We're Living in the Future! Sack Your FA!

[andrewfi]

Yes, we're living in the future! But don't sack your financial advisor just yet!

Here's a story...

I have a chunk of money that's sitting earning interest. The rate is decent for an account of its type, but not good enough to be an effective use of the asset.

I have been talking with my advisor at the bank I am working with. I get the personal service due to the size of the account. The person I deal with is helpful, decently well informed, and conversant with their offers.

BUT, she had suggested setting up a portfolio using several vehicles. I was happy with the vehicles but wanted to know more about how to optimise returns against risk. All she could do was the typical profile of risk acceptance. When I said I wanted to be able to optimise for a particular outcome, that was just not possible. We were stuck with 'computer says this!'.

So, I said I would do the work. It ain't rocket science, and while I do not claim to be an investment advisor, I do know how to do the necessary.

And then...

A little bird whispered in my ear, 'This is a job for AI'.

I had previously used AI to sort out projections for my golden years so I understood the potential.

A conversation with the ChatGPT gods ensued.
I asked if I could upload the data sheets for the different investment vehicles for analysis. Yes, I could.

I asked if it could handle data sheets in both Spanish and English and using different page layouts. Yes, it could.

Can the system analyse the data and suggest a portfolio balance according to a desired potential outcome? Yes, it could.

Everything looked good. I took pictures of the datasheets, uploaded them to ChatGPT, using model 4 (model 1o can't yet work with uploaded data).

The system then did a preliminary summary and analysis of each vehicle. This allowed me to check for accuracy, but also gave me a reference to each vehicle that was fully consistent and thus easier to analyse.

Next, it made a suggestion for portfolio mixes at different degrees of risk. Interestingly, it varied not only the proportions of the mix, but the actual investment vehicles to be used.

We stopped at this point, for the time being. We can drill down into the data. For example, we could:
Further optimise for risk using historical Sharpe ratios.
Set a target risk level and find the mix that offers the best return for that risk.
Explore stress testing different market scenarios.

We might do some of this, but probably not.

However, I now have more and better information than the advisor has. I have, IMHO, a better mix of funds and portfolios that offer similar returns at lower risk and with less volatility than the banks computer offered.

Had I done the work above using a spreadsheet, I would probably have taken a good chunk of the day and probably made mistakes. The maths isn't too tough at this level, but I am an ageing human!

But the longest part of the task was to take pictures of the data sheets and upload them! The whole process took perhaps 20 minutes and generated a report to share with a colleague for later discussion.

Truly, we are living in the future!

[Guile]

If you had just invested everything in Nvidia 2 years ago you'd have 10x your money!  Way better returns than Bitcoin or Gold or anything else.

I caught it late but not too late to 3x

[Manny]

I’ve just signed up to an unusual vehicle today. It’s with a bank in HK. It seems to be designed for people who have money fleeing despotic regimes like Kier Starmer’s UK. It masquerades as a life insurance policy, but really, it is a CRS (reporting requirements) avoidance tool. Insurance policies are not reportable in the same way bank accounts are.

So it has a complicated structure of paying out some kind of “bonus” each year and then a final bonus for not claiming on it after five years and premiums returned. Something like that. So it works like a 5 year fixed rate account in reality, but swerves reporting requirements legally during that time.

It also allows one to enter the realms of private banking by dripping in the advertised minimum deposit over five years. This then opens the door to the whole host of stock trading, financial tools and multi currency accounts, not available to random mortals. Even two relationship managers in your own WhatsApp or WeChat group.

Naturally, members of the unlucky passport club, Russians and Americans mostly, can’t open them. However, they can refer those folks, if HNWs, to an agent to obtain a luckier passport.

I’m pretty confident I’ve wrapped my head around the product and all the terms and conditions, but also I plan to upload all the policy documents to GPT for a synopsis and an overview to make sure I understood it correctly before the cooling off period expires.

