The single worst financial decision

Buying a new car is regarded as a waste of money

  WHEN I discussed whether to buy a car or a house first in my last article, I received a lot of feedback from friends and readers. Someone even sent me an interesting article entitled “Buying a New Car Is the Single Worst Financial Decision”.

The remark was made by Davis Bach, a self-made millionaire who is also one of the American best-selling financial authors, a motivational speaker and an entrepreneur.

That was a bold statement but not without basis. In the article published by CNBC Make It, David Bach said, “Nothing you will do in your lifetime, realistically, will waste more money than buying a new car.”

He pointed out that a car's value drops 20% to 30% by the end of the first year. In five years, it can lose 60% or more of its initial value. And, most people actually borrow money to buy a car.

“Why would you borrow money to buy an asset that immediately goes down in value by 30%?” says Bach.

His views concurred with the idea I have been sharing in this column over the years.

In my last article, I mentioned the value of my friend’s car dropped 70% from RM140,000 to RM40,000 over eight years. On the other hand, another friend who bought an affordable apartment during the same time, enjoyed a huge capital appreciation as the apartment increased from RM100,000 to more than RM200,000 during the same period.

Both borrowed money to buy their house and car respectively. However, there is a clear contrast between the two items by looking at their long-term values. A house is an appreciating asset, and a loan on such an asset I like to call a “Good Debt”; while a car losses money, and is therefore deemed as “Bad Debt”.

Not only does a car depreciate in value, but owning a car also comes with expenses such as petrol, maintenance, licence, toll, insurance and parking costs. A person who owns a normal sedan car and travels about 1,000 km per month, can easily spend about RM1,500 per month for car loan repayment and other relevant expenses.

With ride-sharing services (such as GrabCar in Malaysia, and Uber & Lyft in other countries) becoming so convenient, and with the LRT and MRT networks being more developed, we can now choose to be car-loan free. Imagine having your own “driver” and able to use your time productively to read a book or relax when being caught in traffic jam. We are now able to enjoy this with ride-sharing services on call.

For a more economical approach, you can even opt for a "hybrid" transportation mode by combining ride-sharing and public transport services.

Chua, a reader from Muar wrote me an email last month. He shared his experience of not having purchased a property when he was young and only bought one when he was in his mid-30s due to some misperceptions.

“Looking back, how wrong I was! But today, there are just as many graduates who think just like myself when I was in my 20s and 30s. Therefore, your constant reminder to Malaysians is valid and practical. Instead of a new car, get a used car. Buy a medical insurance policy, pay EPF and try to buy a small property. These should be the priority of any young Malaysian,” Chua wrote in his email.

Bach, the self-made millionaire said, “If you’re spending US$500 (RM2,000) a month for that car, well, that’s US$6,000 (RM24,000) a year, not including the car insurance or the gas (petrol). That could be two months or three months of your income. Run the numbers and then ask yourself: Do you really need a car that's nice or could you buy a car that’s less expensive – maybe a little older – but still looks good and runs?”

That’s the sentiment that I had when I wrote about buying a house first before a car.

Buying a car may not be the single worst financial decision for everyone. There are different financial priorities at different stages of life. However, it may be the case if you buy a brand new expensive nice car prior to owning any long-run appreciating asset or investment, like a house!

Food for thought by Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the World president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com

Related posts:

Better to buy a car or a house first?

Putting our house in order

Restructuring our household debt

 

Leaving a legacy by buying a house first before a luxury car ...

Rich Gen-Y kids making their own success

Housing affordability is an income issue, what's with the fuss?

How to allocate your money wisely: lessons from my father

The single worst financial decision

Buying a new car is regarded as a waste of money

  WHEN I discussed whether to buy a car or a house first in my last article, I received a lot of feedback from friends and readers. Someone even sent me an interesting article entitled “Buying a New Car Is the Single Worst Financial Decision”.

The remark was made by Davis Bach, a self-made millionaire who is also one of the American best-selling financial authors, a motivational speaker and an entrepreneur.

That was a bold statement but not without basis. In the article published by CNBC Make It, David Bach said, “Nothing you will do in your lifetime, realistically, will waste more money than buying a new car.”

