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When is a recommendation not a recommendation?



One of the great things about these articles is the feedback I receive from readers, although sometimes this can be surprising, in a good way and a not so good way.


Some of the “once in a lifetime” investment opportunities that I have been asked to write about have often been farcical, yet somebody somewhere has probably bought into them. My favourite offers are always those where I have to pay a fee and provide my bank details in order to receive an inheritance or a win from a lottery I didn’t enter.


More seriously, I was recently asked why I don’t write about specific products and investments anymore and why my advice is more general than in the past. Quite a few of you have noticed that I have been highlighting the importance of using chartered and regulated firms, authorised advisers and avoiding unregulated investments. As always, there is a bit of background to the change of heart and some sound reasons for the change of stance.


In the early years, I had seen the articles as providing a little information on some of the more interesting investment funds or products that were available or had come to market. My goal had been to try and write something interesting and to provide information that would allow the reader to go off and do their own research to be able to speak to their adviser.


I hadn’t anticipated that someone might go off and buy the products or investment funds based solely on what they read in the articles, but how wrong I was. In the case of the MAN AHL fund, this had rocketed in value and if you have made several times your initial investment you might think it would make sense to “bank” a bit of the profit. A common strategy is to gradually sell down the holding and take out at least your initial investment so that any remaining holding is profit.


It seemed that this reader had been watching the holding all the way up and all the way down again without thinking he might be wise to review the decision, seek advice or take some profit. Why on earth he would be waiting on my monthly articles to see if I had written a “sell” recommendation was beyond me and forced me to take a slightly different approach.


So why the regulated and chartered stance? The problem with many products and investment funds that are available to investors based offshore is that the buck usually stops with the investors and they often don’t realise this. Some readers have been surprised that very high profile companies that are household names would offer investment funds that are not suitable for retail investors.


It is the role of the individual investor, the trustee or the financial adviser to ensure that any specific investment is suitable, given their objectives, time horizon, capacity for loss, etc. Sadly, many investments turned out to be only suitable for unregulated financial advisers, paying high commissions and exposing the investor to unanticipated risk of loss.


What’s the difference with a regulated and chartered firm? I have been suggesting more recently that investors seek advice and look for firms that are regulated, insured, authorised in a stable and secure jurisdiction. The reason is that the majority of these firms only deal with retail clients and only recommend products, services and investments that are suitable for these investors.


I know one company based in the UK, which is not only chartered, authorised and regulated, they are completely independent, acting in the interests of retail clients. In addition, they specialise in advising clients in Thailand. They provide their own global investment platform which offers investors the opportunity to buy over 3,000 different funds in multiple currencies, as well as individual large cap shares. They provide advice on recommended funds and, surprisingly, only around 90 of the total funds available come with an individual recommendation to “outperform” over the next five years. If investors want to run their own investment portfolios, half of the total available funds are excluded on risk grounds as being unsuitable for retail investors. Please contact me if you require details of this UK-based firm.


I have been impressed with this regulated and chartered firm’s approach, focussed on the right thing for the client, restricting choice where investments may be unsuitable.