There’s a book that all aspiring investors should read. It’s called ‘Where are the customers’ yachts?‘, and the sub-title is ‘A Good Hard Look at Wall Street‘, by Fred Schwed Jr.
Schwed was a stockbroker and an author, his book is still, some 80 years after its first publication, described by leading investors like Warren Buffet as a timeless and authentic description of the investment culture on Wall Street.
The title refers to the supposed question a visitor to New York posed on seeing rows of luxury boats belonging to bankers and brokers.
It is a slightly tongue-in-cheek study of what is wrong with the investment business, a coruscating look at the finance industry. Today, if Schwed were still alive, his book might be entitled ‘Where were the regulators?’ because it is clear that the silver-tongued financial services salespeople (let’s not call them investment advisers, that suggests they have your interests at heart) continue in business unchecked. The regulators are basically asleep on the job.
Want to make a million quickly? Come up with a complicated fraud and diddle lots of people. Leave a complex money trail across multiple jurisdictions and most regulators will spend years working out who has the authority to investigate cross-border transgressions before they do anything as mundane as starting to look for you.
So, why am I writing about this? Well, it’s only the second working day of the year today and already I’ve had six phone calls from financial services companies falsely claiming to be ‘following up on our emails’ and ‘further to our discussions last year’. Six. In two days.
Cold calling is an invariable red flag for me. What a shame there are precious few others I could refer to, like a comprehensive international listing of every conman ever penalised for investment fraud or breaching regulatory requirements in any major jurisdiction across the world. What a service that would be.
Such a book doesn’t exist. Because regulators aren’t interested. It’s too much like hard work for them.
So the age-old warnings must apply:
- If you are cold-called about an investment or pension matter, hang up.
- If the call originates from somewhere unusual, say the United Arab Emirates, or Turkey, or you simply don’t recognise the country code, hang up.
- Ask for details of the firm. If the adviser isn’t based in the UK and isn’t regulated by a recognised UK financial services body, hang up.
- Check out the caller on LinkedIn. If he[*] seems to have barely a year’s experience and was previously flogging second-hand cars in the UK, put the phone down.
- If you google the organisation the person calls from, go past page 1 of the search results to see what their firm has paid to squeeze off the top results – check for news stories about fines and regulatory breaches. These are all red flags.
- If you’re leaving your home country to work overseas for a few years, square your finances away before you leave.
- Using an offshore financial adviser in your new home is an invitation for trouble. Most of them are not properly regulated or, worse, belong to some self-regulatory scheme that isn’t worth the headed paper they will use to write and tell you they can’t help when things go wrong.
- If you’re only going for a few years, do not transfer your pension offshore. It will cost you to do so and transferring it back when you return will be difficult, if not impossible.
- If you want to buy a house back home with your new wealth, try to do it before you go…mortgage companies (especially in the UK post Brexit) don’t usually want to know offshore buyers, too much red tape.
- If you want to put money into a savings or investment vehicle, avoid anything promoted as offshore and taxfree. It will usually come with copious small print that means it will underperform. Especially avoid anything with a minimum investment term – you’ll find the first three or four years’ payments are pure commission to the middleman. You’ll never get it back if you cancel early.
In short, the offshore financial world is a minefield for the unwary. I come across endless Facebook groups dedicated to the cause of the ripped off and the out of pocket. Don’t add to their numbers.
[*] I don’t know why but it is invariably Englishmen of a certain age (usually 22-40) who pop up working for these lightly-regulated offshore financial services organisations. Not Scots or Welshmen. (If you know why, let me know!) Perhaps their first career selling second-hand cars didn’t work out. Perhaps life just didn’t quite work out. Maybe personal circumstances changed and they are now short of cash. But, if you get a call from a well spoken Englishman inviting you to a chat about your investments, you know what to do. Hang up.