Published by Kauders Portfolio Management, Authorised and regulated by the Financial Services Authority
To us, financial planning seems simple enough. Perhaps it is too simple for many people. But then, most people are busily planning for inflation, ever-rising markets, and easy money. Those assumptions are wrong.
Once you have accepted the basics of inflation and ever-rising markets, as most people do, without any questioning at all, then you can really put the cart before the horse: tax, tax, tax, tax. Investment advisers will focus on "tax efficiency" first and forget the realities of investment life. Why should those who cannot afford to lose and desperately need income, be advised to buy an equity ISA? The very thought is a nonsense. Why should someone with patently insufficient income be put into single premium stock market bonds at all? For the commission? Or, because one must be seen to be recommending equities to satisfy greed? Or because advisers don't think?
The reality is that many people are going to be very unhappy when both share prices and yields go down. It will be a bit late to wind the clock back by then.
The rules of sound financial planning really have not changed much from when we published them in November 1993:-
1. Avoid risk. Stand aside, let others make the mistakes.
2. Use compound interest to get rich slowly but surely.
3. Keep it simple. The less fingers in the pie, the lower the costs. In an era of low returns, complicated schemes go backwards even if asset prices rise.
4. Avoid debt. It is costing you real money, so pay it off as quickly as possible.
5. Plan to pay some tax. You will do better than paying good money for schemes that don't work in a deflationary world.
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