Independent Financial Advisor

[SirKenneth]

Hi

I've been reading this forum for a couple of years but have never posted as I've always been able to find help/answers and never had anything worthwhile to contribute! I may be missing a whole section so apologies if I'm doing this wrong or am in the wrong place.

Can anyone recommend a trustworthy financial advisor? I talked to an 'independent' one at work but was not convinced - he couldn't answer even the most basic of questions. I need to start putting away something for retirement but I need some help.

Has anyone had a good experience in setting up something tax-efficient that's long-term (15 years+) with regular payments that's a bit flexible? I like the plan the guy was selling and it looks like a reputable fund management company, I just don't trust the financial advisors in the middle! (plan providers won't sell the plan direct to me)

All advice appreciated.
Ken

[Strong Eagle]

I have yet to meet a financial adviser in Singapore that was worth even a bucket of warm sh*t.

Most of them are flogging products for the company for which they work, and I have a rule of thumb: The farther away, geographically, the offered investment is, the worse it will be.

The second problem is that if you actually were to find an independent advisor in Singapore, they don't know enough about international finance to deal with an expat's needs... and I never did find a decent independent financial advisor.

None of these guys has any insight or experience into an expat who might own various assets in various countries... no concepts of asset allocation, or tax treatment.

My view is that you should do these things in preparation for investing activities.

a) Contact a knowledgeable tax accountant to discuss the tax ramifications (income and capital appreciation) encountered by investing in your home country versus elsewhere. For example, as a US citizen, it doesn't matter where I invest, they want my money.

b) Become at least passingly familiar with the basics of investment products... stocks, bonds, alternative investments (commodities, metals, REIT's, arbitrage, M&A plays, and the funds that invest in them). I believe the "traditional" ratios of cash/bonds/stocks are bullsh*t numbers in this world of today.

c) Determine your own appetite for risk. You can Google for websites that let you test yourself. You might think you are aggressive but might rethink that if I offer you an investment that requires a 5 year lock in period.

d) Work backwards to determine your retirement requirements. Assess how much money you need to live on. Subtract out any social insurance you will get. Assume that the rest of the money will come from investments generating 4 to 6 percent a year. Now you have your investment targets.

e) No one works for nothing, and even independent advisors have to have an investing philosophy. Avoid people who work only for one company or represent only one fund (or set of funds)... for example, can offer you only ING products. I suspect you'll need to find someone in your home country or the US... if you find one in Singapore, it will be a miracle.

f) Look for the following additional qualifications.

i) Can offer you multiple investment alternatives.

ii) Is compensated roughly equally by each of those alternatives, that is, he is compensated by the funds or investments, not by you, but has no real incentive to steer you one way or the other on the basis of his own income.

iii) Understands that "traditional investments" like stocks are available through mutual funds and ETF's at very low management costs, and will allow you to make your own selections not subject to his management fees (he can offer you nothing for "managing" a Fidelity or Vanguard fund).

iv) Is thoroughly able to describe to you such basics as the trade offs between bonds and bond funds, risks and rewards in alternative investments, his views of international markets, capped risk and return funds, etc. You want to know that the guy has a framework within which he provides his investment advice... knowledge of world economics, his take on them, and impact to you personally in your investment package.

v) Will offer you advice on an hourly basis for things like stock portfolio selection outside of any funds for which he is compensated.

Unless you plan to spend a lot of time with your investments, I don't see much point in chasing individual stocks and bonds, except for maybe some small percentage investing to see what kind of a player you are, or, if you know someone that can provide you an investing advantage... a brother in law running the company that gives you insights into future performance.

Instead, you really dice up your investment picture into several categories, then work with your advisor to decide the percentage of each based upon required returns, risk tolerance, and his views of the world.

a) International stocks and bonds versus "home country" - for me, the USA.

b) Large cap versus small cap investments. Doing an ETF that tracks S&P 500 gives you a large cap portfolio, the Russell 2000, small cap.

c) Mix in alternative investments. I have chosen funds/ETF's which offer a variety of trading alternatives, depending upon the degree of focus of a particular line... foreign real estate, commodities, BRIC/BRAC investments, etc.

