Top Financial Mistakes People Make Without a Financial Consultant in Singapore

The industry has faced major changes to uphold the integrity of its practitioners, concurrently building trust of the population to turn to them for professional financial advice and to protect consumers in Singapore’s financial advisory industry.

The Singapore government has implemented several measures to improve the ethical practices of financial consultants.

Financial Advisers Act (FAA) and Regulations

• Establishes licensing requirements for financial advisers
• Sets standards of conduct and competence
• Requires financial advisers to act with integrity, objectivity, and due care

Guidelines on Standards of Conduct:

• Covers areas such as integrity, objectivity, confidentiality, and competence
• Addresses due care, diligence, disclosures to clients, and conflict of interest management

Continuing Education Requirements:

Financial consultants in Singapore are required to fulfill Continuing Professional Development (CPD) requirements to maintain their qualifications and stay updated with industry developments. The key CPD requirements are:

• Annual CPD hours: Financial advisory (FA) representatives must complete at least 30 hours of structured CPD training annually.
• Ethics and Rules & Regulations: Out of the total CPD hours, FA representatives must undergo at least 6 training hours in Ethics or Rules and Regulations, or both.
• Specialised requirements: Representatives who only advise on or arrange mortgage reducing term assurance policies and/or group term life insurance policies need to complete a minimum of 16 hours of structured CPD training annually.
• Accreditation: Courses in Ethics and Rules and Regulations must be accredited by the Institute of Banking and Finance (IBF) or the Singapore College of Insurance (SCI) to count towards the required training hours.
• E-learning: This is an acceptable mode of delivery, provided it meets specific requirements such as a minimum duration of 30 minutes, an assessment component, and proper authentication processes.

Code of Ethics and Standards of Professional Conduct:

• Developed by industry associations like the Investment Management Association of Singapore (IMAS)
• Provides guidance on ethical decision-making and professional behaviour.
• Singapore’s international reputation as a safe financial hub is managed through Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
• Ethics Pronouncement 200 (EP 200) applies to all professional accountants and firms in Singapore
• Aligns with Financial Action Task Force (FATF) recommendations

Supervision and Compliance:

• Financial advisory firms must implement measures to supervise representatives’ activities and conduct
• Ensures representatives understand and comply with relevant Singapore laws

Personal Conduct and Trading Policies:

Firms are required to have policies governing staff conduct and personal dealing

Includes restrictions on short-swing trading and market timing

Conflict of Interest Management:

Financial advisers must identify, record, manage, and disclose conflicts of interest

These measures aim to maintain high professional standards and protect consumers in Singapore’s financial advisory industry.

With a more comprehensive understanding of the services that a financial consultant can offer, tapping on their industry know how will be advantageous to avoid financial mistakes.

Many Singaporeans attempt to manage their finances independently, which can lead to are some common pitfalls and how a financial consultant can help avoid them:

Common Financial Mistakes

Being too conservative with financial planning

Singaporeans often have a “kiasi” (afraid to die) mentality, leading to overly cautious investment strategies.  On the other end of the stick, could be too aggressive and employing a herd instinct from hearsay from their community of “financial advisors” leading to knee jerk reactions.

How Financial Consultants Help Avoid Mistakes

Assessing individual circumstances and goals – As this process is a very personal and can be sensitive, trust is key here.  Providing a reasonably transparent sharing is important for the financial consultant to provide personal and suitable advice tailored to different life stages.

With access to updated financial products and industry outlook, a financial consultant can tap on resources to offer a more balanced portfolio management. This will include mitigating appropriate risk levels, based on age and financial goals, to optimise investment diversification and returns.

Insurance planning expertise includes

• Ensuring adequate coverage for various life scenarios
• Explaining national schemes and supplementary options
• Regular financial review and adjustments
• Monitoring and adapting plans as life circumstances change
• Keeping clients informed about market trends and opportunities
• Debt management strategies
• Advising on efficient debt repayment methods
• Helping to improve credit scores for better financial opportunities