Global Investment Opportunities for Malaysians

Have you ever thought of expanding the likes of your investments to countries like Mexico or Nigeria?

Most Malaysians are investing into limited types of investments mostly in local stocks, properties and single unit trust funds. Little did they know that an undiversified investment portfolio creates higher risk to the investors. When that particular investment devalues, they will lose the same proportion as the underlying asset.

Recently, global investment platforms have been introduced to Labuan, one of Malaysia’s Federal Territories. Labuan is a well known Offshore Financial Centre offering international financial and business services via Labuan IBFC since the 1990s. This platform offers global investment opportunities to Malaysians and grants them access to the worlds’ largest fund houses such as Blackrock Merrill Lynch, J P Morgan Asset Management, HSBC bank and many others. However, due to the level of sophistication, these investments are not widely available to the general public. Therefore, Bank Negara Malaysia specifically approved the Licensed Financial Advisers to provide these services to selected sophisticated investors.

I strongly believe that the introduction of this platform is beneficial to Malaysians as it allows investors to further diversify their assets to multiple sectors (such as agriculture, natural resources, technology, healthcare), multiple geographical regions (such as Eastern Europe, Latin America, African nations, Asia) and to reputable global fund managers (such as Blackrock Merrill Lynch, J P Morgan Asset Management, Fidelity, HSBC bank). Many of these global funds were not available to Malaysians previously. But with the recent liberalization of the financial services industry, Bank Negara have taken positive steps to allow sophisticated investors to diversify their investment portfolio using only approved investment platforms based in Labuan.

Diversification allows the clients to spread their risks through a portfolio of global funds managed by a pool of reputable global fund managers. With a well diversified investment portfolio, the risk exposure can be better managed according to the client’s risk profile. This gives the client a peace of mind even during bad economical times or recessionary periods. This is crucial because there are some financial objectives that you can’t afford to risk (such as your retirement and children education plans). These investments will be held in strong foreign currencies such a British Pounds (GBP) or US Dollars (USD) which will give clients multiple currency holdings to minimize speculations.

Through this platform, clients are now able to gain exposure to global investment funds even with a smaller retail sum. Minimum lump sum investment is now available for as low as GBP 10,000 or GBP 300 per month for regular saving with a minimum term of 10 years. Previously, reputable global investment funds were only made available to high net worth individuals through their offshore bank account with a minimum sum of at least couple of millions.

To understand more on the above global investment opportunities, you can talk to any Bank Negara Licensed Financial Adviser Representative.

Lastly, I wish you and your families a healthy start to the New Year ahead!

What is a Wrap Account?

Wrap accounts have gained much popularity since they were first introduced to Malaysian public since the beginning of 2009. Today, a wrap account is a common facility to most financial planners in assisting their clients. So, what exactly is a wrap account and how does it work?

Basically, a wrap account is a service that “wraps” all your investments into a single account. One of the biggest advantages of this account is the ability to invest into multiple funds (even from different fund houses) through a single wrap account. Although this is also achievable using the existing distribution method, but the assistance of multiple agents is required to invest into the hundreds of funds available for diversification purposes. Now, with the introduction of wrap accounts, clients only need to deal with one Licensed Financial Planner for all their Unit Trust investment needs. This is the preferred method as it is relatively hassle-free and saves precious time and money. (Currently, only Financial Planners licensed with the Securities Commission, through their CUTA license, are allowed to advise and to construct a portfolio of approved Unit Trust funds for investors using the wrap account from a platform provider.)

Another benefit of the wrap account model is the ease of contributing. Investing into various fund houses using a wrap account does not require clients to make multiple payments but rather, a single cheque would be sufficient. Due to the wrap account structure, administrative work will also be minimised as statements from different fund houses will be consolidated into one concise softcopy version. Traditionally, clients receive physical statements through mail from various fund houses. Most clients that are bombarded with these statements do not have the time to read all of them and thus, making it difficult to monitor and track the value of their investment efficiently.

Another advantage of using wrap account services is the option of unlimited free switching of funds. Free switching is not only applicable within the same fund house, but also between different fund houses. As compared to the traditional industry practice, switching of funds within the same fund house may be free, but the number of times per year is limited. Subsequently, switching funds from one fund house to another will attract sales charges ranging from 3% to 6%. Conversely, unlimited switching will give clients the advantage and flexibility in their portfolios, which can be done easily without incurring any cost through on-line instructions to your Financial Planner.

Other than that, wrap accounts also offers a lower upfront charge. Traditionally, clients will be charged up to the maximum rate for their investments, but with the wrap account structure, financial planners can practice their own discretion in deciding on the upfront fee. This greatly benefits the clients in terms of cost.

For all the above benefits, flexibility and professional advice from a Licensed Financial Planner, a minimal fee will be charged annually on the investment portfolio which is as low as 0.25% to 0.375% per quarter. This fee will be shared between the platform providers, dealer group and the Financial Planner.

Finally, transactions can be conveniently conducted online and with a wireless and paperless transaction environment. Thus, financial planners can now serve clients better and bring their business anywhere in the world.

Below is a summary table of all the benefits and advantages of using a wrap account.

	Wrap Accounts	Traditional Tied Agencies
Range of Investment Funds and Fund Houses	Wide range	One
Lower Upfront Charges	Yes, (0% - 5%)	No, (5% - 6% Equity Funds)
Cash Account Facility (With Interest)	Yes	No
Switching	Multiple free switch (intra & inter funds)	Fixed number of free switch only for intra funds
Free Switching	Yes	No
Online Transactions	Yes (Buying, redemption & switching can be done ONLINE)	No (Manual - filling forms)
Ease of Monitoring Your Investments	Consolidation of reports are available on the Internet to give immediate information 24/7	Only certain fund houses offer this facility

Next update: Global Investment Portfolio Opportunities