Journalist Tan Kian Leong speaks to licensed financial planner Ian Wong about fried chicken, owning a house, and the financial hurdles millennials face.
Ian Wong is a licensed financial planner specialising in Generation Y and Partner at IPPFA Sdn Bhd. A graduate of the London School of Economics with a Bachelor’s degree in Actuarial Science and a Certified Financial Planner, FLY: Malaysia’s Journalism Team caught up with him in October to see what he had to say.
It is a well-established fact that the longer one speaks to a financial expert, irrespective of their background, the likelihood of them bringing up the spending habits of millennials and our tendency to buy Starbucks (and all the things we could be doing with that money!) increases exponentially. It seemed oddly fitting, then, that I found myself seated in front of the upmarket Starbucks of Bangsar Village II on a brisk Friday morning, speaking to Ian Wong, a licensed financial planner specialising in advising Generation Y.
Of Fried Chicken, Finances, and Friends
A graduate of the London School of Economics, Ian’s decision to transition from actuarial science to financial planning is certainly an unorthodox one, a matter which I pressed on during the interview. “Coming from LSE, our focus was mostly on investment banking – which was really more of a lifestyle choice than a career choice. While the pay was good, I knew I wanted to do something more consultation-based where I could help people, and eventually I stumbled upon financial planning and advisory work.”
As a partner at IPPFA Sdn. Bhd., he offers insight into the current state of financial affairs in Malaysia, and his hopes for the future. Associated with the IPP Financial Services Holding (IPPFSH) Group in Singapore, he met his current senior partner at a seminar, and he jumped at the opportunity to receive mentorship and training under them – an opportunity that, clearly, that has done Ian much good. Seeking to branch into Malaysia, their associates in Singapore have been satisfied by the progress made under Bank Negara in developing financial services locally. Malaysians in general, he explains, don’t value intellectual property as much as their associates in Singapore, and are less willing to pay for expertise and services. It’s a mentality that has been changing as of late, and it bodes well for IPPFA in the years to come.
Ian’s path to financial planning, it would seem, was paved long ago when he was young – with fried chicken, Magnum ice cream, and a touch of entrepreneurship. He smiles as he recounts his past, “I went to school where a piece of fried chicken cost 2 bucks, and I only got 1 Ringgit a day. I realised if I wanted to eat chicken and I wanted a Magnum ice cream, I needed to do something about it. I couldn’t save for 3 days and not eat anything, so [instead] I decided to invest by buying things from outside of school and selling it to students in class.”
The conversation takes a more sombre turn as he offers hard-earned advice on the importance of remaining humble and connecting well with others in life. Labelling his younger self as too smart for his own good, Ian also reveals on a deeper level why he is personally attracted to face-to-face work. “Growing up, I wasn’t a very nice person. [S]ometime in university, I realised…the value of having people around, not because it would benefit me, but because I realised that in life, everything comes either with or through other people.”
“To answer this question, we have to understand why you would want to manage your finances. Most of our parents [have] given us the expectation of a certain lifestyle that we’ve become used to.” Ian is explaining why the golden adage of ‘delayed gratification’ simply doesn’t work for millennials. It’s advice that is the exact opposite of what I’ve heard of before, which makes it even more interesting. “People always say [that] you can go from living in a terraced house to a bungalow, but [to go] from living in a bungalow to a terraced house is very difficult – if you are used to that lifestyle. That’s not happening for millennials. We’re going [to go] for holiday at least once a year…[and] if you do not plan for it, it’s going to eat into your money quite a lot.”
The key, Ian explains, is keeping track of your day-to-day expenditure, and budgeting for savings and spending. (Right on cue, he brings up the example of cutting back on your weekly lattes from Starbucks.) Reducing your expenditure to reasonable levels is essential – and so is getting used to saving a specific amount or percentage of your income. He reasons that a good budget is a bit like a diet: if you wanted to, you could probably eat a salad as a meal once every day, but to insist on having a salad for all 3 of your main meals would probably mean a quick end to your diet. One simply cannot set a budget that is too tight for them, lest they risk becoming unsatisfied with their daily lifestyle.
