Last year I made a commitment to write a book. Everyone I knew was told, so there was no going back. I should probably also thank modern communications technology even if it isn’t conscious of its own existence, because this is helping me to spread the word around more quickly than I could ever have anticipated.

The ‘Six degrees of separation’ refers to the idea that if a person is one step away from each person they know and two steps away from each person who is known by one of the people they know, then everyone is at most, six steps away from any other person on Earth.

I am not sure if the sixth degree has made the Dalai Lama aware of my writing, but he should know that my book, ‘How to invest better than the average primate’ is now available for pre-order, with publication due later in March 2010.

Under all normal circumstances I would love to give all my clients a free copy and an extra one to pass to a friend as it will be a valuable gift. However, I feel this would be a missed opportunity to do some good. I am asking for help raising funds for two life-changing charities. I know that many of you actively raise funds for your own good causes, so there will also be an opportunity to raise donations for these on the book reservation form.

When it comes to raising money for charity some very fit people run marathons, the tough ones climb mountains, while those who are mad enough decide to swim the Channel. I leave you to work out if I have either reached an age when I am no longer capable of enduring such hardships or if I have acquired a certain degree of common sense over the years!

Please pass the information to your friends and colleagues and in turn ask them to do the same before 20th March 2010 to benefit from the pre-launch order discount.

“This is a fascinating read. Michael Barr has certainly gone to great lengths to dispel some of the mysteries of investing. I really enjoy the way he uses analogies from everyday life to explain in simple language ideas that can quite easily be hideously complex to understand. Well done.”
D James Martineau FIFP
Certified Financial PlannerCM
Director, Morton-Wilson Limited

Michael’s book launch

“Michael Barr has written a straight talking, politically incorrect book that doesn’t require a degree in economics to understand. The two enemies of the investor; the financial institutions that ‘manage’ their funds and the investor’s own animal spirits are identified as the major culprits of wealth destruction. Michael Barr offers simple low cost solutions that the reader would do well to adopt.”
Craig Burgess DipPFS IMC
Managing Director
Blackstone Wealth Management Limited

The title of my book was inspired by a controlled experiment, in which chimpanzees made random investment selections by throwing darts at the Wall Street Journal. Their selections outperformed those made by the majority of professional fund managers.

The thought of a chimp successfully moonlighting as a fund manager, whilst mildly amusing, also serves to expose the shortcomings of the fund management industry.

The book’s style is designed to be entertaining and educational, a fundraiser and a great gift idea. My intention is to help the majority of investors trying to save their hard earned money without being ripped off or misled.

I explain why many experienced investors should review the way they invest and why they should challenge the advice they are getting from their advisers and stockbrokers.

One advantage of a book is the freedom to be able to write with more honesty than is often permitted in a magazine article. Often, the advice given in newspaper and magazine articles cannot be trusted when there is a cozy relationship with advertisers.

I have covered the set up costs so that the funds raised will not be reduced by high production costs. The book will be on sale soon and listed on Amazon.com. The way to maximise the value of donations is to have a high volume of pre-orders so we do not pay resellers costs and high pay-pal fees.

My named charities are UNICEF and MAG International. Most of us have heard of UNICEF’s work for children around the world.   MAG is an international humanitarian organisation clearing the remnants of conflict for the benefit of communities worldwide. MAG is co-laureate of the 1997 Nobel Peace Prize.

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[How to invest better than the average primate]
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[How to invest better than the average primate]

I often imagine the conversations between some advisers and their potential customers.  The scenario is the adviser opening with a leading question, “Would you rather pay me a fee or would you prefer I collected a commission from the investment I recommend?”

It does not take too much imagination to expect a reply of, “Well naturally I would much rather not pay a fee!”

Sensing a successful sale is in the air that afternoon, the adviser goes on to seal the deal with a seductive, “What I have done is to negotiate a special enhancement for you – adding a full 2% extra to your investment, but I don’t know how long the deal will stay open.”

I can see meetings run along these lines every day in homes and offices all over the country.  The clients initially feel happy because they believe they have got a good investment for nothing, but how does this really work?

The art of selling

I recently received an invitational letter from the Prudential.  I receive offers like this all the time but I know everyone has heard of Prudential.  The letter implied that the rates of commission on an Investment Bond were going down to only 7%.  For example, the sale of an investment for £10,000 or £100,000 would produce a commission of £700 or £7,000 respectively.  Not bad for an afternoon’s work.

It is for this reason that an adviser can afford to give up 2% of the commission. The important question to ask in these circumstances is, “where is this commission coming from?’  The answer is very simple; it is coming out of the investment.

I would say Investment Bonds are very much over-sold as they are an ideal salesman’s product.  I wonder how many would be sold if there was no commission?  I think the answer is very few.

I come across investors who are quite smart and they have told me they have been advised to look through the documentation for the ‘total expense ratio’ to work out the cost. Unfortunately, the financial services industry has revised the meaning of the word ‘total’, as some quite significant costs are excluded from this ‘total expense ratio’.

Commission-based independent financial advisers are due to be phased out by the end of 2012 but there is plenty of time to be misguided on costs. I recently listened to a Radio 4 programme where the public rang in and spoke to a panel of experts.  Of the three clients who called, two of them had been recommended Investment Bonds with high costs.  Investing can certainly be a minefield.

If the investment pays a commission, then more than likely the investment is expensive.