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  • Stuart Fowler

Markets don’t destroy wealth, people do


Thursday 19th March 2009

Baltic Exchange, 28 St. Mary Axe, London EC3A 8BH

6.15pm for 6.30 start

A prolonged period of financial stress, both in capital markets and ‘the real economy’, is now unavoidable. Whether this means personal wealth is temporarily harmed or permanently destroyed depends more than you may realise on you. It depends on the decisions you have already made that lead to your current risk exposures (whether delegated or self-directed) and on the decisions you make in response to a period of financial stress. How on earth are you supposed to know how to acquit this responsibility deliberately and well? This seminar answers that question.

This seminar will challenge you to question your assumptions about equity risk and its role in meeting personal financial objectives, about the seductive alternatives to equity risk and about your relationships with the financial services industry as your gateway to capital markets. As always, we do this without hype or exaggeration, by reference to a few simplifying principles, graphical historical evidence and easily-followed logic.

Wealth creation arises from:

  • Payoffs to entrepreneurial activity

  • Savings from labour income

  • Return on invested assets

All three are facing a prolonged period of destruction, not creation. This is hardwired into the global economy by the need to rebuild the solvency of banks and repair the balance sheets of households, with the certainty that beggar-my-neighbour actions to achieve these ends will first make most people’s financial positions worse.

The wealth creation source that we are involved with is invested assets. Depending on what investors own, we are confident this episode of wealth destruction will not be permanent. It will reverse, or revert to trend. But there are many popular investment strategies, existing inappropriate risk exposures and prospective decisions made in reaction to crisis that will turn this into a permanent loss of wealth. These mistakes are made by professional managers, possibly under pressure from their clients, by individuals (whether they realise it or not) through the process of selecting whom they delegate to and they are also made by self-directed individual investors.

In this seminar No Monkey Business founder Stuart Fowler will:

  • Demonstrate the long-term cycles in real wealth values for ‘evidenced assets’ making up public markets – the product of the wisdom of crowds

  • Explain the wealth-management principle of matching these evidenced assets to your time horizon or series of horizons

  • Illustrate the typical decision errors made by investors when they do not observe the principle

  • Distinguish the popular investment approaches, products and structures that have been developed in private markets or using derivatives that aim unrealistically to avoid the principle – the wisdom of wizards

You will have a clearer idea attending this seminar of whether your personal wealth is currently organised to survive, thrive or destruct in a prolonged global recession. You will be unequivocally clear how much the responsibility for one of these three outcomes rests with you even when you think you have shifted it to others. You will have a good general idea of how to make changes in the way you exercise that responsibility. Where you may only see the downside of time, effort or tedium in engaging in the wealth management process, we hope a key insight will be the emotional upside that it brings in clarity, confidence and avoidance of regret and recrimination.

Stuart Fowler is the author of No Monkey Business: what Investors need to know and why (FT Prentice Hall 2002) and is one of Global Adviser’s Financial Gurus. He is a frequent contributor to the FT. His no-nonsense approach to finance was illustrated in the front page he wrote for the FT’s personal money section in 2004 predicting the crisis we are now dealing with:

“How relevant is Japan’s experience? Very. Japan has suffered a vicious combination of falling equity and property prices, crushing consumer confidence, piling up banks’ bad loans and so making it difficult for the authorities to stimulate demand. Both America and the UK have enjoyed a bigger than usual house price rise, whether we call it cycle, boom or bubble, so a heavy fall in house prices is likely. No major equity market except Japan is so low as to be at all confident of avoiding further falls. So the same generalised deflation of asset prices and confidence might not be avoided. With much lower household savings than the Japanese, the impact on living standards could be dire.”

No Monkey Business is a wealth management firm managing fully-customised goal-based portfolios for high earners and retirees, based on comprehensive financial planning. Typical goals involve securing defined inflation-protected, sustainable ‘income’ streams, from investment total return, within agreed quantified ranges of tolerable outcomes. These are customised programmes for managing the uncertainty of a financial journey and so transform the typical experience of portfolio management which is as a performance race with face-saving waffle about ‘risk management’. Clients pay flat fees based on value delivered, not portfolio value.

Seminar Details: 6.15pm for a 6.30 start. The seminar will last no longer than 45 minutes with an opportunity for further questions afterwards over drinks.

For more information or to accept our invitation please contact Joseph Clark on 020 7736 2434 or email him at joseph@nomonkeybusiness.co.uk

#assetallocation #risk

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