Being rich in Singapore might solve a lot of problems, but it also causes new and complex ones.
Do you agree?
Back in 2011, when a Sentosa Cove resident complained about a S$2 to S$7 fee to get in; in 2014, the same thing happened when residents complained about a S$1 fee on the shuttle bus. The residents were complaining about the principles involved, not the amount – but you can imagine the amount of eye rolling received from the public.
Likewise, whenever there’s a news report that a rich person lost money, there’s much less of a reaction. Consider this investor who made a S$8.4 million loss and sued the bank. Was there public outrage? The incident was, instead, mostly shrugged off.
The rich tend to be “on their own” when it comes to many financial issues, and often feel that way.
NEXT: The rich worry more about everything →
The rich tend to diversify their wealth across a wide range of assets, from property and stocks to gold and art and so forth.
However, this brings the added issue that they are worried about everything. They worry when home prices go down, they worry when gold prices go down, they worry about the market sentiment for fine art…the list is endless, because they have substantial sums of money all over the place.
The more wealth there is, the harder it becomes to manage.
NEXT: Accredited investors are at higher risk of losing money →
In Singapore, you can be an accredited investor if you: 1) have a personal net worth exceeding S$2 million, and 2) had an income of at least S$300,000 in the past year.
Being an accredited investor allows you to make various high-risk, high-return investments that are not available to the general public. The assumption here is that, due to your wealth, you are able to manage more losses.
But a loss is a loss – a recent example being the Swiber bonds incident. Many accredited investors were sold bonds in oil and gas company Swiber, often at minimums of S$250,000 or more. When Swiber defaulted on the bonds, many of the bond buyers were left with nothing. Even at a net worth of millions, a loss of hundreds of thousands of dollars can be devastating.
NEXT: Exchanging money becomes a headache →
Let’s say you want to convert money to buy a house, which costs 3 million euros. Assuming the exchange rates shifts a little, and 1 euro costs S$0.07 more, that’s a S$210,000 loss. Even a slight nudge in currency exchange rates can cost you an earth-shaking amount of money, when dealing with large amounts.
Now if you constantly deal with big sums (for example, you have assets abroad that bring in US$150,000 a month), fluctuations in the currency rate can lead to jaw-dropping losses over a period of several years.
NEXT: Taxes, taxes everywhere →
If you are rich enough to be in the highest tax bracket (above $320,000 a year), taxes can be as high as 22%. This can be worse in other countries, sometimes reaching 57% in some Scandinavian countries.
This often results in a complicated scramble to allocate assets in order to minimise the costs. This can mean distributing your assets across many different countries, and needing a better understanding of financial management than most people. (Lottery winners and celebrities, who often don’t get rich via business or savvy investing, are faced with a real nightmare here.)
NEXT: The public generally has no empathy for the rich? →
By Ryan Ong, SingSaver, February 2017
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