Building value in wealth planning: An interview with Mon Chao

Gwyneth Yeo

At first glance, Mon Chao looks like your friendly next door neighbour who is fresh out of college and just starting out in his career. That is, until you learn that the fresh faced 27 year old is a highly successful wealth planner for the mass affluent and the high net worth individuals, and founded his own agency Mon Chao Assurance in less than 2 years. In fact, he represents the top 1 per cent in Prudential Singapore.

To be sure, Chao never planned on being a financial planner, much less a wealth planner. In fact, he told ZUU Online that his career path arose from a series of happy coincidences. Upon graduating from university with a public relations and journalism degree, Chao landed a position at a reputable public relations firm. However, due to a series of internal errors, his position was taken by someone else.

The very next day, Chao received a phone call from a headhunter from JCO Premier – an insurance agency which distributes Prudential insurance and investment products –  inviting him to join the agency as a financial planner. “They told me the job would be about insurance, but I was a little bit concerned because I didn’t really know what to expect from the job, and I had no idea what insurance was about.”

His lack of experience became his motivation to overcome his initial fears. “I’m the type of person who will give it my all once I decide to try something out.” After joining the industry and undergoing training from the insurer, Chao realized that the job was right up his alley, and was not unlike his previous part time work experience in luxury sales, working for brands like L’oreal, Chanel and YSL.

“I actually really liked it,” he said with a smile. “It is ultimately a sales position, which I was familiar with. In my previous work, it was all about selling lifestyle products, and after a while I got very jaded, because it was all very materialistic. But now, instead of promoting tangible items, the things I recommend have a direct impact on a person’s life, and that to me is the most gratifying part.”


Convincing potential clients

Part of what Chao did to prove his worth, was to demonstrate it tangibly. When he saw an investment opportunity, he convinced his parents to individually park $50,000 with him to invest in mutual funds. Within a year, he managed to provide them with a return of more than 7%, by actively managing the portfolio, buying at a low price and switching to another fund when prices went up. The dividend payouts and the yield from the fund growth alone provided a 13% gross yield before fees.  Word got around, and now, Chao manages over $2 million worth of assets for his clients.

Chao became the top consultant in his agency for his first month of work, a position he held consecutively for the next 4 months as well. By the end of the first year, he had become the top consultant in his agency. Admittedly, Chao conceded that his first month’s success came largely from his immediate family, but his past work experience became a stepping stone for his success in the subsequent months. “When I gained more confidence after the first month, I began speaking to prospects of a higher calibre and surprisingly, we were able to connect quite well. I was able to speak their lingo because I came from a luxury background, and it helped me understand their lifestyle and their needs.

“I can immediately try to relate to how I could potentially offer something that actually adds value to their lifestyle.”


Adding value as a priority


Source: Shutterstock


One of Chao’s earliest strategies to provide value for his potential clients, was by offering a complimentary portfolio review. “I believe that when the other party realises you are adding value to their lives, they would be more receptive to any advice that you give them along the way.”

His aunt was an unexpected beneficiary of that service. In fact, she had been initially rather skeptical of Chao’s offer. However, when she noticed that the premiums she and her husband were paying for their insurance policies had risen dramatically, she turned to Chao for help.

Chao noticed that the couple was paying $15,000 each in annual premiums for a certain investment linked policy, though its benefits had already been sufficiently covered by the other policies they already had. “I realized that that premium was ridiculously high, and after all these years, they had made a loss of more than $100,000. So I brought them down to the insurer to make some adjustments, to remove some riders that were unnecessary.”

“They were over-insured,” he said thoughtfully. “Of cos if you can finance it, by all means go ahead. But to me, if they are paying tens of thousands of dollars every year for something they don’t really need – and all these have no cash value – then I think the money is better placed somewhere else. Maybe in a retirement plan, maybe in a savings plan, even if you use the money for a holiday, it would be better. It doesn’t make sense to pay more than 10,000 every year for something that you don’t need.”

His efforts allowed them to save $16,000 annually. “Eventually, because they were so thankful that I helped them, they decided to place some of the money they saved into a retirement plan with me.”


Tailoring advice for those who need liquidity

“Providing good financial advice is always about identifying the gaps in a person’s portfolio and then proposing a particular plan that can address that gap,” explained Chao.

