Financial Planning


#41

[quote=“Buttercup”]Good luck, EA.

Although I didn’t earn a huge amount in Taiwan, I had no dependents or responsibilities so my attitude to money has always been ‘ignore it’. The plus side to that attitude is that I never spent all my salary, however miniscule it is. My head is firmly in the sand and I should really have financial plans other than being nice to the old people in my family, hoping my boy will reveal himself to be a secret aristocat with a castle in Germany or daydreaming that I will leave my laptop in a taxi which will be picked up by Tarantino.

Not dying alone in a rented hovel in Bangkok is a good thing for me to aim for but I don’t understand pensions and most of my father’s generation are already dead. I’m just not sure if it’s a horse worth backing, gene-wise.

Should I just try and save money? Do pensions give you more back? Will I be able to donate it to charity if I die in my fifties?

Aiyo. Teatime. Real life is creepy![/quote]

Buttercup - never quite sure how seriously to take your posts.
Pensions in the UK are horrible - you pretty much have to buy an annuity when you get to retirement and annuities just line the pockets of the insurance companies.
In your positions I would focus on setting up 2 savings pools - one for long term and one for whatever short term goal you are most focused on - e.g. car or travel
In addition you should make sure you have up to date trab\vel insurance as you are likely to jump on a plane with no notice
Not sure how stable your income is but some income protection in the form of a permanent health plan should be affordable - baiscally if you get hit by a bus and can’t work you could fund your retirement to bangkok

Thanks everyone who sent positive messages. I went and talked with an IFA firm in HK yesterday - think I’ll be talking to a few more.


#42

Doesn’t that conflict with what you said earlier? Please elaborate why you think that the commission does not come out of the client’s pocket when the company uses the premiums for such payments.


#43

Why do you say Warren Buffett’s credibility is not intact?

I think you don’t understand his investment principles. He’s a value investor. He’s particularly interested in holding an investment for a very long time (in his words, his favourite holding period is “forever”).

When he buys a stock, he’s looking at the fundamental value of the company. He views it as owning a piece of the company, not as owning a piece of paper to be trade willy-nilly. The whole point of value investing is not to be hung up on what the market is doing and stampede in that direction. Typically, the average investor buys when stocks are rising in price (notice I didn’t say value), and sells when stocks are falling in price (again, notice I didn’t say value). If they’re rising in price and getting close to what you think your valuation of them is, then it might be a good time to sell (or perhaps just keep holding them if they’re paying handsome dividends or buying stock back). If they’re falling in price, and they’re considerably below what you value them at, then it might be a good time to buy. If you thought a stock was good value at $20, then it’s even better value at $19 (assuming everything else stays the same).

I’m sure Buffett couldn’t give a fig about any short term downturn in his stocks other than as an opportunity to buy more.

You have in no way shown how Buffett’s credibility has been diminished, except in the mind of the stampeding, ignorant masses.


#44

Of course, how else would a company exist?[/quote]

The below is my impression and I could be wrong about some things but never stopped me before so…

Having worked with commercial insurance brokers (free agent brokers free to choose between different insurance company providers) previously in Taiwan I guess what happens is the commission comes from the insurance policy provider as some sort of % on the premium or profit margin of the provider plus a signup bonus. This would encourage the broker to opt for a higher policy. There is a slight conflict there of course for the client to get the best coverage at the cheapest cost to him.

So yeah it depends on the honesty and integrity of the broker, but when it came down to it with two insurance policies almost equal you can guess the broker will recommend the one with highest margin for him everytime. But so will the insurance company saleman…

The broker doesn’t get his cut until the deal happens (so probably most consultations do not lead to any business) and he also would like the policy to be extended far into the future so he does have some interest in making the client happy and showing how the client is getting a better deal. He also has to be competitive compared to quotes from other brokers or direct insurance providers. I found dealing with a broker was useful as he very clearly explained why one policy would have been useless to us due to exclusion clauses and also explained how these things usually work out so going with a broker is not a bad idea IMO even if they get their cut from the insurance provider. He/she also can help in filling out all the forms and dealing with communications between all the insurance providers which can be confusing and tedious for outsiders.


#45

Ithink any expat that remains in Taiwan over 5 years and who isn’t an entrepreneur should start their financial planning right away. If you’re a Canuck, maximize your RRSP and TFSA options. If you have kids or will soon have kids, start your RESPs early. An added bonus of the RESP is that for every $100 contributed to an RESP by you, the government provides a $20 grant called the Canada Education Savings Grant. It is basically free money and can be as much as $500 a year for each child.


