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Finance: Cut to chase: advice or pitch

Legacy Phuket Gazette

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PHUKET: How do you know if the financial advice you are receiving is solid, or if it is a sales pitch in disguise? The first line of due diligence you should always employ is to check the educational background of the advisor. Ask where they did their financial studies and then verify with the institution that they do have the claimed financial education.

Once you can be sure the advisor at least has an understanding of financial markets, you next need to be assured that your interests are aligned. There are several set-ups that can do this. None are perfect, with each having their own set of pros and cons. The worst is a set-up where the advisor makes money for each transaction, as this encourages churning, where the advisor is tempted to make a profit off a transaction that is not in your best interest.

The indemnified commission, another common set-up, is often needed for new advisors to make it in the industry. This is where product providers such as insurance companies pay out in advance to advisors and then collect their money back from the policy, once it is sold. This solves the issue of churning and makes sure the investment decisions are independent of the need of the advisor to make a living.

I started my career this way and don’t think I could have survived the initial years any other way. However, this makes it difficult to service accounts, because there is no future benefit other than referrals and so advisors are constantly forced to find the next deal rather than service their existing clients.

Trailing fees are the best in my opinion, as the advisor is encouraged to do his best job to ensure a future income stream, yet can make investment decisions independent of his need to earn. Even this form is not perfect, however, as it encourages excessive risk taking.

Many advisors earn great fees managing high risk portfolios in the later stages of a bull market and as the markets climb to new highs, so do their fees. The problem is that when the crash comes, the advisor is not required to give back gains, but your portfolio will.

Where things can be tricky is that some salesmen hide where they are really earning money. Look at any lock-ups as a sign that the advisor is earning a commission. This is fine if he is honest about it, and you are happy with the terms. If advisors are dishonest about this, however, that is a big red flag. 5-4-3-2-1 redemption penalties only exist so the advisor can earn a five per cent upfront commission and there is absolutely no other reason for these.

The client’s situation that convinced me to write this article appeared like a good set-up to him, as he was told the advisor made his money off charging him a half per cent per annum trailing fee, which is fairly low and should have been a red flag. In reality the advisor also earned himself tens of thousands of pounds in upfront soft commissions on funds with much higher risk than the client wanted.

Finally, you must understand the limitations of financial advice and get a real understanding of the meaning of the word risk. Risk means you may lose (hopefully only temporarily in most asset classes), and realizing a loss does not mean your financial advice was bad, or the advisor incompetent. If you really understand this, you will analyze the risks you are taking much more carefully and take responsibility for the results. An advisor’s job is to point out the risks and steer you towards taking the risks that match your desire and ability to withstand.

Nobody can guarantee results, so be very wary of advisors who portray themselves as gurus. Remember that if they were so good at making money, they wouldn’t need to be managing yours. Many of my clients have made amazing returns in their portfolios, while others have made horrendous mistakes, or had terrible luck. I have made very painful mistakes in my own portfolio, but I have always lived to invest another day because my risk taking has always been in the correct proportion to my overall position.

Just to be clear, while this article may in fact be a pitch for anyone who is looking for a new advisor (I won’t pretend to hide that), it is also solid financial advice, which I hope helps you avoid falling for a pitch in disguise.

David Mayes MBA resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached at david.m@faramond.com or 085-335-8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

— David Mayes

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Business

Turbulence ahead for Thailand’s aviation industry | VIDEO

The Thaiger

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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Domestic air passenger numbers double those of January

Maya Taylor

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Domestic air passenger numbers double those of January | The Thaiger
PHOTO: Vietjet

Passenger numbers on domestic flights within Thailand have doubled within a month, rising from 4,000 in January to over 10,000 this month. Having nearly recovered to pre-pandemic levels, domestic travel plummeted once more when Covid-19 resurfaced late last year.

Apirat Chaiwongnoi from the Department of Airports says 15 of Thailand’s 29 airports are now operating domestic flights, with more expected to follow. He believes the aviation sector will continue to recover further in the coming 6 months, bolstered by the national vaccine rollout.

Around 120 domestic flights a day are now operating, which is twice the number that were operating at the lowest point in the crisis. Prior to the resurgence of the virus in December, domestic passenger numbers had recovered to 30,000 – 40,000 a day, around 80% of pre-pandemic numbers.

The DoA says airports must continue to adhere to the Covid-19 hygiene measures put in place by the Health Ministry and the Civil Aviation Authority of Thailand.

SOURCE: Bangkok Post

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Coronavirus (Covid-19)

Samut Sakhon’s shrimp market to remain closed until February 15

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Samut Sakhon’s shrimp market to remain closed until February 15 | The Thaiger
PHOTO: Kom Chad Luek

Samut Sakhon’s Central Shrimp Market, the epicentre of Thailand’s recent wave of Covid-19, will remain closed until February 15. The market can reopen once the overall hygiene situation at the market and surrounding area has improved, according to the province’s disease control committee.

Local officials say the shrimp market needs to remain closed until the market structure and nearby residential facilities are inspected. People who violate the order face up to a year in prison and a fine up to 100,000 baht.

More than 12,000 people in the province have tested positive for Covid-19. The increasing number of infections is a result from the active case finding to contain the spread of the virus.

SOURCE: Thai PBS World | Thairath Online

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