Brexit, the EU and all that – Financial Planning Considerations

It seems that we live in very interesting times! Your team here at the Basi & Basi group have been tracking the effects of the EU referendum, and at 04:40am we decided that this was indeed a Brexit.

This post is written around an hour later after some contact work with our European clients, as we await our UK clients to wake up and we can remind them of a few key things;

  1. Nothing changes technically this morning. The process will take some time;
  2. Despite (1), the markets are wildly reacting already;
  3. Despite (2), the sky is not falling in;

It is worth gaining some perspective ahead of wild swings in the stock markets which have already begun in Asia, and we expect on the FTSE 100, CAC, Dax and S&P 500 etc. etc.

Let us remember what the financial markets have survived over the past 100 years or so;

  • 2 world wars;
  • Simmering potential nuclear war;
  • End of empires, rise of fragmentation;
  • 2 financial depressions;
  • Multiple recessions;
  • Collapse of the international League of Nations;
  • Collapse of the USSR;

Sail the Stormy Financial Seas

We could go on. The point? Lots of momentous things happen in history. By it’s very nature, navigating the sea of human decisions is a choppy affair. But investment decisions for the long term need to look beyond even huge events, to the long-term fundamentals.

So if you are sitting there worried about how this will affect your retirement, should you now proceed with Flexible Drawdown, or that Annuity, or that investment bond, or that ISA etc. etc. – well, your adviser is best placed to run through this with you so have a chat with them. And yes, fundamentals may change as a result of this vote, but the time to implement that into portfolios is usually not at the moment of emotional reactions.

As the saying goes, “steady at the helm”!

Posted in Uncategorized | Leave a comment

Obedience in Finance – an Anachronism?

After a long hiatus, welcome back to the blog! Its the first day of proper sunshine in official summertime (for what that may be here in rainy southern England) so what a perfect opportunity to resume the intermittant flow of commentary, diatribe and general musings from MrFinancePlan.

To begin this entry, i would like to proudly introduce the latest member of the team below… :-)

image

Video:
Cassie the Puppy

My in-laws have recently obtained the above bundle of puppy joy (10 weeks old today), who has provided copious amounts of entertainment as she rapidly grows. As the above video shows, the journey from a bouncy cannon ball to obedience has been extremely rapid. This got me to thinking on something;

We have all seen the affects of the over-exuberance of some in the finance industry. Whether it’s failures of certain structured investment products or failures in the courts of certain exotic tax schemes, the lack of obedience to regulations on the part of the architects when rules are actually broken often leads to painful outcomes for the unwary, usualy unadvised or poorly-advised investor.

However, those instances of direct disobedience to the rules – although painful – are thankfully rare. Although the media would like to paint otherwise, if nothing else the majority of the finance community do play by the rules. The problem is with the rules.

“Poppycock” I hear you say! “What about the chaos we find ourselves in?”

Think of the puppy; without clear, direct instructions it will just play with the toy as it sees fit. The same applies to modern global finance: it is important not to forget that the west has chosen a system of democratic capitalist regulation which in simple terms works thus:

– The people elect their representatives to govern;

– These representatives frame law;

– The judiciary interpret its application;

– The people (including finance professionals) do their best to adhere to the law, which is clarified on the ground and enforced by the police.

Unfortunately, for finance in the main, western powers have decided that an additional element is needed – a “regulator”. Such regulators, for example the FCA in the UK, sit in a democratic “no mans land”.

Technically their accountability is to the representatives but in reality these regulators have been left to function autonomously, acting as both judiciary and police force.

The key point is this; in a democracy, it is the people who elect the representatives who setup such a system, effectively a form of partial dictatorship. In such a system, which the people have permitted, you are relying upon the competence of the “dictators” rather than the collective will of the people.

Think of country systems who have done the above, typically where the military have acted in both roles. What tends to happen? Token adherence to rules which are made successively more and more complicated by each flavour of military leadership in place at the time. Does anyone adhere to the “spirit” of the law, or do they focus on the letter because they feel they have no input into the framework of law?

