Wealth Management Singapore

CPFIS Changes

Starting from 1st July 2010, the first $40,000 of members’ Special Account(SA) balances will no longer be allowed for investments. The previous limit for 2009 is $30,000.

There is no change to the requirement for members to set aside $20,000 in the Ordinary Account (OA) before they can invest their Ordinary Account monies.

Members will still be able to use sums above $40,000 in their SA to invest. If you have already bought investments under CPFIS-SA but do not have $40,000 in your SA, you will not be required to sell them. However, when you liquidate these investments, you would not be able to re-invest them unless you have at least $40,000 in your SA. Additionally, standing instructions for monthly deductions of SA into investments will cease if there is less than S40,000 in your SA.

CPF Interest Rates

CPF Interest Rates (01 Apr 2010 to 30 Jun 2010)(reviewed quarterly)
Ordinary Account – 2.50%
Special & Medisave Accounts – 4.00%

CPF Interest Rates (01 Jan 2010 to 31 Dec 2010)(reviewed yearly)
Retirement Account – 4.00%

The Government will maintain the 4% p.a. minimum rate for interest earned on all Special and Medisave Accounts (SMA) monies and Retirement Account (RA) monies until 31 December 2010. After which, a 2.5% minimum rate will apply for all CPF accounts.

In addition, an extra 1% interest will be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the OA and the rest on SMA or RA. The extra interest from the OA will go into the member’s SMA or RA to improve his retirement savings.

Universal Life Insurance can be used for dividing your estate equally as was done in this case. The same solutions apply for situations where other single major asset, such as property, forms the major part of your estate.

Mr Tan is approaching 65 and wishes to do some estate planning. His estate consisted of a business, valued at $8 million, a landed property worth $2.5 million and $2 million in cash. Mr Tan has a wife, two sons and a daughter. He is semi-retired from the business and handing the business over to the eldest son, who is the only one interested in running the business.

He is not worried about the wife, should he pass away, as she is close to the children and has ample savings. However, he is worried about how he can distribute the estate equally. The main worry is the business. Should he hand major ownership of the business to the eldest son, it will not be fair. Should he distribute the business equally, the two youngest children will be more interested to sell the business. This will dilute the ownership of the business and disrupt expansion plans the eldest son has. Secondly, it will be difficult to split the inheritance of the landed property.

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Markets
The MSCI Asia Pacific Index has rallied in the past six weeks as concern over monetary tightening and Greece’s debt receded, and as companies reported better-than-expected earnings. The Index has gained about 9.5 percent from its lowest level in more than two months on Feb. 8, as better-than-estimated U.S. employment data and a pledge of support from French President Nicolas Sarkozy for debt-stricken Greece bolstered confidence in the global recovery.

The average price of stocks in the index has risen to about 19 times estimated earnings from 18 at February’s low. The world economy will expand 3.9 percent this year and 4.3 percent in 2011, following a contraction of 0.8 percent in 2009, according to IMF estimates released in January.

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A recent article from Paul Sullivan a dedicated reporter covering high-net-worth investors for New York Times, discussed about the importance of looking at hedging the Human Capital of the client, not just the Investment Portfolio.

Learning How to Hedge Yourself, and Not Just Your Portfolio

The idea of hedging a person’s future potential income is not new. This is the sole basis of insurance. In the earlier days, insurance companies have been championing this, though their more recent focus have unfortunately became advertising and enticing customers with promotions.

Here are some thought provoking ideas in the piece.

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The following is a real life case study.

Mdm Hayashi is 60 years old. She was the second wife of her deceased husband, late Mr Cheong, who was also her second husband. She married Mr Cheong when she was in her late forties and Mr Cheong in his early fifties. She has 2 adult children still in Japan from her first marriage and Mr Cheong has 2 adult children from his first marriage living and working in Singapore.

When Mr Cheong passed away 3 years ago, he left in his Will 55% of his assets to Mdm Hayashi and the rest to his 2 children. Mdm Hayashi’s current networth of $5 million is almost fully from this inheritance. Mr Cheong’s 2 children are both doing really well financially. However, it is Mdm Hayashi’s wish and the step children’s expectation that upon Mdm Hayashi’s passing, most of the wealth from Mr Cheong should be inherited by the step children instead of Mdm Hayashi’s Japanese biological children.

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Recently, I have been asked this question by a friend of mine. “What can you do that Prudential cannot do?” It is not an easy question to answer especially with when the public have preconceived impressions. Let me answer the question here.

Prudential is a huge company. If Prudential is willing, there is certainly very little that they cannot achieve. However, the insurance product provider with an asset management arm, is not interested in several aspects of wealth management business. For insurance companies, the sales force, insurance agents, are not under the companies’ payroll. Therefore, the sales force should not be mistaken for Prudential itself. I will rephrase the question to, “What can I provide that other Insurance Advisers, even other Financial Advisers cannot?”

There are a few areas:
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