Better To Be An Academically Uninclined Female In Singapore?

Jack and Jane were the best of friends in secondary school. Jack had always been the smarter guy who scored all As for his exams while Jane would be struggling to get just a B grade. Jack scored 8 points for O'Levels while Jane scored 20. As expected, Jack got into a top junior college while Jane enrolled at a polytechnic. Few years later, Jack achieved distinctions for his A'level exams and got accepted into a local university while Jane managed to earn her diploma and enrolled to a part-time private university programme. 

Fast forward a few years, Jack finally graduated from the local university and began looking for a job. He secured a job interview and when he arrived at the office in a tailored suit , he saw Jane. Jane was one of the interviewers. What happened?

It is proven time and time again that academic performance does not always guarantee career success. All things being equal, is the light at the end of the tunnel brighter for an academically uninclined female in Singapore? Females in Singapore have a 2 year advantage over guys who served NS. In addition to the shorter duration of a private university course compared to a local university's, private universities also offer part time degree courses, allowing students to take up a full time job in the day and gain valuable working experience while beefing up his/her resume. 

The timelines below show a clearer view of the opportunity costs of serving National Service and taking up a full time university programme :

	JC To Full-Time Local University Route
	Female	Male - Jack
Age 12	PSLE	PSLE
Age 16	O'Level	O'Level
Age 18	A'Level	A'Level
Age 19	Start of University Year 1 (June)	Army
Age 20	Start of University Year 2	Army
Age 21	Start of University Year 3	Start of University Year 1 (June)
Age 22	Start of University Year 4	Start of University Year 2
Age 23	End of University Year 4 (June)	Start of University Year 3
Age 24	First year of work @ $33600/year	Start of University Year 4
Age 25	2nd year of work @ $36000/year	End of University Year 4 (June)
Total Salary earned by age 25	$69,600.00	$0.00
Amt saved @ 20% savings rate	$13,920.00	$0.00

	Diploma to Part-Time Private University Route
	Female - Jane	Male
Age 12	PSLE	PSLE
Age 16	O'Level	O'Level
Age 18	Polytechnic 2nd year	Polytechnic 2nd year
Age 19	Earned diploma	Earned diploma
Age 20	Part Time Degree + Full Time Work @ $26400/year	Army
Age 21	Part Time Degree + Full Time Work @ $27720/year	Army
Age 22	Part Time Degree + Full Time Work @ $29106/year	Part Time Degree + Full Time Work @ $26400/year
Age 23	Full time work @ $31200/year	Part Time Degree + Full Time Work @ $27720/year
Age 24	Full time work @ $32760/year	Part Time Degree + Full Time Work @ $29106/year
Age 25	Full Time work @ $34398/year	Full time work @ $31200/year
Total Salary earned by age 25	$181,584.00	$31,200.00
Amt saved @ 20% savings rate	$36,317.00	$6,240.00

Assumptions have to be made as there are too many variations. As such, I came up with the following non-exhaustive list of assumptions for the tables above :

• No part-time job and no money saved in the 2 years of army, 3 years of diploma and 4 years of  local university
• No year-end bonus
• Annual salary increment of 5%
• Salary of full time job after diploma = $2200/month or $26400/year
• Salary of full time job after part time private university = $2600/month or $31200/year
• Salary of full time job after full time local university = $2800/month or $33600/year
• Full time job is in private sector : Male with NS same pay as female of the same rank in the company 
• Private University : 3 year course
• Local University : 4 year course
• Total tuition fees for Private & Local University assumed to be the same

In addition to the salary earned and amount saved, Jane has already accumulated 6 years of full-time working experience at the time when Jack graduated from a local university. When will Jack be able catch up?

Are Personal Bankers Qualified Enough?

Personal Bankers / Personal Financial Consultants / Personal Wealth Managers are the sales people in a bank branch who promote all kinds of banking products which include unit trusts, insurance, loans, structured deposits, etc. Walk into any bank branch and you will see young and driven personal bankers dressed in corporate wear soliciting walk-in customers or sitting in their cubicles servicing the mass market customers.

Since personal bankers are on the front line of a bank recommending financial products to potentially ignorant consumers, we naturally assume they have adequate financial knowledge or at least a degree in finance or other related majors. However, a simple search on JobStreet will reveal that the minimum qualification for personal bankers is a degree or diploma in any discipline. In addition, candidates are required to have a minimum 1 year of sales experience.

Personal bankers are required to pass the CMFAS exams (all MCQs) and go through some form of sales training for about a month before they are eligible to start selling banking products. I personally have taken the CMFAS HI, M5, M8 & M9 exams and I can say that the exams alone are insufficient to equip a person with sufficient financial knowledge. The bulk of the CFMAS syllabus is on rules and regulations rather than finance topics.

From what my personal banker friend told me, there are a number of personal bankers who have non-finance related degrees such as geography, engineering, etc. With insufficient financial knowledge, personal bankers might not be able to fully comprehend and explain the inherent risks of certain products to customers. In a desperate attempt to hit sales target, some personal bankers start using past performance to paint a bright outlook on a fund's future performance or comparing interest rates on savings deposits with potential returns of a bond/equity fund without emphasizing on the risks involved.

The Lehman Brothers saga in 2008 exemplified this problem. Investigation findings on the sale and marketing on structured  notes linked to Lehman Brothers released by MAS stated that there were insufficient steps taken by some financial institutions to ensure that all their financial advisory representatives were properly trained before marketing and selling the product.  Also, from the many descriptions given by investors with regards to the information the received from sales representatives, it is clear that there were misrepresentation of this product.