For business owners, Chao realized that their biggest concern was liquidity. So when he proposed any plan for them, he would specially highlight ones that did not have a lockdown period. “Mostly, they do not want their money to be locked down in an endowment plan, so when I highlight that there is no lock down period, they are more receptive to it. Simple things like this are very crucial.”

“As the policy has indefinite growth, by setting aside 10% of their annual earnings over a period of ten years, they would effectively be stashing aside one year’s worth of earnings into a policy that would have tripled in value by the time they are ready to retire. And the value will keep increasing even after they retire, so it’s building passive income for the long term. What’s more, the plan is capital guaranteed so it’s impossible to make a loss. There’s no downside for them, and the upside potential is very attractive. My clients also appreciate that the plan can benefit up to three generations”


Cost effective financial planning

Source: Shutterstock

Cost effectiveness is another common thread that runs in all of Chao’s investment advice to his clients. “This is my way of planning for my clients, I want them to put in as little as possible, but get as much out of it as they can,” said Chao.

For instance, if a client wanted to put $100,000 into an insurance policy, Chao would recommend that his client pays his first premium of $10,000 into the policy, then invest the remaining $90,000 into mutual funds that pay a 5% dividend. The dividend payouts would help to pay for the policy, while the customer stands to gain from the capital appreciation when the mutual fund performs well.

He also found a better alternative to term insurance for his high net worth clients: a variable universal life product. For a $2 million sum assured, he found that a term plan would require a premium of $30,000 a year. That in itself was not ideal, because he pointed out that term plans had no cash value.

On the other hand, the VUL he had in mind required an initial payment of just 20% of the single premium amount, with the remaining 80% financed through a bank loan. What was unique about this VUL was that the collateral for the loan was the VUL policy, and that the client would only need to pay the interest of the loan.

And the cost of a single premium for $2 million sum assured under the VUL? $300,000.

“This means you pay $60,000 upfront, and then service the interest, for the remaining $240,000, which makes out to be about $4000 a year,” he calculated. “What’s more, the policy has a guaranteed day 1 surrender value of 80%. And over time the policy will keep accruing bonuses, so eventually, the gains are much more than the costs.”

The math made sense to his customers, and Chao sold two of them shortly after the product was launched.

Then there were some customers whom he recommended both the VUL and the endowment plan, as a complement to one another. “I proposed them the variable universal life to protect their assets, and at the same time I recommended them the endowment plan that lasts till 100 years old. That way, when they retire, they can do a partial withdrawal from the endowment plan to finance their VUL.”

“When I plan something, I will stretch it out over 10 years, 20 or even 30 years. In 10 years, would they still be working? For some, it’s not likely because they would call it a day when they make their first $10 million. So the question becomes, how can they make this last for the rest of their life?”

“I call this wealth preservation,” Chao said. “You can make a lot of money, but if you do not know how to spread out your earnings to last you for a much longer period, then chances are, you will end up working for the rest of your life.”


Stability, over high returns

One of the most surprising experiences he had in his wealth planning journey was when he was introduced to a group of fund managers, investment traders, and boutique brokerage owners. “Before I spoke to them, I was frankly quite intimidated,” Chao admitted candidly. “This group of people can beat the market and make 10% returns or more, so how could they possibly be enticed by an endowment plan that makes them 4 to 5% a year?”

As it turns out, it was the stability of the endowment plan that attracted some of them. As Chao explained it, they were well-aware of the losses they could be making and understood the importance of building a stable retirement fund that is consistently growing.

“I would never have thought that a group of investment experts would actually be interested in an endowment plan,” said Chao. “They might be the investment experts, who are very good at making money. But perhaps they may not be as savvy when it comes to wealth preservation.”

“This made me realise that ultimately, we are all experts in different areas.”


This exclusive interview was kindly granted by Mon Chao Assurance and first appeared on ZUU Online.

Mon Chao Assurance provides comprehensive financial consultation services, to walk you through your needs in wealth accumulation, protection for your family and the preparation for the unexpected.

Mon Chao is a “firm believer of bringing about positive changes wherever we are, in whatever capacity” by adding value to people’s lives professionally and personally through the benefits of insurance and sound financial planning. He hopes to raise awareness regarding the importance of the latter by sharing his professional knowledge and experiences with the people he encounters.


(By Gwyneth Yeo)

Related Articles
- Legacy Planning – The Essential Next Step After Retirement Planning
- Getting Inter-Generational Wealth Transfers right
- Investment in Singapore: private wealth management