Friday, 23 September 2016

Changing jobs

I have held back from writing about this recent development in my professional life because it's quite personal and I wasn't sure how useful it would be on this blog. But I figured a change in jobs is a significant event because it can have an immediate and long-term impact on your salary income. Which makes this a personal finance topic.

Newsflash: I will be resigning from my current position in an accounting firm and taking up a new position in a bank. This means I'm finally joining my wife in the banking industry, which is something I never imagined doing.

I have always believed in employment risk diversification to reduce the possibility of both my wife and I being retrenched at the same time. Working in different fields and industries is a good way to achieve that. Protecting at least one source of salary income is a high priority for us to be able to navigate an economic downturn and recession.

So why have I gone against my risk diversification philosophy? I have considered all these factors that led to my decision and figured it would be a good reference point to check back on after working in my new job. Just to see how they played out.
1. Is the salary income higher?

I always knew salary incomes in the accounting industry are lower than those in the banking industry. And I could justify that by convincing myself that my technical skills and knowledge will increase at a faster pace. At some point in time, I will be able to catch up on the gap in the salary income and make up for it. Besides, I figured there was more room and scope for professional development in an accounting firm.

I have come to realise that this is not entirely true. I can say this because my wife and I entered into the banking and accounting industries respectively with similar academic qualifications, achieved the same professional qualifications and our career paths have diverted.

It's true that I picked up compliance and advisory technical skills and knowledge in an accounting firm. But my wife has also picked up specialist skills and knowledge in a bank. Neither is less valuable than the other. However, a lower starting salary and slower increase in salary due to a fixed promotion ladder has resulted in an ever increasing gap with my wife's salary.

I'm happy to have a wife that out earns me and I don't understand why society views it as an issue to be discussed. I could go on and on about the benefits of a higher earning wife but that's not the point of this post. What's important is that I start pulling my weight to address this salary gap. Not just for my wife but for myself as well.

I agree that money should not be the most important factor in a job. But it is one of the main employee motivation factors for me. The fact that I can be paid 15% more by making a lateral move from an accounting firm to a bank makes me wonder how much my lost earnings are from not having done so earlier.

2. What about the current job crisis in the banking industry?

This is a good question posed by my colleagues. Why move to the banking industry that is currently going through a job crisis with increasing retrenchment statistics? The problem for me is revenues are already declining in my current team and will eventually cause a restructure. I might as well deal with that problem now and move to an external role with demand for my skills and knowledge.

This actually answers the question above. It depends on which area of the bank I am moving to. If that division is in decline, I am going to run into the same issues eventually. However, if it's in a growing area such as regulatory compliance, there's potential for longer-term application of my expertise.

3. Would my professional development plateau?

I will admit that my professional development might stagnate. But it's very much up to me to decide whether that happens. The work environment in an accounting firm pushes you to learn but you have to push yourself to learn in a bank. It's easy to keep doing what you are doing and not pick up new skills and knowledge.

In short, there will be a greater learning inertia at a bank but I have to be active in overcoming it. Besides, failing to do will probably result in retrenchment so I might as well give it my all.

4. How does this fit into my personal finance goals?

One of my biggest weaknesses personally and professionally is that I get bored with what I'm doing quickly. This translates into me starting something and never finishing it properly. As you can imagine, doing that in your career can have disastrous consequences.

I have done my best to alleviate this by working in different aspects of the same field to keep myself interested in the job. But all these moving and jumping around in my job history will cost me in the long run for my career. Something my colleagues have made sure to point out to me.

This is what I have to say. Screw it. I only have one life and I'm going to learn as much as I can about as many things as I can until I find something that really fires me up. Actually, I might already have.

As a couple, our ability to generate salary income has contributed greatly to the growth in our asset portfolio. However, lifestyle inflation has eaten into our net worth by resulting in a large amount of liabilities.

The more I manage our personal finances on the assets, liabilities, income and expenses, the more I realise there's so much that I don't know. This is the case even when I am interested in learning about it. I can only imagine how much steeper the curve is for people who are not interested but still want to improve their personal finances.

I have to believe that what I learn and earn from my jobs will eventually result in me being able to contribute to improving the general personal finance management and education level of people in one form or another. This might result in me not having a traditional career path but I reckon it's something worth striving for.

Tuesday, 20 September 2016

Relevant FinTech startups for us

I'm a fan of the FinTech Revolution and I believe that FinTech startups will improve the quality of financial services provided to consumers. Before I go into any detail on specific ones that I find interesting and relevant, I should highlight that this is not a sponsored post.

In fact, none of my posts so far are sponsored. I have mentioned before that there are no plans thus far to monetise this blog. Besides, it's not self-hosted, has a basic design and there are no ads on it, which is not optimal for monetisation. Since I still rely on my full-time job for salary income, this is purely a hobby for now.

I'm exploring content partnerships but still find it too early to accept guest posts on my blog or even provide guest posts on other blogs. Besides, I like writing about how we approach personal finance & investments and other topics that interest me. However, the writing style is not likely to appeal to a wide range of audience.

The last post I wrote on FinTech as a topic was about my hopes for its development in Singapore. This was back in April 2016. Since then, I have been monitoring a few of the startups that I find relevant to us and discussed related topics in subsequent posts on:
  • Robo-advisors
  • P2P lending
  • Personal finance management
  • Government support on developing the FinTech industry

It's about time I provide more detail on why I follow certain FinTech startups or monitor the development of the industry at all.

