While the Singapore economy is historically built by many multi-national companies, big businesses and innovative start-ups, it is also shaped by independent workers such as freelancers or gig economy workers. In fact, freelancers accounted for almost 9% of the Singapore workforce in 2019.
The variances in work hours, compensation models, and other factors within the gig economy set these workers apart from those employed in traditional full-time positions. It is crucial for individuals in this sector to adopt a distinct financial plan tailored to their unique circumstances. As financial advisors in Singapore, how can you ensure that clients who are independent freelancers are adequately served?
Understanding the challenges
In Singapore, most full-time workers have 20% of their salaries automatically deducted by their employers to be put into their Central Provident Fund (CPF), a public pension system that will help to foot medical bills and provide a monthly allowance during retirement after the age of 65. However, independent freelancers will have to rely on their discipline to set aside the same percentage of their already irregular salaries for their CPF as well.
Furthermore, clients who are working in the gig economy often worry about their financials since compensation depends on variables such as work hours, services rendered, number of active projects and more. This means they may have difficulties making monthly premium payments since they do not receive a fixed monthly salary.
Tailoring financial advice
Due to the irregularity of income streams, freelancers and gig workers are more vulnerable to financial emergencies. Encouraging them to build emergency funds is crucial to mitigate the impact of income fluctuations. Financial advisors can help determine the ideal amount to save based on the worker’s specific circumstances and guide them in setting up automatic contributions to build their emergency funds gradually.
Krizzia Angelica Malicdem, a two-year MDRT member from the Philippines, says she “encourages them to allocate money for their savings, policies, and emergency funds. I even created a Facebook group for my clients to help them stay on track with their goals through articles and videos of myself giving financial advice they can watch whenever they need to review their budgets,” Malicdem shares.
Unlike traditional employees who often benefit from employer-supported retirement plans, freelancers and gig economy workers must take responsibility for their retirement savings. Financial advisors can assist in creating retirement plans tailored to their income patterns, helping them choose suitable retirement accounts and investment strategies. Educating freelancers about the importance of consistent contributions and the potential benefits of compounding can encourage long-term financial security.
Encouraging financial stability
One-year MDRT member from Singapore, Marcus Chew, shares, “It is important for freelance workers to identify the figures for their living and business expenses to plan for ups and downs.” This is so that they are able to set aside six months of living expenses and three months of business expenses before starting to save for retirement. Once the client has sufficient savings for their lifestyle and business expenditure, he typically suggests for them to put 15% of their monthly income, regardless of the amount, into their retirement savings.
Financial advisors have a significant role to play in assisting freelancers and gig economy workers in Singapore get on the right track with their financial situation. By tailoring sound financial advice, building trust through specialized services, and empowering them through education, advisors can help this demographic achieve financial stability, security, and long-term success. As the gig economy continues to thrive, financial advisors have the opportunity to make a positive impact on the lives of freelancers and gig economy workers, guiding them towards a brighter financial future.
Contact: MDRTeditorial@teamlewis.com
