Ep368: Michael Stanhope – Think Long-Term When Building Your Investment Portfolio

Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that the win in investing you must take risk but the win big, you've got to reduce it and I bet you're exposed to investment risk right now. To reduce it go to my worst investment ever.com and download the risk reduction checklist I've made specifically for you my podcast listeners, and it's based on the lessons I've learned from all of my guests, fellow risk takers, this is your worst podcast host Andrew Stotz from a Stotz Academy, I'm here with featured guests. Michael Stan, whoa, Michael, are you ready to rock?

00:43
Yes, Andrew, I'm as ready as I'll ever be. And thank you so much for having me today.

Andrew Stotz 00:49
Yes, and it's great to have you on. And let me introduce you to the audience. Michael Stan hope is founder and CEO of promise, which is a leading provider of content and learning solutions for Asia's wealth management and private banking industry. The company has a business in Hong Kong and Singapore and operates across the region. Michael has an extensive background in financial services in Asia, Europe, and North America. He's been in Asia Pacific since 1995, first in Hong Kong, then in Sydney and Singapore, returning to Hong Kong in 2007. And now is in Vietnam. Michael, take a minute in Philly further tidbits about your life.

01:32
Great. Thanks, Andrew. So maybe just to add a little bit of color to what you said. So I was born in Wales just impact in case people confused that for any other part in the UK, in a seaside resort call or um, did know. Then I went from North Wales to South Wales, where I went to university in Cardiff. Before I sort of headed off down to London. One of my first jobs was with a company called Euromoney, which still exists today and is a large sort of financial publisher. And I think I was one of the youngest publishers. And I really, really enjoyed that first job. And it was back in the old days when doing investment banking and capital markets was a good thing to do. And I remember in my first year, I think I traveled to about 25 different countries, and have the opportunity of coming out to Asia for the first time. So I know you're in Bangkok, I remember coming out to Bangkok, I think in 91, or 92 is the first time that I arrived there. And then I decided that I wanted to get into Asia because I liked it so much. So I arrived in Hong Kong in 1995 ultimately founded a business that still exists today called finance Asia, which again was a lot of fun, because it was focused on investment banking, and capital markets. And then, you know, thankfully, after doing a few businesses sold a business in 2007, which was a really good time to sell a business on the global financial crisis. And then we decided to specialize in wealth management. So I now live in hoochie Minh city, as you said, got three kids, who unfortunately, still not off the payroll, but I'm hoping one day are also there between 15 and 20. And they're all in university and boarding school in the UK. So there's a few details that just to fill in on what you said.

Andrew Stotz 03:31
And I was thinking about just a couple of days ago, there was a gentleman on my balcony here in Bangkok, and he had a beer in hand. And he was telling me about when he first started to work getting out of university at Euro money. And his name was Ben Davis. And he was talking about getting, you know, thrown into Turkey and all those different things. And I think, what a What a great way to start I mean, listening to you and going to 20 different countries. And just like the experience of that at a young age must have really been mind blowing, coming from where you came from. And you know, all that. No, I

04:10
think so. Yeah. I mean, I think financial publishing in those days was a really interesting thing to do. And companies like Euromoney were very good, that employee very smart journalists from Oxford and Cambridge. And in my case, who was more on the publishing and on the sales side, yeah, they gave you a lot of responsibility. So I remember going to all these countries from Argentina, to the US to Turkey to just about every country in Asia. And as long as you sold something and came back with a bit of money, they were quite happy to set you off on your next trip. So you're right, it was a lot of fun.

Andrew Stotz 04:50
Well, now it's time to share your worst investment ever and since no one ever goes into their worst investment thinking and will be tell us a bit about the circumstances leading up to it and then tell them Your story?

