Financial adviser under CAD probe

[Musicwhiz]

13% per year sounds scammy to me.....she must be a very good investor to achieve that!

The Straits Times
Apr 9, 2012
Financial adviser under CAD probe
She's quizzed over practising without a licence; allegedly owes clients $20m

By Jalelah Abu Baker

A FINANCIAL adviser who allegedly owes her clients more than $20 million is being investigated by the Commercial Affairs Department for practising without a licence.

The 50-year-old, who spoke to The Straits Times on condition of anonymity, said she did not know she needed one and feared the publicity would affect her business.

She was called in for questioning by the department last October.

She invests on her clients' behalf in funds, equities and shares, which means she requires a licence under the Financial Advisers Act.

For more than a year, various creditors, businessmen and women, including housewives, have been pursuing her for more than than $20 million in returns.

Between March and December, 17 people filed civil lawsuits against her to claim money. Eight are pending, and the rest have either been discontinued or judgment has been made in Chambers.

The financial adviser, who also asked The Straits Times not to name her company in case the publicity affects settlement talks, promised some of her clients returns of 13 per cent a year. They are also her friends, she said, and some have been dealing with her for at least five years.

The woman, who has school- going children, said she started investing on others' behalf in 2008 after word spread of her success at doing it for herself. She usually pays promptly, she added.

Asked what happened, she said she made some stupid decisions. The Japan earthquake last year and the European financial crisis were reasons for her business woes. Some of the sums are big, she said, and will take time to pay.

Breaking down, she said: 'I really want to pay them back slowly. I think I can do it. The market is picking up. I know it's people's hard-earned money.'

One of those affected is Madam Chan Chui Ying, a 45-year-old businesswoman who sued her for close to $1 million through lawyer Suppiah Thangaveloo of Thanga & Co. According to a statement of claim filed last July, the woman was supposed to return more than $1 million in instalments.

She paid $30,000, but not the remaining sum. But Madam Chan, who spends a lot of time in Malaysia, dropped the case in January. She did so partly because she felt sorry for her, and because she did not want to spend any more on legal costs.

The financial adviser's company is not operating while investigations and negotiations continue. Company accounts have been frozen by the department.

Her lawyer Derek Kang, from Rodyk & Davidson, told The Straits Times: 'Negotiations are underway with various parties to reach an amicable settlement.'

Mr Leong Sze Hian, former president of the Society of Financial Service Professionals, said cases like this are not common. When advisers do end up in court, it is usually because of unregulated investments in areas such as gold and land banking.

jalmsab@sph.com.sg

[kazukirai]

13% per year sounds scammy to me.....she must be a very good investor to achieve that!

she started investing on others' behalf in 2008 after word spread of her success at doing it for herself.

No one can be lucky forever.

This is why people should be looking at a track record over a long period. I recall Graham using market records of at least 50 years. I'd say that one needs a record of at least 10-15 years before they can say with some confidence that they are likely to achieve returns of X% p.a. on average.

Even then, to guarantee 13% p.a is crazy.

[shanrui_91]

13% per year sounds scammy to me.....she must be a very good investor to achieve that!

she started investing on others' behalf in 2008 after word spread of her success at doing it for herself.

No one can be lucky forever.

This is why people should be looking at a track record over a long period. I recall Graham using market records of at least 50 years. I'd say that one needs a record of at least 10-15 years before they can say with some confidence that they are likely to achieve returns of X% p.a. on average.

Even then, to guarantee 13% p.a is crazy.

13% p.a will not be hard if she has collected all the money in 2008 and not in 2010 and 2011. If she manages to get 2 bagger from all the stocks assuming she dump all the money in March 2009 into the better stock, she can guarantee payout for at least 5.5 years.

I read somewhere before that it should take at least 25 years to prove the ability to generate alpha return. This is why Buffett is more well respected than Peter Lynch though Lynch managed a 29% return over 13 years for his fund which has more restriction than Buffett's Berkshire

[CityFarmer]

I read somewhere that it need to go thru at least 2 bull-bear cycles before you can any conclusion on your investment return. So it translate to approx 10, 15, or 25 years as what i got from the posting.

If the bull-bear cycle shorted with much faster environment as today, can we conclude that the duration will get shorter?

Just a question pop-up when reading the posting.

[Temperament]

1st bull-bear cycle is the most difficult to pass or survive. i think you can only survive if you have done your "money management" properly before you start to invest. If you pass the 1st bear-bull cycle, the second one should not be a "surprise" or a very much lesser surprise. At this time you should be making some "good" money. The rest of the story should be a kind of lifestyle if you stick to your "investment/money-management priciples". Don't ask me what principles. Everyone should have his own because we are all different. That's why the market is still there.

---

13% per year sounds scammy to me.....she must be a very good investor to achieve that!

she started investing on others' behalf in 2008 after word spread of her success at doing it for herself.

No one can be lucky forever.

This is why people should be looking at a track record over a long period. I recall Graham using market records of at least 50 years. I'd say that one needs a record of at least 10-15 years before they can say with some confidence that they are likely to achieve returns of X% p.a. on average.

