What does your job involve?
Tse: We meet with scheme members. The message we carry depends on the request of corporate clients. We have four different modules for different life stages of an individual under a retirement scheme. The first one is what we call "Starting Out", for people who are just joining the scheme. It covers the basics such as how much to save for retirement and the ART concept. A stands for Asset Class, R stands for Risk, and T stands for Time/Investment Horizon.
We usually go back to our clients on a semi-annual basis, this is the second module "Investment Strategy", where we have a performance review and talk about how to rebalance your portfolio.
The third module we call "Moving On". This is done on an ad hoc basis, usually when people are leaving a retirement scheme due to various reasons, such as restructuring. We will talk about how the scheme administration on handling their benefits at termination. We also cover the merits of keep investing for retirement and long-term investment.
The last one is called "Retirement Income" and it's for people who are retiring and how to calculate the income stream they need and how to set aside their money to achieve this.
How have people reacted to the poor market conditions?
It isn't easy for most MPF members. It's very new and from day one if you follow the equity market closely almost everything has been going down. A challenge we face at the moment is people's feelings about absolute return. As you know, fund managers, given a typical retirement portfolio, will usually measure themselves against a benchmark. Scheme members measure us on an absolute level, as they don't understand the investment working behind it.
What do you tell people about switching funds?
We encourage them to invest for long term and not to switch too frequently, but of course we can't stop them. We do tell people that if they switch too frequently it won't do their portfolio any good. Based on 20-year historical data on major equity markets, we point out the downside risk if someone times the market incorrectly.
Do you anticipate your job getting easier when markets recover?
When the markets go up I expect that it will be a test on the message we convey today. If the advice we give leads people to benefit from a rise in markets they will have more trust in us. But I do worry that when the market improves people will not bother to attend the meetings any more. Like when people go and see a doctor, they don't go for preventive medicine, only when something goes wrong. So the market going up is a good thing, but I worry that the maintenance part will be neglected.