05:03
Yeah, so I gave, I gave this quite a lot of thought. And it wasn't necessarily bad investment, but I will give you some specific examples. It was more like a breakdown in the investment process. So, you know, what I'm about to say, isn't necessarily, you know, unexpected, but certainly when I was younger, I didn't know much about investments, and certainly didn't have any advisors. So now we specialize in wealth management. And it would be unlikely that I would make these mistakes today. But certainly, when I was younger, you know, and reflecting back on them, you know, I wish I hadn't done them. But equally, it was a good experience. And, you know, I suppose the mistake was, you know, that I used to try and make investment decisions myself, when I obviously was not capable or competent, or qualified to do so. And certainly every mistake I've made is when I've taken a short term view on my investment, as opposed to thinking about things in the long term. So I'll give you I'll give you a few examples, you know, some on the property side. So I was very far so reasonably clever with hindsight, that at the age of 23, I went and got a mortgage. And I bought myself a house in earlsfield, which is in southwest London, or South London, near Wimbledon. And I remember paying 92,000 pounds for this house, and I got a mortgage. In those days, you had a choice of the type of mortgage you've got, you can either get a repayment mortgage, which is typically what people would get, or in this, in this case, yeah, they used to persuade you to get a mortgage where the principle remains the same, that you were supposedly saving money into an investment scheme that would make enormous amounts of money, in addition to paying off the principal, which inevitably never happened. And it was always a bit of a scam, because obviously, there were enormous fees involved yet. And I remember the bank sending me a letter or the provider of the mortgage to say that, I was actually now going to have to make significantly more payments, even if I ever wanted to pay the principal off, let alone You know, pay, pay, get any money in return. So a few years after buying this house for 92,000 pounds, I decided that I would sell it. And I sold it for 150,000 pounds. And I remember at the time thinking how smart I was that I'd made money on this on this house. And it's sort of made sense in some respects, because I was now living in Asia and no longer living in the house. Now, obviously, now when I look back, and I reflect on that decision, I'm assuming that that house in hillsville, today is probably worth, you know, a million pounds plus. And I would be able to rent that house out for a significant amount of money, and the starting, you know, money and the mortgage, which was a whopping 92,000 pounds, that is blended away into insignificance. So not only did I made that mistake, but then I decided to compound that mistake several times over my life. So I also bought a house or bought the apartment in Sydney, which again, I decided to sell for some reason, I cannot remember why. And also bought a house in Sydney that I decided to sell. And then the other mistake I suppose I've made on the property side is that, you know, we all like to think that we're clever. And I you know, over several times have decided that I would like to try and develop properties. But I rapidly again, came to the conclusion that that's not a very clever thing to do. Because I think, you know, you've got to really, really know what you're doing. And I would also suggest that, you know, you have to have the right relationship. So I never seem to be able to get the right approvals from councils or local authorities, whereas developers magically seem to be able to get those approvals you know, no problem. So that was one example, you know, I suppose, of just buying something was actually quite a clever thing to buy, but then, you know, just not sticking at it, you know, for the long term, which would have been a very clever thing to do. Another example of a short term investment, which I wish I'd never done.

09:35
Unfortunately, for me selling my last business coincided with the global financial crisis. And I was a little bit bored between jobs and decided that I would try and invest myself. And this was obviously at the time when things were going down. So I decided that I would fiddle around with you know, reverse ETFs you know, betting on the fact that financial institutions Dude carry on going down in value forever. And you know, if you remember those times, you know, this is when things like Citibank share price went from $55 to like, less than $1. And, you know, even amazingly robust institutions like JP Morgan share price, you know, went down to historically low levels. And now the reason for saying that is, again, you know, this all seemed like a great thing to do. And maybe there were days when, you know, I made a little bit of money. But inevitably, in no time at all, I lost a load of money. And again, it's because I was trying to be clever, and trading, when really, I don't have any idea what I'm doing. And again, taking a very short term view was not good. Now, I know that that's what everybody says, and with hindsight, that was not a very good thing to do. So you know, so I think, you know, what I learned from that is, again, you know, there are people now equally, there's a lot of people in wealth management and private banking, who are not very good, and ultimately don't add any value. But equally, there's a lot of people that do. And I think, you know, what I learned was, is that I'm certainly not as clever as I like to think that I am. And ultimately, you know, you should have long term objectives around the building your wealth, or generating income, or whatever it is you're trying to achieve. And then for sure, try and get a professional advisor, who is licensed, qualified and capable to help you. And you know, in taking a very long term view, you know, can try and map that to whatever the investment objectives are that you have. So, you know, it seems like an obvious thing to say, but it was certainly, you know, the doing it yourself and taking a short term view on your investments. Were certainly not anything that ever worked for me.

Andrew Stotz 11:54
All right, well, let me let me summarize some takeaways that I have. I mean, it reminds me of back in my day as an analyst in brokerages, you know, in Thailand for 20 years, I always used to joke that if we could get the true portfolio of the salespeople in the in the analysts, and measure their performance, I'm almost certain that the majority of them, you know, seriously underperformed the market. And the reason being is that they were constantly swayed by all the excitement of what was happening in the market, there was very few people that really could see through them. And so that, you know, made me it. Luckily, when I started in the market, I didn't have a lot of money, we were at the peak of the market in Thailand, in 1993. And then I set up a business with my best friend. So a lot of money went into that in the, you know, in the development of that business, which is now like 25 years old, but it gave me some breathing space before I started investing in. And I think that takes me to my takeaway, which is the idea of setting a long term goal and trying to build that long term portfolio first, and then taking a portion of that, as you built it up, and then playing around with some short term. I mean, everybody wants to play. Everybody wants to try to be clever, as you said. And you know, you can even put that money in two separate accounts, and then see how it goes. But I think the challenge is, it's really hard to make it these days with, you know, short term thinking. So that's probably my biggest takeaway. Anything you would add to that