#46

[quote]whitetiger wrote:
Of course, how else would a company exist?

Doesn’t that conflict with what you said earlier? Please elaborate why you think that the commission does not come out of the client’s pocket when the company uses the premiums for such payments.[/quote]

Well in both scenarios(commission and hourly or set fee) the fee for the agent is already factored into the premium. I simply meant that the commission wasn’t directly paid from the customer to the agent as would be the case for a flat or hourly fee. So it should in fact be cheaper for the client if the agent gets commission.
I am a former financial advisor and always went with what was best for the client. If an agent ever experiences a clawback, they will know not to sell a policy that is too expensive for the client.


#47

[quote=“whitetiger”][quote]whitetiger wrote:
Of course, how else would a company exist?

Doesn’t that conflict with what you said earlier? Please elaborate why you think that the commission does not come out of the client’s pocket when the company uses the premiums for such payments.[/quote]

Well in both scenarios(commission and hourly or set fee) the fee for the agent is already factored into the premium. I simply meant that the commission wasn’t directly paid from the customer to the agent as would be the case for a flat or hourly fee. So it should in fact be cheaper for the client if the agent gets commission.
I am a former financial advisor and always went with what was best for the client. If an agent ever experiences a clawback, they will know not to sell a policy that is too expensive for the client.[/quote]

That really depends upon several things. Obviously, for someone with only $1,000, an hourly rate is probably going to be a massive hit. Yet for someone with a large investment, or even that same person with $1,000 initially who contributes say, $50/month over several decades, commissions could really prove more expensive.

It’s also psychological in the same way that an infomercial is. If a product were advertised as costing $1,000, people often might not buy it, but many might be willing to make 36 easy payments of $39.95. What’s $39.95 per month for a machine that will give me rock hard abs in only 2.5 minutes every fifth Friday in February, right? Oops…it’s actually $1,438.20, and maybe even more if it’s on a credit card not paid off in full each month.

Same thing with commissions. Death by a thousand cuts.


#48

[quote=“whitetiger”]
I am a former financial advisor and always went with what was best for the client. [/quote]
Ahem. Do you mean financial advisor as in a CFA/CFP who worked under a relationship of feduciary duty to the client, or were you just given the title “financial advisor” (read “salesman”) by the company for which you worked? Be honest, now. Flogging whole life policies is hardly ever in the best interests of the client.


#49

Ahem??? :loco: :blah: I’ve already pointed out 1 situation where a whole life policy could be beneficial. The fact is that whole life is better suited for some clients as is term, I’m not agasinst term at all, it is often the best fit.
Fitting name by the way :thumbsup:


#50

Thanks for the clarification but what is cheaper for the client would depend on the percentage of the comission or the fixed fee in relation to the amount to be invested. E.g. USD100 is too much when the amount is (a hypothetical) USD1000 and the comission only 5%, but if you invest USD20000 and the insurance takes 5% off then USD100 is obviously cheaper.


#51

The truth is most people I speak to will not buy.

Typically a 30% or higher close rate is a strong closer - I know I have managed thousands of sales people.

If I charge a flat rate for a consultation then I suspect most people will not even sit down with me. Would you pay a couple of hundred bucks for something you don’t think you need?

As I said before, I’m happy to explain commissions to customers, and also all of the options - e.g. mutual funds V targeted savings, but I don’t think the flat fee system will work with my target audience - i.e. ex pats in Taiwan.


#52

If you hope to send your child who is born today to Harvard, start saving now because it will cost about a half million dollars according to one of several articles on the subject in today’s NYT. And, following up on earlier comments, if you’re an American. . .

nytimes.com/2009/04/19/educa … .html?_r=1


#53

Financial Daydreaming

[quote]The professional advisers were good at getting you in but were daydreaming when they should have gotten the public out. Were you told to sell your General Electric or your Citigroup before they became single-digit stocks? Many value-oriented funds were buying Fannie Mae months before it became Uncle Sam’s property. Even Warren Buffett was loading up on banks stocks as they were about to disintegrate.

Folks, buy and hold is in disrepute.

Investors beware: You have to watch over your money like hawks, read your monthly statements and ask questions. You must be active, not passive, when dealing with commoditized investment firms that are rotten at knowing when to sell. Why should they know? They’re paid based on the amount of money you hold in their funds, and receive little compensation for keeping that cash safe.

