The value of teamwork

A skillful landing

The occupants of a car involved in a serious accident were very fortunate yesterday.

Seconds after their car was pushed into the air, spinning like a top before landing in a field 50 metres off the road, the incident was attended by local doctor Stephen Houghton. I called the emergency services as he released the passenger who was trapped upside down in the overturned car.

Within minutes the ambulance and air ambulance arrived from Blackpool. An efficient operation got underway with Dr Houghton briefing and then working with the other professionals. All the medics - were fantastic.

If you were in such an incident you would be very pleased if the air ambulance turned up. Quick and  life-saving attention and transport to the local hospital within minutes.

Villagers take refuge while MAG makes their home a safer place

The MAG-net business network meeting at the award-winning Chips development in Manchester was a success for everyone who attended.
In my presentation – The inspiration for ‘How to Invest Better than the Average Primate’ I observed the common ground. MAG holds a Nobel Prize for its humanitarian work and investing truths come from Nobel Prize winning research. Both experience many hidden dangers, although the exhibition imagery put everything that was delivered into perspective.

You should not miss the photographic exhibition ‘Surviving the Peace’. The bare, utilitarian setting of an unfinished building may sound a strange setting for an exhibition, but it is in harmony with the images of survival, bravery and the determination of the human spirit. On this occasion a carpet on the ground would feel inappropriate and out of harmony with the black and white images and blood-red supports.

The book is now in its second print run and a short thought provoking video is available for you to view on YouTube.

Michael’s MAG presentation - 8th July 2010
http://www.youtube.com/watch?v=1MxTz6OopkM

If the quality of the high quality presentation is not uploading fast enough on your system, try the lower resolution version below.

http://www.youtube.com/watch?v=kRKDXQ_qAAY

As a world-class professional goalkeeper, would you choose to dive to the left or to the right? You could make a third choice, which is to do nothing and stay in the middle, although any fan of ‘Match of the day’ will tell you that very few keepers would stay in the middle.

It may be a surprise to know it is best to stay in the middle as this choice is three times more likely to save a penalty than diving one way or the other. Interestingly, the best chance of scoring is to also to knock the ball down the middle, as the goalkeeper is never there!

This information cannot be a secret. Also, goalkeepers and their coaches are highly motivated and trained, and have unlimited resources, so why do players usually ignore the one option which the one most likely to win the cup?

It could be to do with the way a player feels after letting in a goal. It never feels good, but it feels worse when you stay in the middle and do nothing. You fear looking foolish just standing there and looking like a rabbit caught in the car headlights. This is not at all good for the epitaph or indeed when negotiating the next transfer fee.

It may also be that you or the supporters do not believe the evidence. More important perhaps, is to make it look exciting for the fans watching a brave, athletic and heroic dive, even though it so rarely successful that everyone will remember that one great save.

The same pattern of ignoring the evidence can be seen when managing investments. Advisers and investors rarely stay still as often as they should. They jump from one investment to the next, even though a look at the evidence tells us that active management does not work and it rarely meets our investing goals.

Too many investors are conditioned to expect action when it would be much better to start with a robust game plan and then to ‘stand on the same spot’.

Less exciting - but far more profitable.

To read abut Michael in the news click here

Michael reading with the Lemurs at Blackpool Zoo, Thursday 10th June 2010

Not so-average primates check out Michael’s book.

Although not renowned for their spelling, these cheeky primates did not take too much encouragement to seek a second investment opinion. According to Wikipedia, Lemurs are just like us in that they use tools and understand basic arithmetic operations. It seems they also appreciate a good read.

The photo was taken at a seminar held at Blackpool Zoo’s Corporate Hospitality Suite. The event started well with a fascinating MAG display presented by Mark Bradshaw and Michael demonstrated how a run of good luck can be misinterpreted as investment skill. One lucky member of the audience won a fine bottle of wine.

The event was a lead up to the official launch of ‘How to Invest Better than the Average Primate’ which takes place in Manchester on the 8th July, although the book is already in its second print run.

The event was a great success thanks to a wonderful audience and of course the appearance of the very sociable Ringtailed Lemurs.

Charles Ellis and Michael Barr exchanging copies of their books

Yesterday, I had the great privilege of meeting Charley Ellis, a legend in the investment industry. Charley has more than 500,000 copies of his book ‘Winning the loser’s game’ in print, and it is now in its 5th edition. In any other non-fiction genre it would be described as a blockbuster.

With Charley’s books out there in great numbers, it always surprised me that so few of those I met had any idea about the ’secrets’ of investing, and hence I identified the need for ‘How to invest better than the average primate’ which is written primarily for the UK investor. It has been well received, so much so, that during the pre-launch period we have had to arrange a second print run.

There is a similarity between the two books. Most books about investing are complicated, whereas these are written simply, they use interesting anecdotes and stories, and they provide compelling evidence to support their recommendations. Each contains numerous references to the chronic under-performance of many of the investment funds sold, and how investors can avoid them.

10% of my book sales have been to other financial advisers. I think that many advisers have started to look at the evidence more carefully and this is becoming a burden for those who continue to recommend funds that are expensive and will have a high chance of failure. I believe the book is useful to advisers as it gives an insight to the types of conversations they should really be having with their clients.

Thank you to all of you who have bought the book which is appreciated by UNICEF and MAG.

Please don’t keep it to yourself!

Michael

To order the book and raise funds for MAG & UNICEF click here
Charley’s achievements are really too many for a blog but here are a few - Graduate of Yale University, Ph.D. from New York University, M.B.A. from Harvard University, founder of Greenwich Associates (a consulting firm that serves virtually all the leading financial service organisations around the world), taught at Harvard and Yale, author of 12 books, a director of Vanguard.

We have updated our Five Top Tips for Avoiding Financial Crime

To download the document, please go to:   

Important tips on avoiding financial crime

One of the growing areas of criminal activity is misleading people into buying tickets for concerts and sporting events which will never be delivered.

The London Olympic Games will be a growing target for criminal activity both online and with fraudsters making direct, face-to-face contact. They may offer you tickets, fake lotteries and prize draws.

No tickets for the games are available, and it is not possible to reserve tickets, but you can register an interest in tickets for the games through the london2012.com  official website.

Imagine the scenario.

A very hard-working and highly educated scientist has made a breakthrough with his new project. It is expected that his new device will have a huge impact on many people’s lives. We expect he is very excited.

He is an engineer with expertise in rocket propulsion, aerodynamics, chemistry, physics, and fluid flow. His particular speciality is delivering substances that decompose rapidly under certain conditions and produce gases which expand by heat of reaction. Today he has made a breakthrough by creating a device that can be delivered to women and children living in the most remote areas.

The hi-tech device is called a PFM-1 and if a child or mother steps on it, the resulting explosion neatly removes their foot from the knee down. If they are lucky they get to keep the other foot.

A lot of effort has gone into the science of maiming people using landmines and it takes a very special organisation to stop this horror. I had the privilege of meeting  Phil Halford who is one of MAG’s ‘ bomb disposal’ experts,  who estimates that during his time with MAG he has removed about one million devices, which were designed to change people’s lives in the most horrific way possible.

When I decided to support MAG, by donating the proceeds of my book to them, you no longer need to ask me why.

Since posting this blog I have been delighted at the response. It is good to know there are so many people who are willing to give generously to a very worthy cause once it is brought to their attention. To order the book and raise funds for MAG click here

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.

Preview Michael Barr’s Book

[How to invest better than the average primate]
Buy Michael Barr’s Book

[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.