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

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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 :chuckle: ;D ;D

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:

--- Quote from: Guile on September 26, 2024, 03:00:35 PM ---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 :chuckle: ;D ;D

--- End quote ---

Isn't hindsight a marvellous thing?


--- Quote from: andrewfi on September 30, 2024, 05:27:41 AM ---Manny, that looks interesting.

--- End quote ---

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:


--- Quote from: GPT ---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.

--- End quote ---

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.


--- Quote from: GPT ---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

--- End quote ---

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