THINGS TO CONSIDER WHEN MAKING AN INVESTMENT OR PURCHASING A FINANCIAL PRODUCT

Making an investment or buying a financial product is a significant decision which should be carefully considered and researched thoroughly. Here are some things to consider.    

Deal only with regulated firms

Only deal with firms that have appropriate regulatory approvals. The activities of regulated firms are overseen by regulators, such as the QFC Regulatory Authority, to ensure that they comply with the rules and regulations and have processes to treat their customers fairly.

When you deal with unregulated firms you place yourself at risk. These firms are not monitored by regulators and may not follow proper processes. If something goes wrong, you may have limited options to remedy the problem and may lose some or all of your investment. Here is a link to a press release issued by the Regulatory Authority, which highlights some of the dangers of dealing with unregulated firms. 

You can check details about QFC firms in the Regulatory Authority’s public register which is available here.

QFC firms are required to have a proper complaints handling process to address the concerns of their customers. Those customers also have access to the Customer Dispute Resolution Scheme (CDRS) which provides a free, fair and independent dispute resolution service. More information about the CDRS is available here

Understand your own needs

Before you buy a financial product, you should carefully examine your own needs:

  • Make a realistic assessment of your income and expenses in order to decide how much you have to invest.  You may find it helpful to prepare a budget to better understand your short, medium and long-term financial commitments. It is important to ensure that you do not over-commit yourself when investing.

  • Decide why you are investing. Is it for a short-term goal, for example to fund a child’s education or for a longer-term goal such as retirement? Closing a long-term investment product before it is due can often result in significant early termination fees.

  • Decide the levels of risk you are prepared to accept; generally higher returns involve higher levels of risk.

  • Shop around and compare products with those from other providers, including the costs involved.

  • Make sure that the financial product meets your needs and goals. 

Understand the investment

If you are considering whether or not to invest, it is important to understand the details of your investment. Read documents carefully and seek independent advice if necessary. Don’t simply rely on what your financial adviser tells you; do your own research. Investing is an important decision that can have long term consequences.

Always read documents before you sign them and never sign blank documents. Key things to look for in financial product contracts are:

  • the length of the investment;

  • fees charged by the product;

  • commissions paid to your financial adviser; and

  • early surrender penalties.

In some financial products, fees can remain fixed, even if the amount of your premium is reduced.  

Avoid get-rich-quick schemes

If an investment looks too good to be true, it probably is. Unreasonably high returns can often be an indication that the investment is a scam. Unduly complex financial products, products that don’t adequately explain the investment or products that you simply do not understand, can also be warning signs.    

Keep records

Keep copies of all important documents and make notes of important information which the product seller or your financial adviser tells you. Make sure that important statements that you are relying upon are recorded in writing. 

Monitor your investments

Keep an eye on your investments and don’t just adopt a “get and forget” approach. Regular monitoring of your investments allows you to take prompt action if there are unexpected problems or complications.

 
 
This information is general in nature and should not be considered financial advice.  You should seek your own financial advice.