Of course, such a system has the advantage of being efficient and quick to respond – where no true consultation is required, decisions are much quicker to achieve.

MrFinancePlan is strictly apolitical, so this comparison does not seek to elevate one system over another (indeed, globally all such systems seem to fail citizens to one degree or another) however I do seek to blow a hole through rank hypocrisy.

We cannot seek to simply blame the puppy when we have allowed a system to flourish where rules are varied, complex and dictated by the few. What did the electorate (of which MrFinancePlan is not a part, to maintain his independence) expect to happen? It may be convenient to blame “evil bankers”, but far less palatable to recognise that a voter has supported the construction of such a system.

Advisers who were students of history may not of been able to predict when it would all go wrong, but they were able to know that it certainly would. Its simple, run either system; repatriation of responsibility to representatives and the judiciary, or accept the benefits (speed, economic innovation, wealth) of the alternative dictatorship policy but we have to also accept the risks when it goes wrong.

It seems the majority of developed economies in the west are opting for the latter; replacing one set of three letters in the UK with two sets of three letters doesn’t change the reality of what has been setup; a mandated autocracy: let’s hope its better than the last!

I of course don’t particularly mind which, it just introduces a seperate set of client risks, carefully calculated and made provision for. Its all happened before!

Until next time and further puppy updates.

Posted in Uncategorized | Leave a comment

3 things that sometimes just don’t work; Computers, Mobiles and Investment Funds

I hope this (belated) blog entry finds you all enjoying a well-earned winter break. Like many of our clients, friends and colleagues, I decided to use a significant proportion of this break in the highly satisfying endeavor of doing, well, very little at all.

Ensconced in the middle of the peak district in a lovely cottage cleverly sourced by my wife, the serenity of the countryside and roaring fire was soon offset by my maddening irritation at things that just WON’T WORK.

To what do i refer? Predictably, technology gets it in the neck from yours truly. Despite all the cooing and crooning over the wonderful magnificence of smart phones, the Internet, computers and everything in between, one does have to wonder at the number of times these devices and technologies just simply will not do what humble, basic tools will do pretty much straight away – that is, obey you. This was made somewhat acutely poignant by the simple serenity and elegance issuing forth from my wife as she used the far simpler technology of a pen to write her book, whilst I struggled away to deliver the promised output of my fancy technology (namely a movie and the ability to send a text to family that we had navigated the incessant rain safely).

If you are still with me, let me regale you with a story or two for the fireside. There is a financial connection towards the end, if you get that far…..but without further ado;

Once upon a time, a financial man with many plans was settled near his fire, all stoked up in fury by……

1) Computers

It was a simple task I set the computer. Launch the media-playing software (iSomething), and play a movie I downloaded previously. Quite simple, no?

Oh no, because of course the computer doesn’t listen to me. Despite apparently having a processor that can process five zillion (yes, it’s a word) calculations per second, and more open space in it’s memory banks than can be found in the Atacama desert, it is busy.

Doing what? Launching online backup services (nothing to backup today), box-dropping services (nothing to box-drop today), video-chat services (I don’t want to talk to anyone), Internet defence services (I don’t need the Internet today) and a million other non-descript applications.

Dutifully, I begin closing them as soon as they are opened. “Aha”, you may be thinking, “It’s your own stupid fault for having them all installed in the first place”. Before you hit the “reply” button to email such wisdom to me, I would explain that I do actually need most of these applications at different points – just at THIS point, i did not. I just wanted to play my movie.

The impossible thing with computers is that they are fundamentally stupid, in this regard. They have no awareness of their environment or the purpose for which they have been started at this particular location in the space-time continuum. So they just prepare for all eventualities.

Ultimately, this is the fault of the programmers. There is no way or method or action to be able to feed into the computer what your true intentions are (don’t even get me started on a horrible little program called “svchost.exe” which, if you are on Windows and start “task manager” right now, you will likely find is running many times over sucking up huge amounts of memory with absolutely no explanation whatsoever of what it is doing with it all – NB; if you want to find out, download “process explorer” from Microsoft).

