Hong Kong: fee-based investing, next step full disclosure? 

At long last the scales of ‘fairness’ are tilting towards the client. For far too long the advisor and the Insurance industry were disproportionally rewarded for their ILAS related services/products. This years’ implementation of GN15 (Google it) has brought about the end of unfairly high levels of commission. Whilst we don’t think GN15 went far it enough it is certainly a step in the right direction and as such is better late than never.

Post-GN15 once commission based salesforces are now ‘fee-based’ albeit under sufferance and probably still with some revenue generating characteristics that might potentially impact on their ‘objectivity’.  Again, it is certainly a step in the right direction and as such is better late than never but it does mean that prospective clients might find it even harder to find ‘old school’ fee-based firms.

For the Google savvy amongst us there are articles ‘out there’ such as this gem from the SCMP of November 2012 http://www.scmp.com/magazines/money/article/1080854/partial-impartiality highlighting practices that were we well ahead (some more than others) of the regulator in championing the rights of the consumer. In this piece our MD, Rick Adkinson had the following in to say:

“Rick Adkinson
Private Capital, managing director
Hong Kong's disjointed regulatory framework overseeing the financial-services sector opens up loopholes for unscrupulous advisers to cash in on high-commission products, particularly investment-linked long-term savings plans, says Rick Adkinson, managing director of Private Capital.

This is because insurance-licensed advisers are not in the best position to advise clients on long-term financial planning, because without the SFC licence, they cannot tap into a wide range of other fund platforms that offer similar products though at much lower rates, he says.

"Some companies will have a mix of SFC-licensed and insurance-licensed advisers and as a result, are able to duck and dive between the regulators and take advantage of the fractured industry," he says.

Adkinson uses the Singapore-based iFAST platform to tap into hundreds of mutual funds for his clients, at minimal costs, and allows them to benefit from reduced investment costs.

Using an hourly charge rate to calculate costs, Private Capital will agree with the client an upfront overall capped fee for reviewing one's financial plan. A one-off administrative fee will then be charged for clients who decide to set up an account, with a 1 per cent fee on total assets under management.”

Three years on, November 2015, and nothing has changed at PCL; we are still doing the same thing:
 
“Private Capital will agree with the client an upfront overall capped fee for reviewing one's financial plan. A one-off administrative fee will then be charged for clients who decide to set up an account, with a 1 per cent fee on total assets under management.”

Happily for us GN15 has been a very welcome step in the right direction and has had no material impact on the way our client-centric practice operates. We are unbiased, and always have been, because it is ethically and morally correct. 

Next step full disclosure?
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