A man walks into my office. This is the first time we are meeting. I know that his name is Mr. Timothy Lim. He looks around my office then fixes his gaze on me. I smile and invite him in, making him welcome.
From the brief conversation we had on the phone earlier, he said that he is on his ‘journey to financial freedom’. He believes that he has already reached the pinnacle of prestige, power and authority and will spend his years in retirement comfortably. He must be 50-years-old and is the kind of man who worked hard, was prudent in his savings and made it a point to put his family first.
With middle age, he is wondering about his family’s financial future – how is he going to discharge his duties as a parent and husband? He wants to make sure that he and his wife can live to a ripe old age in the manner to which they are accustomed.
I stand and we greet each other cordially with a handshake. I feel the slight tremor in his hands. I motion for him to sit and ask if he would like a cup of coffee. We indulge in idle chitchat for a while before I invite him to explain the purpose of his visit.
“Mr. Yap,” he says, “I have done some research and I know what I want.” His words are precise, every word enunciated, revealing his overseas education. “All I really want is to maintain my current lifestyle. A few years ago, there was a person who told me I could make lots of money and I followed his advice. Instead of becoming rich, I almost lost everything. Now, seeing how bad the economy is, I have decided to do the safest thing and saved up RM3 million. When I retire, I will put all this money into fixed deposit and my wife and I will live off the interest. So, when I die, my children will get the RM3 million.”
Oh dear! I pause for a bit then ask, “Mr. Lim, can you tell me how you came to this conclusion?”
“I used a simple formula. Say the bank gives me an interest of 4 per cent. With RM3 million, the interest I should get is RM120,000.00 per year.”
I look him in the eye. “Mr. Lim, you are completely wrong. In about 30 years, you will not leave RM3 million to your children. Instead, you will probably leave them RM375,000.00.” His jaw drops and he sits back aghast. “How can that be? Where did all my money go?”
I wait a while longer for the information to sink in. Then, I take a piece of paper and set out how Mr. Lim’s hard-earned principal is depleted by the time he reaches 80.
Mr. Lim’s story is no different from 95 per cent of people I see regularly. I could empathise with Mr. Lim’s predicament, which was one of the reasons why I chose to become an independent financial advisor in the first place.
Many years ago, I was a new life insurance agent. During one company event, I spoke to the top sales agent of the year and asked him, “How did you manage to do so well? Can you share your secret to success?”
“Sure,” he replied. “You should make your client like you. But what’s more important is that the client buys your sales pitch. He must like your selling idea.”
Curious, I asked him, “Your average insurance sale size is very big. How did you determine how much premium to sell?”
“Basically I just go for maximum premium. The bigger the premium, the better it is for me,” he answered.
I frowned, confused. “But, don’t you need to consider whether your client actually needs what you offer and his other financial commitments?”
I will never forget his answer: “Well, that’s not my business. I am an insurance salesman. What matters to me is the sale. When you think and consider all those other things, it just becomes too much and you won’t be able to sell well.”
For some time, I was in a dilemma. Sure, I wanted to achieve peak performance in this business and be a success, but I was not going to allow that desire to overshadow my strong belief that my clients’ wants and needs are equally as important (or possibly more important than mine). Considering my client’s needs was the only way I could be sure that the products I offered would result in a ‘win-win’ for us both.
I soon concluded that selling life insurance was not something I could do on a long-term basis; I cannot just sell and sell. I liked (and still like) analysing clients and coming up with solutions rather than shoving products down their throats. I knew I had to search for a career where I could strike that balance between being successful and still ensuring that my clients’ financial interests and goals are well taken care of.
In 1998, I attended a conference and heard about a new term new called ‘Independent Financial Advisor’ (IFA). I learnt that, in simple terms, an IFA would study the total financial position of his client and recommend a plan that will help his client achieve financial freedom. An IFA will recommend financial products based on what was in the best interests of the client and not when it is in the interest of the IFA. This was the moment that I found my life’s purpose and began my journey as an independent financial advisor.
I spent the next few years furthering my professional knowledge and, in 2000, I graduated as a Chartered Financial Consultant (ChFC). I went into practice and started my independent financial advisory service company, Whitman. I am proud to say that we now advise more than RM950 million worth of clients’ wealth. It gives me even more pleasure to say that many of my clients are now financially free and no longer have the burden of managing their finances on their own.
