IFA mess

Good morning,

Merry Christmas!

It’s Friday and I am looking forward to a great holiday and weekend getaway. I had a good time drinking a few bottles of Argentina wine with a good friend and one of the top investment advisers in a rival firm last night at my bar. A topic we talked about was the mess the IFA industry is currently in Singapore which was splashed across the front page of the country’s main newspaper.

It reported the illegal moneylenders' ties with the IFA firms where the victims’ investments accounts were churned to generate more commission to pay off their loan interests and signatures were forged without clients’ knowledge in these transactions. We wished that the authorities will get them and put them in jail for such dishonest acts. The rotten weeds must be removed so that the real financial advisers can survive. The report also suggested that the authority should reduce the upfront sales charge to 1% or totally remove the sales charge. I don’t think it will benefit clients because many of the good FA will leave the industry to seek better compensation elsewhere. It’s not easy getting a client to listen to how financial planning can help them, so without the motivation of a good compensation scheme, I am sure my friend will be the first to leave the industry. Perhaps the authority can impose commission sharing limits for the FA firms so that these illegal moneylenders and unscrupulous FA managers will find the compensation unattractive for the scheme to work. I just cannot believe a FA company with such a high compliance and running costs can pay their FA 90% of the gross commission earnings if churnings are disapproved at the firm’s level.

Anyway, it’s Christmas so I will not continue to lament. Let’s be jolly and enjoy the profits we made from the US market this week. Here is the performance evaluation for the stocks KUTE selected:

DJIA Friday’s close 10328.89; this week’s close 10520.10
NOV Friday’s close $43.28; this week’s close $44.77
DOX Friday’s close $27.44; this week’s close $28.88
NE Friday’s close $41.09; this week’s close $41.31
MGLN Friday’s close $38.48; this week close $41.43
PTI Friday’s close $20.29; this week close $19.97

My position for DOX was squared last night when the limit order was done, much in the money. I am still holding on to my NOV and PTI. NOV is in the money and PTI has only a fractional loss, which I believe I should be in the money next week. I will be back only next Monday morning Singapore time for the new KUTE selection and see you then.

Have a great day.

Francies Cheng
BBus MAppliedFinance