MPF Intermediaries Undertrained, Scholar Warns of Market-Chasing Risk

As MPF opened up and members gained more choice, concerns grew over inadequate intermediary training. In December 2011, RCM’s Asia Pacific CEO (康禮賢) wrote that whether intermediaries would be sufficiently trained before Employee Choice launched “remained to be seen” — potential conflicts of interest from monetary incentives, plus whipsawing global markets, made objective advice hard to deliver.

Are MPF intermediaries trained well enough to give objective advice?

In 2011, observers widely questioned whether MPF intermediaries were adequately trained: they might lack knowledge of other providers, funds and strategies to advise properly, while monetary incentives created potential conflicts of interest. RCM’s Asia Pacific CEO noted that MPF is a long-term, regular-contribution investment — members should adjust strategy gradually, not chase markets when they swing.

Two Worries: Conflicts of Interest and Training Gaps

Beyond potential conflicts of interest from monetary incentives, whether intermediaries were trained well enough to advise objectively amid an uncertain economic and investment outlook was a live concern. Other financial industries offered a cautionary tale: asset managers who supplied product information while deliberately withholding advice were criticised for failing to help prospective investors see how a product or strategy fit their overall investment.

MPF Is Long-Term; Short-Term Tips Are Irrelevant

A shared trait of MPF members, the author noted, is that MPF is a long-term investment funded by regular contributions — advice on short-term tactical shifts is therefore largely irrelevant. Members need not overhaul strategy on short-term asset-class or market moves. Most providers recommend adjusting MPF strategy progressively, changing course step by step to reduce the risk of trying to time the market.

The Employee Choice Risk: Switching in Volatile Markets

The risk of Employee Choice was that members might switch providers and change investment strategy during market turbulence, amplifying market-timing risk. With global equities whipsawing and the economic outlook murky, whether intermediaries would be adequately trained before launch remained to be seen.

Funds Can’t Be Compared Like Stocks: Keep Discipline

Many investors treated mutual funds or MPF funds like individual stocks, comparing performance directly. But a globally diversified fund spanning cash, bonds and world equities offered entirely different opportunities from a China fund — the two could hardly be compared. Members should first set overall investment goals and asset allocation by risk tolerance, then rebalance on schedule — selling outperforming markets at highs and buying laggards at lows — to resist the lure of chasing the market.

Members can compare fund performance themselves on mpf.hk’s fund comparison and the MPFA’s fee comparison platform.