The financial advice market in Singapore is predominantly a sales industry. As such, many product providers employ salespeople to sell you their commission-based plan, regardless of what is right for you.
At Ascenta Wealth, we do things differently.
Unlike many financial salespeople in Singapore, we don’t recommend commission-based plans. Instead, we operate on a fee-only basis and only ever recommend what we’d do ourselves.
Read on to find out what you should know when seeking financial advice in Singapore and why we’re adamant that fee-based planning is the best route for clients.
3 typical ways financial advisers are renumerated
Financial advisers can:
- Charge a fee
- Earn a commission from the financial products that you bought or invested in
- Be paid a salary by their employer – in some cases, advisers may earn a basic salary that is supplemented by additional commission.
In Singapore, although Ascenta Wealth, and several other advice firms have embraced fees, the majority of firms still use a commission model.
Regardless of how they receive payment, every financial adviser should be fully transparent about their compensation structure. Of course, they should also ensure that their recommendations are in your best interests.
But this isn’t always the case.
How advisers are compensated can affect the advice you receive and its cost
Although you don’t directly pay commission-based financial advisers, you may find that, over the long term, you end up paying excessively high costs.
In Singapore expats typically receive advice from the local banks or financial advisory firms, with commission levels typically between 4 and 7%.
Financial advisers who earn their living through commission can profit from inflated product charges and account tie-ins. Over time, this type of charging structure could erode the value of your investment portfolio.
For example, a $1 million investment could end up costing you as much as $100,000 in hidden fees. And, because there’s no disclosure of this, it happens behind the scenes, meaning you often have no idea of the true price you’re paying.
Indeed, we recently worked with a client whose previous adviser offered to pay them S$150,000 to go ahead with an insurance-based investment plan, which required the client to save S$150,000 a month for 10 years.
Had the client gone ahead, the local bank that made the recommendation would have received around S$1 million in commission.
With such staggering figures being used to financially incentivise clients not to leave, you have to wonder just how much money some advisers may be making from your investments.
Another “gotcha” to be aware of is that commission-based products often lock you into long-term tie-ins, and, if you want to withdraw early, you may face a hefty penalty.
Fee-based advice offers transparency and independence
Unlike commission-based financial advisers, fee-based advisers (like Ascenta Wealth) charge upfront, fully disclosed fees for their time and expertise.
These fees are based on the complexity of your needs, rather than the amount you invest, meaning you don’t need to worry about costly account lock-ins, penalties for withdrawing money, or any other hidden costs.
As a guide, when you work with Ascenta Wealth, we typically charge an ongoing advisory fee of 1% a year, based upon the value of the investment. And upfront fees range between 0% and 2% of the amount invested.
So, if you invested S$500,000 our typical planning fee would be somewhere between S$4,000 and S$6,000.
For the same S$500,000 investment, if you were paying commission it could cost you between S$15,000 and S$50,000.
Furthermore, our ongoing charges are typically well below the FCA's average cost of advice in the UK, and significantly lower than the average advisory fees we observe in Singapore.
How you pay an adviser could signal the difference between transactional advice and long-term lifestyle planning
Commission payments are often associated with transactional advice. For example, an adviser may earn commission for giving advice to help you organise life insurance or set up a personal pension, then you may never hear from them again.
Unlike commission, fee-based financial planning supports and encourages clients and advisers to form long-term relationships with one another.
As International Adviser reports: “Diversification of income streams away from commission-only models just makes good sense [...] the business […] can focus on the value proposition for existing clients because the business is getting paid to service their existing clientele and in doing so is generating income not wholly based on finding new relationships.”
At Ascenta, we help expats in Singapore work towards financial freedom, and are here to support you in achieving your goals and aspirations with long-term, fee-based financial planning.
Our dedication to providing fee-based advice ensures we work for you, not for product providers
Bringing fee-based financial planning to expats in Singapore, we focus on your lifestyle, goals, and aspirations, providing personal bespoke advice and tailoring solutions to meet your exact needs.
This transparent approach empowers you to make informed decisions – you know exactly what you’re paying before work commences and why.
Aligning our renumeration with your goals is good for both parties, because it helps to build trust and eliminate unnecessary costs.
If you or someone you know would like to learn more about how we can help you to grow your wealth and attain your long-term financial goals, please get in touch.
