Changing times and changing investment
David Lindsay speaks to financial advisor Michael Grech,
Managing Director of Michael Grech Financial Investment Services Ltd,
who has seen local investors becoming more street smart in line with
todays challenging investment climate.
Financial advisor Michael Grech has been in the business
for some 25 years, having started out at a local bank back in 1978,
which he left in 1991 to strike out on his own in his chosen field.
Then some three years ago, gauging the need for a more personalised
service, he set up Michael Grech Financial Investment Services Ltd firm.
The need for a personalised service was felt most acutely in Gozo where
Mr Grech set up the first office, but another Malta-based office soon
followed and so did the Maltese client base.
Like most financial services firms, Michael Grech Ltd deals in both
local and foreign bonds, funds and equities. However, the firm enjoys
one luxury in that it is not tied to any particular provider or institution,
and is therefore not limited in the products it offers. This translates
into the fact that whatever product a client asks for can be supplied.
Mr Grech explains, "In this situation, when someone comes in and
asks for advice we are obliged and committed to give a wide view of
whats avaliable on the market and of course then the client decides
where they want to invest."
I ask Mr Grech how he views investor sentiment after a very difficult
three years on both the international and local markets.
"After whats happened over the last three years, during which
we have seen equity prices tumble both globally and locally, a number
of particular investors have had their fingers burnt.
"However, I think this has served as a lesson for investors in
the sense that they are now more cautious about what they invest in.
They ask more questions, which is something we appreciate because at
the end of the day we do not want to have clients who come in and say
they understood everything when they really havent understood
anything. Thats the worst thing that can happen.
"We like it when people ask questions because that means people
know what they are doing and what they are going into. Obviously our
job is to keep investments in line with the risk profile of the particular
client. This is ascertained by gathering information about a clients
background, job, family, savings, what they expect from their investment
and any future plans they may have. Most important is to derive from
the client the level of the volatility that he is comfortable with."
"We make it very clear that an investment is not a bank account,
it is not comprised of money that three to six months later you withdraw
and everything is fine. With an investment theres always a possibility
that the value could go down. Even the safest of investments
such as UK or US government bonds - although they may be very safe with
regard to the issuer, there is always the possibility that the price
of that bond could go up or down depending on market and economic conditions.
Consequently, we make it very clear to our clients that an investment
has to be viewed in the medium to long term.
"But things have changed over the last few years. The perception
once was that you buy shares and whatever happens you ride the wave
and at the end of the day you would end up on top or at worst at par
with your original investment. However, that has changed over the last
"We are now living in a scenario in which an investor has to review
his investment portfolio on a regular basis, and make sensible investment
decisions, such as taking profits when appropriate and most importantly
taking a loss when thats the most suitable action. There is a
saying in the market which says let your profits run and cut your
losses short. A lot of people have lost a lot of money over the
past few years because they have held on to their positions even if
they were, most likely, advised to accept a loss.
"The idea of taking a loss doesnt go down well with local
investors, who have been used to prices either going up or remaining
stable. But when the time came and the markets fell, like what happened
in the rest of the world, people still hung on and didnt want
to sell out. It all boils down to a question of timing, no one has a
crystal ball with which to see the future."
Mr Grech explains how an advisors job is to look at past performance
of shares, indices and many other factors to get an idea of whats
happening in financial markets around the globe. This research is the
foundation that financial advisors and brokers apply when they advise
He adds, "But the two factors that influence clients most are two
simple words: greed and fear. When things are going well, no one wants
to get out, and when things look bad, people want out and they probably
get out at a very wrong time.
"Sometimes clients want us to take a decision for them, which we
are unwilling to do because it is the client who has to feel comfortable
with the decision taken. We provide all the advice and information possible,
we digest that information for the client and break it down into simple
information - but when all is said and done, its always the clients
"On the local scene we are probably seeing the bottoming out of
the equity markets, proven by the recent pickup in equity prices. Although
the market has some problems mainly a liquidity problem we see good
potential in the local market. We also are of the opinion that this
market needs investors and not speculators. Ultimately speculators always
ruin any type of market whether that market is financial instruments,
property, or art speculative behaviour can ruin any kind of investment
you can think of.
"One has to digest the information being made avaliable by a particular
company listed on the exchange and must determine if there is any particular
value in that company.
"For example, if one looks at certain shares on the market, one
would find that the dividend being paid is quite attractive when compared
to whats being offered by the banks.
"Eventually the smart money will always go to shares in a company
that knows how to manage its affairs and can pay its shareholders a
nice dividend as well. But obviously a company could go through a bad
patch as well and there is no guarantee that they will pay a dividend
even if that company turns a profit."
Mr Grech, however, sees investors becoming savvier. He comments, "I
would say investors are becoming more streetwise and are shopping around
and going to different advisors and brokers more and more to see what
the best investments are.
"This development helps the market a great deal. At the end of
the day, we want smart people who come in and take intelligent decisions
because the more prosperous our clients are and become the better
for the industry."
What does he see in the future for the financial services firm?
"At the moment my company employs ten individuals in two different
offices and we see scope for future growth in this area. However, at
the moment our main focus is on consolidation because we pride ourselves
on giving a personal service to our clients.
"I personally am always avaliable to any client who wants to come
into the office and I am also one of the few within the industry who
always accepts phone calls from clients whether Im in a
meeting or not. Im not an 8:30 to 5:30 kind of person if
I have clients I dont mind staying as late as necessary if it
means giving that personal service."
He also has words of praise for the Malta Financial Services Authority
and its strong regulatory framework. He comments, "Malta is considered
a highly respected and well regulated country thanks to the MFSA, which
is continuously striving to enhance Maltas reputation on the international
"The regulators have also been instrumental in informing investors
about their rights and their obligations as well. Theyve done
a good job in coming out with certain publications that the man in the
street can understand and absorb very easily. These have gone down well
"I am pleased that we have a good regulator around that is firm
but fair because at the end of the day we dont want cowboys in
our industry, these can really do a lot of damage to the industry.
"Investors have to be extremely cautious these days. Many people
are receiving high pressure phone calls from abroad, they are receiving
glossy material being sent by DHL and e-mails urging them to invest
in any number of products and schemes.
"People have to be very cautious because a fool and his money are
parted very easily. Some think risks are worth taking but if
something sounds too good to be true, it probably isnt true."