How will your finances look like in 10, 20, 30 years? There are apps for that.
Originally published in the Business Times
SHORE up three to six months' worth of expenses in an emergency fund. Allocate a quarter of income to investing. Buy insurance. Work towards S$1 million for retirement, ideally by 60.
Broad personal finance guides and cookie-cutter advice are readily available on the Internet to help individuals navigate their money matters.
But financial planning is never as straightforward as it seems. Case in point: the savings- to-income ratio of a 25-year-old with a student loan to pay off could look vastly different from his debt-free peers', even if they take home the same salary.
Laurent Bertrand, chief and co-founder of fintech BetterTradeOff, says: "There is a lot of information available, but not much clarity regarding what people should do beyond the obvious when planning for retirement, protecting their family, or investing to make their hard-earned money work for them."
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Still, fret not. In this digital age, financial planning apps have emerged as a way to offer more tailored and interactive advice to the masses. Anyone with a bank account in Singapore today would be able to access some form of in-app money management tool via mobile banking.
Fintechs like BetterTradeOff alternatively offer independent solutions, while SC Ventures- the innovation and ventures arm of Standard Chartered (StanChart) - has tied up with Franklin Templeton to launch a "bank agnostic" platform known as Autumn.
Many of their digital tools leverage data and artificial intelligence (AI) to calculate a user's net worth as well as generate interactive simulations and tailored insights on how to close personal wealth gaps.
Singapore residents can also tap Singapore Financial Data Exchange (SGFinDex), which allows users to consolidate their financial information across seven major banks and relevant government agencies.
Nudge and wink
How personalised are these solutions? For a start, many financial planning apps offer a "retirement calculator" function.
Pulling data on current age, salary, monthly expenses and other types of assets/liabilities such as investments and home loans, the tool can project the user's net worth, and whether retirement is achievable by their desired age.
Financial projections can also be made for specific goals such as purchasing a home or funding a child's education; users can run simulations to understand how their goals will affect their future.
If the path to financial freedom looks unclear, customised "nudges" tailored to the user's personal situation could help.
This could involve recalibrating their goals, retiring later to generate more income, reducing their intended retirement expenses or reviewing their investments, says an Autumn spokesperson.
Some platforms also offer users a visually-organised and interactive dashboard of their overall finances when they log in.
On DBS' NAV Planner, for instance, users will see a personalised balance sheet which gives a full overview of their cash savings, loans, insurance protection plans and current investments held with the bank.
This view can be complemented further by a consolidation via SGFinDex - that is, DBS customers can pool their external holdings onto the NAV Planner for a more holistic assessment. About 120,000 users have done so as at May this year.
It will help users have a clear view of whether they are keeping three to six months of emergency savings; if they have the right amount of insurance; and if 50 per cent of their net worth is being invested.
Evy Wee, DBS head of financial planning and personal investing, notes: "Users can see how a decision made in one stream can potentially affect outcomes in others. More importantly, it helps them visualise how smaller day-to-day financial decisions can lead to a substantial impact on longer-term financial goals."
Insurance coverage, typically a tricky financial commitment to navigate, can also be made simpler.
Based on a user's life stage and number of dependents, the NAV Planner will be able advise on whether the user is adequately insured, not just in terms of the types of coverage but also on the coverage amount.
About 2.4 million customers have engaged with the NAV Planner since its launch in April 2020.
Many financial planning apps are also ramping up access to investment advisory and products. StanChart's SC Goals Planner lets users simulate how their financial situation will improve through small, steady investments such as unit trusts.
For those with existing investments, the tool will be able to project whether the user is investing enough, investing well, or if more investments will be beneficial and at what age they should sell their investments to make a difference in their retirement.
With every purchase and sale of an investment simulated, the user's simulated financial status will alter accordingly, giving them more efficient insights to better investing, a StanChart spokesperson notes.
DBS' NAV Planner is able to shortlist and recommend specific solutions across six broad product classes based on a user's unique investment profile. The bank's retail customers invest about S$3,000 a year. Those who are guided by the NAV Planner invest more than double that, at around S$7,500 a year.
Over at OCBC, users have broad access to digital investments directly through the mobile banking app. This includes unit trusts; portfolios of ETFs and stocks via Roboinvest; Singapore blue-chip counters; and even trading on various stock exchanges.
As at end-2020, about 40 per cent of OCBC customers who completed a financial plan took the first step towards their long-term goals by investing. This figure was less than 10 per cent at the start of 2020, says Kelvin Goh, head of wealth advisory.
Other financial players here have turned to strategic partnerships to offer more unique solutions.
Users of the Autumn app have access to investment insights from Franklin Templeton, tapping the firm's global expertise and in-house research capabilities.
They may also choose to receive portfolio recommendations curated by Franklin Templeton based on their respective risk profiles, helping them to make informed decisions, says the Autumn spokesperson.
Overall, fresh data showed that more Singaporeans are embarking on financial planning much earlier than their parents, in part empowered by the rise of digital tools today.
About 75 per cent of Autumn's users are between 25 and 49, says its spokesperson.
In 2020, the average age of an OCBC customer starting their financial planning was 36 years old, down from 52 in 2018.
BetterTradeOff's Mr Bertrand flags that individuals should further buffer against unforseen circumstances.
Exploring scenarios such as job loss, critical illness or death would help users ensure that they have the right insurance coverage, that they can afford the life they're living, or spend on new luxuries, he adds.
"Answering basic questions like 'how much do my family and I need to live the life we want?' is only the tip of the iceberg. For many of us, the bigger questions relate to the curveballs life can throw us and other 'what-if' scenarios, both good and bad."
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