View Poll Results: Should I stay or should I go?

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  • Pull totally out

    4 66.67%
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The true cost of an IFA

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  1. #31

    Join Date
    Oct 2006
    Location
    Hong Kong
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    15,557

    Just sharing with you the fees for the Old Mutual bond fund:

    Regular management policy charge - 1% per annum for the first five years
    Annual Admin charge - GBP384
    Investment dealing charge - GBP96

    Early surrender charge 5% in year one reducing by 0.25% per quarter to nil after year 5.

    And then, and this is the kicker, the IFA also gets a fee of 1%.

    And then the underlying fund fees.

    I think I will unwind the Old Mutual bond ASAP, however I've been told that one of the funds, called the Partners Fund E which has a longer selling period, about 3 months, so there is a good chance the actual value I get back will be less than quoted.
    in all cases the life cover is 101% of the amount invested.

    Last edited by pin; 18-08-2017 at 10:41 AM.

  2. #32

    Join Date
    Oct 2006
    Location
    Hong Kong
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    Update:

    - FPI policy now totally unwound, just received monies in my bank account today. Value after surrender was slightly better than expected, at around USD69k

    - In the process of unwinding my OMI bond. This will have to be in two stages, as one of the underlying funds may take some time to unwind.

    jrkob likes this.

  3. #33

    Join Date
    Oct 2006
    Location
    Hong Kong
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    Further update:

    - Unwinding OMI policy. So far all but 2 positions have been sold so I now have USD66k in cash in the account. I'll give it a week and see if the other two positions can be unwound by then. If not I will withdraw the USD66k first.

    - The overall value of my portfolio stands at roughly USD107k at the moment with a surrender value of about USD104k.

    - So looking through my statements last year my OMI portfolio was up to USD115k. This is how badly these so called IFAs will fcuk you over. During a bull run the value of my portfolio actually decreased in value!! It seems the IFA decided to sell one position and buy another and the position he bought into looks like he got a commission for.

    - My numbers are looking a bit better than initially thought. Of the USD171k invested, I'll get back USD173k. My portfolio value of my FPI stood at USD95k on surrender and my portfolio value before I wound down my OMI was USD106k (total value of USD201k) so I am taking a total hit of USD28k.

    - While the above number is a hard pill to swallow, what is even more galling is that in ten years my portfolio has only grown USD30k during a bull market. The so called actively managed funds haven't actually been actively managed and my profit has just been eaten up in fees.

    Morrison, jrkob and Tadashi like this.

  4. #34

    Join Date
    Oct 2006
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    Hong Kong
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    15,557

    Just to hammer home the cost of these IFAs this is podcast from Dubai given by Andrew Hallam:

    https://omny.fm/shows/businessbreakf...pat-10-09-2017


  5. #35

    Join Date
    Oct 2006
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    Original Post Deleted
    I am afraid I cannot provide any comment on this case.

  6. #36

    Join Date
    Oct 2006
    Location
    Hong Kong
    Posts
    15,557

    To update, just got my final bit out of my OMI bond. So now both OMI and FPI are fully surrendered!!

    Total invested, USD171k, total out after just under 10 years USD174k!!!

    Lesson learnt, albeit an expensive one.

    chichow, Sith and traineeinvestor like this.

  7. #37

    Join Date
    May 2009
    Posts
    1,289
    Quote Originally Posted by pin:
    To update, just got my final bit out of my OMI bond. So now both OMI and FPI are fully surrendered!!

    Total invested, USD171k, total out after just under 10 years USD174k!!!

    Lesson learnt, albeit an expensive one.
    How much was the surrender cost? Meaning what was the Market Value?
    If you had signed up for 10 year you wouldn’t have lost that I guess.

  8. #38

  9. #39

    Insurance linked investment schemes should be banned. Full stop.

    shri, Coolboy and AsianXpat0 like this.

  10. #40

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    5,585

    The problem overall is the risk and return/reward characteristics of all the investment advisors..

    Simple breakdown, assuming you are well trained in financial analysis and advise, your expected salary can be, say, HK$500,000 p.a.
    Private banking ROA (return on asset) are talking about between 0.8% ~ 1.0% p.a. If we follow this benchmark, then to make 500k p.a. you need 100x500k in assets = 50m HKD.

    For a man on the street, and advising other man on the street, to amass 50m HKD of assets is not easy. How many guys are going to put in 1m of assets each for you ? The most you are going to get is maybe 200k HKD each. Then it means you need to have around 250 clients. That is going to take 3~5 years to amass.
    Then, unlike a private banker where you can advise to 'churn' products, for most man on the street the products available to them is not really churnable and you end up needing to find at least 100~150 customers each year.
    Which is impractical..

    So to reduce the number of customers, from 150 down to, maybe, 30 per year.. the only way to help you make 500k for the year is to charge, 5x1% for these products..

    So that's where the problem is..

    How to solve it ? no idea... maybe it really has to be a social service provided by some government department or banks on a pro-bono basis.. otherwise, how can this conflict be solved ?

    Its nothing to do with product.. but its the fundamental industry that is not proper.. Banks still charge 3~5% sales fees for mutual fund sold at the counter, in addition to the 1% p.a. kickback they receive as the distributor.