How to find a competent investment professional

Oran A. Hall, Contributor

QUESTION: I read your article in The Sunday Gleaner titled 'The dos and don'ts of investing' and noted where you said one should find a competent investment professional for help in making investment decisions. I often observe this statement in advice columns but I am not sure where to find such a person. I am a young person - I am employed - who wants to start investing early but am not sure what kind of investments to make considering that I have very little to invest. Could you kindly suggest where I could locate such an individual who could help me take the little I have and do some sound investing?

- Alicia

PFA: I believe I understand your problem because we do not have a cadre of independent advisers to give you the kind of guidance you need. The available advisers are generally employees of the investment houses and are seen as being committed to sell the products being marketed by their employers.

Investors often feel that once they make their investment, they are generally on their own not knowing when to sell or make other appropriate decisions.

Stockbrokers, in particular, tend to assign staff to client accounts but this does not mean that clients should expect to get close monitoring of their portfolios.

There is, nonetheless, a way out for you and others like you who have little or no experience and limited funds, as well as others who have resources but little time to manage their investments. I will direct you, not to a competent investment professional but to companies that offer a particular service.

If you look in the Yellow Pages under 'Investment Advisory and Securities Service', you will see a list of companies and the services they offer. Look for those that offer a portfolio management service. They are licensed by the Financial Services Commission to deal in securities, so you will see other services offered by them as well as various types of securities in which they trade.

Wide gap

I cannot guarantee that you will meet and be assigned to an advisor or fund manager who will give you the quality service and advice that suits you.

From my own interaction with them, there is a wide gap between the better ones and the rest and I believe that some of them need much more training but some companies have a review system in place by which a senior member of staff checks periodically if a client's portfolio meets the suitability standard.

I am confident that you can find good companies in this list. Most of them are. They are owned by well-known and reputable companies and individuals and most have existed for many years although some have only recently started to offer a portfolio management service.

They offer two basic portfolio management services: discretionary management, whereby the company has the client's authority to make all decisions relating to the management of the portfolio, and an advisory service, whereby the company makes decisions in consultation with the client.

At the outset, an assessment is made of the client's situation to determine how much money is available to be invested, what the client's goals, preferences, and time horizon are, and the level of the client's risk tolerance, to determine a suitable portfolio.

The portfolio should be monitored regularly and evaluated periodically to ensure it is performing to expectations and is proving to be suitable to the client's needs.

Some companies start portfolios with a minimum sum of several million dollars but others accommodate small investors with amounts like J$50,000. One fund management company even has a facility for sums less than J$50,000.

Generally, there is a management fee based on the value of the portfolio.

I suggest you consider the following before deciding which portfolio management company you hire to manage your funds: the reputation, integrity and financial strength of the owner, the type of fund management facility offered, whether the investment is registered in the name of the client, the fees charged and the basis on which they are charged, whether there is a written contract, whether statements are made available to the client, their frequency, and the information given, and what additional services are offered to clients.

Check more than one company and don't be shy to ask for evidence of their past performance and for testimonials, if possible. Remember, you are going to be paying them for a service and they want your business.

Start preparing yourself for playing a role in managing your portfolio or for understanding how it is being managed by reading about investments, listening to and watching relevant programmes, and by enrolling in one of the securities management courses available locally.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers free counsel and advice on personal financial planning.Email: finviser.jm@gmail.com.