He pointed out that a car's value drops 20% to 30% by the end of the first year. In five years, it can lose 60% or more of its initial value. And, most people actually borrow money to buy a car.

“Why would you borrow money to buy an asset that immediately goes down in value by 30%?” says Bach.

His views concurred with the idea I have been sharing in this column over the years.

In my last article, I mentioned the value of my friend’s car dropped 70% from RM140,000 to RM40,000 over eight years. On the other hand, another friend who bought an affordable apartment during the same time, enjoyed a huge capital appreciation as the apartment increased from RM100,000 to more than RM200,000 during the same period.

Both borrowed money to buy their house and car respectively. However, there is a clear contrast between the two items by looking at their long-term values. A house is an appreciating asset, and a loan on such an asset I like to call a “Good Debt”; while a car losses money, and is therefore deemed as “Bad Debt”.

Not only does a car depreciate in value, but owning a car also comes with expenses such as petrol, maintenance, licence, toll, insurance and parking costs. A person who owns a normal sedan car and travels about 1,000 km per month, can easily spend about RM1,500 per month for car loan repayment and other relevant expenses.

With ride-sharing services (such as GrabCar in Malaysia, and Uber & Lyft in other countries) becoming so convenient, and with the LRT and MRT networks being more developed, we can now choose to be car-loan free. Imagine having your own “driver” and able to use your time productively to read a book or relax when being caught in traffic jam. We are now able to enjoy this with ride-sharing services on call.

For a more economical approach, you can even opt for a "hybrid" transportation mode by combining ride-sharing and public transport services.

Chua, a reader from Muar wrote me an email last month. He shared his experience of not having purchased a property when he was young and only bought one when he was in his mid-30s due to some misperceptions.

“Looking back, how wrong I was! But today, there are just as many graduates who think just like myself when I was in my 20s and 30s. Therefore, your constant reminder to Malaysians is valid and practical. Instead of a new car, get a used car. Buy a medical insurance policy, pay EPF and try to buy a small property. These should be the priority of any young Malaysian,” Chua wrote in his email.

Bach, the self-made millionaire said, “If you’re spending US$500 (RM2,000) a month for that car, well, that’s US$6,000 (RM24,000) a year, not including the car insurance or the gas (petrol). That could be two months or three months of your income. Run the numbers and then ask yourself: Do you really need a car that's nice or could you buy a car that’s less expensive – maybe a little older – but still looks good and runs?”

That’s the sentiment that I had when I wrote about buying a house first before a car.

Buying a car may not be the single worst financial decision for everyone. There are different financial priorities at different stages of life. However, it may be the case if you buy a brand new expensive nice car prior to owning any long-run appreciating asset or investment, like a house!

Food for thought by Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the World president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com

Related posts:

Better to buy a car or a house first?

Putting our house in order

Restructuring our household debt

 

Leaving a legacy by buying a house first before a luxury car ...

Rich Gen-Y kids making their own success

Housing affordability is an income issue, what's with the fuss?

How to allocate your money wisely: lessons from my father

Goldman Sachs must follow up on its apology with US$7.5bil compensation in 1MDB scandal

https://youtu.be/XxwX8CRvSks

Goldman Sachs Group Inc should follow up on its apology to Malaysia with a payment of US$7.5bil (RM30.86bil), says Lim Guan Eng.

The Finance Minister said a mere apology from the investment bank over the scandal-ridden 1Malaysia Development Bhd (1MDB) is not enough, unless they pay reparations and compensation.

Lim said Goldman Sachs should understand the agony and trauma suffered by Malaysians as a result of the scandal.

“An apology is not enough.

“An apology with US$7.5bil is what matters.

“At least he (Goldman Sachs CEO David Solomon) accepted that they have to bear and shoulder some responsibility but that is insufficient.

“They have made provisions of around US$561mil (RM2.3bil) but that is not adequate.

“We are seeking US$7.5bil,” he told a press conference here yesterday after announcing the names of the joint lead arrangers for the Samurai bond.

