Alan’s Blog February 2012

January was a great month with a lot happening: Interface’s software development came to fruition and we released PaperCloud, a system where our clients can securely log in and view all of the paperwork that we hold for them. They can save it back to their local computer and print if they wish. The transparency and openness even makes me gasp! This is new service is on top of Client Portal released last summer where clients can log in and view all of their factual detail that we hold in our database, view valuations which are updated daily, and exchange secure documents and messages. We are the first in the UK to launch such a comprehensive system and we hope that our clients enjoy the 24/7 access.

On 26th and 27th January I was MC at the Global Life Planning Conference in London. What an uplifting experience that was – meeting advisers from the UK, Netherlands, USA, and other counties who all have the aim of providing the best for their clients. It is less than 3 years since I made a personal commitment to change the way that financial advice is given in the UK and it is stunning to realise what can be achieved when you have a burning desire to do what is right. In my role as a trainer for the Kinder Institute of Life Planning I have already qualified 28 advisers as Registered Life Planners, another group will finish this month, and a further group has just started their training. The stories that I am hearing every day about their experiences with their clients is truly uplifting.

When I mentor my students I stress that it is vital that we live our own life plans and that we our lives with integrity and integrity is the continuing subject of my discussion of the “The 7 Secrets of Money”. This is a book that I strongly recommend: you can get your own copy from Amazon and for more information you could look at the authors’ website at

Secret Number 2: The financial press peddles investment pornography

Investment pornography is a phrase that I have used for a few years and there are many others who have used it but it’s empowering to see it written in a book. I quote from chapter two:

“We strongly believe that the personal finance pages, the weekly investment magazines, the monthly magazines and top sheets that many investors love to read, peddle advice that is, in the main, little more that investment porn. It is designed to excite, but ultimately it is really not very good for you.”

And they continue:

“Slavishly following this type of advice is expensive; the predictions will fail you again and again. We know from experience that reading and studying this type of information acts as a barrier to taking considered and informed financial action.”

If you are addicted to financial porn they recommend that you wean yourself off in the same way that you get out of any other addiction.

The financial press can mislead gullible customers by not presenting an understanding of ‘the market’. The market is what it is: – by volume the total number of stocks bought is always the same as the total number of stocks sold.

“The market’s level is a function of the transactions entered into recently. The very reason the market is at any particular level is because there have been transactions between others that have priced investments using whatever reasoning was available to the market participators.”

Because of the pricing mechanism beating the market is at best unlikely and at worst a costly waste of time.

Reading financial pornography can be extremely addictive. There is often an assumed belief that by reading enough of the ‘expert’ opinion that sooner or later we will get it right. Sadly following the ‘hot tips’ is more likely to reduce your net returns than produce a positive return.

The financial media make their money out of selling copy and they do this though titillation and sensationalism. It may be interesting to read but is so often wide of the mark that acting upon their predictions are of little practical use.

The investment industry has a huge marketing spend on making their funds look attractive or attracting investors to their new fund. While the regulations have been tightened up their adverts still need a lot of digging to find the truth and it is vital that the investor stay sceptical.

I do recommend that you read the book to get more explanation and understanding and I was going to leave the following until you do but on reflection it is too important to wait:

The powerful organisations involved in the investment pornography business include:

  •     Nearly all those who design past-performance advertisements
  •     Those who try to get advisers to use their fund manager du jour
  •     Those who produce fund directories supported by advertising budgets
  •     Those who rate funds and produce Best Buy lists
  •     Those who publish magazines targeting the advisory community with lists of top picks

It is a big pool. All the people drinking from it are paid by you the investor. But you do not pay any of them directly.

The secret: if you can’t wean yourself away from financial pornography altogether, at least retain a huge degree of scepticism. If you are addicted and really need help work with an enlightened adviser who can protect you from fear and greed (more of this in secret number 6).

I’ve already referred to ‘the market’ above and this is where the next big secret lies: you cannot beat the market which will be revealed next month in secret number 3:

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