Finance: Defining a financial adviser

PHUKET: If you haven’t yet seen it, there’s a great episode of John Oliver’s ‘Last Week Tonight’ that covers the financial services industry in America. While it is a different beast in Southeast Asia, there were many points he brought up that are very relevant to expats in the region. Go onto YouTube and search for it if you haven’t seen it yet.

The first part he mentions is that in America, basically anyone can claim to be a financial adviser regardless of education. This is true – they only need to pass a very simple licensing exam that has nothing to do with understanding finance. I know this because I passed that exam many moons ago, and I also studied finance up through my MBA. I say that not to brag either, as neither has stopped me or my clients from being preyed on by greedy Wall Street scumbags in the past. In hindsight, I think these horrible experiences have probably been the ‘real’ education in my life.

What is more concerning is the difference between a fiduciary and an ordinary adviser.

Most financial advisers in the US are not even required by law to act in your best interest. Here, only Thai people are actually allowed to be financial advisers. However, they are not regulated to advise on international jurisdictions, only Thai securities.

Many people mistakenly think I’m a financial adviser, but in Thailand I’m only allowed to provide service linking policy holders to our regulated office in Malaysia. This is similar to the service you could get in Thailand when a representative of your bank in Singapore deals with you.

However, if you use a regulated jurisdiction, such as Singapore, Hong Kong or Malaysia for international advice, you are still just as likely to require ‘luck’ to land someone with an ethical backbone, to look after your best interests instead of some insurance company or bank.

Basically, this is pretty much the situation all over the world, regardless of the regulations or legal framework. This does not mean you should bury your money in the sofa and never trust anyone. It just means you need to be an informed consumer of any type of financial service.

In John Oliver’s segment, he also mentions heavy, sometimes hidden fees. Of course, he kind of does advisers an injustice by neglecting to address that many of them work without salary, spend most of their working hours giving advice that turns out to be free, and have often spent a fortune on their education to do so. There is a huge opportunity cost for someone who could earn a nice cushy salary in a big company that chooses to offer you financial advice instead.

I am not the one to say what a fair compensation is, but just keep that in mind when examining fees. I often use funds with high fees because the underlying managers consistently outperform, and that is something I am willing to pay for.

Of course, index funds are an alternative for those who are not so investment savvy, and John Oliver recommends those on the show. If you read my articles regularly, you know I also recommend that route, but he fails to mention ‘how’ to invest in those.

So, for those of you who haven’t been following, my article next week will explain again how to do just that, for those of you who wish to save for retirement in the markets without using a financial adviser.

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David Mayes, MBA, resides in Phuket and provides wealth management and life coaching services to expatriates around the globe, specializing in UK pension transfers. He is a regional representative of Faramond Group, located in Kuala Lumpur, Malaysia. Faramond UK is regulated by the FCA to provide advice on pensions and taxation. He can be reached at 085-335 8573 or david.m@faramond.com

— David Mayes