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Key Messages:

  • When seeking investment advice, the more questions you ask, the more likely you will get advice that suits your investment needs.
  • Do not sign any client agreement or disclaimer if there is anything you do not understand.

Know your investment objectives

What are your investment goals? How much can you set aside to invest? Are you making a long-term investment? What is your risk tolerance; in particular, how much can you afford to lose? The higher the return you seek, the higher the risk. Be prepared to tell your investment adviser about yourself.

Know your adviser

Ask questions about the adviser. Is the adviser licensed? What experience and qualifications does he have? What products and services does he offer? Will the adviser offer you an ongoing service after the initial sale of a product? What remuneration (e.g. commission, rebate) will your adviser receive from selling you the product? Shop around before deciding what is best for you.

Consider the financial plan

Does your adviser provide the advice in writing? If not, request one. Read it carefully and keep a copy for reference. Ask why the advice is suitable for you, given your circumstances and whether the financial plan meets your investment objectives.

Also, ask these questions:

  • Are prospectuses, offering circulars, product key facts statements and other documents relevant to the investment products available?
  • How will this investment make money? What will affect the return?
  • What are the risks? How are these consistent with your risk tolerance? What is the maximum you could lose?
  • What are the fees and charges that you will pay upfront, on an ongoing basis, and upon exit?
  • Are sales related information available, including the capacity (principal or agent) in which your adviser is acting, affiliation of your adviser with the product issuer, disclosure of monetary and non-monetary benefits received from the product issuer and generic terms and conditions under which you may receive a discount of fees and charges from your adviser?
  • Does the investment product confer a cooling-off or unwind right on investors? If yes, what are the details, including cooling-off arrangement or unwinding mechanism (including the amount of reasonable administrative charge)?
  • What if you suddenly need cash? Is there any penalty for early encashment?
  • Why borrow to invest? Why put all your money in only one product?
  • Are there any other options apart from the recommended product? Why are other options not suitable?

Understand the product

You should also understand the recommended product and how it works. What are the pros and cons of the product? It is not enough for your adviser to hand over documents saying, "read these, they explain the product and its risks" . You have every right to ask your adviser to explain.

Besides, is the recommended product SFC-authorized? Or is it authorized or regulated in other places? Different places may offer different levels of investor protection. Why has your adviser recommended an unauthorized product to you? Does the manager of the unauthorized product have a good and long track record? How are your interests protected?

Don't sign away your rights

You must read and fully understood the client agreement. Know the services provided, your rights and responsibilities. If in doubt, ask your adviser to explain. Don't sign it if there is anything you don't understand.

Be careful if you are asked to sign a disclaimer, which may be a separate sheet or form part of the client agreement. What are the responsibilities your adviser is disclaiming? How will this affect your legal rights? If the disclaimer states that your adviser does not offer you advice but only executes your orders, does this reflect the true situation? Don't sign it if that is not the case.

A professional adviser will be pleased to answer your questions. If your adviser cannot explain things clearly, seek a second opinion.