But on the face of it, I had my first taste of private banking today. It took three hours to open the account with KYC nonsense, but HK is notoriously difficult to open bank accounts in for non residents. It’s an escape hatch in case Starmer imposes bank account taxes, currency/exchange controls or any other crap under his umbrella of “wealth redistribution”.

[andrewfi]

Manny, that looks interesting.

Guile, if one were lucky enough to have bought Nvidia at the time, one would have been fortunate. The example illustrates the roulette wheel aspect of investing in stocks.

When I started buying Bitcoin and later other crypto, it was based on information that was foreseeable at the time. Continuing to do so reflected the correctness of having done so when I did. Nvidia, much less so.

The success of Nvidia today is based on factors that were unforeseen, even by Nvidia at the time. Of course, one could have bought into Nvidia later on and captured part of the gains. The downside being that, apart from fractional ownership/purchase, the price made it unattainable for many and certainly did not coincide with my strategy.

[Manny]

If you had just invested everything in Nvidia 2 years ago you'd have 10x your money!  Way better returns than Bitcoin or Gold or anything else.

I caught it late but not too late to 3x

Isn't hindsight a marvellous thing?

Manny, that looks interesting.

It is. I approached them for a much more regular type of account as a latch lifter, but I know that they are not too keen on opening them unless you can demonstrate solid ties to Hong Kong. In my case, I have a limited company here, so they were quite pleased about that, and that circumvented much of the nonsense as I have a "local employer". But I suppose they are trained to sniff out people who might have a few more quid to invest. The entry level for the top tier account was doable, but I wouldn't have put such a sum with a bank I've not yet built a relationship with. So they have this cunning scheme where you drip it in over five years. But that opens the door immediately to all their other services.

The KYC was different to the others I have encountered. Are you married? Do you have kids? It was far more holistic. Basically you have a conversation and demonstrate that you're not a shady character, and in order to do so they even want to look at your websites and have an understanding of your source of funds beyond what mere paperwork could demonstrate. I think it's a far better method actually to have a conversation then have the silly "computer says no" stuff that you get in the west.

Also, to demonstrate that you are the right kind of chap, instead of demanding reams of paperwork, they just ask that you flick open a couple of your banking apps and show them balances. As long as they collectively exceed their advertised entry level, you're good to go. I found the whole process a bit of a bum sniffing exercise on both sides. And it makes perfect sense why they would do that. In five years, you'll be a bigger customer they'd not have got otherwise.

But the entry product they offer is quite complicated in structure, I don't have any doubts that they misrepresented it, but I will certainly be using GPT to assure myself of the legitimacy of it.

GPT already gave me an overview:

I'm aware that some private banks in Hong Kong offer products structured like life insurance policies, which can serve as investment vehicles. These products might be designed to provide certain tax or reporting advantages under the Common Reporting Standard (CRS), as insurance policies typically have different reporting requirements compared to bank accounts.

The features you mentioned, such as annual bonuses and a final bonus for non-claims, are common in such products, creating an appearance of insurance while effectively functioning like a fixed-term investment. Additionally, the ability to gradually meet minimum deposit requirements can facilitate access to private banking services and a range of investment options.

Such products are utilised by high-net-worth individuals as part of wealth management strategies. They can provide advantages like tax efficiency, asset protection, and access to private banking services. These structures often appeal to those looking to optimise their financial portfolios while minimising reporting obligations.

Curiously, many of the banks to offer similar schemes in HK are American ones, but they don't accept US passport holders. How bizarre is that? I asked GPT, he agreed.

Many banks avoid American passport holders for these types of products due to stringent U.S. regulations like FATCA (Foreign Account Tax Compliance Act). This creates a paradox where U.S. institutions may provide investment solutions that are less accessible to their own citizens

[B.B.]

