Whether the story is true or not I think it reflects well the society we live in. I remember someone explaining to me in a law class that the basis of litigation started in the US when a homeless person fell off a platform and lost his legs when a train ran over them. The argument was that there were no signs to warn him of the danger. When we pick up a cup of coffee the cup has a warning that the liquid might be hot.

The point of all of this is that we have turned very much to a blame culture, if something goes wrong someone must be to blame. Of course sometimes there are justifications especially where wording is very ambiguous and as a result what we think we are entitled to is not delivered.

The reason for all of this is the recent campaign I have seen in the Mail Online around people who had taken out investments with Lloyds and five years down the road they have been disappointed by returns. One comment stated that the adviser didn’t put a gun to the investors head, i.e. they didn’t force them to sign the agreement.

One of points of my campaign has been about improving financial education, there was a recent survey which indicated that people felt that if they had had financial education they wouldn’t be in the position they were now. I totally agree with that but also we have to take some responsibility for for our actions.

I work in the industry and when it comes to investing I have made some classic school boy errors. During the nineties many of my investments were returning around 15 to 20%, towards the end of the nineties some funds were returning 100% plus. I thought I want some of that, so I sold my investments and invested in these funds. Well we all know what happened…….

The bubble burst, and I lost a lot of money. Buyer beware, just because something looks good doesn’t mean you should invest in it. Of course I have learnt from that and I am now a patient investor, I prefer a get rich slowly approach.

This leads us nicely to the complex market we are in, the problem is that people want their cake and they want to eat it. So the lowest area of risk is seen as cash (ignore inflation, low interest rates etc), and when people receive a lump sum they are scared in case they lose it. So where do they go? Cash of course, but interest on cash is 2% or 3% if you look around (but many don’t).

Often they are receiving less than this because it is sat with their bank; they perhaps get a phone call from the bank who suggests a meeting. The advisor knows what their fear is and that is loss of capital, so he explains he can protect the capital but provide the potential of 40% returns over five years subject to the stock market. If you think about this logically, if interest is around 2% a year that would be 10% over 5 years (give or take) so to get 40% must involve some risk. But all the person can hear and see is 40% return……….

Five years on the returns are less than if the money was invested in cash and investors are unhappy, of course if they had invested in bonds or equities they would have got a lot more. So they have to blame someone and that is the advisor who sold them the product.

Before I touch on the madness of this – I checked online income and discovered a structured product offering 6% guaranteed p.a. I know from experience this shows the headline information only, you get a pack and then you sign up. The client signs a disclaimer saying they understand what they are doing but in reality they have no idea what they are agreeing to.

Effectively they become blinded by figures and don’t try to understand what they are buying – they just see 6% p.a. This is the same with the people who are now complaining to the mail online. I have sympathy with them don’t get me wrong but no-one put a gun to their head and made them do it.

I have used this example before; a well-known investment house launched a China investment trust. Everyone invested in the fund and its performance has been poor. Some simple things to consider, firstly this was an investment trust and not a collective (is a collective better?), secondly the fund manager although a “guru” had never invested in China (where there better options) and thirdly well I think you start to get the picture.

Really this all comes down to financial education, whether you seek advice or not you need to have an idea of what you are looking to achieve. So what is your financial plan, what are your goals and what risk are you prepared to take to achieve those goals? Once you know that you can consider how you might achieve those goals, you may feel confident to do it yourself or seek help.

But the key has to be an understanding that any form of investment whether in cash or otherwise carries risk. If you do it yourself then you only have yourself to blame if it goes wrong but if you go to an advisor you still have to take responsibility for your actions. Ask questions, if the returns seem too good to be true then they possible are and remember you don’t have to sign anything.

Just remember 200% return sounds good over 5 years but is it too good to be true.

We are not robots, we can think for ourselves……..

NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.