Wednesday, November 11, 2009

Starting an Investments Plan?

I was questioned some clients on my capabilities in investment and asked to view my portfolio before they are willing to part their money for investment. I’m a very straight talking person and tell him that I’m a poor man. I don’t have much to invest; I don’t have a fantastic track record of investing on my own. I also don’t have a long track record of managing client’s fund.

I’m honest about my own capabilities that I’m not an investment guru or genius who can promises high returns without taking significant risk for my clients. I can't spot the top or the bottom and I’ll not switch funds as often as they buy shares and I shall follow a systematic and disciplined methodology towards investments.
For those who feel that I'm not capable, I’ll wish them well in looking for the adviser with the crystal ball. They are very likely do better than me. I help those who don't know or have no interest to know what to do.

What are the steps I took before investing my clients’ money?

Step 1: Letting them understand why they need to invest
After completing their financial plan, I’ll get to understand their assets available and their short to long term financial goals. This is important in the time horizon point of view and the necessary rate of returns to achieve their goals. We will discuss if taking some risk is necessary for them.

On segregating their assets and accumulation plan meant for specific goals, they will appreciate that this particular investment is meant for what purpose and for how long. I must manage their expectation that I’m not trying to make as much money in as short time as possible. My objective is to remove the fear and greed element towards investment.

Step 2: Going beyond Risk Profiling Survey
The questions set by the insurance company or financial advisory firm may not be sufficient to determine the risk profile of the person. I cannot simply use 5 or 10 questions to determine what my client should invest. I need to apply some judgment and commonsense to understand him beyond that 5-10 questions. If the survey shows him to be a particular investor type, it doesn’t mean that he will belongs to that group automatically.

3 aspects are normally surveyed in a Risk Profiler namely
a) Time Horizon and Ability to take Risk
b) Experience and Willingness to take risk
c) Objectives and Needs to take Risk.

Example (1)
A 35 years old man, having strong positive cashflow, desiring a specific retirement lifestyle but not willing to take risk and the questions he answered show that he is conservative. If I am to recommend a conservative portfolio, he may never achieve his retirement goals.
Example (2)
A lecturer, retiring in 2 years has moderate ability, highly willing to take risk and desiring a moderate retirement lifestyle, but had and agressive score for his risk profiler. The point here is that he may not have the need to take high risk in the first place, why go aggressive?

(To be continued...)

Busy busy with many shield plans lately (34 pages of paperwork including a story from how I meet him and how I convince him to buy a shield plan + 1 hardcopy file open for each case + photocopy and scanning before filing + chasing underwriters + data entry + send, deliver, explain policy etc all for peanuts earnings)... no time to write...

11 comments:

Anonymous said...

Eg. NTUC Growth product is not suitable for people who need to grow their money for retirement because it can't grow but preserve only.
It is suitable for someone who already has accumulated his fund and needs a vehicle to protect and preserve.
For someone who is far from retirement it is definitely not suitable.Whether he is risk averse or not he MUST take risk to grow his money. Alternatively, he can work very hard to rise up the corporate ladder to earn more. In this case he works hard but not his money.
Risk is a misunderstood element in investing. Very interesting subject, right? cannot discuss here, lah. too long.

SGDividends said...

Hi Ah Kiat,

You got to keep positive, think positive. I dont think you should say such negative things about yourself lah...firstly its no good for business as you need to inspire confidence. I dont mean lying about your ability, i just mean that being negative drives away people.

Anyway, i think you are a good person. Frankly, an IFA is not a portfolio manager and their job is not to know when to invest. Their job, IMHO, is just to deal with the personal finance of an individual. What and when to invest, leave it to guys like the fund managers ....though i must admit some of them suck.

Alright, all the best and stay positive....energy man...energy

Anonymous said...

Hey akhiat,
I'm not sure if you realise. Many people actually respect the work that you do for your clients.
You provide your great insights.
You prove that honest adviser can survive in this industry.
We can see your hardwork and your passion.
Stay positive and focus in building your business.

Lau said...

Investing involves risk. One way of minimizing risk is to get advise from an adviser with a good track record.

You may follow good rules to advise your clients when investing, but those are textbook rules. You will find that it may or may not work.

Treating client's money as guinea pigs is what's tarnishing the name of this industry.

When selecting an adviser, besides honesty, confidence is also important. if u cant manage your own money successfully, how much faith do they have that you can grow theirs?

do not think negatively of people who do not invest with you. focus on practicing what you preach if you are sincere and wish to be in the industry for the long term, build your own wealth first and prove it with a good track record in future.

Learning to invest is a journey, all the best!

Anonymous said...

"I'll write about earnings from investments next and my last post will be on how it is possible to make a living despite the low commissions" ????? waiting for this post...

Khiat Han Hwee Adrian said...

I did not think negatively of people who do not invest thru me. Its true that I'm not handling millions of client's fund now. Its also true that I don't have much money which I can manage myself. I'm in the stage of accumulating funds on a monthly basis before I can have a larger fund for investments.

I cannot promise to clients that I will sure make money for them but I'm confident that I'm helping them in controlling their risk and expectations.

I told them my methodology and systematic way of fund management. Those who agree to adopt my recommendations and accepted me as their adviser, I really monitor regularly for them.

Khiat Han Hwee Adrian said...

I wrote about earnings previously but got very negative comments of which many I did not post.

Some comments are meant to pull me down.
Some comments are meant to scold advisers
Some people says that I'm self-pitying myself.
All under the name of "Anonymous"

I don't know why so many of my readers are so negative about Financial Advisers and I don't think I should carry on with that post.

I may write about it if I feel like it in future.

Anonymous said...

Adrain, if your clients find fault with your management methodology it means they know portfolio management.
Tell them nicely they don't need you. They can buy direct from Ifast, Fundsupermart, Dollarex or TRex, Finatigue or from finatic or lunatics if they want and don't need to pay commission. Why find fault with you?

Wealth Journey said...

Anyone want to invest with me?
I have got a track record and own skin in the game.

Maybe I should become a financial advisor.

Anonymous said...

ah kiat,
I'm yr friend and I suggest that you stop blogging. You only attract free people with time to research and act smart. They will never buy anything from you and still calculate every penny with you!!!
Look for busy people like business owners and professionals who rather spend their precious time with family than to read blogs and forums. They will not mind paying you if you can help them save time and grow their money. Can't you see the picture?
The more you write and reply these idiots, the more they try to pull you down.
Touch your heart and ask yourself "Did you ever get a good business from your blog?" You don't need to tell me and I know the answer.

Aspire said...

Well, personally, I like reading your blog Ah K. & think that by continuing blogging, you'll be helping ppl like myself who really'd like to learn more.

If I could give a little advise: Pay no attention to negative ideas & comments from others except perhaps the constructive ones but know that you've ppl reading your blog who appreciate it a lot but just may not be saying it.

Take care. God bless. And success & happiness be with you.