For college and university students unburdened with commitments and with some cash in hand, he has an additional piece of advice: “If you’re in university, you can afford to lose. In that way, you can learn how to invest – and by invest, I mean in stocks. It’s one of the better ways for you to grow capital. You need time and experience to do it, so why not start gaining that experience when you’re in university?”
Planning Ahead For Young Adults
Is the ideal dream of owning a house and a car still realistically achievable for young adults just starting their careers? Ian certainly seems to think so, although he suggests that owning a car is no longer necessary. “It’s a very good objective to set for yourself to buy your first property within 3 years of working. What does it take to own a property? You need cash flow, you need down payment – if it’s your first property, sometimes you can get full financing as well … but you need to work on your income. You need to increase your income as much as possible, to show the bank that you can afford the monthly loan repayment. Truth be told, owning a property isn’t so much a problem as finding one that is located conveniently for you. There are definitely some cheaper properties around, but you should factor in your daily commute (if you intend to live there) or the rental demand (if you intend to rent it out) when purchasing a house, amongst other things.”
“A car is a different case – it’s not considered an investment. Not owning a car is something I advocate. If you don’t need the car, don’t buy the car. [B]uying a car sets you back quite a bit. If you do get a car loan and your income is not very high, that kills your chances of owning a property already.”
There is, however, an exception to this rule. “The only time I would recommend buying a car is if the car enables you to do business. If you really are moving around a lot every day … and it enables you to increase your income, then yeah, sure, get a car. Otherwise, no. Property yes, car no.”
Beyond the goal of owning property, however, Ian points to what he calls a ‘retirement checklist’ – a set of specific targets to achieve by retirement, which in turn ought to shape our current financial goals. Identifying and working towards these targets is important, and the first step in doing so is setting aside a percentage of your income as savings and making sure the amount is adequate. For young adults without commitments, Ian believes they should be looking at saving up to 50% of their income.
A second financial goal that would also be generally applicable would be to build up an emergency fund – one separate from your savings to be used for investments. Ian pegs this fund at RM 10,000, and along with the savings goal, he acknowledges that achieving these goals will be difficult to begin with. Nevertheless, he highlights that it is imperative to have the big picture in mind. “It’s difficult to set goals when you’re this young, but at the end of the day if you don’t have the savings, you can’t do anything.”
Nuggets of Wisdom
As we near the end of our interview, I bring up the latest craze in the financial world: cryptocurrency. With the potential for huge returns, Ian rules out preventing his clients putting money into Bitcoin or Ether, but he strongly advises against it. For those who insist on venturing into this brave new world, however, he cautions against putting all your eggs into one basket: balance out your risks with equities, and avoid venturing into cryptocurrencies at the same time as other high-risk investments.
What about gold, then? “You may want to have a little bit of it to hedge some value. I also believe the actual asset itself is worth more than buying into a gold fund. You don’t want to be in a situation where the fund goes down when the price goes up, [because] then you’re not directly exposed to the market price. You want [the fund] to follow. [Gold] is a good complement to your portfolio, but don’t make it a primary part of it.”
Ian’s final thoughts are directed towards parents, a parable for those wondering how to teach their children the importance of frugality and being thrifty. “I once spoke to the CEO of a company. He said: when I fly, I fly economy, but my daughter flies in business class. Why? My father was poor, but I’m rich, so I can [afford to] treat my daughter.”
“I understand you want to give your children a better lifestyle than you ever had, but you need to know that you’re setting their lifestyle expectations very, very high. A lot of parents do this because they feel guilty – when you work in corporate, you normally don’t have a lot of time to spend with your children, so you give them things.”
“Kids now have certain expectations of lifestyles, which is a problem, because when they come out and they’re earning [RM] 3,000 or 4,000, suddenly, they cannot match [those expectations], which then leads them to go into debt very easily if their parents don’t support them. Get your children to earn these privileges. Make them work for it. Set lifestyle expectations that are reasonable for them, and make sure they’re aware that these privileges you’re giving them are temporary, and that they cannot always expect these things. Get them used to saving a portion [of their allowance]. Get them used to earning [privileges]. When they earn, then they will understand the value of money.”