13:35
is a slightly irrelevant compensation for me now, because I've been banned from doing anything myself from Mrs. Stanko. So I'm not allowed to even go anywhere near money short term or what otherwise? Yeah, I think the other thing, the other thing is, especially in countries like Thailand, yeah. I mean, I remember going to Thailand, and, you know, speaking to brokers many years ago. And you know, and obviously, in those days, there were certain people that were in the know, and really understood what was happening with companies. Also, in a lot of companies where the market cap was not very big, you certainly used to see share prices fluctuating quite rapidly, you know, for no particular reason. And again, you know, I think that also comes back again, to the concept of diversification, you know, I mean, I think, you know, for an individual investor to look at an individual company, unless it's an obvious big one, and part of an overall diversified portfolio. You know, it's incredibly high risk. I mean, again, you might get lucky in the short term, and you might have a little bit of fun, as you said, but I think you know, more often than not, you know, it's going to end up in disaster, and less likely to be a successful outcome in any shape or form.

Andrew Stotz 14:53
So, let me ask you based upon what you learn from this and what you continue to learn what one action Would you recommend a young listener, let's say, take to avoid suffering the same fate?

15:08
Yeah, so I mean, I'll give you a practical example. Right? So my daughter's 20. And with all of my kids, even though they've had a reasonably privileged upbringing, you know, I've tried to get them even at a very young age to think a little bit about, you know, boring things like, what are you going to do when you retire? And because before we know it, we're going to be 60, or 65. And obviously, Gone are the days where the nice people in the government are going to give you a comfy pension. And we're all okay. And, you know, there could be endless scenarios where, you know, you're gonna have to have money, and you know, probably a lot more than you think. So you know, something, you know, what I try and get through to them. So I forced my daughter recently, we encouraged her to set up her own investment account, and actually go and do a few basic courses on financial planning. And I'm sort of surprised even in the wildly expensive schools that my children went to, no one ever has conversations with these kids about money, financial planning investments. So you know, I know that's a separate conversation for 10 hours about what they teach in schools, whether it's worthwhile or not, but it's sort of a little bit disappointing that you spend a lot of money on your kids education, they don't discuss this. So often, when she said, a pro platform, she also started how to have a conversation about fees. So I explained to the platform she actually use, which is one I would highly recommend is a company called swissquote. So she set it up, she was able then to go and think a little bit about how she was going to create her portfolio. I think what's amazing about some of these platforms now, because there's endless funds, and so many products you can buy is, you know, very clever in helping you curate a portfolio, which probably is going to be, you know, very robust in the long term. They even have tools, which allow you to, you know, click on themes, so I am interested in ESG, or impact investment, or even some things that are much more, you know, specific none. So, you know, so I think there's a lot of tools today that didn't exist, and you know, a lot of opportunities for people to, you know, get started and think about their investments in the long term. So, you know, the obvious advice I would be is, you know, again, take a long term view, diversify your portfolio, you know, regularly save all the usual stuff. Yeah. But, you know, it's, it's disappointing and amazing to me, you know, how few people do it. And also few people, you know, who have conversations with young people, you know, all their kids about the concept, I think, in many respects, not that I'm particularly wealthy, but I think, you know, the more wealthy you are, you know, the more chances there are of actually getting this role. So, you know, I think making money is one thing is you coming from Thailand, there'll be no end of very wealthy, I'm assuming now very old people that created hugely successful businesses listed or otherwise in Thailand. And then they have the, you know, the challenge of, you know, what do I do with all this money? Do I just give it to my kids or grandchildren? Do I get them involved in the business? Or do I not get him involved in the business? are they capable of getting involved in the business? More importantly, do they want to get involved in the business, and then I suppose, you know, how they view money and wealth and the value they place on that. And in many respects, again, you know, regardless of whether you got $20,000, or you've got $2 billion, you know, these are decisions that you have to make, you know, regardless and you, you know, probably should be thinking about some of these things, the younger, the better. So, I mean, it's nice that I would, you know, give and try and give as best I can to my own kids.

Andrew Stotz 19:02
Well, I think that's great advice. And for the listeners out there, you know, if you're a man or a woman, you know, it's time to talk with your kids. Use this discussion with Michael here as a starting off point. And if you're a young person, listen to this. Go talk to your mom and dad about investing. It's a critical thing. And you know, one big thing that's really changed compared to my parents generation is that my dad worked for one company his whole life, and they had not only a pension system, but they really helped him invest. And, you know, most people are out on their own these days. And you know, you do need help in that space. I know. In my case, I started my niece's when each of them I have five nieces and when each of them turned 18, I would fly back to America for their ice school graduation with $3,000 in my pocket, and I'd say we're going to start an account. You know, in America, I had them started at Vanguard And I said, you're just gonna own a mutual fund that owns every stock in the world and just contribute to that, I had a little bit of different case, because my nieces were not interested in building, let's say, a stock portfolio or even interested in the stock market. But just because you're not interested, doesn't mean that you can't put the power of the stock market, you know, to your, to your advantage. So I think it's an inspirational story, what you've told, and hopefully can inspire the listeners to get out there and get started.