Stuff your money in and watch what happens.

[Nage42]

Strong Eagle, I registered to just be able to follow up on your post, it was AMAZING.

"Warm bucket of sh*t".... almost pissed myself laughing.

Some excellent information there, that is _still_ very relevant.


Thanks for all that.

[Strong Eagle]

Thank you... that was a few years back... and indeed, still relevant.

A brief update: I made a foray into a fund that made investments into arbitrage, M&A, metals, etc. It looked like it was a good deal. But, it never returned anything like I was expecting.

Then I did my homework. The fund was, of course, taking its management fee for handling all the investment allocations, but, it was investing in funds that were also taking their own management fees. Fees on top of fees.

I've closed them all out. I'd like to look into alternative investments again but until there is something like the equivalent of an ETF for arbitrage plays, I reckon it's stocks (via ETF's) and REIT's.

[Nage42]

What I dislike is that all the McFA (business school handing out econ majors like it's a "science") seem to gloss over observable and very important data points:

For 99% of an ETF/REIT's life, it behaves according to typical market dynamics; then, during certain market conditions (describe in a second), they behave completely non-linearly.

ETFs and REITs are frequently designed to gain liquid access into typically illiquid assets (Bonds, Real-estate, Emerging markets, etc.)... that's great, the money can easily get in and need not be timed to funding events like bond issuance. Yippie! right?

However, then there is the 1% situation, where the underlying assets revalue to -5% or so due to market cycle, which forces the fund manager to sell some underlying, forcing a mark to market at exactly the worst time. Thus revaluing the fund, thus triggering a further liquidation, and the snowball is now well and truly rolling now. Somewhere between -8% and -10% of the ETF price drop the fund manager suspends selling to gate outflow (yep, it's in the prospectus) so that they can revalue the fund at it's true market price... which is falling like a knife.

Thus, when they finally lift the sell restriction, it's gapped-down by 85% of it's value.

If you had a -10% trailing stop-loss, it fires now (the worst possible time), and sells it further down, so that the people who triggered the -5% dip can scoop up all of the assets at ten cents on the dollar....

What could you do to protect yourself from this?!? Sweet fsck all... not a thing, in fact, it was your stop-loss that you put in for "protection" so that you could "sleep soundly at night" that

Considering these 6 sigma events that are only supposed to happen once every 16 billion years, and have happened twice in the last twenty years... well... the McFAs are NOT presenting the reality, they're regurgitating what their prof. told them was "true," and it's really, really not.

I find myself draw to "old school" investing. Fixed allocation to precious metals, small allocation into luxury goods when there's blood in the streets, healthy chunk into venture business, and lining up to purchase good farmland in sensible jurisdictions when I can (i.e. OZ/NZ are fairly predictable, whereas Thailand, Indonesia, and Philippines are frequently not predictable every 10 years or so).

The pendulum swing of tech/pharma/innovation to necessity consumables every 5-7 years seems quite dependable... so far...

[Strong Eagle]

The situation you described also applies to retirees with insufficient cash reserves to weather a downturn.

Everything is OK until the downturn... the returns off the assets are large enough to provide the necessary monthly income. Then the downturn hits... the dividends stop, the stock drops, and the retiree is forced to sell assets at the bottom in order to obtain the necessary monthly income. That's why it is necessary to have sufficient cash (or cash equivalents) to weather a downturn of some duration.

[JustSee]

Awesome post strong Eagle!

I am not a big fan of REIT's, there is nothing wrong with it, but return wise they are just meh at best.
Investment wise, my personal is mutual funds for longterm investment - pretty much all of them are front loaded (meaning you pay an initial percentage from the investment, around 3-5%, and lower yearly maintenance if at all), and index funds for shorter term investments (up to 5 years).

Nothing new in the above philosophy, it comes from Dave Ramsey books, welcome to listen to his podcast, but I warn you, it gets very repetitive.