Many banks avoid American passport holders for these types of products due to stringent U.S. regulations like FATCA (Foreign Account Tax Compliance Act). This creates a paradox where U.S. institutions may provide investment solutions that are less accessible to their own citizens

Oh, we can do that here, just not overseas because of FACTA (which, when combined with FICA, should be called "FCUKYA" because that's what it's about.)  There's a concept called "infinite banking" which gets peddled from time to time, but one need not sign on with one of the providers to do with on one's own, provided one doesn't mind buying whole life policies.  Those are not such a great deal in and of themselves, but they are the vehicle for utilizing the "loan" option for folks without a few million lying around to collateralize loans to oneself.



B/B

[andrewfi]

That reminds me of when I was flogging memberships to the Independent Order of Foresters for a while! It is a mutual benefit society with some decent benefits for the meagre membership cost.

Anyway, as I recall, we sold permanent life insurance policies (a type of policy with a cash value) as a loan vehicle. I am sure that the strategy remains in place today. One does not pay tax on the cash from a loan.

Cryptocurrency holders can do something similar. They can take out a loan against their crypto holdings and spend the loan tax-free. Because crypto is not being sold, there is no tax liability. The repayments come from the holding or in fiat currency—typically, one would expect the payments to be made from the asset's increase in value.

Wealthy people tend not to buy things; they rent them - for the same reason - tax avoidance. Another example is if one has a trust, one can borrow and spend the money. The repayments come from whatever source one chooses, the trust remains intact as far as the balance sheet goes, and there is no income or capital gains tax to be paid.

[Guile]

Guile, if one were lucky enough to have bought Nvidia at the time, one would have been fortunate. The example illustrates the roulette wheel aspect of investing in stocks.

When I started buying Bitcoin and later other crypto, it was based on information that was foreseeable at the time. Continuing to do so reflected the correctness of having done so when I did. Nvidia, much less so.

Bitcoin has had 3 major crashes where it lost 75% or more of it's value since inception.  The last one being 3 years ago.  Now..it has rebounded to an all time high but there were plenty of people who lost their shirt.   And many more who put their money into Bitcoin exchanges like FTX, Mt. Gox etc to find either the bitcoin was hacked and stolen or the founders had a ponzi scheme.

This happens with stock as well.  Nothing is foolproof. Alot of the big dot.com companies have gone bust.  Nvidia rode the AI wave up.  No one could have seen the impact it had.

As the saying "a rising tide lifts all boats". Any of the major tech companies of the past decade could have given you big profits.  Tesla had it's wave but has stabilized.

People will always want to make money and latch onto things to create value.  Gold, bitcoin, stocks...just gotta know when to get in and out.

[Manny]

It is still hindsight, though, isn't it because it takes a particularly skilled or lucky investor to spot a trend or bargain at the beginning.

It reminds me of the US cannabis stocks, I agreed that on paper, they looked a no-brainer, but in practice they turned out to be a flop.

It's looks like we already have defacto currency controls since the new government was installed. I've been trying to send some money over here and all the banks are blocking the transfers. I've diverted them through my wife and sons accounts and all kinds of different routes and most of them are getting blocked for KYC and more information, and this is just like a few thousand quid at a time. I think since the Labour government was installed, money is fleeing the country at a great rate, and they are using KYC to stop it or slow it down until they can implement legislation to throttle it.


When I come to HK in December, I'm bringing cash. Fcuk Labour!

[andrewfi]

Most assets increase and decrease in price. The difference between Bitcoin and any given stock is that Bitcoin has an economic justification for an increase in price over time against any given fiat currency. Bitcoin also has a real economic and thus practical purpose (in fact, several of them). Of course, it is also subject to general economic trends, just like any stock.

The current success of Nvidia is based, as noted before, on a factor that was unknown, and thus, buyers who purchased at the time of Nvidia's current rise were buyers who were lucky. Buying a 'black swan' stock is thus a matter of chance and good fortune rather than knowledge of the future.

I have made out like a bandit with Bitcoin because I was fully aware of the economic rationale behind the asset and I was also aware of the short-term variations. I have largely held and, of course, did not sell during times when the price fell. All of this is just being a sensible investor/buyer.

