To start off, can you tell us a bit about your background? What passions do you have apart from finance?
I have always been in client facing / relationship management roles since graduating in 1998. My first job was in London, working as an account manager for an FTSE-listed firm. From a young age, I found that I had a talent in engaging and connecting with people with ease. Consequently, I was entrusted with the firm’s largest clients within the first two years, where I quickly developed my own team of advisors and support staffs.
In my spare time, I actively participate in trekking and adventure sports in remote corners of the world. This includes challenging hiking trips to Everest and the Annapurna Base Camp in Nepal, trekking the Kokoda Trail in the jungles of Papua New Guinea, cycling across the Steppe in Mongolia, and reaching the summit of Mount Kilimanjaro in Tanzania.
What drew you to Hong Kong? What unique opportunities does it present?
After working in London for nine years, I felt that a sabbatical was in order, so I decided to see the sights in Asia and spent three months traveling in 2006. Ever quick to sense opportunities, I realised that the Asian financial markets are where it’s at. So I decided to move to Hong Kong in 2007 to capitalise on the opportunities here.
In 2007, Hong Kong represented an interesting market where the stock market was only going up and China was firing on all cylinders, which meant the financial planning services in hong kong and property markets were booming.
How did you become a financial advisor? What do you like about this job?
I arrived in Hong Kong in the summer of 2007 and started my career to provide financial planning in Hong Kong. The stock markets were at an all-time high and at the time, and I thought my timing was perfect…
I was excited about starting at a new company and in a new country. But that excitement quickly dissipated as I realised what the company was all about. In that culture, the clients’ success meant nothing, and the managers’ success meant everything. It was completely antithetical to everything I believed. My second week there, however, one of those managers handed me a big stack of heavily thumbed and marked business cards. My mind flashed back to Glengarry Glen Ross. These were my leads. These were my tickets to the big time, I thought. My enthusiasm at that time was palpable.
Then in 2008, Bear Stearns collapsed, and Lehman Brothers went bankrupt. The global financial crisis struck, and worldwide stock markets were in freefall. Many of my colleagues and their clients panicked. Many clients made paper losses on imprudent investments that they had been made in the boom years on the advice of my colleagues.
However, being relatively new to the business then, I was untouched by the crisis. But I learnt a lot about managing risk for my clients. Despite the dire state of the world’s economy, I successfully persuaded a group of young investment banking clients to let me invest their money in 2008/9.
My strategy worked out. These clients of mine had been making good money prior to the global financial crisis, and they needed a way to protect themselves. My tailored investment strategies reduced their downside and provided good upside potential. Soon, I was getting introductions and referrals from them, everywhere. By the time I left that company in December 2011, I was an Area Manager, responsible for the largest number of clients there and overseeing a team that consisted of advisors and business development managers.
What is a QROPS and who does it apply to? Why should someone use a financial advisor to set one up?
A QROPS is a Qualifying Recognised Overseas Pension Scheme, which is established outside the UK and offers some serious advantages.
If you now live outside the UK and have previously lived and worked in the UK, you may have several pension schemes that unfortunately may still be liable for UK tax. As well, 82% of people with UK pension benefits don’t seek investment advice on their pension money. This could result in insufficient funds for retirement and, as we’re seeing all over the world, people are being forced to work into their 70’s.
According to widely cited numbers from the UK’s Department for Work and Pensions, the average employee stays in each job for 4.4 years and averages 10 to 12 jobs over a lifetime. This has huge implications for retirement planning. Whereas before you had one or two old age pensions from your employers, which, thanks to high interest rates, yielded decent returns, even if they weren’t brilliantly managed – now you might have a dozen pension funds with low returns.
QROPS allows you to consolidate UK pension schemes into one pot. This could create greater growth that helps you retire earlier with more money. Plus, income can be taken free of UK tax.
Where are the best places to invest in property right now, in Hong Kong and the UK?
With increased stamp-duty on buy-to-let UK properties, making an adequate return has become a little more challenging. On the other hand, there are now alternative ways to boost your income from property – particularly leveraging AirBNB. There are many landlords in the UK who have doubled their monthly income using AirBNB. Here’s how:
Firstly, buy the right sort of property for AirBNB. The ideal markets for a traditional buy-to-let and an AirBNB property are quite different. For a traditional buy-to-let, you want something cheap, practical, and versatile. A non-descript two-bedroom house in a frankly boring commuter town, located within walking distance of the train station and a supermarket, which you can get for a bargain, is ideal. However, as you might imagine, it’s not the kind of property that’s most likely to attract tourists.
Good AirBNB properties are located in tourist destinations, and the more stable the tourist numbers, the better. London and Paris have visitors year-round, while a beach property might stay vacant in the winter, hurting your returns. Being close to attractions and public transportation is a plus, as is anything remarkable about the property – be it a nice view or pretty architecture. Also, consider what the supply of competing properties and hotels is like. With over two million listings worldwide, in some large cities, competition and vacancies keep rents down, even though the total number of people visiting is high.
