Offshore brokers: putting clients second?on Wednesday, 15 February 2017. Posted in +CatererGoodmanPartners, Caterer Goodman Partners, Economic Commentary, Financial Advice, General, Investments, Offshore
Surprisingly it is low tax centers like Hong Kong, Singapore and Dubai that seem to be leading the way. Waves of complaints can waken even the sleepiest regulator it seems. It’s not a revolution mind you. It’s not a requirement for fiduciary duty or even for mandatory commission disclosure, something that happened in UK and Australia years ago. The progress is merely a ban on the “indemnified commissions” which is like a cap on upfront commissions paid for starting a regular savings investment account. It’s a blunt rule, but it’s definitely progress.
Even this small change however has led to a backlash from some in the industry forced to improve their practices and change their business models. This has been too much for many brokerage companies and individual brokers in Hong Kong and UAE based brokers are living in fear the same is in store for them. When you are reliant on a $20K USD commission for selling a three thousand a month savings plan so you can pay for your team of cold callers and your snazzy office, it can often seem difficult to see another way. Sales of insurance linked investments in Hong Kong collapsed after the commission ban.
Still let’s not kid ourselves that our competitors will suddenly be clean with these welcome changes. Indeed, there has been some unexpected negative consequences, which we might discuss in a future post. Even in the US where considerably more protections are in place, the roll-back of the fiduciary rule show how progress is far from certain and how far it has to go elsewhere. Keep in mind that the fiduciary rule was to be for only retirement accounts, not ordinary accounts.
Even that small change had brokers up in arms because it would expose the gap between sales spin when a broker was forced to use two different standards for two different accounts. The uncomfortable reality as John C Bogle, founder of Vanguard put it in a recent New York Times opinion piece.
The now-endangered fiduciary rule is based on a simple — and seemingly unarguable — principle: that in giving advice to clients with retirement funds, stockbrokers, registered investment advisers and insurance agents must act in the best interests of their clients . . . It simply doesn’t seem like a good business practice for Wall Street to tell its client-investors, ‘We put your interests second, after our firm’s, but it’s close.’
Can you imagine what a truthful statement would look like for most offshore IFAs? We put clients fourth! After ourselves, our company and the investment company providing the product! Sign up now!
Bottom-line: Get your adviser to manage your money in an online discount brokerage account for a management fee. Insist on complete transparency and no lock-ins or if you can’t find anyone, simply do it yourself. It might not be a fiduciary rule but given it aligns the interests of your broker with yours, it works like one. Your investment account will do far better as a result.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.