Thursday, 7 February 2013

DON'T BANK ON THEM

When I retired, I had a bit of money to spend.  After putting aside some for holidays, moving house, grandkids, Sugar Puffs, etc, we invested the rest.

Here was my thinking - the economy was apparently facing a downturn.  Bank interest rates had already begun to drop.  A whole range of interest rates had just plummeted, but, although many had climbed a little, they had then leveled off.  Previously favourable options, such as building societies, local councils, etc were also not offering much return (there were I think at the time only a few, obscure councils still looking for investments).  And house prices had begun to show signs of peaking.  If I put my money in an interest-bearing bank account, or similar, I would receive a regular, but only very small return.  So the answer seemed to be to engage the bank's investment portfolio manager.

Of course, banks are in such bad odour at the moment that today my decision sounds like a stupid idea.  At that time, it seemed quite prudent.  What happened next was that the manager deducted his hefty fee from my investment up front and the value of my remaining investment then fell through the floor.  It has just recently looked as though it might be rising again, but, if I withdraw it now, we still don't have invested even the amount we first handed over.

We haven't just sat here miserably of course: we have constantly chased up the managers, discussed other mixes of investment, even complained to the Ombudsman.  My contention is that everyone knew the market wasn't continuing to do well, but engaging an expert manager would guarantee my money would do better than if I, an amateur, stuck it in a low interest bearing account.  As it happens, I was quite wrong - putting it in the building society, or even leaving it in the bank, would have been better than giving it to the investment manager.

The managers of my money have the following excuses - we are in a world recession, no one could have foreseen a world recession, the Euro is struggling, that makes the growth of European investments poor, shares indices have all fallen, property prices have foundered and not picked up.  My reply - yes, but, given all these problems, which I was paying you to overcome/avoid, why didn't you put my money into something that wasn't recessing/struggling/poorly/foundering, etc?  Naive, aren't I.  If they had just stuck it in the bank, it would have done better than it has.  And I would probably be praising their foresight and management skill now.

The Ombudsman, by the way, studied all the papers and concluded that the investment manager had done nothing wrong, since investments can go up and down.  Er . . . yes, so I should only expect success if the market is rising anyway?  What am I paying for then?  In a rising market, I could have cut out the expensive middleman and bought my own shares.  The manager actually did three things wrong - he called himself 'an expert'; he moved my money from an interest-bearing bank account to what has turned out to be a worthless bunch of shares, something I could have done quite well by myself and he charged me a fee for losing my money.

Why am I telling you this?  Well, I have just received a glossy booklet from the bank with masses of facts of and figures and graphs and pie charts, showing how my money has lost value.  It then has a Twitter-like tweet from each portfolio manager, a commentary on the present position of the market, designed presumably to boost your confidence in them as managers, or advisers, or insightful commentators, or just plain bright people.  I shan't bore you with them all; here's just one to give you a flavour of their expertise:
'Approaching a point where we can see a possible way through the economic crisis.'

In English, the sort you and I speak everyday, this appears to mean, 'we can't yet see what to do.'  And guess what?  I'm approaching a point where I can see a possible way to trust them.

14 comments:

  1. damned if you do, and damned if you don't....

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  2. Sorry to read about your investment nightmare Neil. I hope it's not going to spoil your chances of whisking Natasha or Julia (or maybe both) off their feet and keeping them in the manner to which they've become accustomed.

    Least you can blame the Investment Manager. We invested in some shares years ago and through our own sheer incompetence we managed to shrink it to only 10% of its original value. Which reminds me, I must cash it in and buy myself a Caramel Latte with the proceeds

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    1. Well, it's not really a nightmare, Ian; I suppose not having the money to fritter away on a Ferrari or Jammy Dodgers is a form of saving. Natasha needs to see the moola glint in the sun, but I'm hoping Julia will be excited by the potential of a man with share certificates.

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  3. I've seen this happen several times, including my parents, so even if I had money to 'put away' (and that's a big 'if') I would go with low-yield, but guaranteed return through the bank than risk it in this way. I have no confidence whatsoever in markets investment

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    1. Property has never really lost value (long term), and managers argue that shares haven't either (not particular individual companies of course), but recently the value of pretty well everything (except maybe petrol and handbags) has been pretty dead. So I guess you just have to take your chance on what 'long term' means.

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  4. Living in a country that seems to have a bank on every street corner, I should be an expert, but am not. I leave it mostly to Mr. Swiss, although he also only does the so-called "safe" investments. We have a bloke at our bank who is responsible for us. We don't have to pay for his service (perhaps because our bank owns part of our home). but I cannot complain and he listens to what we say and just makes his suggestions. Anyhow my money is in safe stuff - no big interest rates, but it does its job. I also have quite a bit in the Swiss Post which is about equal in interst to the banks, sometimes a little bit more. I also have a bank account in England. I just believe in spreading it out a bit. but I will never become a millionaire.

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    1. This might be the Swiss in Mr and Mrs Swiss that makes you trust the bank account rather than investments. I think you are wise, Pat.

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  5. did you mean can or can't see a way to trust them? I have a big problem with the lack of integrity that seems to stick to banks and investments. Do casinos give better odds?

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    1. I mean that I haven't yet reachd a point where I can trust them.

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  6. Casinos probably do offer better odds too! But only a small percentage of those who leave the casino are substantially richer.

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  7. When I retired, I had a lump sum of about £100,000. I gave it to Gillian's son Matthew and he bought a house in Germany with it. Much better than investing in banks. And it has increased in value, if I ever want it back.

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    1. Can't see my family giving me any money back!

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