Financial firm's chief aims to leave his heirs $1m
WHEN it comes to managing his retirement money, Mr Ben Fok prefers to ensure that his principal sum will remain intact for his heirs.
Said the chief executive of Grandtag Financial Consultancy: "I prefer a method where I can save enough money so that my retirement savings will generate enough income or cash flow to meet my expenses throughout retirement. Therefore, when I die, my retirement savings will still be available for my heirs."
Mr Fok, 46, explained: If an individual has accumulated a nest egg of $1 million and that generates an income stream of 5 per cent a year, this should provide a cash flow of $50,000 a year.
As long as his cash-flow needs do not exceed $50,000 a year after he retires, he should be able to maintain a portfolio value of $1 million at death. The money can then go to his heirs.
Retirement planning
MR BEN Fok sticks to a method where he can save enough money so that his retirement savings will generate enough income to meet his expenses throughout retirement.
For example, if an individual has accumulated a nest egg of $1 million and that generates an income stream of 5 per cent a year, this should provide a cash flow of $50,000 a year.
As long as his cash-flow needs do not exceed $50,000 a year after he retires, he should be able to maintain a portfolio value of $1 million at death. The money can then go to his heirs.
In contrast, some retirees slowly deplete their nest eggs over the course of their retirement years in order to meet expenses. Thus, when they die, there might be nothing left for their descendants.
Mr Fok's money habits have changed through the years. He recalled that, when he was a dealer at Fraser Securities in 1997, he put almost his entire savings in the stock market.
This was because the nature of his job made it all too tempting for him to trade with his own money. He was doing contra trades and wanted to make a quick buck.
"Whatever savings I had went into the stock market. I probably lost about $15,000. I was tempted to make quick money, but I also made quick losses," he said. "However, the experience taught me about defensive investment, where you go for fundamentally sound and undervalued stocks."
From 1998 to 2003, he was the executive director of Fraser Financial Planners, a subsidiary of Fraser Securities, after which he helped set up an independent wealth management firm.
He was with ipac financial planning Singapore for nearly two years as its director of wealth management before he joined Hong Kong-based Grandtag Financial Group as a shareholder in August last year. He is responsible for its South-east Asia operations.
The firm focuses on offering offshore financial products to high net-worth investors.
Mr Fok is married to housewife Sharon, 45, and they have two children.
Q What are your money habits?
A I save 10 per cent of my income. When I have other income, for example, from my part-time lectures, I put it aside and don't spend it. I am more of a saver now and I have a system: I save first, spend later.
As for investments, I started a regular savings plan in 1999 that involves investing $500 every month in a unit trust portfolio.
When I withdraw cash from the ATM, I usually take out $200 at a time, about three times a month. I use credit cards for most purchases and pay off the bills at the end of each month.
Q What financial planning have you done for yourself?
A I have invested in unit trusts and direct equities for wealth accumulation. I believe in diversification and asset allocation for growing my portfolio.
But I am starting to build up a portfolio of high-dividend stocks for passive income. I'm aiming for a minimum dividend yield of 5 per cent a year. Over time, I hope to rely on dividends to supplement my income. Because of the bull run over the past three years, the returns have averaged 12 per cent, but over the long term, I would be happy with 7 per cent.
Q What about insurance planning?
A I have two whole life and four term policies, with a total cover of $1 million. I also have a critical illness policy and I'm covered for $500,000. I've taken out a mortgage-reducing term policy for my home and health insurance for my family. The family's premiums amount to over $15,000 a year.
Q What's your investment philosophy?
A I learnt my lesson during the Asian financial crisis. Previously, I thought I could time the market by buying low and selling high, but now, I am a long-term investor. I invest in value stocks for the long term and buy on bad news.
When it comes to picking stocks, I must understand the business model of a company, which must be difficult for its competitors to replicate.
Q Any other investments?
A More than three years ago, I invested in a piece of raw land in the hope that it would be developed. The investment recently matured, giving me a return of 11 per cent a year, which translates into gains of $30,000.
From a non-monetary perspective, during the past eight years, I have invested many man-hours into my position as an associate lecturer with the Singapore Institute of Management/Royal Melbourne Institute of Technology.
Q Moneywise, what were your growing-up years like?
A I was fortunate in that money was not a problem when I was growing up. I lived with my parents, three older sisters and grandmother in a three-room flat in Toa Payoh. My dad, a manager with Rolex, was the sole breadwinner.
In the 1980s, he bought some blue-chip stocks - Singapore Airlines, ST Engineering, SMRT, Singapore Exchange - that have more than tripled in value. He is still holding on to them and they have given him good dividends.
Q How did you get interested in investing?
A In 1988, then Prime Minister Lee Kuan Yew said Singapore was going to be a financial centre. That got me excited and I began to look for a job in the financial sector. I ended up in an investment advisory firm that handled the investments of high net-worth individuals. It exposed me to global investments.
Then I took up a course and obtained a diploma in investment, followed by a degree. Later, I joined Fraser Securities as a dealer and that was where the action was.
Q What has been a bad investment?
A In the early 1990s, I invested in the Fort Canning Country Club which went bust. It wiped almost $10,000 off my savings.
Q Your best investment to date?
A I bought some quality stocks during the Sars period, when most stocks were sold at a discount. I enjoy picking stocks during a bear phase; I avoid buying in a bull market.
Currently, I prefer to buy high-yield stocks that give good dividends. Five years ago, I bought into CapitaMall Reit, which provided me with capital appreciation and handsome dividends. I also invested in DBS preference shares, which give me a fixed annual return of 6 per cent. My other stocks include City-Spring Infrastructure Trust, Hyflux Water Trust and DBS Bank.
Q What is the best money lesson you've learnt?
A I was caught out by the Asian financial crisis and that taught me a lesson: Never panic in a bear market and sell out. In fact, you can buy more. A crisis is the best time to buy quality assets, whether these are stocks or real estate.
