Archive for the ‘Financial Advisory’ Category
Who’s Managing Your Money?
I liked this diagram by Tommy Sikes, an advisor in North Carolina at TS Financial. It illustrates the madness that sometimes goes on in the industry.
Financial Advisor Magazine has the results of a study by Cerulli Associates which tells us that in the US, advice business has hit a wall and is not replenishing the ranks with young talent.
Neglected Investment Accounts
I have been particularly interested in taking over neglected accounts. There are a few reasons for this. For the client, it is quite difficult to get good advise and service in the market today. Additionally, this means additional value to the client at no cost to them.
Bank customers buy thousands of dollars of investment products from Personal Bankers (who may or may not be well-versed in investments. They are trained on a sales pitch and try too get the sale). Customers are charged 5% upfront fees. However, once fees are collected, expect no advise. It is not the bank’s responsibility to monitor the investments or advise customers. Basically, customers will hear nothing except a thick prospectus sent to them every year.
Customers of advisory/insurance firms pay annual advisory and service fee of between 0.7% to 1.25% of portfolio value. However, in many cases the clients do not get any advise or updates promised and paid for. Some customers have not heard from the agent/adviser in years!
What can I do that Prudential cannot do?
Recently, I have been asked this question by a friend of mine. “What can you do that Prudential cannot do?” It is not an easy question to answer especially with when the public have preconceived impressions. Let me answer the question here.
Prudential is a huge company. If Prudential is willing, there is certainly very little that they cannot achieve. However, the insurance product provider with an asset management arm, is not interested in several aspects of wealth management business. For insurance companies, the sales force, insurance agents, are not under the companies’ payroll. Therefore, the sales force should not be mistaken for Prudential itself. I will rephrase the question to, “What can I provide that other Insurance Advisers, even other Financial Advisers cannot?”
There are a few areas:
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Continuing development of the Financial Industry
Previously I commented about the need for the financial advisory industry in Singapore to be more mature. There has been sweeping changes to the financial advisory industry in UK this year.
Changes affect 3 main areas: more stringent entry educational requirements for financial advisers, higher capital requirements for financial advisory firms, banning of commissions paid to advisers for products purchased by clients.
Some criticism has surfaced against the Financial Services Authority deadline for the changes. Strong points include insufficient time to adjust to meet the deadline, small firms having to suffer with the high capital requirements and the fear that independent financial advisers will be forced to restrict their services to rich customers.
There has been changes earlier this year too, to the financial industry in Singapore. Much more needs to be done, one important aspect I will really like to see is that the regulatory requirements is adjusted to improve the quality of Financial Advisers in Singapore.
The Proper Role
Private banks need to focus much more on advising clients on their investments rather than selling products to restore the industry’s reputation, a Swiss banker said yesterday.
Before the crisis, ‘banks were using private bankers to sell products they make – that’s very bad for the industry’, said Jean-Pierre Cuoni, founder and chairman of Swiss bank EFG International.
The proper role of private banks
This is the same for financial advisers. I think the first thing that comes to mind when your hear “I’m a financial adviser” is “I do not want to buy anything”.
Citi Personal Wealth Management Shifting Towards New Investment Advisory Model
October 5, 2009
Source: Citigroup Inc.
Citi today announced a strategic shift in the retail investment business of Citi Personal Wealth Management by focusing qualified Financial Advisors located in Citibank branches on providing fee-only investment advisory services instead of commission-based transactions.
“Moving to an investment advisory model is the right decision for our clients and for Citi. This model is where the market is headed and it will help us offer clients greater flexibility, transparency and meaningful investment choices,” said Terri Dial, head of North America Consumer Banking and Global Consumer Strategy. “This change is about keeping our clients at the center of all we do and providing them with the investment advice they’re looking for and the services they need.”
Investment advisory clients may work with a team of Citi Personal Wealth Management’s own investment advisors who will act as fiduciaries, the industry’s highest standard, charging a transparent fee for advice, based on assets instead of commissions. Clients can also work with Citi Personal Wealth Management’s National Investor Center where they can transact on a self-directed basis or after seeking advice from a “coach-on-call,” choosing from an array of individual securities or a select set of advisory products.
How much we lag behind the UK financial advisory industry.
In some developed countries, a financial adviser is a professional. The profession consist of highly educated and respected members of society. In Singapore, given the low entry criteria, financial advisers are looked upon as uneducated and people who cannot land better jobs, such as lawyers, engineers, doctors, etc. A friend once asked me why I would consider this role given my ample academic qualifications. Many have asked me when I said I am a financial adviser, “you mean selling insurance?”
In UK, they are talking about plans to ban commission payments from product providers and force financial advisers to agree fee payments with clients upfront.
Confidence in Banking Wealth Management
There was an column published last Friday in Business Times. Just some thoughts.
Regaining bank clients’ confidence
“A fifth of the Asian banks surveyed have lost more than 25 per cent of their client assets, compared to the global average of 10 per cent of banks”
One of the main reasons is that the AUM of Asian banks are newer and have been managed for a shorter time. Unlike in developed western countries where wealth have been with banks for decades if not generations. Another related reason is also the ‘trading’ and ‘quick buck’ mentality of the clients and short term ‘bonus maximizing’ mentality of RMs. Banks, the RMs and clients are responsible for this. How many of you truly believed that the banker who sold you the 5-yr Structured Product will be there for the whole period?
The push for “transparency and simplicity” and “open architecture” is good for clients. I have thought for some time that the usual affluent client do not need complex structures and derivatives just to achieve the extra bit of returns. There was a time it seems that products will be so complicated that even RMs will have difficulty appreciating them.
Majority clients accumulate wealth from their profession or business. Best approach for them is to continue to do so, while having prudent growth for wealth accumulated.