Even then, to guarantee 13% p.a is crazy.

13% p.a will not be hard if she has collected all the money in 2008 and not in 2010 and 2011. If she manages to get 2 bagger from all the stocks assuming she dump all the money in March 2009 into the better stock, she can guarantee payout for at least 5.5 years.

I read somewhere before that it should take at least 25 years to prove the ability to generate alpha return. This is why Buffett is more well respected than Peter Lynch though Lynch managed a 29% return over 13 years for his fund which has more restriction than Buffett's Berkshire

A lot of people who are afraid or no time, or not suitable to to DIY investment are easy preys for so called self-style "Investment Messiah" , who can shows very impressive result for a short time.
People tend to forget that except death & taxes, there is no Guarantee in life.

[d.o.g.]

The 50-year-old, who spoke to The Straits Times on condition of anonymity, said she did not know she needed one and feared the publicity would affect her business.

Ignorance is no excuse before the law. And I find it hard to believe that she didn't know given the amount of publicity on regulations out there, and the fact that she must have come into contact with others in the industry if she was a bona fide operator.

She invests on her clients' behalf in funds, equities and shares, which means she requires a licence under the Financial Advisers Act.

If she was indeed investing on her clients' behalf, my understanding is that then she was acting as a fund manager and needs a fund management license/exemption, not a financial advisor license. The moment you have discretion to buy/sell, you are a fund manager. Only if the client is free to reject your suggestion, can you still be considered merely an advisor.

The woman, who has school- going children, said she started investing on others' behalf in 2008 after word spread of her success at doing it for herself. She usually pays promptly, she added.
...
Some of the sums are big, she said, and will take time to pay.
...
'I really want to pay them back slowly. I think I can do it. The market is picking up. I know it's people's hard-earned money.'

This sounds like she held the client's money in her name. This is a basic operational no-no. Whether you are a financial advisor or a fund manager, you do not EVER touch the client's money.

If she was a bona fide fund manager she should have no problem liquidating the investments and returning money to clients. Of course there could be heavy realized losses, but the money can be located.

If she has trouble locating the money then it begs the question of whether the money was ever properly invested at all.

[Musicwhiz]

Which makes me wonder why so many people are either too gullible or just plain naive to pass their money to someone who claims they can produce 13% returns every year, guaranteed and no questions asked.

It's not even regulated, yet so many people piled into it to the tune of >S$20 million. That's a staggering sum for ONE person to manage, and to manage it WELL is even tougher.

It will be lucky if those "investors" can even recover 50 cents for every dollar they put in......

[KopiKat]

13% per year sounds scammy to me.....she must be a very good investor to achieve that!

she started investing on others' behalf in 2008 after word spread of her success at doing it for herself.

I can identify with the statement in red. Look at STI year end gains,

2003 : 36.63%
2004 : 17.09%
2005 : 13.61%
2006 : 27.20%
2007 : 16.63%

I was 'forced' to finally agree to invest for my mother-in-law in mid-07. All her 'savvy' friends were making 'tons' of $$ during the good ol' days when the bull surged non-stop from '03 to '07. After months of trying all the different strokes of 'tai-chi', I finally relented. The total sum of money wasn't a lot and I told myself that worse come to worst, I'll just top up her full amount if I ended up losing all her $$. Yes, anything for some peace and quiet...

As the total sum of $$ was small and it was closed ended (no subsequent new funds), it was indeed very challenging. I could at most buy 2-3 stocks and had to select with the utmost care. Still, as the market then was already entering the last leg of the bull run, I was badly hit when the huge correction came along. Haha.. it was a terrible feeling to see my 'managed' fund dropping by 10%.. then 20%.. within a short span of time.

I really learnt a lot during that couple of years as I tried everything I could think of to turn the 'fund' around. The luckiest thing I did was to switch most of the non-performing stocks to StarHub in Oct-09 when it went below $2. This one stock alone helped to turn the whole 'fund' around even as it was paying a ~10% dividend yield.

I'm a lot better now with my 'tai-chi' strokes. Bull run '09-'10 and '12 to ??, I still get pressure from close acquaintances to help them invest but now, at most, I can help to point them to read ValueBuddies forum and ask them to ask the real gurus here, haha..

[yeokiwi]

I'm a lot better now with my 'tai-chi' strokes. Bull run '09-'10 and '12 to ??, I still get pressure from close acquaintances to help them invest but now, at most, I can help to point them to read ValueBuddies forum and ask them to ask the real gurus here, haha..

Keep your performance under wrap and you will have less of this type of problems.
I hardly talked about stocks nor investment gains with my relatives or friends.

First, if your gain is too extraordinary, fews will believe.
Second, if your gain is too little, it is better to be modest.

Lastly, I hardly can find someone that have the temperament and patient to use value investing.
Most prefers stock tips and I really do not know which stock will go up next.

[Musicwhiz]

Lastly, I hardly can find someone that have the temperament and patient to use value investing.
Most prefers stock tips and I really do not know which stock will go up next.

How very true. Happens for my circle of friends, peers, relatives, colleagues too.