Taking stock of assets a habit worth forming
THIS is the last Money Matters column for 1993 - an ideal time to have a full financial check-up, just as some doctors recommend that you have a full medical every year.
Many Hong Kong residents have at least two tax jurisdictions to consider; their home country and, of course, Hong Kong. Also, if your spouse comes from a third country, you might find there are a number of rapidly changing factors that need near-constantreview. Investment markets move quickly, and opportunities and trends come and go.
Furthermore, if you have enjoyed pay increases over the past few years, your protection packages - life insurance, income protection or health insurance - may well be woefully out of date and inadequate.
Always check your policy documents and certificates. When making a financial commitment via unit trusts or an insurance plan, do not throw your share certificates/policy documents into your bottom drawer. It is always worth double-checking; maybe a name was spelt incorrectly, maybe the term is not as you originally prescribed.
Prepare for your meeting with your financial adviser. Think about subjects to discuss with him: what do you want to achieve? When do you want to retire? Where do you want to retire? How much, in today's terms, do you want to retire on? And what is your attitude to risk? Only by giving your financial adviser this type of information can he do a good job.
There are so many investment alternatives that you should be able to get the product or products that are best suited to you. Independent financial advice is important.
This does not mean insurance companies have all the answers. If independent financial advice simply means that your adviser can go to a number of different insurance companies, then that is not good enough. A good financial planner will have access to a plethora of different financial instruments.
Because of Hong Kong's low tax, we are in a good position to be able to save, to make hay while the sun shines. But few expatriates take full advantage of this.
The ''normal'' retirement age in the West is at around 65, yet with a little bit of ''pre-action'' it is quite possible to retire 10 years earlier simply because of low taxation in the territory. If you haven't already done so, take action before it is too late.
As far as documentation is concerned, never sign anything until you have read it carefully. Brochures, whether from insurance companies, unit trust companies or whatever, are designed to sell to you. Always double-check the small print and never sign until you have slept on it.
Ensure always that your financial adviser is SFC (Securities and Futures Commission) registered. This is not a guarantee that you are going to get good financial advice, but it is a first step. Stronger regulations are slowly but surely coming in to Hong Kong, and the SFC is there to help.
You are the boss. Never forget that. If the advice you have received does not match with what you require, don't carry on - seek alternative advice, get a second opinion. Many life insurance plans commit you to a long-term investment. Make sure at the outset of the commitment that the plan you are taking out suits you today but also has the flexibility to accommodate you in future.
Evaluate the risk in your investment. Don't be fooled by the fact that most fund managers in Asia have had an excellent year, returning 60 to 100 per cent in an average Asian fund. This is not going to happen year in, year out.
There will be ''corrections''. If things take a turn for the worse, when there is a chance you will be wiped out. You need to accept the risk.
Cash deposits have been one of the least attractive investments available in Hong Kong, with inflation running at about 10 per cent, but with interest rates in banks at only 2.5 per cent, you are guaranteed to lose. This means that leaving money in the bank is a risk in itself.
It is essential that you find a good adviser, not just a salesman. If a product is hastily forced down your throat without much information to back it up, beware.
A good financial adviser will be able to bring the various strings of your financial well-being together. Here's to a prosperous 1994.
If you have any queries or practices you wish to have answered or investigated, please contact me confidentially by facsimile on 565-1423.