Regular saving plan (RSP) is a discipline way of investing. For RSP to work it must fulfill certain requirements such as:

• The RSP must be fully automated. Some people try to invest monthly manually. Such manual methods require the use of a human decision which tends to be clouded by (1) Emotions (2) fatigue due to the need to make decision every month and (3) Priority drift. One's emotion is the greatest enemy in the realm of investment. When market drops (like this year), it is almost certain that the person who uses manual method of doing RSP will stop his RSP. The need to make decision everymonth can cause a person to be tired easily. This especially so if you see the holdings decrease in value after making the month's contribution. As for priority drift, some people wants to buy a big item. Instead of budgeting it for it, they conveniently use the budget from the RSP and rechannel it to purchase another item. If this is done once and will be done again, a habit is formed resulting in frequent use of diverting the budget for RSP to another. Soon, the RSP will cease to proceed. For this I can testify that I have a few clients who does manual RSP but decided to stop the manual RSP because of poor market sentiments. The reasons are mainly emotions, fatigue and priority drift. Although two years ago I have a few clients who do manual RSP, right now I have none who is doing it because they have stopped the RSP. For those who did automated RSP, 90% continue their RSP amount faithfully despite the current market turmoil. Only 10% gave up their RSP.

• The RSP amount itself should be meaningful. The word “meaningful” has to be in relation to the person's planned saving ratio. Saving ratio is = (savings & investments)/(total income). Practitioners recommend a minimum saving ratio of 10%. But that guideline is used by the West which I disagree. In my view, a person should have saving ratio of at least double of that. But the absolute amount of RSP should also be meaningful as well. So for a person who just RSP $100/month, I seriously doubt that can achieve anything meaningful considering $100 in today's term is so small due to inflation.

• Changes to the RSP asset allocation should be kept simple. Simplicity is required otherwise frequent changes incur problems with emotions, fatigue and priority drift.

• Avoid lock-in type of RSP. Some advisers uses regular premium ILP with long lock-in period as a RSP for their clients. They are not doing a favor for their clients because there is no liquidity for such RP-ILP. The client has to commit to the plan regardless for a very long period. If they would to surrender their policy (fully liquidate) they will incur huge losses. Some RP ILP surrender penalty is 100% depending on when the surrender happens. But if these advisers would to recommend a plain vanilla RSP into a unit trusts, they will not earn enough in fees. Let's say the RSP amount is $1000 per month. For RP-ILP the potential commission for the first year is 1000*12*50%= $6000. This amount decrease on the second and third year. If the adviser uses unit trust assuming a sales charge of 3% and wrap fee 1%, than the first year earning is approximately (0.03*1000*12 + (1000*12)/2*0.01)*70%= ($360+$60)*70%= $294. If the adviser need to earn $60,000 a year, he has only need to sell 60000/6000= 10 RP-ILP or 0.83 clients per month. If he uses unit trusts, he has to find 60000/294= 204 clients or 17 clients per month. So it can be seen why such an adviser's interest and the client's interest is not aligned.