What we need is a “stop doing everything apart from this” button. Or an “I am your father” button (perhaps with a Darth Vader sound effect). Anything to stop the computer and just make it focus on what I want at that time.

But is there anything like this? No. Anyone who can help me with this? No (try this with an IT support engineer and I’ll buy you a coffee if the answer isn’t “lets reboot….” followed by “I think we should try a reinstall…..” which is as useful as a builder knocking down a house because the wall got a little damp).

So the financial man with a well laid plan had to wait for the stupid computer, and eventually the movie appeared. However, there was another cause of certain ire…..

2) Mobile Networks

Now, perhaps many of you will sympathise with my predicament a few months back; after being with one of the oldest and most reliable Mobile Networks in the country (indeed a global brand an regular constituent of the FTSE 100, albeit one with rather poor customer service, but lets stay focused on the technology for now….) for quite some time, I was tempted to the dark-side; a newly merged Mobile Network promised even greater coverage, faster speeds, and best of all a free Samsung Galaxy Note; the phone I desired.

To my shame, I took the bait and left old reliable for the new world. Nothing, Nowhere was born – or at least, were I to name a company in light of the Sale of Goods Act (Fair Description), this is the name I would choose.

Even worse, both myself and my wife are with the same appalling network (with different mobile smartphones, I would add, eliminating device issues). All we wanted to do was send a mobile text message, within 20 miles of a number of reasonable population centres (Derby and Nottingham). Could we?

Not on your nelly. Even more infuriatingly, my Mobile Broadband “dongle” was still with my prior network; as I plugged this into my laptop I discovered that I not only had network connection from this trusty old device on a trusty old network, but indeed broadband Internet access.

The phones still had Nothing, Nowhere. Sigh. A lesson in life learned; research skipped, quality dipped.

3) Investment Funds

So, we reach the end of the tale – and what financial lesson do we learn? Well, as i sit by the fire drying off, about half an hour later than I expected to finish my film and having managed to send a text message by propping myself up on the door frame with one hand in the rain to glean a bar of signal, I reflected on the lessons learnt.

Often, as with computers, investments can leave us perplexed – particularly when they do not keep track of our position in space-time;

Investment and financial plans suitable for those just beginning the path of work, wages and wealth just generally do not WORK for those preparing to enter retirement and vice-versa; those for a young family who are preparing for the inevitable costs which follow again just do not WORK a few years down the line.

Why? Well, what we want and need the investments to do changes with time – specifically the risk we want to take, the return we desire and what capacity we have to sustain losses in our investment values without running to the nearest scrapyard, buying all of their lead and waiting for the end of the world in our underground bunker (ref: Only Fools & Horses).

It is even worse with regards to investments taken without ANY advice because in that case, as with computers, it is likely that investments get put into the “prepare for all possibilities” mixed bag of a “balanced managed” fund by the provider who wants to play it safe and insure themselves against mis-selling claims in the future. Just as this approach tends to lead to a computer which is consumed with doing almost everything apart from what you actually want it to do at any point in time, likewise such an approach to investment usually means that it is never really specifically suitable for you – the investor.

Finally, if you have advice, if this is not constantly revised in line with the changes in your life, how can the resultant financial plan and investment strategy REMAIN something which “works” for you, NOW?

Another element to consider, even if you have a customised investment strategy which is reviewed every 6 months or so, are the investment “vehicles” you choose to use.

As is the case from the Mobile Network fiasco, just because something looks good, and is cheap with good marketing does not mean it is fit for purpose. We need to INVESTIGATE the investments money – your money – is placed into. This needs to be thorough, independent, reliable and repeatable. So make sure you ask and make sure that whoever executes your financial plan has comprehensive research behind them.

Conclusion

So there we are. Lessons on investing from a computer which doesn’t listen, and a Mobile Network which doesn’t work the way it should.

The answer? Design a computer which listens, and stick with a proven Mobile Network which you have researched. Or alternatively, substitute “financial plan” for computer and “Investment Fund” for Mobile Network if you want to relate this to your money!

