Commonly Asked Question: Should I Invest With My Financial Adviser or on My Own?
Go on and take a swipe at the some of the Financial Advisers you met.
We get the many stereotypes towards Financial Advisers, but for most of us, insurance is our first introduction to personal finance.
For male Singaporeans, we even started paying for our MINDEF/MHA Group insurance as early as during National Service (NS) days.
Let’s not allow the usual stereotype get in the way of you making smarter financial decisions.
Should I Invest With My Financial Adviser or on My Own?
A commonly asked question with regards to investing.
Insurance companies are partnering with global investment firms to offer more products to consumers.
Along with the advancement in technology and uprising of FinTech, it is also easier for an average Singaporean to invest. We see the need to weigh the pros and cons of both scenarios.
Pros and Cons of Investing on Your Own
There is a school of thought that believes that we should not mix insurance and investment together.
In this case, insurance acts as a guarantee or your safety net. This is very much like the defenders in a game of soccer.
And yes, you would love to have a “Van Dijk” in your “team”, in case sh*t hits the fan.
While every decision comes with its pros and cons, here are the pros and cons when investing on your own.
| Pros | Cons |
|---|---|
| Possibly lower cost of investing | Lack of second opinion on your investment decisions |
| Possibility of yielding higher returns if you are good at it | There is a chance of you making a loss from your investment too. |
| Reduces any conflict of interest if your Financial Advisor does not have your best interest | The need to evaluate your own risk and benefit. |
| - | Time and effort is required when monitoring your portfolio |
| - | Requires certain level of knowledge and having to do your own research and reading |
The need for a certain level of knowledge is important when doing your own investment decisions. These decisions range from the which brokerage or platform to embark on, to which instruments or stocks to invest in.
The barrier of entry to invest immediately can be a rather steep learning curve. However, there is a chance that you incur less cost on your investment (depending on the product), and making more returns on your investment decisions.
Pros and Cons of Investing in Investment Plans Sold by Financial Advisers
On the other hand, turning to your financial adviser has its pros and cons too.
| Pros | Cons |
|---|---|
| You can get a second opinion on your investment decisions | Potentially higher cost |
| So far, there is no products sold where you can lose all your money. | Possibility of yielding lower returns compared to doing it yourself. |
| A proficient agent can effectively evaluate your own risk and benefit. | Possibility of a conflict of interest if your Financial Advisor does not have your best interest at heart. |
| Lesser time and effort is required when monitoring your portfolio | Limitation in products, but some advisers may recommend you products that fit you better despite them earning nothing from it. |
| Requires potentially lower level of knowledge than when you invest on your own | - |
With insurance companies partnering with global investment firms to offer more products, consumers can now tap on more products through their financial advisers for their need.
This is assuming that your agent
- is someone you trust
- is someone who has a good level of proficiency in the product
You can also find out details on the competency, financial soundness and integrity of an agent you just met on the MAS public record.
All you need is their representative number or name.
Some Valid Concerns on Financial Advisers
A group of us might be slightly concerned about the commission that their agents are getting from the sales of policy.
You can actually ask your agent about the commission that they are getting, it is part of MAS regulation that they be transparent to you about it. However, we suggest focusing on the quality advice given. Revenue, profit and commission come from every aspect of sales anyway.
You can also go for fee-only advisers such as Providend or fee-based advisers such as Wilfred Ling.
The different between fee-based and fee-only advisers is that:
- Fee-based advisers charge a fee and also, take a commission
- Fee-only advisers charge a fee but do not take commissions at all
There is also an interesting alternative point of view provided by SeedlyCommunity which furthers explain the point of view of someone with little time but having a specific investment mandate in mind.
In fact, an interesting point of view brought up by the community is that:
Which do you prefer:
- Paying others to do it for you, with a possibility of lower returns
- Potentially lose money to learn, with a possibility of making higher returns in future
Always Do Your Own Homework
Without sounding like your parents nagging at you when you were younger, the need for a certain level of personal finance knowledge is essential in either of the approaches you are going to take.
Here’s a simple checklist to help you choose better:
| Checklist | Invest on your own | Invest with your Financial Advisor |
|---|---|---|
| Are you willing to spend time and effort reading up and investing on your own? | Yes! And I know there will probably be lessons learnt which will incur losses. | - |
| Do you think that you have enough financial knowledge to make a decision on your own? | Do it! Or if you are surrounded by friends who are willing to share their knowledge. | If you appreciate a second opinion from a Financial Advisor. |
| Are you confident on the proficiency of your Financial Adviser? | - | Yes! Assuming you have ways to evaluate this with the help of SeedlyCommunity, your conversations with him or the content he generates. |
| Your investment horizon and risk appetite | You control your risk appetite and investment horizon, be it short-term or long-term. | There are products catered to both, so it is important to understand your risk appetite and investment horizon. |
There are also many other considerations involved when making this decision and there is nothing stopping you from doing both.
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