20:31
Yeah, can I just comment on what you've said, Andrew? And I think it's completely correct. I mean, you it's not so difficult. Yeah, as you say, I mean, there's a lot of people that can help. But you do need to take some personal responsibility for it as well. And I know, it's very difficult for a young person. I mean, it's like, you know, when you're fat and old, you know, you're fat low, when you're young woman, you know, and thin and you know, energetic and running around, maybe, then you're not thinking about your health or what you eat in the way same way that you will in the end, by the time you're sort of arrowed. So, yeah, but I think equally, you know, you've got to try and encourage people and get them enthusiastic about taking some level of interest in these things. Yeah. And they've got to take responsibility for learning something themselves. Yeah. And the other reason for that is, there's obviously a lot of people that will take your money off you or charge you excessive fees, or give you endless advice, which is not particularly very good. So I think, you know, the key word is, you know, trying to make an effort to understand, I suppose, the consequences of doing it or not doing it at a young age. And then, you know, really trying to find people who you trust that can provide you with advice. So it might be people within your own family, but it is probably people that are independent, and you know, happy to go on that journey with you. I think the key word there is independence. Yeah. I mean, especially in Asia, in, in Europe, and in North America, most people now, so says the regulator, you know, do not charge per se, for the products and services that you buy it, but they're charging you a fee for the advice that they give you. And therefore, they're not in any shape or form encouraged to sell certain products to where they may get paid more or less fees. Yeah. And surprisingly, they'll probably sell the ones where they get paid the most. And that's what I think, you know, in Asia, this sort of conversation is more important. So even though Asia is now you know, sort of enthusiastically moving in the direction of advice, and people, you know, paying for advice, as opposed to products, it's still some way behind. So I think, you know, not only do people need to educate themselves around the concept of investing, and thinking about the long term and some level of sort of financial planning, but then also to educate themselves on you know, here's the wealth management firm, that I am going to go and deal with, and what are the different options? And, you know, what are the differences between them? So it's not right or wrong, which one you choose. But at least, you know, people have made some effort to try and understand both those things. So why am I investing? But also who the people that are best capable of helping me on my journey? Does that make sense?

Andrew Stotz 23:26
Yeah, definitely, definitely. And I think, in one way, you're touching upon, you're getting close to the topic of what you talked to your daughter about about fees. And now, you know, in Asia, fees used to be you know, crazy. Of course, in more developed Asia, like Hong Kong, Singapore, fees are a little bit more reasonable. But sometimes in countries like Thailand, or Malaysia, or Philippines or Indonesia, the fees can be extremely high. So you know, just pay attention. I think the lesson that I've learned over all of these interviews is that you're going to make mistakes, and you're going to pay for your mistakes. That's the one thing I kind of, you know, the world is doesn't have much sympathy for the mistakes that we make. But the more that you can learn and reduce those mistakes, you know, the better and I think, by starting investing early, in a small sort of way and try it out and learn on your own. You're definitely you know, getting there. Alright, last question. What's your number one goal for the next 12 months?

24:27
It was really interesting question. Yeah. What really, really hoping that the pandemic eventually comes to an end? I don't know really. I mean, I don't particularly enjoy the boring digital world in which we live even though I'm sitting here now talking to you in the digital world. You know, I mean, I quite enjoy traveling around and talking to clients. And in many respects, you know, most of those clients over the course of many years have become, you know, friends as well and it's very difficult to differentiate Between the business and friends, which I enjoy. And I stood in line those interactions. Yeah. So you know, so my number one goal is hopefully to survive the next nine months. Yeah. In this more restricted format, you know, in the hope that we can get back to something resembling normal. And I can get back to you know, those more enjoyable personal interactions. Yeah. Which I must admit now after the course of the last 12 months, and missing somewhat.

Andrew Stotz 25:32
Hmm. Well, I think we all want to get back to those in person meeting. So I'm with you. Well, listeners, there you have it another story of loss to keep you winning. My number one goal for the next 12 months is to help you my listeners to reduce risk in your life. So go to my worst investment ever.com right now, and download the risk reduction checklist and see how you measure up. So as we conclude, Michael, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

26:11
No, Andrew, thanks for the opportunity. You know, really appreciate it. And hopefully, one day I'll be able to come and see you in Bangkok again, like in the good old days.

Andrew Stotz 26:21
Amen. I'm looking forward to that. And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.