On Thursday, Solomon apologised to Malaysians for former banker Tim Leissner’s role in 1MDB.

Solomon also said it was very clear that Malaysians were defrau­ded by many individuals, including the highest members of the previous administration.

Asked if Malaysia would drop charges against Goldman Sachs with the US$7.5bil payment, Lim quipped: “US$7.5bil ... then we can discuss lah”.

Lim added that it was very clear who the top government official Solomon was referring to as there could only be one person.

“You worked hand in hand, and there has to be accountability. It also involved a breach in fiduciary duty, and I think the banking industry has this obligation to make good the losses that we suffered.

“I think this is at least an admission.

“If not for the change of government, do you think Goldman will apologise? We’re dealing with the largest investment bank in the world,” he said.

Lim added that he found it distressing that Datuk Seri Najib Tun Razak still refused to admit there was something wrong with 1MDB and the entire exercise.

He also lambasted the former premier for passing the buck to Goldman Sachs, and for being in a state of denial for refusing to admit that Malaysians suffered huge losses due to the scandal.

By Royce Tan The Star

Goldman Sachs CEO apologises for ex-banker’s role in 1MDB scandal

NEW YORK: Goldman Sachs Group Inc chief executive officer David Solomon (pic) has apologised to the Malaysian people for former ban­ker Tim Leissner’s role in 1Malaysia Development Bhd (1MDB) scandal, but said the bank had conducted due diligence before every transaction.

Goldman is being investigated by Malaysian authorities and the US Department of Justice (DOJ) for its role as underwriter and arranger of three bond sales that raised US$6.5bil (RM26.7bil) for the sovereign wealth fund.

US prosecutors last year charged two former Goldman bankers for the theft of billions of dollars from 1MDB. Leissner, a former partner for Goldman Sachs in Asia, pleaded guilty to conspiracy to launder money and violate the Foreign Corrupt Practices Act.

“It’s very clear that the people of Malaysia were defrauded by many individuals, including the highest members of the prior government,” Solomon said on conference call discussing the bank’s fourth-quarter results in a report by Reuters.

Solomon said Leissner denied the involvement of any of Goldman’s intermediaries in transactions with 1MDB.

An attorney representing Leissner did not immediately respond to a request for comment.

Roger Ng, the other charged former Goldman banker, was arrested in Malaysia at the request of US authorities and is expected to be extradited, according to John Marzulli, a spokesman for the prosecution.

The DOJ has said that US$4.5bil (RM18.5bil) was allegedly misappropriated by high-level officials of the fund and their associates between 2009 and 2014.

As part of Goldman’s due diligence efforts, Solomon said the bank sought and received written assurances from 1MDB and International Petroleum Investment Co (IPIC) that no third parties were involved in the first two bond sales.

Abu Dhabi’s IPIC had co-guaranteed the 1MDB bonds when they were issued in 2012.

In the final offering, the Malaysian government itself, along with 1MDB, represented that no intermediaries were involved, he said.

“All these representations to Goldman Sachs have proven to be false,” Solomon said.

Goldman Sachs did not disclose any other information about its involvement with 1MDB, but said the impact on its client franchise had been de minimis. Shares of the bank, which reported strong fourth-quarter results earlier in the day, have fallen over 25% in the last three months, after headlines about its involvement with the sovereign wealth fund emerged.

The Malaysian government said in December it was seeking up to US$7.5bil (RM30.8bil) in reparations from Goldman over its dealings with 1MDB. – Reuters

In an immediate reaction yesterday, former Prime Minister Datuk Seri Najib Tun Razak said Goldman Sachs had to take responsibility because they were appointed and paid by 1MDB to take care of Malaysian’s interests.

“We put up a system, the system was there to take care of our interests, you see.

“So if they fail, then they have to take responsibility, because they were appointed and paid by 1MDB to take care of our interests,” Najib said.- The Star

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 Goldman Sachs  CEO David Solomon apologises for ex-banker's role in 1MDB scandal

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China leads the way as world's billionaires get even richer

The United States created 53 new billionaires in 2017, down from 87 five years ago

China produced around two new billionaires a week last year as the fortunes of the world's ultra-rich soared by a record amount, a report said Friday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

China produced two new billionaires a week last year as the fortunes of the world’s ultra-rich soared by a record amount - AFP

 China produced around two new billionaires a week last year as the fortunes of the world's ultra-rich soared by a record amount, Swiss banking giant UBS and auditors PwC said.

