, but we will make sure that you can’t pay. For most people, it’s is not going to be enough. So, you have the option to upgrade your MediShield Life plan with an integrated shield.
And that premiums can be mostly paid by your MediSave. So the government is saying that, “Hey, you know, we give you very basic by force.” If you want to upgrade it to a higher benefit, go ahead and do it if you can afford it
Reggie: So is the integrated shield one of the best option in market?
Reggie: Because there is no profit generation from the government’s viewpoint.
There’s not private interests in that sense.
Cherie: The private interest is indirect. Most insurers are in the picture because of…
Reggie: They take on risk.
Cherie: They want to be seen. When you’re a part of the integrated shield system you are seen.
Reggie: It’s a branded content there lah.
Cherie: Yeah, it’s more of an indirect marketing.
Reggie: It’s like how FMCG companies sell branded milk cartons to the kids.
Cherie: They do?
Reggie: Right, in the U.S. they do that. I’m not sure about here, do they do that? But in the U.S. they do that. So they make the milk, let’s say with Meiji milk. Of course Meiji is not in the U.S., but let’s say in Japan. And then from young, you drink Meiji milk. And you remember the brand.
Cherie: And you continue with that.
Reggie: And you continue with Meiji milk as you go on. And that arrangement with the schools is always cheaper compared to retail when you buy, right?
Cherie: Like Yakult that is full of sugar,
Reggie: Okay, so insurance companies do that also.
Cherie: Yeah, it’s not profitable, yes.
Reggie: Okay so it’s not profitable for them, but they do that. So from a consumer’s viewpoint, from our audience viewpoint, we should consider the Integrated Shield as the priority when it comes to medical coverage.
Cherie: Yes. Yeah. And that is priced very competitively, very much monitored by MOH.
So it’s wise to do it as long as you can afford it. Yeah. And do it for your parents too because they’re also your liability if they are sick. Yeah.
Reggie: Okay. That’s, that’s a very, very good point because I think there’s a lot of options out there in the market, right? Private ones, government ones, and everyone else in between.
And sometimes there’s just this choice paralysis that people go through. So many choices, what to do, right? So it’s good to know that you have something concrete to share with us, because a lot of people tell me case by case, case by case. 我不要停 (wǒ bùyào tíng) case by case.
Cherie: That one is a straight yes, you should do it. It’s not enough, but it is better than nothing. It is what the MediShield Life is trying to do.
Reggie: Yeah, okay that’s good. So we get that you’re trying to build this app, and it’s trying to reframe the whole financial space. Where do you see this at?
How’s the user experience going to be like for someone, maybe in a year or two time/ And yeah. How’s it going to be for all of us?
Cherie: Okay, so at this point, what we have built is a consolidator. So, the weighing scale that I’ve mentioned, it is basically the weighing scale that you can step on and off whenever you need to do a quick check.
In the future, we will hope to be able to be smarter at telling you your problems. And bringing you to solutions that truly fits you with technology. So it’s consistent. And of course, you know the fancy word of AI is in the picture, but we will explore that option very carefully because AI in the wrong way can go quite stupid.
Yeah, but we want to give people an experience of figuring out their problems. And finding the solution in just a few minutes without having to go through that decision fatigue or asking around. Oh, an interesting thing is, we’ve been exploring the concept of Taobao. So, people like shopping on that or even, I don’t really shop on Zalora, but looking at reviews and pictures from other people who have bought the same product, do help you make that decision.
Reggie: Oh, yes.
Cherie: So we want to build that feature into the products as well. So people could read reviews and experiences that other people have from buying that same product before they make that choice too. So, it’s almost like shopping for clothes, you choose the size and the color that you want.
And then you look at other people who have bought it before and you’re like, “Okay. I feel more at ease that these people have actually bought it had good or bad experiences that you accept.”
Reggie: Okay. I definitely love that. And I’m sure a lot of our audience will love that. So thanks for coming on the show and we appreciate your time and I hope all of you guys learned something useful today.
Cherie: Thank you, Reggie.
Reggie: Hey, I hope you learned something useful today and truly appreciate that you took time off to plan it online with thefinancialcoconut. Knowledge is more powerful when shared, debated, and discussed. I hope you share what you gained with people you love. And I want to hear from you. Give me some questions and help me along with building our community or financially savvy coconuts.
I hope together, we can fulfill our curious minds with clarity. Join our community’s Telegram group. Reach out to us on Facebook, Instagram, and sign up a weekly newsletter. Everything is in the description below. If you enjoyed the podcast, if you want to keep us growing and stay independent, buy a kopi at kopi.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.
Reggie: Test test. Okay. So I hope you guys had fun. You know, I definitely have fun talking with Cherie and it was interesting because you don’t always get like very… How would I put this? Like you don’t usually I hear financial planners talking about themselves in such a brutal manner. I mean, fundamentally, yes, she is doing a startup, trying to use the whole technology thing to simplify and make the process more objective and more effective and whatnot.
So check out her app. But I think more interestingly is that I think one of the main reason that push her to do it is because she really sees a lot of problem in the whole like financial planning feel, right? I also see a lot of these problems and I’m sure many of you guys have faced similar challenges when talking to financial planners.
And I just want to put it up here today that you need to recognize that a lot of these financial planners are fundamentally salespeople. So, they are just trying to sell certain products. They are very expert in their product and that’s the most, that’s kinda how I see it. And I’m sure there are some people that really understand financial planning, but probably not most of the people that I’ve met.
So, that’s that. As long as you find a planner that works for you, and an agent that you’re comfortable to work with, good for you and that is the goal, it’s not to trying to do everything on our own, right? Next week, we will be answering the long awaited question, like many of you guys know that I lived in Malaysia for an extended period of time.
Physically, now I’m back in Singapore because of the whole lockdown. But yes, I think a lot of people are curious, like “Eh, why you live in Malaysia, what is the perks of living in Malaysia?” So I’m going to share with you some of the interesting perks that I have experienced being in Malaysia, beyond your one-to-three exchange rate or all those kinds of stuff.
Yeah, so next week, listen to my personal experience and my personal journey. I hope it gives you some inspiration. And if so you choose to live abroad or live specifically in Malaysia, feel free to connect and feel free to chat. And if you need any questions, come to our community telegram group and yeah, feel free to reach out. See ya next week!
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