Please grow up!

Today I received a call from a client of an orphan policy-holder. The original advisor, his brother in law, has left to join a reputable IFA firm in Singapore.

He wanted to know the value of his CPF investment-linked policy, as he needed the fund to sustain his mortgage. When I dutifully reported to him the information, he was upset. The current value is lower than the initial capital he put in 2 years ago.

"I was told by my brother in law that when I need the fund, I can cancel this anytime, and I won't lose the capital and 'interest'......, and now I need the money to pay my mortgage ..." The client told me. I felt a sense of deja vu. A young advisor trying to make a quick sale on investment, withhold important information to the client, and did not study the client's financial position in depth enough.

A few lessons I want to share:

1. Investment using CPF is a serious affair. Don't fall into the sales pitch: "no cash involve, anyway you can't touch your CPF, invest lah...."

2. If you really cannot reject the person uttering above sales pitch, because he/she is your football buddy or dream girl, use only a small portion of your CPF, i.e. not more than $5,000. And demand your football buddy or dream girl to write down all the heavenly promises of the "investment" for you to file. So that if the investment don't behave what is being promised, you have something to fall back on.

2. If you forsee a liquidity need on your CPF within 5 years, don't invest. Any serious investment needs time to generate the result. In Singapore context, make sure your mortgage is provided for before investing.

3. You earn interest on deposits, you make returns on investment. In deposits, your capital is preserved. In investment, your capital is not preserved. (capital guaranteed products will be discussed at another time, they are different and have their pros and cons)

To that advisor who did this to your sister and brother in law. I wish you well in your new career in the reputable IFA firm in Singapore, and please grow up!