A Crisis Of Confidence

I thought I better get this month’s Informing You out before the GDPR deadline in case my readership falls dramatically.  If you are like me you will probably be choosing to receive only a small minority of emails in the future but hopefully this is one that will make your personal cut.

This whole GDPR thing is an example of the impact regulation has on business and associated costs.  For example, the paperwork we have to send/email with our recommendations is prescribed by our regulator, the FCA.  The amount of times I come across it years later still in its envelope when I have been asked by clients to clear out their files would suggest it is read by a minority but it still has to be produced, printed and sent to everyone at a cost which is ultimately paid by the consumer. 

Another change coming into effect this year is you will now receive quarterly valuations from your investment providers.  Previously these have been sent out either six monthly or annually but under the new MiFID II rules this is not enough.  Personally, I believe that for most people looking at values once or twice a year is sufficient, especially as technology means that if you want to look at them more often you can login to the provider’s website and see their real-time value whenever you want.  But no, big brother has said you need to get these quarterly whether you want them, or not.

It is ironic that on the one hand we have one set of legislation imposed asking us to ensure that data is protected far more than it ever has been in the past and at the same time different rules mean companies are being forced to send even more data through the mail than they were previously.  Quelle surprise.

What I cannot fathom is why they believe getting valuations quarterly will benefit consumers?  We are all aware that investments fluctuate in value on a daily basis.  We make you aware that none of the money we are investing is for the short term and indeed most of the time it will remain invested for your lifetime so I fail to see the relevance of how it has performed over 90 days.

The shorter the period of time you look at an investment the greater the chance that it will have fallen in value.  As 2008 proved these can show quite dramatic swings in value that would not concern an experienced investor but can spook someone less experienced.

For example, looking at the FTSE All-share index over the last fifteen years, over a 3 month period 34% of the time it was lower, on an annual basis 26%, on a 5 yearly basis 18% and on a 10 yearly basis 0%.  (Source:  FTSE All-Share Index 01/01/03-01/05/18).  Given this covers the period of the financial crisis I would suggest it is proof that the amount of time that you are invested is more crucial than how markets move in the short term but it would appear the EU disagrees.

Anyway back to GDPR (another EU diktat) it is probably no surprise to learn that political parties have exempted themselves from the new rules as apparently being able to contact us and use our data is vital to them being able to serve us.  Really?  Well they certainly seem to think so as it achieved cross-party support and applies all the way down from MPs to local councillors.  Oh joy!

We at ASAM have no intention of becoming a political party so if you do want to continue to receive these ramblings you will need to confirm this on the separate email you should have received, and if this does end up being the last of these that you will read I hope you have found them to be of interest over the years.

Steve
Author
Steve Forbes
Managing Director
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

This letter is the personal view of Steve Forbes. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.