- Christian Armbruester
The financial services industry is an amazing construct of epic proportions and infinite possibilities. The sheer number of different things one can, or has to do, by moving money from one place to another is simply mesmerising. The jargon is even better, and we have terms and acronyms for a seemingly endless array of different products, services, rules and regulations. From “SICAVs”, to “UCITS” and other “collective investment vehicles”, or “Basel II”, “MiFid II”, to “futures”, “forwards”, “butterfly spreads”, and “Asian quantos”. It goes on and on and on, and every year new products, new technologies and new terminologies, like “cryptocurrencies” or “blockchain” add to our universe. And there are trillions and trillions of dollars, euros, and yen in capital that is moved around the globe and the scope to deploy money for whatever purpose has never been greater or faster.
For most people, as beautiful as the whole thing is, it can also be very frightening, particularly when the fear of losing, or paying too much, makes everything even more difficult. Clearly, no one can know everything, but undoubtedly, people who make it their full-time profession know more than someone who does not. We can’t expect to perform open heart surgery because we had a bit of a read on the internet, so why would anyone think they can manage their wealth in their spare time?
There are many different service providers who can help. From IFAs, wealth managers, private banks, family offices, asset managers, investment managers and even to so apply called “robo-advisers” who all say they can do it all. The choice seems akin to the one I had when I recently stepped into a sports shop to buy a pair of trainers. I looked in amazement at the rows and rows of shoes in every style, form, shape or colour, and in every size for whatever purpose I could want. What happens when a human being is faced with seemingly infinite choices? We shut down, as our brains can’t process so much information, it becomes too difficult to make any decision and so, I left.
But that cannot be the answer and doing nothing is very costly, with interest rates being where they are. There is also inflation and of course opportunity cost, because it is still a lot easier to make money with money than it is without. So, here are a few things to bear in mind: Practice makes perfect, and setting up a few calls or meetings to talk to a few providers seems a very sensible idea. Eliminate anyone who takes a view on where things are going to go (note: no one can predict the future, least of all a financial advisor, otherwise they wouldn’t be talking to you). And most important, don’t speak to anyone you cannot understand. Yes, even with all the financial jargon and the complexities of the global investment universe, things still either go up or down. And if someone can’t explain things to you in a way that you fully comprehend, then they probably don’t know it all that well either. This should eliminate the majority of the offerings. The rest is up to you, and you would choose one over the other because of cost, service or how you got on. And always remember the advice of our fathers: “trust is good, but control is better”, so make sure you know exactly what is happening with your money.