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Money Moves

Maximising investment potential

by Mariejean Li

Stephen Gollop
chief executive officer
Tyche Group
Photo: Johnson Poon

Since the implementation of the Mandatory Provident Fund (MPF) system in December 2000, retirement protection for Hong Kong's workforce is no longer a benefit for the few, but a mandated savings plan from the Hong Kong government for all. It ensures wealth protection for members and ranks Hong Kong economically alongside other developed countries with established retirement schemes.

However, many scheme members in Hong Kong lack the knowledge necessary for sound MPF investment choices. Demographically, the mean age in Hong Kong continues to rise, creating a subsequent need for greater retirement funding. As a result, financial investment experts like Tyche Group are taking the necessary steps to educate clients on choosing appropriate MPF schemes tailored to match individuals' lifestyles and retirement expectations.

"When the MPF first started, people didn't know what or how to choose correctly. Nobody knew the difference between a good, mediocre or bad scheme," says Stephen Gollop, chief executive officer of Tyche Group. It was only in June of last year when Tyche Group first decided to add MPF consulting to their list of services.

After months reviewing existing schemes and member choices the results of the findings revealed a huge discrepancy in scheme usage. An overwhelming lack of knowledge and understanding also became apparent. "The key to the paradox lies in educating members properly and finding qualified professionals to do so," notes Mr Gollop. The current lack of such professionals is linked to the costs involved. "We're actually one of the few companies with a licence and qualified advisors who continuously conduct reviews and look after our members' schemes on a regular basis," explains Mr Gollop.

The right kind of advice can make all the difference to return size. "Many people don't know that they can easily transfer between providers without penalty," he says. In addition, youngsters nowadays who have been given proper advice and planned ahead of time could easily enjoy a fully funded pension based on MPF contributions alone, without ever adding extra to it by the age of 60. "They are the ones who will benefit the most because they invest wisely at a young age. On a large scale this will only happen if the general public is educated about appropriate MPF choices," adds Mr Gollop.

Although the MPF is a good system overall, and if used properly existing members can enjoy huge benefits, there are still limitations. To maximise returns, choose more aggressive funds. However, some members, especially management and higher paid staff, are encouraged to add an ORSO scheme on top of the MPF scheme in order to provide access to wider investment options and potential tax benefits. "The shortfall in MPF is the lack of fund choice with even the best restricted to equities, cash and bonds. Whether through ORSO or investments held personally, the key is to create an overall balance and accept that the only funds offering real growth potential in MPF are the equity funds. For example, add other asset classes such as hedge, property or commodities externally to MPF to create a balanced strategy," says Mr Gollop. "It's ultimately long-term investment for the future and Tyche's quest is to protect and manage that investment throughout our client's lifetime," he concludes.


Taken from Career Times 09 November 2007, p. A15

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