It's a crazy world

As financial planners we try to be as precise, logical, methodical and as objective as possible when it comes to giving sound, appropriate financial advice to our clients. Well, why wouldn't we? For one reason, there's no rational reason for doing things any other way. For another, if we flew by the seats of our pants, and opportunistically flogged the latest-colour, financial ipod-gizmo to hit the market, we would very quickly be hauled up before the beak, and quite rightly be given a thorough dressing down, not to mention encouraged to help with the regulator's final salary scheme deficit.

So, why is it that, when we are trying to do everything empirically, absolutely by the book, the whole world has gone stir-crazy, or just plain bonkers? Here we are, humble IFAs, inhabiting this rulebook-dominated world, where even careful, well-documented advice can form the basis for retrospective action, and where, just a short distance away, the real drama is being performed on a cosmic scale that can only leave you gasping.

At home, the FSA's mismanagement of the Northern Rock fiasco quite rightly leaves us feeling breathless, if not on the verge of an asthmatic attack. Over the other side of the pond, the Bear Stearns debacle leaves us in serious need of an oxygen tent. Eighty-five years of investment banking were wiped out when panicked investors removed $10Bn almost overnight. Whilst we might have our own views on such panic-induced actions, the reality is that this bank was up to its neck in the "bog of eternal stench" (as David Bowie might have called it), more commonly known as the "subprime market".

We are told that it is all to do with globalisation. Thus Norwegian fishermen and German dentists discover to their surprise that they are participating in the losses from the US subprime market. In the US, in some cities, one in eight homes is now vacant due to foreclosure. Repossession filings are up by 93%. Over here, thieves are effectively demolishing vacant or semi-derelict properties in order to swipe the copper piping (worth more than bricks and mortar), and churches in Leicestershire are discovering gaping holes in their lead cladding. The BOE warns us that around half of the UK's lenders are looking to 'ration' mortgage deals over the next quarter, and if that were not enough, Experian predicts that 5million people are going to find themselves in serious financial difficulty.

Yep, it's a crazy world. You wouldn't find IFA's designing investment products based upon debt secured against collateral that was one step up from 'trailer trash' - would you? You wouldn't expect IFAs to encourage their clients to overstretch themselves in dangerous markets at the most dangerous time possible - would you?

And yet it's IFAs who proportionately suffer the sharpest burden of regulatory focus, when all this surreal stuff is happening around us, in a world where the regulators appear strangely ineffective. So what's the answer? It seems to me that our distinctives remain even more critical in today's insane markets: precision, logic, method, and objectivity when it comes to delivering sound, appropriate financial advice.

You won't find it anywhere else.

Kevin Moss, 09/04/2008