By Ashford W. Meikle, Staff ReporterJAMAICAN FINANCE companies are becoming more sophisticated in the products and services that they offer to their clients, particularly individuals.
According to the manager at Jamaica Money Market Brokers' (JMMB) Haughton Terrace Branch, Yolanda Johnson, companies like hers are adopting "a more holistic approach to financial planning." The latest trend, which is aggressively being marketed, is portfolio management for individuals.
Essentially portfolio management involves a certified financial adviser from the finance house working with an individual to identify the latter's goal. Based on the individual's objectives, various money market instruments are suggested. But the process is an interactive one, with the client being counselled by the financial adviser on how best to achieve those objectives. An integral part of portfolio management is the direct management and one to one supervision of the client's portfolio by the financial adviser.
However, not all companies offer this aspect of the service. Recently, Mayberry launched its Mayberry Managed Equity Portfolio (MMEP) product. Sunday Business spoke with the general manager of the Asset Management Unit at Mayberry, Kevin Richards, who said that, "The MMEP is a private client managed account, where Mayberry will have full discretion to purchase stocks on behalf of clients and sell on their behalf also."
Mr. Richards said that the objective behind the MMEP "is to get people into the habit of investing regularly ...developing what we call the investment lifestyle." The product has a minimum opening account of $1 million and about 10 per cent of the funds are invested in cash instruments.
MANAGEMENT FEE
Mayberry has a management fee for managing your portfolio but the company insists that its fees are competitive and low compared to similar products such as unit trusts and mutual funds. Mr. Richards notes that, compared to other companies, Mayberry is quite transparent in its upfront disclosure of its fees.
According to Ms. Johnson, portfolio management is vital and critical to planning for retirement. She believes that its popularity and its growth is a result of the realisation that that the traditional investment instruments for retirement is woefully inadequate. (Many Jamaicans rely on either NIS benefits, insurance, savings and company pension plans when they retire).
Account executive at Guardian Asset Management, Karen Powell, agrees. She said that the traditional methods "are not serving their purpose. If you depend on these methods alone, you will not be able to maintain your lifestyle or improve it when you retire." And argues that personal portfolio planning such as the one offered by Guardian (Portfolio Valuation), encourages "better planning at an earlier stage. It helps the client to devise a strategy to achieve goals."
The JMMB branch manager notes that "the older you get, the more susceptible you become to illness. You have to remember you won't have any income and with inflation eroding the value of money, the traditional savings will not be enough." She emphasised that portfolio management and planning "ensures that your money continues to work for you during retirement." JMMB assesses each client individually because "very often a client has the funds but has not identified a goal... we help them by identifying a timeline to achieve certain objectives."
The view is that given the fluctuating and volatile nature of the Jamaican economy, long-term planning makes no sense. But the experts hold a contrary opinion. In fact they emphasise that portfolio management and planning underpins long-term goals. In fact, the professionals agree that portfolio management can help to allay the fears about long-term investing in Jamaica since the adviser would encourage the investor to diversify his assets.
According to the chief operating officer at Sterling Asset Management, Mildred Moss, "Planning is important. You realise early that in order to reach financial goals you have to make wise investments."
Agrees, Ms. Johnson, "We don't have a choice. We age, we will all get old what you have to do is diversify and constantly review your portfolio to track fluctuations in the money market."
Ms. Moss concurs, "What is important is a diversified portfolio."
PROPER PLANNING
Karen Powell told Sunday Business that because of a lack of proper planning and advice most persons do not start planning for retirement until they are well into their 50s. By this time, they would have finished with their education, their children's education, the house, the car and other tangible assets. Then the reality hits them and they start to panic. "We encourage persons to start planning for their retirement as early as their first job and certainly by the time you are 30," says Ms. Powell.
Personal portfolio management offers an advantage in that the experts guide you into making reasonable, calculated risks. An investor in his 30s or 40s would, for example, have a portfolio heavily invested in stocks and equities. The argument is that, with time on your hands you will be able to withstand the fluctuations in the equities market. However, those who are middle-aged are encouraged to invest heavily into certificates of deposits (CD) and repos or foreign currency.
The reason behind the conservative investing for the middle-aged is that, according to Ms. Johnson, "the older you get the less tolerance you have for losses. That is why it is important to constantly review your portfolio to track market fluctuations and diversify. Diversification provides greater returns and less risks."
