“May you live in interesting times” is an English expression purported to be a translation of a traditional Chinese curse.
For the investment sector, the past few months have certainly been ‘interesting’.
You only need to watch BBC’s Panorama last night (Can you trust the billion-pound investors?) to realise the extent of the issue.
Investors in Neil Woodford’s Equity Income fund still have a long wait to find out how much they will recover.
Indeed, shortly before the Panorama programme was broadcast last night, I was chatting with a friend whose adviser at another firm recommended a significant allocation to Woodford in her pension fund. She’s braced for a 50% loss.
Woodford himself, his fund administrators at Link Asset Services, the FCA, the press, and the discount brokers who heavily promoted his ‘star fund manager’ status, are all coming in for criticism in the wake of his fund empire collapse. I do not doubt that the subsequent FCA investigation will have significant ramifications for all of those parties.
Thankfully, we never recommended Woodford to our clients. I went a step further and attempted to counter some of the puff pieces we saw in the press around the time of his launches, warning investors about the hype.
But I do often talk about specific investment funds in the press.
Year to date, I’ve spoken to personal finance journalists on 180 different occasions. During the past 20 years of my career in retail financial services, I’ve probably mentioned specific funds in the press on hundreds, if not thousands, of occasions.
Referencing an investment fund in the press is never a personal recommendation. How could it be? Without knowing the individual circumstances of the reader, listener or viewer, a financial adviser is unable to assess whether a specific fund is suitable for them.
But there’s a real danger that, by mentioning a specific investment fund in a news article, it could be perceived as a tacit endorsement or recommendation.
The impact then of that perceived recommendation could quickly spread across many thousands of readers.
To date, thankfully, I’ve not referenced in the press any investment funds which have subsequently turned out to be complete lemons. I’ve also been critical on several occasions of funds which did eventually turn sour.
Whether this was due to luck, judgement, or a combination of the two, I’ll leave this for you to decide.
But in the wake of Woodford, it’s not a risk I’m prepared to take in the future. For that reason, we’re no longer talking about specific funds in the press.
I’ll continue to speak to journalists about investment issues in broader terms; including commenting on the risks involved with different investment asset types and the broader economic situation.
But specific fund tips stop from today.
Will this make any difference to how financial journalists write about and generally cover investing for the public? I’m only one commentator in a field of many. There will, I’m sure, be others who are still prepared to tip specific funds.
But I hope, in time, how the financial press writes about investing money will change and focus on the issues that matter; issues like the need for risk and capacity for risk, how investment decisions help meet overall financial planning goals, and scam prevention.