Billionaires' wealth enjoyed its "greatest-ever" increase in 2017, rising 19 percent to $8.9 trillion ($7.8 billion euros) shared among 2,158 individuals, said the report by Swiss banking giant UBS and auditors PwC.

But Chinese billionaires expanded their wealth at nearly double that pace, growing by 39 percent to $1.12 trillion.

"Over the last decade, Chinese billionaires have created some of the world's largest and most successful companies, raised living standards," said Josef Stadler, head of Ultra High Net Worth at UBS Global Wealth Management.

"But this is just the beginning. China's vast population, technology innovation and productivity growth combined with government support, are providing unprecedented opportunities for individuals not only to build businesses but also to change people's lives for the better."

The report said China minted two new billionaires a week in 2017, among more than three a week created in Asia.

In the Americas region, the wealth of billionaires increased at a slower rate of 12 percent, to $3.6 trillion, with the United States creating 53 new billionaires in 2017 compared to 87 five years ago.

Currency appreciation saw European billionaires' wealth grow 19 percent although the number of billionaires rose by just 4.0 percent to 414.

Wealth transition from just five families accounted for 30 percent of the continent's wealth expansion, the study said.

It warned of lower economic growth in the United States and China if the trade war between the two countries escalates.

"US and Asia ex-Japan equities could fall by 20 percent from their mid-summer 2018 levels."

Asia challenging US dominance

For China's young billionaires "the country's fundamentals of a huge population and rising technology will continue to offer fertile conditions for entrepreneurs to grow their businesses," the study said.

It there were only 16 Chinese billionaires as recently as 2006.

"Today, only 30 years after the country's government first allowed private enterprise, they number 373 – nearly one in five of the global total."

It said 97 percent of them are self-made, many of them in sectors such as technology and retail.

Billionaires from Asia, especially in the Chinese city of Shenzhen, are now challenging the traditional dominance of Americans as technology entrepreneurs.

"In 2017, they equalled America's level of venture capital funding for start-ups, registered four times as many Artificial-Intelligence-related patents and three times as many blockchain and crypto-related patents as their US counterparts."

Ravi Raju, head of Asia Pacific Ultra High Net Worth at UBS Global Wealth Management, said Asia's billionaires "are young and relentless. They are constantly transforming their companies, developing new business models and shifting rapidly into new sectors."

The report said that globally, self-made billionaires have driven 80 percent of the 40 main breakthrough innovations over the last 40 years.

UP AND OUT OF POVERTY - Xi Jinping

https://youtu.be/SYWz2bwCUEE

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© 2018 AFP /Phys.org

Asia's billionaires see fastest wealth growth: report  September 17, 2014 

 

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Asia's billionaires led by Chinese tycoons enjoyed the fastest increase in their wealth this year compared to their peers in the rest of the world, a report said Wednesday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

Asia's billionaires see fastest wealth growth: report

September 17, 2014

Asia's billionaires led by Chinese tycoons enjoyed the fastest increase in their wealth this year compared to their peers in the rest of the world, a report said Wednesday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

Money game scourge

Easier option: Poor experience with regulated investment product providers may be the reason for investors to go for ‘alternative’

Poor wealth management experiences fuel money games

OVER the past 2 months, it was virtually impossible to pick up any newspaper and not read reports about the money game phenomenon that has taken the media by storm.

It is as if the Pandora’s Box had been suddenly flung open by the exposé of JJPTR, leading to other similar schemes coming to light.

The victim profile ranges from white-collared professionals and savvy businessmen to senior citizens and housewives. It would appear as if just about anyone from different walks of life could be susceptible to these money schemes.

