Start early to plan million-dollar goals

Whenever people learn that Ms Tan Siew Lee heads OCBC Bank's wealth management team, they always think that she serves only very rich customers.

She says: "The word 'wealth' is a very misunderstood word in banking. I have a customer who tells me that wealth is about the power to spend for wealthy people. So wealth management sounds like it is only for the rich people."

It is precisely such perceptions that inspired her team to do things differently. So instead of using the world "wealth", OCBC chooses the term "life goals" in its campaign to let customers know that wealth management simply means doing financial planning to achieve the outcome that they want.

And for most people, their important life goals are having a good retirement, enough funds for the children's education and legacy planning for their families.

"Let's face it. People don't usually just walk into the bank and ask us to help them plan their retirement," says Ms Tan. "This process takes time and many working people are usually too busy to even think about retirement."

So for the past two years, OCBC has been using the soft approach by providing interactive planning tools online so that customers can check and test their own financial stability.

This has proved to be a good move because many of the bank's Internet banking customers begin to input their financial data themselves, which in turn speeds up the planning process when they turn up at the bank later.

"Many of our customers tell us through this exercise that they want to have about $3,000 to spend each month when they retire. That's why we came up with the amount $1.3 million because that's how much you need if you want that for the next 20 years," adds Ms Tan, noting that the sum has also factored in the rate of inflation.

This resulted in the bank's recent campaign, which featured three friends discussing their retirement holiday plans. The bank hopes to remind Singaporeans in a tongue-in-cheek manner that they should start planning for retirement now rather than later, so they can achieve their goals.

Not surprisingly, there are some customers who "couldn't come to terms" with this amount and they choose not to do anything instead.

Ms Tan says: "My advice to our customers is, don't be too fixated with the number. Come and talk to us and we will help you. The most important thing is the willingness to start planning. 

BETTER TO START EARLY

Some feel that their financial gap is too big and so they feel discouraged and do not want to take the first step, but our staff always share that it is always better to start as early as possible. Through the power of compounding and regular savings and investments, their goal might not be as far away as they think.

MS TAN SIEW LEE, head of OCBC’s wealth management team, on why some customers have not

"After all, the planning that is done now is meant to make you happy later on when you retire."

Invest posed some questions to Ms Tan on several issues raised by the campaign.

Q Who needs the most help when it comes to planning for retirement?

A Many Singaporeans underestimate the amount they need to save up for their retirement as they may have underestimated the monthly expenses required for retirement and the impact of inflation on the purchasing power of the money that they save. This fact is brought further to light in the "OCBC Financial wellness index 2019", which found that 73 per cent of Singaporeans are not on track with their retirement plans.

In particular, we hope to help those in their 30s and 40s because these folks are likely to need more resources for their own families if they are married, as well as to take care of their parents. If they start to plan early, they stand a much higher chance of achieving their targets as their investments have more years to grow.

 
 
 

Q How did your team arrive at the figure of $1.3 million?

A The assumptions that we use are as follow:

• Customer's age: 40

• Number of years to retirement: 20

• Number of years spent in retirement: 20

• Inflation rate: 3 per cent.

• The amount that many customers say they want to have monthly: $3,000 (in present-day amount)

So to derive the total amount that is needed, we need to calculate the future value of the $3,000 monthly expense in the next 20 years x 12 months x 20 years spent in retirement. And that amount would come out to about $1.3 million.

Q How does OCBC help customers achieve this?

A Our approach follows three key principles - managing, safeguarding and building/growing wealth.

For liquid funds, we advise customers to place them in higher-yielding deposit accounts.

We also tell them the importance of having enough insurance coverage to cover any unforeseen circumstances.

Finally, we advise them how to build and grow their wealth by using suitable financial products in order for them to meet their goals.

Ms Tan Siew Lee, head of OCBC’s wealth management team.
Ms Tan Siew Lee, head of OCBC’s wealth management team.

Q What financial insights did your team gain by speaking to these customers?

A Thanks to the many campaigns by the Government, we find that generally Singaporeans are very good savers. They know the importance of retirement planning but many do not know how to start.

Some feel that their financial gap is too big and so they feel discouraged and do not want to take the first step, but our staff always share that it is always better to start as early as possible. Through the power of compounding and regular savings and investments, their goal might not be as far away as they think. After all, making any form of progress towards narrowing their gap is better than not taking any action.

Finally many customers have competing financial priorities, such as planning for their children's education, and so saving for retirement does not seem so urgent. But it is precisely that - the sooner you start, your money will have more time to grow and there is a higher chance of reaching your goal.

Q Is OCBC also encouraging all its employees to do likewise?

A We believe in our staff being the first advocates of our products and solutions.

The OCBC Life Goals programme has been widely marketed to our staff since its launch in 2016. For example, we conducted a special staff event in 2018 which included free health screenings, talks by the CPF Board and how our programme can help our staff and customers. The event was a big success with more than 400 staff attending the sessions. We continue to engage our staff in conversations.

Q Any last word to those who still have not done anything for their retirement?

A Do not be intimidated by the amount that is needed for your retirement, or think that it is a life event which is still far away. Rather, leverage the power of compounding - the earlier you take steps towards planning for your retirement, the higher the chance of you being able to achieve your desired lifestyle.

What you really need to do is to set aside some time to plan for this so that life will be a bit easier when you retire. So come and talk to us. Even if you can't go to our banks, make an appointment for our personal financial consultants to pay you a visit at your workplace.

A version of this article appeared in the print edition of The Sunday Times on March 15, 2020, with the headline 'Start early to plan million-dollar goals'. Subscribe