Why flexible is best
on Saturday, 11 February 2017. Posted in +CatererGoodmanPartners, Caterer Goodman Partners, Economic Commentary, Financial Advice, General, Investments
Today I had yet another reminder why flexibility is best, when it comes to investing. Before we get to today, let’s go back to November last year.
It was a cold drizzly Shanghai day, the sort London is famous for, as I found my place upstairs at Element Fresh at the Shanghai center for a coffee. A friend invited me out to pick my brain about investing. It turns out he had been offered an investment in a property deal. Unlike most opinions I’m asked for, this actually was a good investment. Still I cautioned him against it. Even though he was a successful entrepreneur with 15 staff in two businesses in Shanghai that were quite profitable I wasn’t sure it was a good idea.
My reasoning was he would need more flexibility than he thought. Although profitable, the investment might take 5-8 years to be realized. That’s a long time when you are doing business in China. Several business waves have come and gone in that time. Even successful entrepreneurs need considerable cash reserves. He took my advice with a confident smile and said he had ample cash reserves. Despite my advice, he went ahead.
Flash forward barely 6 weeks and I get another phone call. Her business has a big partnership opportunity and she needs to help fund it, but she is a million RMB short, even after her accessing working cash. She was desperate. Was there anything I could do to help her get her investment back? Her broker couldn’t help her. Rarely have I been proven so right so quickly with without feeling the need to say “I told you so!”
Lock-ins are for brokers benefit.
Sadly, it’s not an uncommon story. You’d think that access to your investment would be a given in today’s globalized world for stock and mutual fund investing. I’m approached possibly dozens of times per year, with requests to help people “access their money”. Even now, most brokers in Asia who help expatriates with their money love to lock investors into for long periods. “This is for retirement, so you don’t need access, do you?” they ask with their leading sales questions.
Well, it’s possible you’ll use it for retirement. It is good, of course, to put money away. But that doesn’t mean you should put it on a desert island where it is untouchable by all, except those financial institutions who wish to charge fees. The stock market trades every day, Monday to Friday except for the odd public holiday. The assets are easily sold, so why have the lock-ups?
The bottom line is that locking your money up is not for your benefit. It’s for your brokers and the investment company. It allows them to charge fees and pay off the commissions paid to your broker paid at the beginning. Anything they say otherwise is just sales nonsense.
Does anyone know where they will be in 5 years time?
Very rarely have any clients or potential clients answered with confidence “where will you be in 3 years time?” So why invest like you plan to be a wage slave for your entire life? Will you be an entrepreneur? Will you be offered a ground floor investment chance in the next Google or Uber? Or a discounted property purchase from a distressed seller? Will you have to say no because you’ve safely put away your entire life savings in somewhere you can’t touch? The chance of missing the once-in-a-lifetime opportunity because of decisions such as these, happens more than you could imagine. In Asia, it happens literally every day.
Don’t miss your lucky chance.
So when investing in the stock market, as you should, there is no reason to lock up your money. Use a discount brokerage account that gives 100% access all the time. Either manage it yourself, or find someone like us to do it. But whatever you do, don’t sign a multi decade contract obligating your money to stay put like a sitting duck.
Not everyone will be as lucky as my friend – we have managed to find a buyer for his investment at short notice so they’ll still be able to go ahead with the partnership and expand. Not everyone has that sort of luck. Avoid the lock ups so you can take opportunities when they come.
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.