It is easy for observers and bystanders to pin the blame on the investors for getting themselves in a sticky situation. After all, if we apply the caveat emptor (buyer beware) principle to other types of goods and services, the investors should have clearly known the risks of subscribing to these money games and therefore should have been aware of the possibility of losing their investments.

So, what caused groups of people to lose their common sense when it comes to money games?

Scams come in many shapes, sizes and forms but look closely and you will see that they all have many things in common in terms of the modus operandi and the people they seem to attract. From JJPTR and MBI International right at our doorstep to China’s Nanning investment scheme and the most notorious Ponzi scheme of all times – the Madoff scandal, all these scams preyed on innate human weaknesses and appealed to investors’ desire to grow their wealth.

Many would be quick to label these investors as greedy or gullible, but I beg to differ. I see nothing wrong with wanting to achieve financial freedom and get higher investment returns. The people who invested and lost in these scams are not multi-millionaires with ample financial resources. They are average Malaysians who have worked hard and saved their money for a rainy day, only to see their nest egg disappear into thin air. What drove them to place the precious results of their blood, sweat and tears into unregulated investment schemes?

I am convinced that the reason stems from the investors’ poor experience with regulated investment product providers.

The so-called ‘push’ factor

There is a mismatch of what consumers need and what financial institutions are trying to sell. Consumers want guidance on how to use regulated investments as a means to grow their wealth with high certainty and achieve financial freedom.

The general public sees banks as an easy, accessible channel to obtain advice on personal finance and investment matters via wealth management services. There is no issue with legitimacy as the array of financial products and services available through banks are duly approved by the regulatory authorities.

The problem arises when investors are not getting what they need, which is advisory support, from their current wealth management providers. More often than not, investors feel overwhelmed by the choices available in the market. Worse still, investors do not know what action to take when their investments lose money. It is not uncommon to find that the wealth management providers are very attentive and proactive in recommending options; but once the sales is concluded, the investor is basically left to his or her own devices.

As a result of the lack of hand-holding or after-sales service, some investors may find that rather than growing money, they end up losing 20%-30% of their capital. The sheer irony of it is that because of the experience of losing money, they now perceive regulated investments as highly volatile and uncertain, and ultimately lose faith. I have personally encountered clients who harbour such misgivings about unit trusts, that they would bluntly tell me right from the initial meeting, not to propose such options to them.

I realised then the extent to which poor experiences with wealth management providers can lead to misplaced biases against certain investment vehicles even though investors could benefit from the right ones. When disillusioned investors turn their heads elsewhere, this is when they discover “alternative” investment options. And many end up falling for money games because they are sold on the idea of fixed return investments perceived to be low risk, coupled with the promise of better returns.

In this instance, the “push” factor, i.e. the unmet financial needs of consumers, which contributed to investors subscribing to shady schemes, has equal bearing to the “pull” factor (attraction) of these money scams.

“I am like any other man. All I do is supply a demand.” – Al Capone, American mobster

As with most goods and services that are detrimental to our well-being (e.g. junk food, cigarettes, gambling, etc), it is consumers’ demand for them that drives their industry and makes them thrive. Without customers, these shady businesses would naturally die off.

The ability of the money games to proliferate boils down to the “smart” business acumen of the operators to “fill the gap” so to speak. By offering an alternative investment scheme at a time when the market is slow and when many investors are experiencing losses, these money games are seen as a sudden golden ticket towards becoming rich. However, as we have seen, the golden ticket eventually loses its shine and the investors are left holding nothing but a worthless scrap of paper.

Therefore, there would be fewer victims of money games if the wealth management industry as a whole were to step up and reinvent themselves into a genuine one-stop financial centre to help their clients address all financial and investment issues at various points of their lives.

When the grass on one side is always greener, the rest will not matter

In order to ensure that they are seen by clients as the “go-to” person for all financial and investment related concerns, wealth management providers will need to exceed expectations and to a certain degree, over-deliver on their current role.

Wealth managers could assist clients to evaluate various investment proposals to determine its suitability and guide clients to use regulated investment vehicles to invest in various asset classes such as equities, bonds, REITs and foreign investments to grow their money effectively. They could also play the role of a financial bodyguard to help investors fend off scams and illegitimate investments.

