Managing Expectations for a Happier YouApril 17, 2022
China Taiping i-Secure LegacyMay 4, 2022
Also known as (a.k.a) Securities Wrap Account
Securities advisory service was affectionately known as the securities wrap account when it first started. Most people in Singapore are likely more familiar with Unit Trust Wrap account. Operating similarly with the proposal acceptance model, yes you understand it right, instead of the underlying being unit trusts, it is globally listed securities instead. When the service unveiled, I jumped on it and became the first person to submit its first case, with official PFR (Personal Financial Review) documentation.
Why am I so won over by it?
It was kind of a pseudo fund management arrangement. On one extreme end of the spectrum, trading representatives (a.k.a remisiers) are only allowed to provide execution related advice. The other extreme end is that of portfolio managers who have the discretionary powers to buy and sell on behalf of their clients (provided if its within the mandate of course).
Prior to its debut in yr2015, its only available largely to the private banks at much higher entry quantum. This has been made available at a minimum of SGD25,000. Which can also constitute part cash or part securities. In other words, if you have securities in your SGX-CDP account, you can also do a transfer in.
What pseudo fund management?
Remember you retain control.
- No trade order can be placed without your confirmation.
- Bespoke means you can indicate the directions of what securities to make up your portfolio.
- Pricing of the service is a percentage not far from a unit trust management fee percentage on NAV.
How some use this?
Different persons that eventually became my clients use this securities advisory service differently. Beginning with the simplest, whatever-you-propose-I-ok. They trust my judgement calls on how best to capture returns of the market without taking on too much risk.
Then there are those who specify an asset allocation strategy for me to follow. I call these I-know-what-I want-so-you-help-me-search. I kid you not, the image below was sent to me in an email in the past. I did accommodate.
Then I also have some of my stock broking clients who are very self directed in their investments, one of them told me,”Isaac, I am buying your style.” In other words, same but different, he kind of belongs to the whatever-you-propose-I-ok camp in a way. Frankly, I classify this as Buy-your-style. He clearly told me that while I can see his trades on his own trading account, I am not to use my StrengthsFinder strength of Individualization to let it influence my advice on his account.
Other nuanced instructions on the allocation include, every counter must pay a dividend. Which I can accommodate, particularly for retirees. I call this group, every-counter-must-pay-dividend.
So what is your style? How you engage markets?
I asked my securities advisory service client (buy-your-style) to describe my style after observing my trade calls over a period of time. He knows what he wants and don’t want as part of his portfolio, and very self directed too. He said it was flow style. He said I went with the flow of the market.
It was honest feedback and I had to acknowledge that it’s not far from the adaptive market hypothesis approach which I would define my style to be. Whichever made sense, fundamental or technical, I will go with it.
Over time, simply because I provide daily updates to my securities advisory service clients, they understood the trade calls in relation to the situation that unfolds in the markets. I bring to them the hot-seat decisions at times, of how things might pan out, and how we should position those portfolios on the balance of probabilities of those outcomes.
Clients who have followed me over multiple years are “trained” to understand just how dynamic markets are. They have made top ups and withdrawals to their accounts as well. There is no-lock-in period for this product service.
Any drawbacks to this?
This is not portfolio management at the end of the day. Only because I have history that I can point out at one stage, it was really good that as long as it was a listed security, it can be included in the account. Now, DLCs, structured warrants or any leveraged products are not to be included. For me, I felt it was a curtailment of style and options to hedge against the markets.
I did consider moving to the portfolio manager role but those restrictions remain. What good is a portfolio manager who cannot deploy shorting strategies to hedge a portfolio. I obtained my CFA charter in 2015 with a fair amount on content on derivatives. Perhaps that had an effect on my style.
Previously, the range of securities was not limited to a list of marginable securities set by an investment committee. Well now the universe is constrained to an extent. Well it is possible to submit applications for inclusion, but I do not wish to go through the hassle of justification, plus it will reveal my trade intentions. Yes, I keep my trade intentions and market views rather secretive and save them for my securities advisory service clients mostly.
But I fully understand the risk management perspectives behind these drawbacks. Zero leverage reduces risks, constraining the universe to a marginable securities list adds a layer of investment committee scrutiny.
What is my value add?
As I mentioned, the market updates are daily, done via Whatsapp Broadcast. Everyone likely to have their own style, so mine is a mix mash of portfolio management with a trading perspective, incorporating a unique blend of fundamental and technical analyses. Have I made wrong calls before, oh definitely, but more importantly I seek to be profitable than being right. There is a difference.
If you have been following my posts for a while now, you will know I have some pet phrases. One of them is that forward statistics are not stable. In connection to that, the returns from the various strategies are also not statistically stable.
I have tried to display returns attributions in the past. But there are challenges in attribution when people close their accounts and new ones are onboarded.
Whilst this is just one instance of 2022-03-08 of a timely entry, reading to the right side of the charts is a craft. Once again, I reiterate that I have made wrong calls before as well, but proper risk management and position sizing mostly avoided crippling the portfolios in total.
This service is not for everyone. For those who are self directed in their investments, this is not necessary. This is for those who see value in this service (busy professionals), that there is someone watching over the securities portfolio and providing actionable recommendations based on the dynamic market. It is bespoke, running your “portfolio” with a trading representative who will provide the advisory and execution of trade orders directly into the market through a proper broking house – PhillipCapital. From the bottom of my heart, I kind of wish a family office can adopt me though. Here I serve multiple individuals, I much like to be able to serve multiple family offices. Haha.