Risk has been heretofore little understood, but it is the reason so many investors are firing their investment advisers and looking for someone more astute, more trustworthy and more focused on individualized investor needs.[/quote]


#54

Spook’s post is probably the number one reason I hate mutual funds(the non-index ones). I understand their use for savings, but their fiduciary duties clash greatly with their profit motive. Does anyone during the internet bubble remember large investors getting to sell their positions in mutual funds at profit if their actual value was greater than the market value? Small investors got screwed greatly on that.

Also anyone good at buying and selling stocks, etc normally goes to a hedge fund-The Major Leagues, mutual funds are like the farm teams for the hedge funds.


#55

Surely that’s why, if you must invest with a manager, you do it with someone who has the majority (or all) of his investments in exactly the same things you do. If he’s not willing to disclose whether he does or not, or it’s not abundantly obvious, then he’s not the right guy for you.


#56

One of the few good things that have come out of the current financial meltdown is we now have a definitive metric for separating the financial planners from the financial daydreamers. It’s the question ‘did you have any inkling the world was about to be hit by the worst financial downturn since the Great Depression and, if so, what did you do about it?’

If the answer is something along the lines of ‘no, not even an inkling’ then you know you’re dealing with a financial daydreamer and it’s time to move on. If the answer, on the other hand, is something along the lines of ‘yes and . . . cash’ then you know you’re dealing with one of those rare individuals who is actually worth paying money to for the purposes of helping you plan your financial future.


#57

[quote=“spook”]One of the few good things that have come out of the current financial meltdown is we now have a definitive metric for separating the financial planners from the financial daydreamers. It’s the question ‘did you have any inkling the world was about to be hit by the worst financial downturn since the Great Depression and, if so, what did you do about it?’

If the answer is something along the lines of ‘no, not even an inkling’ then you know you’re dealing with a financial daydreamer and it’s time to move on. If the answer, on the other hand, is something along the lines of ‘yes and . . . cash’ then you know you’re dealing with one of those rare individuals who is actually worth paying money to for the purposes of helping you plan your financial future.[/quote]

Assuming your financial future is all about investing. In fact if your financial planner only speaks about the next “hot” investment then they probably are just flogging products and not planning at all.


#58

[quote=“Edgar Allen”][quote=“Buttercup”]Good luck, EA.

Although I didn’t earn a huge amount in Taiwan, I had no dependents or responsibilities so my attitude to money has always been ‘ignore it’. The plus side to that attitude is that I never spent all my salary, however miniscule it is. My head is firmly in the sand and I should really have financial plans other than being nice to the old people in my family, hoping my boy will reveal himself to be a secret aristocat with a castle in Germany or daydreaming that I will leave my laptop in a taxi which will be picked up by Tarantino.

Not dying alone in a rented hovel in Bangkok is a good thing for me to aim for but I don’t understand pensions and most of my father’s generation are already dead. I’m just not sure if it’s a horse worth backing, gene-wise.

Should I just try and save money? Do pensions give you more back? Will I be able to donate it to charity if I die in my fifties?

Aiyo. Teatime. Real life is creepy![/quote]

Buttercup - never quite sure how seriously to take your posts.
Pensions in the UK are horrible - you pretty much have to buy an annuity when you get to retirement and annuities just line the pockets of the insurance companies.
In your positions I would focus on setting up 2 savings pools - one for long term and one for whatever short term goal you are most focused on - e.g. car or travel
In addition you should make sure you have up to date trab\vel insurance as you are likely to jump on a plane with no notice
Not sure how stable your income is but some income protection in the form of a permanent health plan should be affordable - baiscally if you get hit by a bus and can’t work you could fund your retirement to bangkok

Thanks everyone who sent positive messages. I went and talked with an IFA firm in HK yesterday - think I’ll be talking to a few more.[/quote]

It was fairly serious… Thanks for the advice.

My income’s pretty stable but not huge. It basically rules out buying property in the south, and rent sucks up a huge amount. I don’t care about having no cash, I just want to be OK if I get old.


#59

I do have to say that the best financial planning advice I ever received was “Don’t get married – at least not in the U.S. or Europe.”


#60

Or Australia, which is why I’m not doing it there. Wouldn’t do anything there with the anti-male family law system and the blood-sucking legal community.

Actually, there was an interesting article in The Economist several issues back about divorces between high-flyers from different countries, often based in third countries, and how different countries and states/provinces do things quite differently, and how each party will try to get the divorce heard in the place most favourable to them, but it’s all incredibly messy.