At about the same time when I started Whitman, there was a new book taking the Malaysian market by storm – Rich Dad, Poor Dad by Robert Kiyosaki. His work has had a positive impact on millions of people all over the world and challenged how people handle their personal finances. He and I share a common purpose: both of us want to help people to get out of the ‘rat race.’
However, where Kiyosaki and I differ is in the solutions we offer. Kiyosaki asks people to get rich to get out of the ‘rat race.’ When Kiyosaki made over-generalisations about the middle class, I became even more concerned. For instance:
We want to encourage you to become rich because America and many other countries are becoming two class societies – rich or poor, classes or masses. One reason: If you do not decide to become rich, the chances are you will become poor. In Western nations, the middle class is disappearing – slowly, surely and catastrophically. If you want to remain in middle class, you may need to consider living in China or India. Rather than squeezing out their middle classes, China and India are growing their middle classes.
In America and other Western nations, however, the choice is becoming limited to … be rich or poor. The middle class is disappearing the same way the polar ice caps are disappearing – slowly, surely and catastrophically. However, people in China and India’s middle class often aren’t living any better than many American poor people. So you might as well decide to get rich in America.
The passages above seem to imply that the only way out for the middle class is to become rich. I have seen how many Malaysians adopted this approach and took uncalculated risks that set them up for financial disaster. Instead of becoming financially free, they are trapped in the ‘rat race’ with no way out.
My decade-long practice as an independent financial advisor has shown me that the path to riches involves a lot of risks and uncertainties, which may not be everyone’s cup of tea. Therefore, my solution is simply to aim first for financial freedom and only then seek wealth. Look at the bright side, if you fail in your pursuit of wealth, at the very least, you are still financially free and secure.
In this book, I want to share what has helped many of my clients (many of whom are middle class) optimise their wealth and achieve financial freedom because I understand the challenges and limitations they face. As the income of the middle class is increasing year upon year, this presents a great opportunity for me to share a proven and methodical system for the middle class to become free financially.
To mirror my approach in real life, I will start with you, my ‘client’. I will help you understand just what it means to be middle class. Then, I will demonstrate just how simple actions you take can affect your financial position and propel you to financial freedom and, thereafter, wealth.
You will also see that one of the biggest risks you expose yourself to is the quality of advice and services that you receive from the various providers of financial services. If you choose to follow the wrong advice, you are in trouble. This does not mean that you have to do away with advice altogether and do everything yourself as this will bring its own set of problems. On the contrary, the ideal and practical solution is to get someone reliable and competent to assist you to manage your finances and investments personally. This allows you to minimise making unnecessary mistakes, compound higher returns over longer periods and increase the probability of achieving your financial freedom with minimum effort. That said, don’t go running to the first person who is willing to undertake this task just yet.
What follows is what I wholeheartedly believe: the person you choose to help you manage your personal finances and optimise your money must be independent. I will use my resources, experience and knowledge to give you a detailed explanation of what this means. To give the entire issue a sense of completeness, I will then show you how to find and choose the right independent financial advisor. This is to guarantee that the business relationship with your independent financial advisor that you have painstakingly created will be a fruitful, productive and long-lasting one.
I am aware that for most middle class Malaysians, what I am proposing sounds radical. After all, the traditional approach has been to manage one’s finances on one’s own. Many still think that the words ‘independent financial advisor’ mean that I am asking them to hand over all their money to a stranger. This is not what I am asking you to do. Instead, what I am advocating is a paradigm shift – I am asking you to keep an open mind and explore a new method to manage your personal finances and optimise your money.
All said and done, you have two fundamental options: you can choose to continue on the path you are on already. This could mean that, like our Mr. Lim, despite all the efforts you are making, you feel that your wealth remains not optimised to its fullest potential. Alternatively, you can explore the idea of learning about how an independent financial advisor can help you optimise your wealth and meet all your financial goals. Rest assured, should you choose the latter option, what I share with you in this book would guide you to find someone who acts with integrity and puts your interests first.
So, do not delay any further; take charge of your financial destiny and learn a safer and more certain route to becoming financially free and, thereafter, wealthy. In other words, to paraphrase Mr. Lim, let me guide you on your ‘journey to financial freedom’.