See all this progress? Drives you mad it does. You spend lots of time and energy not to mention more than a few bob over the years on your Website and the next thing some outfit called Google suddenly decides to change everything. And apparently they have the world franchise tied up. So unless we reorganise the "design", whatever that is, we'll be left floundering and communicating only with folk like Fran's Mum who's 93 and thinks she uses a "Flat Top". It's actually a Kindle but dinnae tell her.
Now I don't know about you but all this stuff about iClouds and Smartphone-friendly nonsense is bewildering. (I hate smartphones….isn't it odd the lower the IQ of its owner the longer the battery lasts?). However technology is obviously the future and if I want to be able to keep up with my 5 grandkids aged 5 to 9 but who are already at PhD level in Software Applications I'll just have to knuckle down and get on with it. Even when Hannah was three and a half she knew all about search engines advising me to "Google it Granddad" when I didn't know the answer to her question.
So.…all we need to do is have some techy genius stick a few wires into some hardware, type keys in the right sequence and off we go? Erm…..not quite. Compliance needs a look first. If your website is being brought into the Space Age it's a requirement for your old content to be reassessed. And if you make claims of excellence or special knowledge you have to back it up with evidence say Financial Regulators. Well that's a dawdle if you're only a few years old like many IFA companies but not when you've celebrated 40 years like us and you've been trying to keep generations of journalists on the straight and narrow since the 1980s.
Sadly our files of newspaper cuttings before 1997 have vanished but we still can prove our accusations of rampant mis-selling of unsuitable Pension Drawdown plans by Equitable Life and others in early '97 more than 3 years before UK Financial Regulators woke up. And there's been loads of other warnings made by us over the years typically reminding investors that.... 1) there's no such thing as a free lunch, 2) if it sounds too good to be true it usually is, and 3) when something is obvious to everybody it's obviously wrong. Folks say we are contrarian. I'd say we just apply commonsense.
Unfortunately to become a PhD in Commonsense you need years of experience. And if you recall from last month's Letter from Linlithgow, the formula involves making mistakes and learning from them over time. But it's also about being curious and reading as much as you can. If it's good enough for Warren Buffett's sidekick Charlie Munger it's good enough for me. Takes a while mind.....been at it since 1969 when the first electronic calculator the Anita arrived on my desk in Actuarial dept. It was twice the size of a microwave and took twice as long to deliver the end product.
Sadly I've seen scams and mis-selling aplenty over the years. Watched "expert" journalists with their obsession on "rip offs" and "the end is nigh" exclusives come and go. Been forced to stand by and watch Government after Government together with their expensive Watchdogs overcomplicate matters for investors while massively underdelivering on safeguards.
Oddly enough the most damage to your savings over the years has come from "safe income" products. Even today a scam has been discovered involving a Cayman Island High Income scheme where around £50 million has disappeared into thin air, private jets for the scammers to be precise. So some poor dearies in suburbia fed up with buttons from their "tax free" interest free ISAs were sucked in? Far from it. Would you believe a tax adviser claims to have lost a six figure sum? And he knows others who've lost up to two and a half million pounds chasing higher returns. Doh!
So is this a new area for scammers given Interest rates are so low? (Since the Bank of England started setting base rates in 1694 did you know this is the lowest rate ever?) No.... the fact is no matter the rates available on deposit or from Gilts over the years some investors always want more, seemingly unaware that to achieve higher rates there's always a risk.
You won't find it on Google (gotcha!), but Gibraltar based Signal Life's Guaranteed Gold Income Bond offering 15% net thirty odd years ago went like hotcakes when top rates anywhere else were around 12%. Didn't add up if you worked out all the costs and commissions attached. Ten foot barge pole stuff. Turned out it was a Mafia linked scam featuring somebody called something like Luigi "Coathanger" Scarfelli. I kid you not.
The link to Gibraltar failed to dissuade other high income seekers from piling into Barlow Clowes Income schemes widely advertised only a couple of years later. To the uninitiated it looked kosher especially when even the Financial Times carried adverts. But good old commonsense hinted this "safe Gilt linked tax free" scheme didn't add up....but some 18,000 older savers swallowed the story. And both these scams were before the UK Financial Services Act in 1986. So no protection available....sorry.
But how successful has this Financial Regulation been? Well given the Regulators actually regulate businesses who supply investment and savings products as well as regulate the products themselves, you'd assume effective protection is now in place. And you'd be wrong. Think Equitable Life, With Profit bonds, Scarp Income Bonds, Pensions Mis-Sellling, PPI claims to mention only a few. And now the Government promotes Pensions Freedom and already there's evidence of income seekers turning their backs on Guaranteed lifelong income in a search for higher rates even if it means risking the lot on parking space investments in the Sahara Desert. Yes really.
Been saying it for years now. The best way to produce rising Income in later years is to stick to Equity Income funds. They invest in companies with an outstanding record of steady rising dividends. Their objective is to raise your income and your investment above inflation year by year. And they're far less volatile than alternative investments. Only been around since the 1950's.
Second last words to legendary US fund manager Peter Lynch "Whatever method you use to pick funds your ultimate success or failure depends on your ability to ignore the worries of the world long enough to allow your investments to succeed".
"And if it says Guaranteed be very, very careful" That's from me.
This letter is the personal view of Alan steel. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.