AirBNB can be fantastic for pension income because some pensioners enjoy the activity of taking care of their guests. It can also be good if you have teenagers or young adults who could use the experience of dealing with ‘clients’.
On the other hand, if you work full-time or are based overseas, your best option might be to have a manager. Many people have found a rewarding profession in managing short-stay rental properties for friends and taking a cut of, say, 20%.
Someone managing ten properties like the one from the example above could earn roughly £65,000 per year this way, without any investment of their own, while the property owners would still make much more than through traditional rental. Not bad for either one! To find such a ‘managing partner’, talk to colleagues who also have buy-to-let properties, friends who are vocal about their own success on the platform, or others who have time on their hands and are looking to boost their incomes.
As for Hong Kong Property:
According to the Centaline/TradingEconomics Index, Hong Kong property has been very much of a boom and bust market. In the decade prior to 1997, prices rose by five times, promptly collapsing by over a third in less than a year and then suffering a long and gruelling bear market all the way to 2004, when they bottomed out at less than a third of their peak 1997 value.
Since then, and until mid-2016, property in Hong Kong followed China’s ascent and rose by an incredible four times, reaching prices 40% above previous 1997 peaks, with only occasional and moderate lulls – during the global financial crisis and SARS epidemic, for instance. That’s over 15% per year purely in capital gains, without even factoring in rent.
Given the high prices and recent slowdown since the doubling of stamp duty to 15% for permanent residents in November 2016, some specialists have gone as far as to wager on a further 20% fall over the next year. Of course, Hong Kong property forecasters have been wrong more often as they are right.
Unless you are very wealthy, to buy property in Hong Kong equals dramatic concentration of your personal portfolio.
If you are a permanent resident of Hong Kong, both from a legal standpoint and in practice, then you need to have a home, have an investment horizon of many years, are not subject to punitive stamp duty and have access to reasonable mortgage financing. In that situation, buying Hong Kong property could make sense for you. With rental yields at around 3%, and without much room for further appreciation, that is the sort of return you could reasonably expect from your investment.
On the other hand, if you have an international perspective and are thinking whether to buy property in Hong Kong purely from an investment standpoint, it might make sense to consider other prime markets. Most have lower stamp duty, require lower mortgage deposits, are at more affordable price levels and are linked to less volatile economies.
The pound has reached record lows in recent times, how will this impact on people’s savings and pensions? What can they do to protect their savings?
If you believe that Brexit is ultimately unlikely, as do some specialists since the recent legal challenges, the depreciation of the Pound may present an excellent opportunity to buy UK assets at a discount at some point when negotiations have been completed, and they should recover much of their losses. Were the Pound to rise back to $1.60 – it’s 2015 year-end level – that would be a 14% increase – a spectacular return for a four-month investment.
On the other hand, there could be further downsides – if the UK does exit, that could not only cause a further fall in the currency and stocks but also permanently hurt the long-term prospects for UK assets.
So if you don’t have much exposure to UK assets, it could well be a risk worth taking on.
On the other hand, if a large part of your net worth is already tied to the UK, it makes sense to be more conservative.
- UK-based pensions will become riskier, both because lower interest rates hurt their returns and because their sponsors may be weakened.
- Property values may cool off together with financial jobs in London.
- In other areas of the country, the overall weaker economy could also put pressure on property prices. Strong curbs on immigration have been promised, but on the other hand, they depend on the post-Brexit agreement with the EU. If they do come into effect, they would also reduce housing demand and thus lower property prices.
- Sterling is likely to remain at a lower value against other currencies, making overseas holidays and retirement more expensive.
What advice do you have for people today? How should they protect themselves in these uncertain financial markets?
As a long term investor, you shouldn’t panic when your investments experience short-term movements. When tracking the activities of your investments you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short-term.
People save and invest money for a variety of reasons: for retirement, children’s education fee planning, to make a major acquisition such as a house or a second home, or to have a reserve for a rainy day. But research shows that personal savings rates are close to the lowest levels in the past 50 years. The US Bureau of Economic Analysis puts the current saving rate at less than 5%, less than half of the 10-12% of 50 years ago.
So it’s now especially important to make sure that you are getting the right investment advice, making good investments, making the best returns at a level of risk that is appropriate for you. With the mind-boggling range of investment options buried in acronyms and jargon, investing can seem daunting, but successful investment boils down to just a few key points:
- Defining your objectives and planning for them
- Investing enough over time to meet your objectives
- Understanding the basics of what you are investing in and choosing your investments according to your objectives and risk profile
- Keeping an eye out for the tricky things like taxes and fees