A survey by the CFA Institute found that only 10% of retail investors in Singapore believe that their financial advisors always have their clients’ best interests in mind. Moreover, less than half of retail investors trust the financial services industry as a whole. This could be due to a high fee-based compensation system that encourages advisors to facilitate transactions rather than focusing on benefiting their clients. However, there are legitimate alternatives to growing your assets without the help of a professional financial advisor. Below, we discuss some investment strategies for skeptical investors in Singapore.
1. Follow the “crowd”
In investing, literally following the crowd can be a risky tactic. However, crowdfunding can be a great way to grow your wealth while maintaining a unique and diversified portfolio, especially if you are interested in investment opportunities that most financial advisors cannot provide. There are several crowdfunding platforms in Singapore that offer private investors the opportunity to invest in local SMEs and startups. These platforms give individuals access to deals previously exclusive to banks and private equity firms, with the potential for very high returns (15-30% per year) and a minimum initial investment of S$50.
For example, Funding Societies is a platform that will intrigue even the most cynical investor because its management team co-invests in every deal it offers to investors. This suggests that the platform is aligned with investors’ interests and addresses a key concern highlighted in the CFA Institute survey. Fees are also fairly low at 18% of interest. As with any investment, crowdfunding campaigns must be analyzed carefully. Investors need to consider the strategic, financial and risk profile of the companies they are considering. We also recommend spreading your investments across multiple crowdfunding campaigns to spread risk.
2. Robots are cheaper than humans
Robo-advisors offer another promising investment mechanism. These automated investment platforms can offer customizable investment strategies with lower fees than traditional advisors. For example, some robo-advisors in Singapore charge between 0.2 and 1%, compared to traditional advisors’ fees of 2.5 to 5%. What’s more, robo-advisors typically offer solid annual returns of 4-7%. While CFA Institute research initially suggested that robo-advisors were less trusted than private wealth managers and financial planners globally, now that these platforms are becoming more widely used, more consumers are evaluating robo-advisors as an alternative to financial advisors.
3. Take the problem into your own hands and open a brokerage account.
Individual investors who don’t want to pay for advice and can do their own research should consider opening an online brokerage account. Globally, 84% of CFA Institute respondents said full disclosure of fees and other expenses was one of the most important criteria for trusting an investment firm. However, only 48% were satisfied with how the company disclosed these fees. Brokerage accounts also incur fees, but some online brokerages do. Some companies, such as SAXO Capital Markets, charge much lower fees than others and fully disclose all costs associated with trading securities on their platforms. Learning the basics of investing takes time and effort, but opening a brokerage account gives individuals the opportunity to do their own research and avoid advisor fees.
4. Let the experts do the research without paying a fee
Exchange-traded funds (ETFs) are funds created by pooling investors’ money that is professionally invested in a group of securities. ETFs are designed to give investors a diverse way to track a particular industry. What’s more, investors don’t have to pay fees for ETFs and can easily purchase them through an online brokerage account with standard transaction fees. ETFs are a cost-effective way to invest in the stock market without doing too much research. However, returns vary widely between ETFs, so you’ll need to do some research before choosing an industry (such as Asian tech stocks) or asset class (such as gold) to invest in.