In an ideal world, wealth managers will set aside sufficient time and effort to understand the client’s financial position in a holistic manner. They will prepare a tailored and dynamic plan with milestones and checkpoints to help monitor and review progress.

To my peers in the wealth management industry, I would say, cut the lip service and let’s get serious about managing and growing wealth for our clients.

When more and more investors realise that they are able to count on their wealth management providers for all the required support they need to achieve their financial end game, then money games will no longer have room to take root.

Money & You Yap Ming Hui

Yap Ming Hui (ymh@whitman.com.my) is a bestselling author, TV personality, columnist, coach and host of Yap’s Money Live Show online. He feels that the financial world is getting too complicated for everyone, and initiated a weekly online show to address the issues.For more information, please visit his website at www.whitman.com.my


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Modern finance and money being managed like a Ponzi scheme ! Economic Collapse soon?

Healthy wealth management

THE term “wealth management” came about in the 1990s to describe a complex series of services similar to financial planning. The phrase has also been adopted by accountants, estate planners, lawyers and some finance specialists. These experts cater mostly to high-net-worth clients.

Rather than just perceiving wealth as product of a toil-and-reap process, money can be considered a tool with which you can gain profit

Instead of just spending your money, invest it wisely to get returns.

Unlike professions such as accountancy, taxation or auditing, which involve specialised fields of study where professionals are provided official certifications by governing bodies who supervise the field, wealth managers are yet to require official certifications.

However, the Investment Management Consultants Association (IMCA), the governing body that awards the CIMA certification (Certified Investment Management Analyst), began offering a certification for wealth management in 2007 known as the Certified Private Wealth Advisor (CPWA).

The certification recognises individuals who specialise in the life cycle of wealth – accumulation, preservation and protection and distribution.

They identify and analyse challenges faced by high-networth clients and how to develop specific strategies to minimise taxes, monetise and protect assets, maximise growth and transfer wealth.

What is wealth management?

Wealth management is a system that involves the effort of both experts and clients to design and adopt ideas to manage and grow the clients’ wealth.

Wealth comes in many different forms – hard cash, properties, shares, luxury items, businesses, lands and others.

Managing it, however, involves collective consultative processes that build a specific portfolio for owners. It is a slow and painstaking process that requires the clients’ trust and the consultants’ patience.

Deciding to involve a wealth manager in planning your finances is an important step.

It requires you to entrust the management of your wealth to someone else.

However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

What wealth managers do is enhance wealth while providing a valued experience for clients. In addition to learning about the many financial areas, those undergoing the CPWA certification study family dynamics.

This includes the study of anthropology and building relationships based on shared experience.

This is particularly important if the wealth involves a few generations of a family.

The difference between wealth managers and financial advisors is that wealth managers are a niche group of people.

They have cultivated specific tools and skills over the years and have a relatively small number of clients.

They can also apply distinctive designs and have a better skill set compared to other more common models.

Wealth as a tool

A common mistake that people make is to see income as a figure to make purchases with.

Having wealth does not necessarily translate into profitability.

Rather than just perceiving wealth as a product of a toiland-reap process, money can be considered a tool with which you can gain profit.

In this circumstance, having professional help will evolve this tool into a working design that will snowball into a self-sustaining model. The process often involves a lifestyle change for clients as well.

Even those who do not fall within the high-net-worth bracket should consider getting consultancy aid since the nature of wealth management allows it to be adaptable as a tool to manage one’s situation even when in deficit.

Behavioural issues

Humans are generally protective of their finances, therefore a new concept such as wealth management may not be easily accepted as it is still largely unexplored and remains unknown to many people.

As a result, finances are normally made stagnant or spent, not giving much return to its owners if not put in a bank or invested with little or no returns.

K. Gunesegaran, financial planner and money coach from Wealth Street Sdn Bhd, was recently a guest on BFM (a Malaysian radio station) and spoke about how to keep emotions in check when dealing with money.

He suggested that adhering to a certain behavioural portfolio regardless of the market’s response and adopting a shared behavioural framework that clients and investors can agree on and adopt in any finance management context offer a good solution to the behavioural issue surrounding wealth management.

