Sales vs Advisory

I got a call from a client whom I had been servicing for the past 4 years after my ex-colleague left the company. She got her 4th toe amputated and may need further amputation if the condition does not improve. She’s also worried that may led to her loss of job.

She will be selling her 5 room flat to get some cash to pay for the medical bills and plans to get a 3 room flat. Her property agent ,however, suggested to her to terminate the endowment plans and investments from her CPF so she can have more money for a 4 room flat. She called to seek my opinion.

I asked her a few questions.

1) You can have more money for your one-time downpayment to get a 4 room flat but what about the on-going monthly installment?

2) The purpose of selling the 5 room flat is to get cash profit for the medical bills. Is it better to keep excess profit for rainy days such as the possibility of another operation or the medical bills in future than to pay more Cash Over Valuation for a 4 room flat?

3) What other insurance can she buy now if she terminate her endowment plans?

I mentioned to her that the final decision lies with her. But if she decides to terminate all investments and endowment plans, I will do it after the property transactions are done so her CPF-OA will not be wipe out. She would start off with some money in the OA which in my calculation will be sufficient to pay the mortgages for at least 3 yrs assuming she lost her job immediately after the purchase of  house. I am glad that she seek my opinion and took my advice.

There are many people who despite the numerous test on Acts & guidelines still fail to pass their maths & ethics test. This is one example of being a agent for sales  and for advisory. From a sales angle, there is nothing wrong with the purchase of 4 room flat. From an advisory point, it is not wise to do it.

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