Holistic planning pays off

OCBC Wealth Panelist Tan Siew Lee shares how starting early and being prudent about managing one’s finances are among the best ways to a secure retirement

In his early 40s, Mr Lee is starting to think about retirement. He is thinking about how he might like to wind down overtime, do everything that he did not have time for previously while still be able to enjoy his twilight years with his loved ones without constantly worrying about money.

The good news for Mr Lee is that he is in a very sound financial position, having built up a substantial nest egg after many years of investing.

As he started when he was in his 20s, he can look towards planning for early retirement.

“One should always start planning early for retirement as it allows you to take advantage of time and compounding to enhance the value of your funds,” says Ms Tan Siew Lee, Head, Wealth Management (Singapore), OCBC Bank.

“Whether you start small or big, you will be positively surprised by what compounding can do.”

Goal-based advisory

The first thing OCBC did was ascertain Mr Lee’s liquidity needs upon retirement by understanding the lifestyle he wants and other potential sources of income that he can draw on during his retirement.

“We believe every customer has a goal and purpose in mind when they come to us. We seek to understand the customer’s goals and work to establish a proper long-term plan to achieve those goals. In a lot of cases, customers may have more than one goal which overlap.

“Our goal-based advisory will take into consideration the customers’ overall financial status, objectives and risk tolerance, before customising a plan for them. As an on-going journey with our customers, there is the routine yearly review to take into account any financial or life-stage changes,” says Ms Tan.

The bank then helped Mr Lee build a portfolio of corporate bonds, and bond & equity funds — these generate steady income and are less volatile and risky. The diversified mix of bond funds and corporate bonds with varying maturity also gives him cash to reinvest at better coupon in a rising interest rate environment, Ms Tan explains.

“With interest rate being a key risk, we highlighted to the customer that he should maintain some liquidity and flexibility in case rates move up faster than expected, placing more pressure on bond prices.”

With a rounded understanding of the customer’s financial situation, needs and goals, the bank then guided the customer to build a portfolio that provides assurance and diversity, can offer stability of returns, provide income to fund his retirement and make provisions for legacy needs.

The portfolio advice is based on the bank’s house views, which are rigorously researched and debated by the OCBC Wealth Panel and provide the backdrop for the bank’s market outlook and product recommendations.

The bank delivers these market views and investment recommendations in easy-to-understand publications on a daily, weekly and monthly basis. These keep Premier Banking customers abreast of the ever-changing macro environment and inform customers about the most relevant investment offerings in line with the bank’s outlook. Relationship managers and investment specialists are also readily available to discuss and advise customers on these views and investment ideas.

Responsible risk taking

Regardless of the individual’s investment strategy, one thing that is consistent is OCBC’s core value of prudent or responsible risk-taking, which filters into its customer advisory process as well.

That means that the bank often stresses to customers that they should recognise and understand their financial situation and risk appetites.

For example, the current low-interest environment may be conducive and lucrative for leverage, but it can as easily turn against them during volatile times, explains Ms Tan.

“In our view, while taking risks is essential to yield higher returns, it is also important to balance risk-taking with adequate provisions to protect against unforeseen volatility,” she adds.

“Also, with interest rates likely to move higher in the coming years, investors will inevitably face higher financing costs.”

This is also part of the bank’s “Manage, Safeguard and Build” ethos of holistic retirement planning. The bank believes that individuals should be able to firstly, manage their cash flow; secondly, safeguard themselves, their families, assets and their ability to pay off liabilities; and thirdly, to build their retirement fund and grow their assets through investing.

With the increasing affluence and sophistication among the high net worth customers, there is a growing trend of integrating retirement planning into their wealth transfer goals, Ms Tan says.

Through financial innovation, OCBC’s customers are now able to employ certain financial solutions to create an estate for the next generation while maintaining their desired lifestyle during retirement.

With a wealth of investment and insurance products available, customisation remains essential. At OCBC, customers will have access to experienced insurance and investment specialists who work very closely with the relationship managers to tailor a retirement portfolio that is most suited for their needs and goals.

OCBC Premier Banking customers also receive regular wealth reports with views on market outlook and top investment ideas that are based on close monitoring of financial markets and economic conditions. The unified house-view is consolidated by its analysts.