Health warnings: reading the financial press

Checking my emails is quite frequently a stressful occupation. First off, there's the challenge of weeding out all those tempting propositions from Russian women, or adverts for cheap Viagra. Next I have to work out which of those needy Nigerian widows I'm going to help, as they struggle to manage their late husband's estate. So much to do, so little time.

Next, we move on to the 'legit' stuff. Requests from clients for help. Yet another confession from a product-provider that they've ignored our written instructions and are now working hard to provide the substance for a genuine complaint.

Next down the line are all those on-line media resources - IFAOnline, Professional Adviser and FT Adviser. Quite a bit of this one can delete immediately - the hike in premiums for Parrot Insurance is not a high priority for my clients currently. The latest batch of headlines did attract interest, however:

"One in ten IFAs could disappear if economy worsens"

"Third of IFAs expect pension savings drop this year"

The first headline was intriguing: I had a mental picture of an IFA becoming progressively more transparent, until he had vanished entirely, perhaps just leaving a wry grin hanging in the air. It transpired that this was pure whimsy: apparently Plimsoll Publishing have published a report which is, oddly, not about soft footwear, but which paints a doom and gloom picture of falling sales leading to a fairly significant decline in the IFA market.

The second headline reports new research from MetLife Europe, predicting a 21% drop in new pension investment, and - get this - the primary reason is increased stockmarket volatility. This leaves me intrigued: our own analysis of, say, unit-trust trends, shows that volatility levels for many sectors are below where they were in July 2005. Volatility levels did not stop our clients investing sensibly then - why should they now? Is this a case of some company looking desperately for a newspaper headline? Or is there a real, substantive reason why the current market conditions invalidate the basis for sensible investment, whether into pensions or other vehicles? I suspect not.

I suspect that both headlines have a lot more to do with the attitudes of the individuals concerned, rather than the real effect of economic conditions. One of our Member firms, responding to the downturn in the mortgage market has responded by setting up a new internet marketing proposition, targeted at precisely the types of clients he wants to get. It seems unlikely to me that he will be in the failing ten percent.

And, by the way, if financial-planners are not educating their clients about the main principles underpinning effective investment - what on earth are we up to?

Kevin Moss, 25/04/2008