Picture this scenario. A friend says his insurance agent recommended switching to a “better” whole life plan after he has paid premiums for five years on his existing plan. Another friend has signed up for her third credit card this year because she wanted the welcome gift (after cancelling two last year). A colleague is considering buying a second property even though his first has only appreciated in line with market returns over the past three years.
None of them would describe what they are doing as reckless. In fact, most would say they are being “proactive” with their money to get a better deal.
But here’s the question worth asking: are these genuinely smart financial decisions, or could they quietly be working against you?
The term often used to describe this behaviour is “churning”. While it sounds like financial industry jargon, it can show up in very ordinary financial decisions that many Singaporeans make.
What Churning Means
Churning refers to repeatedly buying, switching or replacing financial products, not necessarily because it improves your long-term financial position, but because there are incentives for someone else to sell it to you.
That “someone else” could be a financial adviser, a licensed agent, a financial comparison site, or even the bank. And each time a product is replaced or switched, a new commission, fee, or sales target may be generated for the person who sold it to you.
From the consumer’s perspective, it may feel like an upgrade and that they are improving their financial health. But in some cases, it may simply restart a new commission cycle.
That’s why understanding how churning works across different financial products is useful.
Insurance: Restarting The Clock On Coverage
Insurance churning often looks like this: your agent (it could be a new agent or your existing agent) recommends replacing your current whole life policy that you have been paying for for about 5 to 10 years, with a newer plan that supposedly offers better coverage or features.
You terminate the old policy, sign up for the new one and assume you have upgraded.
What many people may not realise is that replacing an insurance policy can be costly (for you).
When you terminate a whole life or endowment policy early, you usually receive only the surrender value, which can be significantly lower than the total premiums paid, especially during the early years. You may also lose accumulated bonuses and benefits tied to the original policy. In addition, if you have any existing illnesses, they may be exempted from coverage in your new policy.
This does not mean policy switches are always bad. Sometimes, life circumstances genuinely change. Getting married, having children or facing new financial responsibilities may justify additional or different coverage.
However, if you are being encouraged to switch policies repeatedly within a short period, despite no major changes in your circumstances, that should raise questions. Every new policy comes with a fresh cost structure and potentially a new commission cycle for the adviser.
Investments: How Fees Quietly Eat Into Returns
In investing, churning usually appears as excessive buying and selling within a portfolio.
This can happen in unit trust portfolios, managed accounts or ILPs where funds are switched regularly. Every transaction may generate fees or commissions. Over time, these costs can significantly reduce long-term returns.
Frequent portfolio switching worsens the problem because transaction costs and switching fees may pile on top of annual management fees.
Churning can also happen when investors constantly buy and sell individual stocks. Even if each trade feels small, brokerage fees, platform fees, foreign exchange spreads and other transaction costs can add up over time. This is especially true for investors who trade frequently across overseas markets. The more often you buy and sell, the more your portfolio has to earn just to cover these costs before you make any real return.
Read Also: How Much Can Investment Fees Eat Into Your Returns? The Ugly Truth Behind Paying Just 1% More A Year
Property: When “Asset Progression” Becomes Expensive
In Singapore, property churning is often framed as “asset progression” — the idea that continuously upgrading property helps build wealth.
Property can absolutely be a long-term wealth-building asset. But repeatedly buying and selling properties within short periods is very different from holding property over the long term.
And it can be expensive.
Every property purchase comes with transaction costs. Buyers pay Buyer’s Stamp Duty (BSD), and if they already own a property, they may also need to pay Additional Buyer’s Stamp Duty (ABSD).
There are also legal fees, agent commissions, renovation costs and the opportunity cost of tying up large amounts of capital. If the property is sold within a short holding period, Seller’s Stamp Duty (SSD) may also apply. All these costs mean frequent buying and selling may not be as profitable as headline property prices suggest.
Credit Cards: The Most Familiar Form Of Churning
Credit card churning is probably the most relatable form of churning for many Singaporeans.
The cycle is familiar. A new card launches with an attractive welcome gift, bonus miles or cashback promotion. You apply, meet the minimum spend, collect the reward and move on to the next card.
For disciplined users who track spending carefully, pay bills in full and stay organised, this strategy can work. Some experienced churners do extract meaningful value from sign-up bonuses over time.
But there are still risks involved.
Every credit card application in Singapore triggers a hard credit inquiry. Multiple applications within a short period can affect your credit score. Financial institutions may view frequent applications as a sign of financial stress or increased credit risk. This could potentially affect future loan approvals, including mortgages.
Why Churning Keeps Happening
Churning persists because incentives within financial systems are often misaligned with consumer interests.
Insurance and investment products sold through advisers are commonly commission-based. Banks and financial institutions also operate with sales targets tied to new product sign-ups.
An existing product that is simply maintained usually generates less revenue for the sales people than a new sale.
At the same time, marketing campaigns are designed to create urgency. Limited-time promotions, welcome gifts and “exclusive” offers encourage consumers to keep switching.
This does not mean every recommendation is self-serving or unethical. But it does mean consumers should recognise that incentives exist.
How To Spot Potential Churning
There are a few signs worth paying attention to.
If a recommendation focuses heavily on welcome gifts, bonuses or “limited-time” features rather than long-term value, it is worth taking a step back.
If you are being encouraged to replace a financial product you have only held for a short period, ask why.
Most importantly, ask this question: What do I actually gain from this change after accounting for all the costs involved over the long term? If the answer is vague, unclear or focused mainly on short-term perks, that should prompt further scrutiny.
Building wealth is usually less about constantly switching products and more about staying consistent with a sound long-term plan.
Sometimes, making changes makes sense. But very often, doing less may actually leave you financially better off.
Photo Credit: iStock/Irina Orlova
