Boring is Good
The thing about investing when done properly is it’s far from sexy and is in fact quite dull and boring.
I wish more IFAs were boring…
You see boring is good when delivering sound financial and investment advice. Recently we have relished our boring approach to investment advice. By keeping things simple and sticking to the key rules of investing (keeping costs low, good diversification and staying disciplined) we have been able to avoid the exciting funds which have failed so spectacularly.
If only more IFAs had stuck to this approach rather than push the next new thing.
Whilst I hope that the service we offer, linking your financial decisions to the lifestyle you really want, is never dull the best financial solutions usually are. Paying off inappropriate debt, keeping a cash reserve, rebalancing your portfolio from time to time and above all staying disciplined are often the best course of action.
But when I read stories of inappropriate investment advice I always ask ‘why’?
Why would any IFA recommend a complex and esoteric product (I am talking about so called guaranteed products) unless it is because they get paid more (commission) for this and / or they wish to impress their clients.
Leaving aside the issue of commission (as this is set to be banned from 2103) the need to impress is perhaps more worrying. I accept that interest rates are low and investment markets can be wildly volatile but the case for investing properly is as strong as ever. Despite decades of evidence to the contrary, there are always those that feel it possible to break the unbreakable link between risk and reward.
So rather than simple, evidence based investment recommendations, some advisers will always recommend what we (and the majority of IFAs) would never dream of touching.
The problem is that when things go wrong and compensation is due it is often those that are left who have to pick up the pieces (and the costs).
Perhaps with the introduction of the new RDR rules in 2013 things will improve. I can only hope so.