Director MBMG Investment Advisory
Financial Advice: Making the Right Choices
If you believe what you read on the internet, many
financial advisors have a reputation only slightly worse than a soi dog or a
In fact, one of the greatest challenges of being a reputable and
trusted advisor is assuring prospective clients that not all advisors are
the same and that there are some who are genuinely there to provide an
impartial, professional service, rather than trying to sell them one
particular financial product, taking their money and running.
That is why MBMG Investment Advisory (MBMG IA) is licensed and regulated by
the Securities and Exchange Commission Thailand (SEC). The SEC has strict
regulations on providing advice on different kinds of assets and requires
advisors to be qualified. However, we have lately heard tales of problems
stemming from a number of unlicensed advisors operating in Asia and
therefore MBMG IA’s advisors feel it’s important to point out some of the
common pitfalls out there for people seeking to invest their hard-earned
Cold-calling can be extremely annoying. It also appears to be a
common strategy used by unlicensed salespeople around the world. Sending
money to someone you’ve never seen, and never spoken to until a few minutes
previously, could turn out badly. Nevertheless, an unsolicited offer to
invest isn’t necessarily toxic or anything illegal, but it can make the
receiver of the call feel pressured into buying, which is why strict rules
Unlike Thailand or the US, cold-calling is actually against the regulator’s
rules in some countries. In the UK, for example, the FCA’s investment and
mortgage financial promotion rules ban cold-calling because it can “expose
consumers to high pressure sales tactics which mean they can end up with an
inappropriate or over-expensive product or service.”1
That said, the Thai SEC’s rules do stipulate that if an investor was
solicited through the means of cold-calling the mutual fund or securities
company must allow him/her to cancel the purchase order or exempt the
Still, when we’re talking about people’s savings and/or retirement money, a
pressured buy from an unknown company, in a fund you haven’t researched, is
Last year’s failure of the Australia-based LM Investment
Management was just the latest debacle that caused considerable losses for
investors. LM targeted much of its sales and distribution focus almost
entirely outside Australia and therefore many of its victims were based in
Many of the LM investments had become akin to so-called Mark-to-Model
schemes. These are funds which are based on a predicted future value using a
model, rather than an actual market. Those people who create such schemes
don’t use market prices and generally prefer assets where such prices don’t
exist. In such cases it’s vital to ensure the liquidity and saleability of
the underlying assets otherwise a discrepancy can arise between the reported
value of the investment and its real, realizable value.
Over the years there have been many such schemes, which offer investors a
steady rate of return irrespective of whether actual profits or losses are
being made. The problem is there’s no hard evidence the assets will reach
the predicted values and if enough people take out their guaranteed returns
after the minimum investment period, the fund could be worth less than the
money owed. The chart shows a typical example of the problems which could
occur in such a scheme: the black line represents the quoted performance,
and the pink line the actual performance.
LM’s funds invested most of its investors’ money into real estate
development projects on Australia’s Gold Coast.3 Unlike a completed
property, which has a marketable re-sale value that can be readily checked
and verified, the value of partially developed projects can be difficult to
verify and extremely volatile. Other examples have used litigation funding
schemes, where the fund’s value increases on the assumption that lawyers
will win civil cases that have been funded using money borrowed from the
fund; and life insurance and traded endowment policies sold off prior to
maturity. Even with physical property, care needs to be taken; the student
accommodation sector, for example, is far from clear that the model
calculation of a student hall of residence ties in with the market value of
such a specialized asset.
Speak to a reputable adviser
This does not necessarily mean that investing your money is too
perilous to contemplate. The best move to make is to contact a reputable
regulated independent financial adviser. A list of regulated advisory firms
is available on the SEC website.4 The adviser should listen to what your
plans are, what you would like to do with your money and what level of risk
you are willing to take. The adviser should then come back with a detailed
recommendation in return for an adviser fee, explaining which investments
may be suitable and why.
Another important consideration is the holistic nature of the advice - does
it take into account financial planning or taxation issues? Can the advisor
recommend an in-house or external expert in such matters (where the
expertise is offered in-house the investment advisor should highlight the
potential conflict of interest and offer external choices as well)?
On another topic, MBMG would like to congratulate one of our economic
mentors, Professor Steve Keen on his appointment as the Head of the School
of Economics, History and Politics at Kingston University in London.
2 Notification of the Office of the Securities and Exchange Commission, No.
SorKhor. 43/2547, The Office of the Securities and Exchange Commission
3 The Sydney Morning Herald, 17 February 2014,
.html, accessed 7 May 2014.
1. While every effort has been made to ensure that the
information contained herein is correct, MBMG Investment
Advisory cannot be held responsible for any errors that may
occur. The views of the contributors may not necessarily reflect
the house view of MBMG Investment Advisory. Views and opinions
expressed herein may change with market conditions and should
not be used in isolation.
2. With investment comes risks. Please study all relevant
information carefully before making any investment decision.
3. An investment is not a deposit, it carries investment risk.
Investors are encouraged to make an investment only when
investing in such an asset corresponds with their own objectives
and only after they have acknowledge all risks and have been
informed that the return may be more or less than the initial
MBMG Investment Advisory is a Thai SEC regulated investment
advisory firm in Thailand that provides sound and impartial
advice to assist private, corporate and institutional clients in
all aspects of their financial life. For more information,
please contact us at [email protected] or call 02 665
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