Help savers be responsible for own financial planning

It is encouraging to note that the Government acknowledges the importance of minimising fees that ordinary savers pay towards their retirement funds ("Big opportunity in Asia for insurers, says Tharman"; last Tuesday).

However, it would be futile to leave such responsibility solely in the hands of insurers, who are the recipients of revenue generated through such fees.

A more sustainable solution must entail the ordinary saver being responsible for his own financial planning, so as to cut out any unnecessary middlemen and associated costs.

For this to happen, two main issues need to be addressed.

First, the level of financial literacy among the population needs to be improved.

Formal education in this area could be seamlessly integrated into the maths syllabus in schools, equipping young people with the knowledge and skills to make sound financial decisions.

Second, ordinary savers need to have low-cost direct access to capital markets, rather than having to rely on insurers or fund houses.

Even for a financially literate individual who merely wishes to dollar-cost average into a broad market index fund, the transactional costs of doing so are often prohibitively high, deterring the individual from executing a prudent and self-reliant long-term strategy.

Other developed markets such as the United States offer consumers a plethora of low-cost retirement solutions, from robo-advisers to automated investment asset allocation and zero-fee brokerages, which give their ordinary savers a better shot at planning for their retirement.

As the need for retirement planning becomes more relevant, with our ageing population and longer life expectancy, it would be beneficial to explore how such solutions can be offered in our local context.

Victor Vong Hansheng

A version of this article appeared in the print edition of The Straits Times on June 20, 2016, with the headline 'Help savers be responsible for own financial planning'. Print Edition | Subscribe