Your Xmas Video Treat 

A while ago, I wrote a blogpost on Disruptive Innovation, focusing on the imponderables and risks associated with the newish crypto-currencies that seem to be on  everyone's lips at the current time.  Since then, my inbox seems to be permanently on the receiving end of offers to sell me training on the subject, or 'sure fire' ways of trading cryptos in order to make myself obscene profits with (apparently) very little downside.  It is not entirely clear whether the providers of this misleading garbage are catering for a demand, or simply creating one.

Either way, when I came across this recent video from JP Sears, I thought it an almost perfect antidote to the kind of naivety which feeds this kind of thing:

I hope you enjoy the vid, and it's worth mentioning that JP is always a good source for memorable quotations.

It is, of course, entirely possible that there will be individuals who successfully make large profits out of crypto-currencies.  There have always been people like this.  There were those who made a mint out of the South Sea Bubble and Tulip Mania, to supply you with two historic examples.  And, of course, there were plenty of others who lost their shirts during the very same debacles.  Isaac Newton, the genius mathematician was one such, proving that you don't need to be thick to lose a whole lot of money, just greedy.

Fast forward some 350 years, and there are plenty of people around whose investment horizon is as ill-informed, short-termist and opportunistic as Isaac Newton's.  They don't have to be bad people, but human nature being what it is, they display such a profound lack of discernment and self-awareness, that they contribute a willing supply of victims to the financial market, ready to be fleeced.  Of course, in Isaac Newton's day, when you made your bed, you had to lie in it, for better or for worse.  But, in 21st century Britain, we have regulatory bodies whose prime directive is to protect people against the consequences of their own stupidity, and see to it that others end up footing the bill.

IFAs need to be aware of patterns of behaviour.  Failure to implement appropriately-framed retirement provision almost inevitably results in approaches which are characterised by short-termism.  Opportunism within an investment context invariably escalates the risk of unfavourable outcomes, even of complete failure.  And often desperation feeds the obsession with novelty, resulting in a behavioural bias towards credulity, a presumption that nothing could possibly go wrong when all the cards are stacked on the desired outcome.  This is the financial equivalent of faith-healing:  if I just believe enough, then all will be well.

Watch out!  Such people are frequently keen to engage the collaboration of the willing intermediary - partly because this will allocate a cachet of credibility to practices which one would otherwise regard as clinically insane, but also in order to build in a stop-loss in the form of virtually guaranteed regulatory redress.  I do not think I am overstating the danger - we have seen a steady stream of such individuals over the last seven years, and all of them have been attracted to the same kind of adviser, one which will play the novelty game for all it's worth and willingly turn a blind eye to the oncoming juggernaut.  If we are to build sustainable practices in 2018, we need to observe the following criteria:

  • have a clear sense of history and of the real consequences in the real world of certain kinds of financial behaviour
  • a careful consideration of the character/nature of people we take on as clients - we want people who will take responsibility for their actions, who do not inhabit a kind of welfare-state mentality
  • an absolute commitment to a robust due-diligence and advisory process before anything else
  • a willingness to walk away if the client exhibits a reluctance to take your advice
  • a preference for the tried-and-tested, coupled with a reasoned scepticism about novelty

That's it.  I hope you have enjoyed JP Sears, and I hope that you'll have a very Happy Christmas, and a prosperous and sustainable New Year.

Kevin Moss, 21/12/2017