Question:
What are the advantages of investing through Providend when we can invest directly and at a lower cost through ETFs such as CSPX and VWRA? I’m assuming that Providend also invests in similar funds.
In other words, why should the average retail investor—who religiously Dollar-Cost-Averages a healthy percentage of their monthly income into diversified ETFs—be your client, as opposed to DIY-ing (Doing-It-Yourself)? Thanks!
Answer from our CEO, Christopher Tan:
Thank you for joining in for this AMA and for your question.
The truth is, if all a person is looking for is to execute investments, then DIYing will be much cheaper. This person should not use Providend or, for that matter, any financial adviser or wealth management firm.
There are two options for DIYing:
- Brokerage accounts like IBKR, SAXO, Tiger, Moomoo: If one knows exactly how to create their own portfolio’s asset allocation that will give them the expected return they want and the volatility risk they can accept, and they know exactly which instruments and ETFs to use, and know how to continue to monitor these instruments in terms of tracking errors, performance behaviours, and do not mind executing the trades themselves, including rebalancing, then this is the lowest cost way to do it.
- Digital advisers such as Stashaway, Endowus: If one only wants an investment execution platform but does not want to do the work of creating portfolios and curating the instruments, and also does not want the trouble of executing each trade and having to rebalance the portfolios as and when needed, then using these digital platforms would be lower cost than using any human advisers, and it is the next cheapest cost option. However, one does need to spend some time understanding the investment philosophy of each of these digital advisers because they are all different. One might also need to know the different funds and instruments (Endowus is like a fund super market with different choices of funds) before buying them.
When a client comes to Providend, they expect us to do all the above and more.
Clients come to Providend not just wanting to do investments because they know that investing is just part of the larger wealth picture. They are looking at us to go deep into their lives, work out a comprehensive wealth plan covering every aspect of their wealth needs, execute them, and review with them regularly.
When a client pays us a fee for advice, they are paying:
1. For Clarity on What Matters to Them in Life and What Needs to Be Done (Not Just Financially) to Do Those Things.
We do this in the first meeting. We ask questions with regard to their important relationships, their hobbies and interests, their life goals and what really matters to them that will make them happy, their concerns if they pass away, or become sick physically or mentally.
We ask them their estate and legacy planning concerns, we ask them their thoughts on financial independence, retirement, and their children’s education.
We ask them about their investment experience so far, and through this meeting, we ask them questions that they can’t ask themselves to have clarity on what, to them, is the good life that they want to live.
You can’t do this via the stockbroking and digital platforms.
2. For Clarity on Their Current Financial/Non-financial Position and What Needs to Be Done to Enable Them to Do Those Things That Matter.
We do this in the first and also second meeting. We find out all their assets and liabilities, their income and expenses. We look at all their insurance policies, their investments, their wills and trust deed if they have, their loans, anything financial.
We then analyse everything and present to the client an analysis of their current position. We run through several scenarios that can enable them to live the good life that they want and address their concerns – everything that we discussed in point one above.
3. For a Comprehensively Written Wealth Plan That Provides a Roadmap as Well as Executes the Plan Well for Them to Achieve Their Financial Goals and as a Result Enable Them to Achieve Their Life Goals.
We do this in the third meeting. After which, they go back and think about what has been discussed in the past 1-1.5 months and then make some serious life and financial decisions.
They then return for the fourth meeting to execute the plans. After which, about another 45 days later from the time of execution, we meet them again to review everything that has been put in place and recap the reasons.
The initial advisory is now complete after about two to three months. Clients then come back for regular progress meetings.
In the meantime, markets will go through the cycles of up and down. We execute a program called Turbulence Management Plan not just to educate, update, and hold our clients’ hands during these difficult periods, the investment team also plays their part in ensuring the portfolios and the underlying instruments are behaving in a way whereby it should behave.
In addition, on a daily basis, the investment team is monitoring every instrument that we use, including speaking with the managers, and they also will not hesitate to replace them with other instruments or more instruments to make the portfolio more robust. You can also read about why a robust estimate of future returns is important for investment planning here.
4. For Our Independent Advice, Not Conflicted by Product Commissions.
Learn how we mitigate the conflicts of interest in the financial advisory industry through our fee-only model here.
5. For a Safe Pair of Hands and a Second Pair of Eyes to Help Them Avoid Costly Financial Mistakes.
Many times, our clients bring to us recommendations by their other financial institutions, which they may still want a relationship with. They look at us as their sole trusted adviser because we are fee-only. They look to us to give them our opinions on whether they can go ahead with the recommendations from other financial institutions.
6. For Ongoing Conversations, Work, and Advice to Help Them Achieve Their Goals in the Most Reliable Manner.
At Providend, we believe it is more important to look at the reliability and sufficiency of your investment returns to meet your non-negotiable life goals and events. We do not want to put our clients through the stress of unnecessary risks for the sake of excessive returns that they do not need to achieve their life goals.
Learn more by reading our investment eBook titled “A More Reliable Way to Get Enough Investment Returns: Even During Times of Market Uncertainty” here.
7. For Peace of Mind, for Them to Save Time and Do the Things They Rather Do Today.
Some of our clients are financially savvy, and they may have done many of the things above on their own. But it is taking up too much of their time, and they want to outsource this to a provider who they believe they can trust and also shares the same philosophy. So they come to Providend to do that.
I hope the above answers give a clearer picture of the value of our advice. We perform quite a bit of work for our clients beyond just investing and buying funds. You can also read this article that I wrote on why we charge a higher fee than Robo-Advisors.
At the end of the day, an investor must know whether what we do is what he is looking for.
Thank you!
Our CEO and Founder, Chris, noticed interest and questions on the SingaporeFI subreddit for some time and had the opportunity to conduct an “Ask Me Anything” (AMA) session in October 2023. The above question was selected from the list of many questions that were asked.
If you are interested in viewing the full Reddit list of questions, you can visit this link.
Christopher Tan, is Chief Executive Officer of Providend Ltd, Southeast Asia’s first fee-only comprehensive wealth advisory firm and author of the book “Money Wisdom: Simple Truths for Financial Wellness“. He is also a Certified Ikigai Tribe Coach.
For more related resources, check out:
1. Money Wisdom Podcast: Wealth Management to Reach Your Unique Life Goals Reliably
2. Investing in the S&P 500 Alone is Not the Silver Bullet
3. Generating Superior Returns vs Just Enough: Focusing on Your Goals When You Invest
Through deep conversations with our advisers, you will gain clarity on what matters most in life and what needs to be done to live a good life, both financially and non-financially. Learn more about our investment philosophy here.
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.
