From June 20 to 23 over 100 delegates from Asia and the
Middle East descended on Bali which was the choice for Financial
Partners’ annual convention this year. The group’s
impressive record since the merger of its component parts
in 2002 have led to a decision to move from providing financial
advice to becoming a major private offshore bank with four
lines of business: Banking, Private Client, Asset Management
and Insurance.
Why the financial industry is changing
Recent years have seen many changes in the financial services
industry. Readers will be very much aware of the deterioration
in many services. Examples are high bank charges, less personal
service, touch-dial phone services where it is almost impossible
to speak to a human being, remote call centres and so on.
Why is this so? The rising cost of labour is one obvious reason.
It is no longer cost effective for the banks if you spend
five minutes at the counter paying in or withdrawing a small
amount of money and having a little chat about the weather.
The counter clerk’s salary is too high and the piece
of real estate you are standing on is too expensive!
Where investments are concerned, small savings plans are no
longer cost-effective for the institutions. This is why the
fixed charges are so high and why I do not recommend saving
less than $500 a month into a contractual plan. Even the big
private banks are turning away private clients with less than
a million dollars to invest. The margins are insufficient
to cover the cost of the expertise that is needed to manage
them. Another reason for the changing face of the industry
is increasing and costly regulation and compliance. It costs
the institutions – and your adviser! – a lot of
time and therefore money to keep chasing you for that proof
of address that you cannot find for your remote villa in the
middle of the rice field.
So what is the solution?
Where my group is concerned it lies in improving efficiency
by a large investment in state of the art technology and the
use of the existing network of advisers and support staff
to distribute a much wider range of products. The objective
is to give clients access to high rate deposit accounts, mortgages,
wealth management services, online dealing, legal and tax
services, tailored insurance solutions and other financial
services through a single channel via the Internet or with
personal service, but not to the extent provided by conventional
banks, which has become too costly to operate. This is likely
to be the future direction of the industry.
What else of interest came out of the convention?
We were given the latest market prognosis by the London-based
Investment Manager of RMB Asset Management. In his opinion,
despite the recent highs experienced by many markets, equities
still remained the cheapest asset globally. The public is
still in shock following the bear market of 2000 to 2003 when
over 50% of the value of many people’s investments was
wiped out. This has given an opportunity to smart investors
to move in. Some private equity managers have been borrowing
at 5% and investing in markets that are still producing double
digit returns. Thanks to increased efficiencies and a lot
of merger and acquisition activity, dividend growth is likely
to remain strong. This will not continue indefinitely of course
and at some point the situation will need to be reassessed.
For the moment, Asia is the region where growth is likely
to be the strongest.
What about bonds and property?
With major currency interest rates still rising, the outlook
for bonds, particularly government bonds, remains negative.
The opposite is true in Indonesia where falling interest rates
are causing bond values to rise, although the currency risk
is higher. Emerging market bonds are looking less attractive
than of late as the margin above investment grade bonds is
insufficient to justify the additional risk.
Where property is concerned a rising interest rate scenario
across the globe is starting to have an effect on prices,
although in cities like London commercial property is still
in great demand as the economy continues to thrive. What is
interesting is the low correlation between regions. Asia now
offers huge opportunities in the property sector. A good way
to get into these markets is via a global or an Asian property
fund.
And finally, an inspirational after dinner speaker
We all have challenges in life but few can compare with the
challenges set for himself by Adrian Hayes, our guest speaker.
Adrian has not only climbed Everest successfully but has also
reached the North Pole on foot and this year plans to reach
the South Pole, an achievement attained by only a handful
of people. While the rest of us can only dream of such achievements
(I would give it a shot except I can’t stand the cold!)
we can apply his principles for success to a number of aspects
of life. His first task is goal-setting. Everest and the Poles
in his case. In ours, it could be a savings target for retirement
or other needs. Without a goal, how do we know where we are
going? Next comes preparation. Before embarking on any financial
plan we need to do our calculations properly. Then comes moving
outside our comfort zone. In the case of Everest it is acceptance
of conditions beyond past experiences. For savers it could
mean sacrificing some of the comforts of today to ensure survival
tomorrow. Finally, Adrian emphasised the importance of teamwork.
You cannot climb Everest on your own. When you have financial
goals to achieve you need the support of family, perhaps colleagues
– and of course your financial adviser!
Colin Bloodworth is a senior adviser with Financial Partners
International. The opinions expressed are his own. If you
have any questions related to personal finance you may contact
him at 021 520 8099 or colin.bloodworth@financial-partners.biz