1. Potential job or business opportunities

Since my wife and I work in the banking and accounting industries, we must remember that we are in the financial intermediary and professional services provider sectors. Which means our service industries rely on the growth & expansion of new & existing business industries.

It's important that we monitor business trends to assess their impacts not only for negative consequences on our jobs but also for potential opportunities. Make no mistake. The rise of the FinTech industry will probably result in the fall of certain divisions of the banking industry.

I doubt banks will ever allow themselves to become irrelevant in the new world but perhaps work with FinTech startups to tap into new growth areas. However, this also means some existing businesses of the banks will go into decline.

As for the accounting industry, reduced revenues from existing financial institutions will be offset by increased revenues from new financial institutions that will come under increased regulatory oversight and have more complex business service requirements.

That being said, the development of the FinTech industry in Singapore continues to be slow although the service demand by consumers and businesses are growing. Even though there are potential job or business opportunities in the FinTech industry, they can require transferrable skill sets that we have or completely different skills sets that we do not possess.

Perhaps we will only be consumers of services provided by FinTech startups for now. I will be interested to see whether we get more involved in the services creation aspect in the future. Definitely something to watch out for going forward.
2. Need for robo-advisor

It's become increasingly obvious that we are not allocating our cash efficiently. Our Dollar Cost Averaging (DCA) and Value Cost Averaging (VCA) strategies are effective but we are not deploying sufficient cash to make them work well.

We are probably too conservative and risk-averse despite having enough assets to be more aggressive. Fascinating how we let our emotions from feeling good about having more cash interfere with our logical objective to achieve higher returns since we have a long investment time horizon.

We will probably become more time-poor as we get older with additional family, work and social obligations. We have to implement an investing strategy on the side that is more automatic and allows us to deploy our excess cash.

We considered increasing our investment amounts for the POSB Invest-Saver but the high fees are a deterrent. Plus we would like to diversify away from Singapore equities since our jobs, property and a significant portion of our investment portfolio are already tied to the Singapore economy.

You can start to see how and where our needs are arising. A working couple that has some cash to invest but not enough to attract the attention of financial advisors and privilege or private bankers. And we refuse to believe that high fees and commissions are prerequisites for earning higher returns.

Enter the robo-advisors. Low cost, low minimum account online wealth management services that provide automated algorithm-based portfolio management advice without the use of human financial planners. The problem is what are the robo-advisors that are available to us here in Singapore.

The only relevant robo-advisor I could find for us is Smartly. You can refer to this post by Kevin (Turtle Investor) to know more about the progress on the launch of Smartly. Kevin also talks about how he can integrate a robo-advisor platform into his portfolio.

As for how I am planning to utilise Smartly, I will probably go for a high risk allocation of 80% global equity ETFs and 20% global bond ETFs. It would be even better if the selection of global equity and bond ETFs are entirely different from what I am already investing in using the Stan Chart online trading platform.

The fee structure is 1% for assets between S$0 - S$10,000, 0.7% for assets between S$10,000 - S$100,000 and 0.5% for assets above S$100,000. It's likely I will start investing with S$500 per month first i.e. S$400 for global equity ETFs and S$100 for global bond ETFs.

I'm okay to get hit with the 1% fee at the beginning since I intend to test the Smartly platform first. If it provides to be reliable, easy to use with a well-constructed portfolio to meet my requirements, I will increase the monthly investment amount over time. I'm happy to push even more funds into Smartly as long as it can prove itself as a viable option.

3. Need for personal finance management

We have a growing asset portfolio made up of real property, cash holdings, investments in shares, ETFs & bonds and retirement funds. We are finding ways to reduce our liabilities consisting of the housing loan, credit card debt, personal and property tax payable. Our income and expense types are also increasing with additional sources of income and lifestyle inflation.

Let's run through the various logins I have to do manually to check the balances and transactions:
  • Internet banking accounts of six banks to check my account balances, transaction histories, credit card statements
  • CPF to check my CPF balance and contribution history
  • Internet accounts of two bank brokerages and CDP to check my investment portfolio balances and transaction histories
After doing the above checks, I have to manually update the Google Sheet for the financial snapshot. Even though I build in tables and graphs to track the data over time for trend analysis, their capabilities are limited and quite static in nature.

It's one thing to collect data but another to analyse it. I can't really see the interaction between assets, liabilities, income and expenses, which is crucial to personal finance management. You cannot look at the results of actions to address one item in isolation as they affect each other. Understanding their relationships is key to overall improvement.

I also lack information on how well my efforts to balance the allocations of my asset portfolio between cash (investment vs on hand), real estate (property & REITs), shares (domestic vs international and industry sectors), ETFs (domestic vs international and geographical distributions) and bonds (corporate vs government) are working out. 

The only FinTech startup that I can find of relevance here is PiSight. Its flagship product PiMoney might provide a complete picture of our wealth and enable us to better manage our finances. It can apparently aggregate our savings, loans, credit cards and investments all in one place. I wonder whether PiMoney can provide insights or analysis on how we manage them as well.

For now, these are the immediate needs that we hope to address soon. After that, we might look into other FinTech startups such as MoolahSense that can provide alternative investment options like P2P loans. It's time we diversified our asset portfolio beyond real estate, equities and bonds.