Of course, most people who buy Bitcoin to hopefully make money do so without knowing anything about the asset or the asset class, and so they get scared when there is a short term variation. Me, I just twiddle my thumbs or buy more at the current relatively low price. Of course, that is not an option for most buyers of stocks when considering a costly stock because one cannot buy parts of a share!

Fractional purchases do not give ownership of the share. I can buy $100 or $10,000 of Bitcoin, making it much easier to buy and sell strategically, and I own what I purchased.

So, I congratulate you on your good fortune while understanding the reality of what is going on.

[Contrarian]

Not claiming to be someone with money to invest, however do enjoy reading the essays of this man.

https://internationalman.com/

https://internationalman.com/articles/national-fire-sale/

https://internationalman.com/articles/the-misconception-of-the-man-of-system/

[Contrarian]

Is there hope for the USA? This might also be titled, Is there hope for the UK?

Manny should like his advice, as he advises what Manny is already contemplating, which is having an offshore bank account, a second passport, and a second or third getaway place to live.

https://internationalman.com/articles/is-there-hope-for-the-us/

https://internationalman.com/articles/david-stockman-on-why-biden-harris-could-not-print-borrow-or-spend-their-way-to-a-strong-economy/

[Contrarian]

What others call Globalism or Communisim 2.0, he calls Feudalism. I like it. 

https://internationalman.com/articles/doug-casey-exposes-the-global-elites-plan-for-feudalism-and-how-you-can-resist/

In Karl Marx's Communist Manifesto, Central Banking is the 5th plank.

https://internationalman.com/articles/exposing-the-federal-reserves-inflation-deception/

[Omega1982]

Some people believe the same thing will happen in the US if Harris wins.  The thing with cash Manny is that at least here in the USA it can be seized at the airport under something called "civil asset forfeiture".  even if its under the 10k threshhold. 

It's interesting that as I've traveled the world, the only countries besides the US that ask how much cash you're carrying are generally North African countries.  In places such as the gulf states the limit for export is actually 20k USD.  In places like SE Asia I've never been asked.  Of all the 15 former Soviet republics and I've been to all fifteen, the only one where I was harassed and actually bullied over cash was Tajikistan. 

Manny the solution would be to open an offshore bank account.  For us here in the USA its more complicated after Obama signed a law making it much more difficult for americans to do so.  Or the other option would be to store precious metals or other valuables in a vault in a place such as Singapore which is friendly towards investors. 

It is still hindsight, though, isn't it because it takes a particularly skilled or lucky investor to spot a trend or bargain at the beginning.

It reminds me of the US cannabis stocks, I agreed that on paper, they looked a no-brainer, but in practice they turned out to be a flop.

It's looks like we already have defacto currency controls since the new government was installed. I've been trying to send some money over here and all the banks are blocking the transfers. I've diverted them through my wife and sons accounts and all kinds of different routes and most of them are getting blocked for KYC and more information, and this is just like a few thousand quid at a time. I think since the Labour government was installed, money is fleeing the country at a great rate, and they are using KYC to stop it or slow it down until they can implement legislation to throttle it.


When I come to HK in December, I'm bringing cash. Fcuk Labour!

[Omega1982]

Manny you're trying to send money from the UK to China I imagine?   

Are you doing this as a traditional bank wire transfer or some more modern mechanism? 

[Contrarian]

https://www.zerohedge.com/precious-metals/rickards-what-will-destroy-dollar

[Manny]

Manny should like his advice, as he advises what Manny is already contemplating, which is having an offshore bank account, a second passport, and a second or third getaway place to live.

That idea is as old as the hills. It was first espoused by Harry D. Schultz as the Three-Flag Theory. It was later expanded by WG Hill in his PT series of books. Explained here by GPT:

In Hill's expansion of the Flag Theory, he introduced five flags, which further diversifies aspects of an individual's life across multiple countries:

Flag 1 – Passport/Citizenship: Similar to Schultz's version, having citizenship in a country that offers the most benefits for freedom and minimal interference in personal matters.

Flag 2 – Legal Residency: This is where you physically spend your time, in a low- or no-tax country that doesn't impose heavy restrictions or taxation on foreign income.

