Investment repatriation scheme
should be extended
Jesmond Mizzi is a young up and coming independent
investment adviser who has set up his own company to give advice to
Maltese investors. Julian Manduca visited him in his Valletta offices.
It is a long known fact that the Maltese are great savers
of money and while we are known to be wily businesspersons, we may not
be the best at putting our money to good use.
The amount of times people are robbed of large sums of cash in their
homes is evidence of this, but the massive (approximately) Lm3bn Maltese
hold in bank accounts is an indication of large amounts of wasted capital.
Admittedly keeping money in a bank may be the safest bet, but money
well invested will earn more income and can be quite as safe.
Media friendly Jesmond Mizzi has been popularising investment and for
six years has graced our TV screens providing friendly advice.
Mizzi has forged a successful career for himself, starting as an auditor
with the firm now known as PriceWaterhouseCoopers, and following this
with a senior position at Globe investments before setting up his own
company a some six months back.
Mizzi sees a potential business upsurge in Malta in the coming years
with Maltas attractiveness as an investment centre and should
private pension schemes be introduced.
Jesmond Mizzi Financial Services Ltd was set up to advise potential
investors on the best investment possibilities: "we believe that
no association with one company can provide a potential investor with
the best solutions for all the clients needs."
"The aim of the independent financial adviser is to act as the
agent for the client and recommend the best investments tailored for
his or her needs, taking into consideration the clients risk profile
and attitude towards investment."
"We are strong believers in investing in collective investment
schemes or funds, and our aim is to bring to the investing public fund
managers that may not have such a big name in Malta."
Most of the money invested in Malta is that which is carried forward
from one generation to the next and Mizzis company not only advises
on initial investments, but monitors and manages investment portfolios.
"As the investment world is changing very rapidly several fund
managers, managing a particular product, who move from one company to
another, leaving the investor unawares, and it often happens that the
investment performance does not live up to expectations, or even crashes."
Mizzi is optimistic that more Maltese will be investing in the post-EU
membership scenario. Mizzi knows of two fund management companies coming
to Malta in the near future and his company is bringing one of the companies
to Malta itself.
"We will be launching a product of a fund manager which we selected
from a vast range of other companies next week. We feel the fund manager
has an appropriate product for our market and obviously we have analysed
the product and the people running it, which is our role.
"The Maltese tend to invest in different companies, with different
fund managers and do not have one point of contact, so their investment
adviser is themselves. Often they would see an advert on the media and
buy that product. We can monitor such investments, and advise on better
investment products. Financial planing is in its infancy and we aim
to give our clients all the necessary information to ensure that they
understand the market and the investments they make."
Mizzi is convinced that better financial education will help the Maltese
to a more secure future and he invests heavily in education, especially,
but not solely via the media.
Mizzis company has weekly spots on TV on various stations
explaining to the public the market, what is available and what
types of products are available to different people.
"It is high time that people from a younger age plan their way
of life, how much they can afford to spend, how much they can invest
and how best to invest it."
"As investment advisors we spend money to inform the public that
there is much more than buying investment products, one has to understand
what one has bought."
Monthly investment plans are becoming popular in Malta, including linked
long-term contracts of insurance where people save anything starting
from Lm20-25 per month. "Our role is to select the best products
from the different suppliers to meet the clients needs."
The core of Mizzis business remains clients wanting to invest
larger sums they have saved in the banks and while property remains
the preferred investment opportunity for some, Mizzi points out that
there are advantages to buying funds.
"Property is not so liquid and does not always provide one with
an income and anyone just looking for capital growth might choose property,
but predominantly, about 90 to 95 percent of investment is in bonds
direct, company, government bonds or products that earn
them an income.
"There was a time when equities were popular and up to 30 percent
of investment was in equities, but people are now switching back to
bonds which is ironic because now is probably the best time to invest
in equities, since they are so cheap."
One of the many contradictions inherent in Maltese society is that while
businesses suffer big cash flow problems, Maltese individuals have always
been very liquid. About Lm7,500 is kept in the bank by each and every
Malta resident, while business credit periods are extending beyond a
year in some sectors.
"We tend to meet individuals rather than companies, even though
companies do ask us to approach banks for finances. But by and large,
there is much more liquidity in the hands of individuals and people
keep their money separate from their corporate funds."
"However, more and more business people are having to invest their
own money into their companies in order to remain competitive."
Mizzi believes people are now seeing better opportunities than leaving
their money in banks: "Money in banks is subject to inflation and
one can also see the caution exercised when government bonds are issued,
but people are looking also at medium risk and aggressive investments
and this is why we believe strongly that the investment adviser should
look at ones investments to advise what could be beneficial in
the short and long run."
EU membership prospects had bought a scare to investment advisers that
they would be engulfed by larger foreign companies, but Mizzi is not
pessimistic: "It is up to the Maltese firms to try and associate
ourselves with larger companies that dont have the local knowledge.
I see the possibility of bringing new markets to Malta from other Mediterranean
countries. We need to find companies that are not yet international
enough in the Mediterranean market."
Since the election Mizzi has seen an upsurge of interest in investment
in Malta: "The election had put everything on hold, but since the
elections we have seen an interest to invest and people accustomed to
going abroad are choosing a Maltese contact, because we can offer any
type of investment here or abroad."
"It is easier to grab the phone and call locally than rather than
calling the Channel Islands. Through us they can access the financial
world much easier."
Maltese people have the reputation of seeking total confidentiality
when investing and much including hot money - was invested abroad
in the past, however Mizzi sees the trend changing.
"As we know confidentiality is being reduced or to retain confidentiality
is becoming more expensive. With the exchange of information by EU and
OECD countries, the reasons for investing abroad are becoming more limited.
"Interest rates abroad have also gone down and people are more
aware of what is available. People have to realise that money in bank
accounts is subject to inflation,
The investment market could get a boost from a variety of sources and
Mizzi would like to see the government.
"I was very much in favour of the government scheme where the public
was allowed to declare their assets with the option to register and
legalise investments. It was well received, but perhaps not enough."
"We were approaching the elections and some investors were not
well-informed, others left it too late also because the rules of the
scheme changed. I think it would be very wise to extend the scheme and
give a last chance to all those that thought the exchange of information
between financial institutions would not happen, or who may have thought
that the minister would not be able to obtain information about investments.
This is now happening or about to happen shortly and it is important
for each investor to have the peace of mind to be in conformity with
the law and have access to their money. Often people invested lots of
money but had little or no access to it."
"If people still prefer to pay the 15 percent withholding tax abroad
they should be aware that that tax rate could go up to 30 percent in
some years time."
"If the scheme is re-introduced I believe many more investors will
regularise their situation."
Private pension schemes could also have a beneficial impact on the financial
sector: "Pension schemes will not only be of benefit to the country
in terms of balancing the budget, but will bring money to the investment
world on a regular basis. Pension money is directed to investments,
and could go into Maltese equities and bonds and could be the starting
point of having more money in the local market.
"If there is money going into the market on a regular basis, we
could attract overseas investors. More importantly people will start
to save so that on retirement they will enjoy a better standard of living.
"We have not seen a company going public for some years now, and
pension schemes could be the catalyst for further market business and
more companies being listed on the stock exchange."
Mizzi, however, emphasises that the MFSA as a regulator would have to
ensure that private pensions schemes are subject to strict guidelines
so that investment of funds from the schemes are not subject to too
high a risk.
"The individual could be able to choose where she or he wants money
invested, so that pension schemes work as they should and will provide
the assistance on retirement that one expects. Maltas advantage
is that it can learn from similar schemes that have been introduced
in other countries."