Professional Qualification

One of the major concerns in the offshore industry is the lack of any form of regulation. Therefore, anyone can set up as a financial adviser, regardless of his or her previous experience or qualifications and unfortunately, many do.

One firm recently opened with four or five so called 'advisers', who previously were in other occupations, none are qualified to offer any form of financial advice. However, as another company said regarding their new members, "They will be, when we've finished training them". (One week, by the way).

Would you allow a person to carry out an operation if he wasn't a qualified surgeon? Most unlikely.

In most countries, onshore, there are regulations in place that restrict those who can operate as financial advisers. For example in the UK, where the regulations are extremely tough, the (CII) Chartered Insurance Institute (FPC) Financial Planning Certificate (all three papers) is the minimum standard for financial advisers. The USA and some other countries specify similar qualifications.

Trust & Credibility

Trust is an essential part of the relationship between the consultant and the client. This may be built up over a period of time or come by way of recommendation. Ask others which company they use and if they're happy with the service provided. Look for a company that has a good reputation for providing high levels of service. The way the financial consultant conducts interviews etc also help to develop trust. The correct procedure for a financial consultant is to complete a financial 'fact-find'. This will provide details of the client's current financial situation, their future hopes and aspirations. A report should then be presented to the client, which outlines a recommended course of action along with reasons for choosing any specific products.

A good financial adviser will:

• NEVER pressure or force a client into making a decision.
• NEVER ask you to sign anything at the first interview.
• NEVER accept a cheque in his name or that of his company.
• NEVER accept cash.

He will listen carefully to what you have to say regarding your hopes and desires and be genuinely interested in trying to help you fulfill them.

Regular Contact

One of the biggest criticisms of offshore advisers is that they 'disappear'. This in part is due to 'advisers' regularly flying in and out of the country, but mainly due to companies recruiting unqualified staff.

It is essential that the adviser maintain contact with the client, carrying out regular reviews in order to ensure their portfolio is performing as expected. This should be carried out at least once a year, but better if done quarterly or semi annually.

The modern methods of communication (where would we be without email?) make keeping in touch much easier than in the past and enables advisers to maintain regular contact, even when clients move to other parts of the globe. Regular newsletters and market updates are also essential to keep the client informed, without getting too 'bogged down' in the complexities of the financial markets.

Fee Or Commission Based?

This has been a constant argument as to which is best for the client.

Commission based: when a client invests funds in a particular investment product, the adviser receives a marketing fee from the product provider.

The advantage to the client is that it doesn't cost them anything for the advice.

Fee based: The client pays the advisor a fee, which could be based on the client's assets, income or on an hourly rate to reflect the effort in creating and updating their financial plan and in making transactions.

The disadvantage to the client is that he pays for the service, whether he takes up the adviser's recommendations or not.

It could be argued that commission based advisers will advise clients to invest in products that pay the highest commissions, regardless of their suitability. Likewise, it could be argued that fee based advisers get paid regardless of whether their advice is suitable or not.

Therefore, neither method actually provides an incentive for the adviser to give 'best advice'. This comes from the desire to stay in business, remembering that the advisers best source of income comes from existing clients, either by them investing further or by recommendation to others. One things for sure, if the adviser doesn't take care of his clients, everyone will get to know about it.

This column is supplied by Temple Bar International (Thailand) Co Ltd. For offshore investment advice, contact them on info@tbintl.com or visit www.tbintl.com