Flag 3 – Business Base: Hill emphasizes incorporating your business in a country with favorable corporate tax laws, strong privacy protections, and business-friendly environments.

Flag 4 – Asset Protection: Keeping your wealth in a country with strong banking privacy laws, safe from confiscation or high taxation, like Switzerland or offshore financial centers.

Flag 5 – Playgrounds: Spend your leisure time in countries with a high quality of life, low cost of living, and where you can enjoy freedom, lifestyle, and privacy.

W.G. Hill popularized the concept in his "PT" books, which became highly influential among digital nomads, libertarians, and expatriates looking to avoid excessive government control or taxation. Hill’s PT lifestyle promotes the idea of living as a "man without a country," taking advantage of the benefits offered by various jurisdictions without being tied down to any one of them.

The expansion to five flags made the theory more comprehensive, and it continues to influence the strategies of people who pursue global citizenship, asset protection, and tax minimization strategies.

Theres a new wave of blokes online espousing various versions of PT now.

Manny you're trying to send money from the UK to China I imagine?   

Are you doing this as a traditional bank wire transfer or some more modern mechanism? 

Hong Kong, and I have sorted it now. I wrote a blanket reply to the KYC crap to send for every delay, which seems to work.

What more modern mechanism? SWIFT tends to be the usual.

[Manny]

The thing with cash Manny is that at least here in the USA it can be seized at the airport under something called "civil asset forfeiture". 

We have similar, they don't hassle you under £10k out, over that you should fill a form in. In Hong Kong, the limit to take in is a bit higher at HK$120K, £12k ish. Per person of course. The US has always been overzealous about such things. You guys have more onerous reporting requirements and rules for "structuring" than everywhere else.

Manny the solution would be to open an offshore bank account.

You're teaching Granny to suck eggs here. I've had those since the early 90s. The issue is getting the money to them out of the UK at present. As with anything, there are ways and means. Remember, I can even make money pop up in Russia where banks can't. 

[Omega1982]

I mean if it was a wire transfer or some banking transfer app.  Here people use one called zelle. 

Theres also crypto. 

[Omega1982]

Manny then why are you considering moving to the US?  Especially since a US passport for you or your children would entail worldwide taxation and fatca paperwork when opening foreign bank accounts and tons of other nonsense. 

There are also some that predict that the end of the dollar is near.  what will happen when all those dollars come back home? 

The thing with cash Manny is that at least here in the USA it can be seized at the airport under something called "civil asset forfeiture". 

We have similar, they don't hassle you under £10k out, over that you should fill a form in. In Hong Kong, the limit to take in is a bit higher at HK$120K, £12k ish. Per person of course. The US has always been overzealous about such things. You guys have more onerous reporting requirements and rules for "structuring" than everywhere else.

Manny the solution would be to open an offshore bank account.

You're teaching Granny to suck eggs here. I've had those since the early 90s. The issue is getting the money to them out of the UK at present. As with anything, there are ways and means. Remember, I can even make money pop up in Russia where banks can't. 

[Manny]

Manny then why are you considering moving to the US?  Especially since a US passport for you or your children would entail worldwide taxation and fatca paperwork when opening foreign bank accounts and tons of other nonsense. 

There are also some that predict that the end of the dollar is near.  what will happen when all those dollars come back home? 

I'd not ever consider a US passport (no international bank would look at you then). Nor would I ever want to become involved with the IRS or any other similar US institution. If I ever did want to live there, I'd look at the mechanisms and do the learning then. I'd not keep any significant money there.

I agree that the dollar is a long-term consideration. All those dollars coming home will definitely cause inflation. And it looks like you have already had a lot of that, judging by the big city prices I saw when I was there a few months ago. But a place looking cheap or expensive to an outsider depends on how far your converted home currency goes. And at circa $1.25/£1, GBP isn't stretching too far there. Back in the $2/£1 days, the US was really cheap for us.

