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SCMP Reporter

THE most important investment decision you make might not be among unit trusts, equities or other financial products but rather among advisers.

  Individual investment advisers and the companies they work for should be registered with the Securities and Futures Commission (SFC) and, if they offer insurance-linked products, with the Hong Kong Confederation of Insurance Brokers.

  Both bodies assess the integrity of newly licensed advisers and monitor the compliance of registered companies, but the decision whether to trust your adviser remains with you, the investor whose money is at stake.

  'It's up to investors to do their homework and ask lots of questions of any adviser they are considering using,' the SFC's senior manager of corporate communications, Bill Weeks, said.

  To qualify for registration with the SFC, advisers must have sufficient experience, recognised professional or academic qualifications, financial strength and, hardest to judge, integrity.

  These are rather broad criteria, so questioning becomes the most important feature of any successful advisory relationship - and the questions should fly in both directions.

  While you probe your adviser during that first meeting, make sure he or she is asking you the right questions, too. You should both get a good workout.

  In that initial encounter, said Steve Cumming, director of independent financial adviser Asia Pacific Financial Planning, your potential adviser should ask about your financial circumstances, investment objectives, time frame and attitude towards risk.

  First-time advice-seekers are often keen to interrogate their adviser on the small print of insurance policies or opportunities on the Timbuktoo stock exchange, but few novices can bring themselves to ask how they will be paying.

  The answer is: most advisers get paid not by the client but by the insurer or bank whose product is being sold.

  Mr Cumming warned this could lead to confusion and conflict of interest. 'We rebate all commissions paid by insurers and banks to our clients and ask them to pay us a fee. That way, the client knows whose side we're on,' he said.

  Sara Pack, a partner at Tresidder Tuohy & Partners (HK), agreed but added: 'If the investor is just looking for one product - say, life cover - they know what they want but are unlikely to want to pay fees for just one product.

  'However, if they want a full financial-planning service considering all aspects of their financial needs, then a fee is probably the most effective route.'   Your personal circumstances will determine the choice you make. But before you sign up for anything, make sure you know how the adviser is getting paid and what, if any, relationship he or she has with the ultimate provider of the product you are buying.

  Hong Kong authorities have yet to adopt standards already in place in Australia and Britain requiring advisers to put all advice in writing. If you are looking for a way to judge an adviser, then one who does not voluntarily adopt this practice should probably be avoided.

  In addition, choose an adviser with whom you think you will feel comfortable, possibly over many years. This is important, because when you take on an adviser, you let them look not only into your finances but also into your personal life.

  You need to feel comfortable talking to your adviser about everything - from the divorce plans your partner has not yet heard about, the baby you do not want your parents to know about or the emigration plans you are keeping from your employer.

  One thing you cannot see from that first meeting is what the back office is like. '[So] try and get a personal recommendation, preferably from someone who has had a good experience with them and, most importantly, has got their money out when they needed it,' Mr Cumming said.

  If you do not have access to satisfied customers, make appointments with a number of advisers and shop around until you find one that offers a service with which you feel comfortable.

  You should have the same confidence in your financial adviser as your family doctor. 'You come to us with financial symptoms that need treatment. We either treat you ourselves or refer you to a specialist, such as an accountant or tax planner,' said Ms Pack.

  Confidence is key, and the only way to gain that is to make sure you have all of the facts.

    Regulators can help, but ultimately it is your money and your future. So ask the right questions of yourself and your investment adviser, and it could be the start of a beautiful relationship.

  The Securities and Futures Commission has published a booklet designed to help investors choose a broker or financial adviser. About 17,000 financial entities are registered with the securities watchdog, so anyone not registered should be viewed with scepticism. When in doubt, call the SFC hotline at 2840-9333.

 WHAT YOU SHOULD ASK  1. Are you registered with the Securities and Futures Commission? With the Hong Kong Confederation of Insurance Brokers? 2. What professional qualifications are held by the advisers in your company? 3. Do you have a tied relationship with any insurers, banks or other financial-service providers? 4. How are you remunerated for the advice I get? 5. How big is your company? What kind of back-office support is available? 6. Will I receive all of your advice in writing, and will we have regular face-to-face meetings?   QUESTIONS YOUR ADVISER SHOULD ASK YOU  1. What are your current financial circumstances, including earnings, savings, property holdings and liabilities?  2. What are your investment objectives? Are you looking to pay for a holiday, school fees or some other expensive plan? Or is your primary goal to accumulate long-term savings for retirement? 3. What is your time frame? Are you developing a three-to-five-year plan or 10-to-15-year one? 4. What is your attitude towards risk? THE ADVISER SHOULD TELL YOU 1. How he or she is remunerated for the advice.

 2. How often he or she will contact you and whether advisory research and investment options will be provided in writing.



How to interrogate advisers