Like may professionals, I get more cold calls from financial advisers than I would like (the preferred number of calls is zero). While standards have improved (very) marginally over the years, most are from "independent" financial advisers selling high cost and inflexible insurance products or off the plan overseas real estate.
This week I received a cold call from a large financial institution, one that I did not have a relationship with. Curiosity got the better of me and I agreed to meet with them to see what they had to offer. I should have known better. I really should have. Their product had the following features:
1. front end load of "only" 2-3% depending on the amount invested;
2. annual management fee of 1.5-2% depending on the amount invested; and
3. annual platform fee of 0.3%.
The very neatly dressed and earnest "senior vice president" assured me that they were completely transparent, that there were no hidden fees or charges etc etc etc
And what did they offer to earn these "completely transparent" fees? Access to thousands of mutual funds, ETFs and individual stocks. Big deal. I can also access thousands of funds, ETFs, individual stocks and other investments without paying those fees.
He also waxed eloquently about the portability of the plan - if I leave Hong Kong, I can keep the same account wherever I live (except the US). Hmmm .... and I can't do that with any of my existing accounts?
He seemed surprised when I told him it was a very unattractive proposal.
I really don't understand why anyone would sign up for something as ridiculous as this.
3 comments:
I've been reading your blog for awhile. It has been very informative in terms of your decisions and objectives. Keep it up! I've recently been offer these "services", similarly they sell on the idea on the number of funds accessible through their system. Personally I don't know how someone can keep track of these with so many around. Question is is that you mentioned alternatives. Can you name a few?
Cheers!!!
Hi Dennis
Thanks for dropping by.
Good question. The bottom line is that even from HK, it is possible to access more than sufficient relatively low cost funds without too much difficulty. The simple answers are the ETFs listed here in HK or low cost offerings like those listed in London or New York (all of which you can buy through brokers). There are more than enough choices to construct a properly diversified portfolio. We can't get the costs as low as US investors going through the likes of Vanguard (due to transaction costs), but it's still a better deal than anything I have seen a service provider offer.
I'll do a more detailed post on this subject as soon as possible, hopefully later in the week (work is keeping me pretty busy at the moment).
Cheers
traineeinvestor
I can appreciate the flexibility of investing ETF compared to those offered by the "investment services", which tend to tie you up for years. ETF in Hong Kong seems to be less utilize, maybe due to lack of familiarity hence the low turnover, beside 2823 and 2800 of course. Hence is going overseas a good idea? Furthermore how would one go about picking a broker i.e. what services are important? Your advice is greatly appreciated.
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