I tend to avoid USD where I can, and try not to hold much in it. The investment vehicle I discussed above is denominated in USD, but at year 3 there's an option to switch currency. Depending on the exchange rates at that time, I'd probably seek to switch it into HKD or GBP. That said, the HKD is pegged to the USD, but I'm sure they'd soon unpeg it if the wheels started to come off in the US. One would assume China has a plan [for the HKD] in that eventuality.

[Faux Pas]

In all honesty and no matter who wins the upcoming election, there is nowhere in the US that I'd recommend for one to locate. Be it a foreigner or a citizen. Some places are worst than others. The worst being any metro city  and the best being somewhere off grid in Alaska. Texas is a huge state quickly turning blue. I'm no seer but I do not see anything but doom for the USD on the horizon. Unfortunately most of the world currencies are joined at the hip with the USD. Brix is trying to unplug from it but chances are they won't ever completely.

I'm not a wealthy man apparently like many of you posting here in that I have no concerns about shielding that wealth but the future for existing currency no matter where one resides does not look good. The USD has been in a controlled demolition for some time now and all currencies connected to it will go with it as well IMHO

[Manny]

I mean if it was a wire transfer or some banking transfer app.  Here people use one called zelle. 

Theres also crypto.

Zelle is an intra-US bank thing that doesn't allow overseas transfers. We have a similar system called FPS (Faster Payments). For international transfers, a SWIFT (Wire) transfer is more usual. Crypto has its limitations as Andrew has found out recently with Coinbase (he may choose to elaborate on that - or not).

We may use a third-party provider such as Xe or Wise to facilitate SWIFT/Wire transfers to get better deals than wiring from a bank directly, but the technology remains the same. But it is they who tie you up in KYC nonsense and delay transfers quite often. I see it a lot with transfers to China or Hong Kong, but hardly ever if I send to the US or even Ukraine. Why is that? No way is Ukraine more "trustworthy" than Hong Kong. That tells me there is political influence behind that. These fintech platforms do have their limitations. Lack of proper customer service is one.

[Manny]

On a side note, I have a "US account" with Wise as part of the package. Usual routing numbers, etc. that you guys will be used to for domestic USD payments. Recently, someone in the US wanted to send me some USD but was more comfortable using his usual US banking system. It wasn't much, under US$1000, so I gave him my US bank details with Wise. They charged me almost 4% to receive it! 

I know ATMs often charge in the US, and paying monthly account fees is more usual than in Europe and elsewhere, but is it usual to have to pay to receive money into a regular account, from within the US? Or maybe it's just a Wise thing as the account itself costs nothing to hold. Or do you guys in the US have a system like some international banks where you choose when initiating the transfer who pays the fees? If he ticked "not me mate" I get stiffed 4%? 

I'm not bothered, it wasn't a lot of money, it's just for my learning.

[Contrarian]

On a side note, I have a "US account" with Wise as part of the package. Usual routing numbers, etc. that you guys will be used to for domestic USD payments. Recently, someone in the US wanted to send me some USD but was more comfortable using his usual US banking system. It wasn't much, under US$1000, so I gave him my US bank details with Wise. They charged me almost 4% to receive it! 

I know ATMs often charge in the US, and paying monthly account fees is more usual than in Europe and elsewhere, but is it usual to have to pay to receive money into a regular account, from within the US? Or maybe it's just a Wise thing as the account itself costs nothing to hold. Or do you guys in the US have a system like some international banks where you choose when initiating the transfer who pays the fees? If he ticked "not me mate" I get stiffed 4%? 

I'm not bothered, it wasn't a lot of money, it's just for my learning.

I haven't heard of anyone with a regular checking account being charged a fee like that. One can also easily get free checking, with either a pension or something else being deposited monthly. Check various banks for free checking offers.

On the West coast I prefer a regional bank over east coast banks, for bank stability. Not a fan of Chase or Wells Fargo.

I would be weary of Zelle as there have been some shenanigans of money not being transferred properly and then a big hassle trying to get your money back.