Banks should have more stringent requirements on hiring personal bankers and have a more detailed and extensive training program. The sales target of personal bankers puts them under such high pressure that closing the deal overrides everything else. It is well known that retail banks have a high turnover rate for front line staff as many of them are unable to hit ridiculous sales target. For example, bankers of local bank XXX are given monthly sales targets which are denominated by 'revenue points'. Each dollar of sales charge or revenue earned equates to 1 revenue point. Monthly sales target could be to achieve 30,000 revenue points or more. This means that a personal banker will have to sell at least $20,000 worth of unit trusts everyday!

So are personal bankers considered finance professionals? Or are they just typical sales people? Many of my friends in university have applied to retail banking programs such as UOB Personal Banking Associate Programme or Standard Chartered Consumer Banking Fast Track Programme. What they might not understand is that it might not be as prestigious as it sounds and the chances of moving from retail banking to private banking are slim.

Who Are The Supercar Owners?

KPO Cafe Bar

Whenever I walk past the 'KPO Cafe Bar' situated beside Orchard Central, the fleet of supercars parked outside the bar never fails to impress me. I have seen cars like Audi R8, Lamborghini Aventador, Ferrari 458 Italia, Nissan GTR, BMW M3, Maserati GranTurismo and different models of Porsche, BMW, Mercedes, etc parked outside the bar. It subsequently piqued my curiosity on who are the people who own them and I started stealing glances of the customers drinking inside the bar and on the open air balcony.

Here are some of my observations:

• People dressed in their business attire can be seen drinking at the bar as early as 4-5pm
• About 30 to 50% of the customers are Caucasians
• Majority of them are in their early 30s to mid 40s

A first hand GTR already costs $350,000 including COE. Monthly maintenance is probably more than $4,000 including petrol, road tax, car insurance, ERP, etc. And we're only talking about a GTR which costs $350,000 here. What about an Audi R8 Spyder which costs twice as much? So who are these supercar owners? What do they do? How can they afford a supercar?

I feel that there are only a few possibilities:

1. They are successful executives (lawyers, surgeons, bankers, etc)
2. They are successful business owners or 2nd generation business owners
3. Supercar belongs to father/family
4. They are overleveraged 

However, from my personal experience, not every wealthy person owns a supercar. For example, the owner of a venture capital firm that I interned at drives a humble Toyota Camry despite having a personal net worth of more than $30 million. The father of my good friend who earns more than a million dollars a year and stays in a Good Class Bungalow owns a Audi A4 and a Volvo S80.

Living in a country with the world's highest concentration of millionaires and the largest proportion of wealthy expatriates where 54% of them earns US$200,000 or more,  I will have to work harder, save harder and invest smarter.

How Much Can A Middle Class Family Save?

According to an article published on Yahoo News, "People who earn S$4,000-S$7,000 are considered middle and upper middle classes." I could not find the household income range for a middle class family and thus, I will take the $7,000 (highest salary range for a middle class individual) as the combined income of a typical middle class family.  This makes more sense as the combined income of 2 upper middle class individuals would amount to $14,000, which is considered quite well to do.

Hypothetical scenario:

• Newly wed couple in their mid thirties making a combined $7,000 a month. Combined savings of $50,000 left after wedding, renovation and honeymoon.
• CPF contribution (20%) is $1,400 per month or $1,000 if only one person is working. (Salary ceiling for CPF contribution is  $5,000). 
• Parents allowance of $500 per month
• Bought a second hand car with monthly expenditure of $1300 (including  monthly installment, yearly insurance, road tax, petrol, hdb parking, ERP + coupons, maintenance)
• Bought a resale flat and take up a loan of $300,000 at 2% per annum interest for 20 years -Monthly installment is $1,518 in this case. For an income of $7,000, monthly contribution to ordinary account is $1,610 or $1,150 if only one person is working (cash top up of $368 monthly)
• Electricity bills = $150 per month
• Internet + cable tv + handphone bills = $200 per month
• Familly insurance = $300 per month
• Monthly food expenditure = $900 - $5 for each meal per person. Assuming 30 days a month and 3 meals per day.
• Has a new born baby - assume monthly child expenses to be $500 per month at this stage. Note that this expense will increase over time due to enrichment courses, school fees, etc as the baby grows older.
• If the couple wants to sponsor child's future university fees in 20 years, saving $300 per month for 20 years would amount to $72,000. (current university tuition fees is around $30,000 to $40,000 excluding other miscellaneous fees such as textbooks, hostel fees, etc)

I did not include caregiving expenses or additional allowance for parents should they take care of the couple's child. So to simplify things, let's just assume the husband is the sole breadwinner and his wife is a full time housewife. By assuming one person is working, CPF contribution will reduce by $400 while cash payment for mortgage will increase by $386 and so, there is essentially not much of a difference. 

Tabulating the raw data above:

Assuming income and expenses remain stagnant, the family will be able to save $1,482 every month. Also, assuming that they started out with $50,000 and are able to generate a 3% return consistently on their savings, they will be able to accumulate $578,064 by the end of 20 years. Personally, I feel that this amount is far from enough for a comfortable retirement in Singapore.

As mentioned, this is only a hypothetical scenario for a middle class family. The family might have more than 1 kid or not give birth at all. There might be unforeseen circumstances such as illnesses, retrenchment, etc. There could also be positive events such as salary increment, job promotion or even striking lottery. So just take this with a pinch of salt.

Cheers!