Uncertainty, planning, hedging

Sometimes, one wonders what passes through the minds of many intermediaries as they seek to advise their clients, and propose financial solutions for their needs.

We have enough historic experience of bubbles, booms and busts to predicate a cautious (even bearish) approach to planning.

We see national governments making economic policies based upon pragmatism rather than principle - it looks as if, for instance, that George Osbourne has learned very little from past property bubbles, and is busy inflating the next one.

We understand the overriding principle in real life that the more complex something is, then the more there is to go wrong.  Yet intermediaries appear to continue their unhealthy dalliance with products that are so complicated that even their designers don't fully understand how they work.

And we get the idea that leaving the house late, in order to drive to the airport to catch a flight, is more likely to end in tears than if we leave early and have a steady, planned and unrushed journey.  So what is it with last-minute, deadline-based investing, frequently using higher-risk products in the hope of a higher return?  The risks of a crash or simply not reaching our destination are disproportionately, and unnecessarily, raised by such strategies.

As the various regulatory structures that govern our lives increasingly proceed on the basis of ideology, it does at times seem quite a challenge to identify how intermediaries may satisfy the beliefs of these unaccountable bodies, whilst at the same time delivering a service which results in good outcomes for the consumer and sufficiently remunerating the intermediary.  One can see in the above summary, clear hints of the kinds of poor advisory practices which lay intermediaries open to criticism from the regulator - but equally well, it's not difficult to spot the converse:  the bare bones of an advice proposition which understands risk and uncertainty, and helps clients to navigate their way towards the achievement of their goals.


Physical Gold - historically a functional hedge against market risk.  Time to sell?  What would you advise?

Kevin Moss, 21/06/2013