Towards a bright future

As Malaysia readies itself for the increase urbanisation of its cultures and communities, the growth of wealth will mean more opportunities for the wealth management field to develop.

By substantiating certification and licensing as well as educating the changing demographics about wealth management, the field will gain more recognition within the finance industry.

Creating a niche market of professionals is also a better option than generalising the industry’s talent.<

For example, a wealth manager who specialises in real estate or the ICT industry would prove to be better than a general wealth manager in certain contexts.

Scouting for a niche specialist wealth manager, especially if the wealth involved is derived from or being invested into a certain industry, would then be a better approach to handling wealth.

However, as a client, the first step is to better understand how you would like to use and invest your money before seeking professional help.

The role of a wealth management consultant

Deciding to involve a wealth manager in planning your finances is an important step. It requires you to entrust the management of your wealth to someone else. However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

Most banks offer wealth management services catered to highnet-worth individuals. There are also private, stand-alone wealth management firms that not only act as advisors but as executors of clients’ instructions pertaining to their finances.

The biggest challenge for a wealth manager is to understand the financial needs of the clients.

It is important for clients to understand the role of wealth advisors to ensure their credibility and market value.

Experts need to convince middle-income and low-income earners of their skills, as these earners have the potential to become higherincome earners.

This creates business opportunities and expands networks, which is the perception of wealth management that the industry is aiming for.

This is important because their relationship with clients is not usually a short-term one and the advice and information given need to be accepted by clients with trust and understanding.

There is no one way to manage wealth because people’s lifestyles differ and different people require different aspects of their wealth to be managed, including tax management, risk assessments, retirement planning, portfolio management, estate planning, generational legacy, trust fund managements and specialised services for executives and small business owners.

Sources: Money & You, StarSpecial


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Asia's wealthy surpass North Americans for first time

The number of rich Asians surpassed North Americans for the first time last year, but their fortunes shrank slightly and still trailed total wealth on the other side of the Pacific, Capgemini and RBC Wealth Management said on Wednesday.

The Asia-Pacific region is now home to 3.37 million high net worth individuals (HNWI) - people with $1 million or more to invest - compared with 3.35 million in North America and 3.17 million in Europe, the firms said in a report.

Asia's wealthy - 54 percent of whom are concentrated in Japan, almost 17 percent in China and more than 5 percent in Australia - saw their total fortunes slip to $10.7 trillion last year from $10.8 trillion in 2010, and lag North America's $11.4 trillion.

The Asia-Pacific Wealth Report, compiled by Capgemini and RBC Wealth Management, is closely watched by wealth managers, high-end property agents, luxury goods retailers and other businesses for signs of how and where the ultra-wealthy are investing and how their fortunes are faring.

Many of Asia's rich made their millions and billions through family businesses and property.

"We don't see massive shifting in the allocations of portfolio management," Claire Sauvanaud, vice president of Capgemini Financial Services, told a news conference.

Wealth fell most significantly last year in Hong Kong (20.1 percent) and India (18 percent) and grew most strongly in Thailand (9.3 percent) and Indonesia (5.3 percent). Growth was more modest in Japan (2.3 percent) and in China (1.8 percent).

Weakness in Europe and other global trends played their part in the slight fall in total Asian wealth, the report said, but the "region grappled with its own economic challenges, including inflation, slowing growth and capital outflows."

"Nevertheless, Asia-Pacific is expected to continue showing stronger growth than other regions going forward, and its HNWI population and wealth are likely to keep expanding," it said.

As part of that, Asia's rich are looking more to offshore wealth centres close to home, such as Singapore and Hong Kong, in search of wider access to products and services, tax advantages and financial confidentiality, the report said.

Challenges for the offshore wealth management industry include a scarcity of skilled talent, lower profitability, and the costs of compliance and restrictions on services due to higher regulatory scrutiny, it said.

Diversity of the backgrounds and expectations of rich clients means there is more demand for tailored products and a greater desire to play an active role in managing their portfolios, the report added.- Reuters