In God We Trust

What do estate agents, used car salesmen and fund managers have in common? Quite a lot, clearly, and none of it complimentary, but the thing that strikes me is their tendency to advertise and stick a picture of themselves onto it as if this is supposed to make us trust them more. We’re always treated to a picture of Neil Woodford in any article talking about him, even those recent ones where he’s trying to explain why his funds are going down the toilet. No doubt we could attach a speech balloon to all of them, stating “I’m in for the long term.”

If there’s one thing that’s lacking in the financial industry it’s this key word, “Trust”. Which is ironic, given the whole monetary system totally relies on it. As it says on the dollar bill “In God We Trust”, in lieu of anybody more credible being available. Even before 2008 there were very few of us who innocently handed over money to the big investment companies safe in the knowledge that they’d do their best with them instead of gambling them in the giant casino that the stock market so obviously is. But what choice do we have? Hand them to real estate agents instead? Which, actually, was exactly what millions of us did, and still do, as a preferred alternative.

I often wonder what people who aren’t interested in finance – i.e 99% of the population – think of the financial industry? Before I decided to take charge of my own investments, I really thought that stocks and shares was rocket science (and bear in mind I studied economics for a year at University). I still think that there’s a desperate desire to make out that investing IS actually rocket science, and that your average hedge fund manager is considerably more intelligent than you, despite mountains of evidence to the contrary. Even within the independent financial blogs I read, I sometimes have a sense that there is an underlying hope (need, almost) that, actually, investing is quite a complex system with underlying patterns and trends that can be analysed, understood and, if you have the right balance of smarts, predicted. What a joke. Who can predict the future of anything? It’s a massive gambling system, pure and simple, with as many wideboys, touts, crooks and charlatans involved as you’d find at your average night at the dogs. If not more.

So what can you do, given this situation? I invest a very small amount of my own cash into Zopa in the hope that they’d be an alternative to the financial establishment, but do I trust them with the cash? Well, no more than the next institution I don’t suppose, and possibly even less. I mean, who are they lending my money to? I have no idea what their lending criteria is, how it is tracked, monitored, measured, none of it. I have to let them get on with it and hope for the best, but at least I went into this relationship with my eyes open. If I get no return on my money, or even a loss on it, I see it as a conscious choice I made. I did it because I wanted to encourage a challenger to the status quo of the financial system and, if they buggered it up, there was at least some awareness that this could happen. This isn’t  “trust”, but it isn’t doubting suspicion either.

Needless to say, I have very few managed funds due to my belief that I can’t really trust a guy with a bonus riding on his performance to manage my money with my best intentions at heart. In this context, I kind of trust computers and index funds more, I suppose, a supposition which, when I think hard about it, should send me gibbering into the street. Trust computers? Am I serious? So nix that too on the Trust Index.

I do trust my mattress when I’m lying on top of it, but the real fact of inflation makes this option unattractive as somewhere to put my savings. Government bonds seem similar at the moment although a cynic like myself should also condemn this option as farcical. Trust the government?

It seems that I’m left with one option when it comes to money: trust myself. If I accept that, then when I’m doling my cash out to Fidelity, Zopa, Alliance Trust, Standard Life, whoever, well, I warned myself, didn’t I? I took on the responsibility of making a decision and had to trust myself that I’d done enough learning to make the call. At the very least, there’s a good measure of satisfaction in being able to say that, whatever way the ball bounces.

 

4 thoughts on “In God We Trust

  1. Hi. Sadly I totally agree. I used to think that land was the ultimate/only ‘solid’ thing, because ”they’re not making any more of it and the world’s population’s exploding”, but even that can be taxed away as Greece today proves. So the land in a country ultimately is valued according to the perception of its safety through rule of law and good governance of said location. If those change though, as with the erosion of genuine democratic structures in ‘the western countries’ then rich foreigners will shift their hot money to somewhere else that fits the bill better.

    So if the US gets more autocratic, the UK becomes an economic disaster and the EU sees political instability, land prices should appreciate in places like Vancouver, Sydney, Auckland and Singapore.

    I think you hit the nail on the head, ultimately, if you constantly re-train so as to have the knowledge everyone wants, you will be paid to use that on their behalf, come what may, so you really can only invest in your health, skills and knowledge, then try to be as adaptable as possible, a la Darwin.

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  2. The lowest cost wrappers one can find which includes careful selection of the products you put in them to keep them low cost. Excluding buy/sell costs my HL trading account costs me £0 per annum, my TD Direct ISA costs me £0, my HL SIPP costs me £200 and my YouInvest SIPP costs me £100 (2 SIPP’s to spread my risk). Watch for when they change the rules and adapt.

    Tracker ETF’s from Vanguard and iShares to keep product costs down. My most expensive ETF is IPRP which costs me 0.4% per annum and my least expensive is VUSA at 0.07%.

    All in I’m surrendering 0.22% of my wealth annually. Leave the financial services industry piranhas to feast on someone elses hard graft with average annual expenses of 2.56% (How much do you really pay your money manager, Financial Times, August 2016).

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  3. It’s kind of the irony of being more and more knowledgeable about a topic such as finance. Thee more you understand it, the more you realize it’s all a big mess, and it’s pretty incredible who we trust our money with.My only hope is that I now know enough to be aware of “the ugly”, so that I just deal with the “good and the bad”.

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