I hope you have enjoyed the read; the phone is now off, laptop soon to follow as I had best return to my dubiously low-burning fire, bottle of Le Coin and lovely wife.

All my best for now!

Please note that the information on this page is a personal view only and does not constitute individual advice.

Posted in Uncategorized | Leave a comment

Greece – end of the world?

“The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.”

An old proverb, but whilst possibly one of the richest kings who ever lived may have come to the conclusion that – with regards to the actions of people at least – nothing changes, if you were to believe the headline-grabbing statements from financial commentators (particularly those whose name rhymes with “Pobert Reston”), you would be forgiven for thinking that something new is about to happen; the Greeks are about to tip into the abyss and take the planet with them.

Dear me, what do we do!

Long-standing clients of Basi & Basi will likely be familiar with two principles; the first is above. The second is that history is our greatest tutor. Let’s take a little look at some history.

The History

The first recorded default by Greece was in 2010….no, sorry, 1932. No, I am mistaken, 1894….1860? Nope, it was definitely 1843. Oh sorry, I forgot 1826, that’s surely the first……

Actually, we need to goo all the way back to c.400 B.C. That’s around the time of the first Greek default, when either 10 or 13 Greek city states (historians argue which) borrowed money from the Temple of Delos. Unfortunately, from what we can gather, the city states were rather over-ambitious and incurred what I believe (as far as I can make out) is the first recorded sovereign debt default outside of the Bible. The Temple of Delos took an 80% loss on the principle loaned out – sound familiar?

In fact, the Greeks have been in default each one of the years listed above, or 5 times in the last couple of centuries, or on another scale, approximately 50% of the time it has been independent.

Fortunately, each time the connected nations who were burnt recovered sufficiently; to that matter, so did Greece (although it took a little time; after the 1826 default Greece was shut out of the international markets for so long it had to borrow from it’s own Central Bank, who probably did recognise the risk their own government posed and allocated a rate around twice the prevailing international rate. It took until 1878 to pay off it’s debts.).

Time faded to mist and eventually some clever person who had done his history homework looked at the risk and decided to lend to Greece at an extremely lucrative rate of interest for the historic risk he was taking and fully recognising this.

The problem was, he was followed by ten poor fools who hadn’t done their history homework, believed whatever they were told and lent out at a low rate and expected a guarantee of return (this happened in 1878 after Greece paid off it’s 40-year default, was lent again and promptly defaulted in 1894. The pattern continued to our time.)

What do we Learn

The first thing is this; beware of Greeks bearing (interest rate) gifts. History doesn’t really change so much when it comes to the actions of people in similar situations (for those jumping up and down and pointing to the rise of the United States, or the current rise of China as “unpredictable” – let’s go for a coffee and debate it. I’ll either convince you it could be seen, or you disagree. Either way, I’ll pay for the coffee.)

When Greece is doing well, it borrows. It then crashes. If you invest knowing this, you will invest smartly and cognisant of the risks, so you won’t be too worried (sorry for wasting your time to get to this).

As for the (economic) planet, well yes everytime Greece defaults it creates a catastrophe for a few years – but it doesn’t change the fundamental nature of the economic cycle nor the actions that individuals take. Diversification still works. Asset allocation (balancing where and how you invest) still works, you just have to know where to go, and when.

But that’s what we’re there for, of course :)

That’s enough musings for one evening, more may follow (if they do, they will be similar to London Buses; unpredictable at best). Enjoy your day!

Please note that the information on this page is a personal view only and does not constitute individual advice.

Posted in Uncategorized | Leave a comment

Basi & Basi – Front Page Of New Model Adviser

Basi & Basi were kindly selected by New Model Adviser for their centre page spread in the 12th of December edition of their magazine. From the PDF document below, you can see the write up of our firm which depicts the basis for our investment process and the foundations of the company.

 

 

 

 

 

 

 

 

 

Please note that the information on this page is a personal view only and does not constitute individual advice.

 

 

Posted in Uncategorized | 6 Comments