Transparency, trust and integrity

My aim is to provide an independent, unbiased service to members and develop a real relationship based on transparency, trust and integrity.

After all the revelations from the royal commission of the last two weeks, tell me something I don’t know. Banks behave badly. AMP lies to ASIC and gives poor ‘expert’ advice. Clayton Utz is complicit, Morgan’s revalue Blue Sky down 60% after the fall, and the likes of KPMG, EY, JLL, Savills and Colliers stood behind its valuations, and then of course Facebook is sorry – again!

We face a litany of lies and bad highly paid bad advice. So why is it we give these people our money when their only interest in many instances is to clearly to line their own pockets. Financial markets are at a crossroad. Go Mr Haynes.

AMP’s sales strategy of having a vertically integrated ‘approved product” list that effectively sells their own products to themselves with an associated lucrative fee structure naturally feeds a continual flow of ‘conflicted’ fee payments within these companies. This conflict has been condoned for years but no one has questioned or challenged this absurd structure to ensure that in fact the client is looked after. The result of this conflict is now apparent.

Who do you trust?

Where’s ASIC?

Where’s pride on our performance?

Where’s the respect for the code of conduct?

Are our brokers really doing their job or just reactive, highly paid yes men?

What is the retail client meant to think and who are they to trust?

These questions demand answers. We now know trust and credibility is a bigger issue now more than ever before in the financial markets. Thankfully the emergence for the new activist share trader is finally taking some of these stocks to task and filling a much-needed gap in honest and real independent appraisal of companies for us. Yes they have an objective, which is to see prices lower, but the market can still take them on and they are making the playing field a bit more level. To their great advantage is that the fear of a loss is greater than taking an opportunity to make money. However there is probably a few nervous CEO’s out there right now worrying about a tap on the shoulder. No one else has up to now taken the time to query some of the questionable ‘figures’ these companies throw about seemingly with blasé ease as the fee ‘club’ lives on in strength.

It seems it’s the same old same old when it comes to money. People can’t help themselves from lining their own pockets at the expense of the ‘kept in the dark’ retail investor nor can our big institutions, four of which we bank roll with our ‘to big to fail’ guarantees. The thanks we get. If we got caught doing similar crimes we would be handed out a severe punishment. The book is thrown at us. Not for the big boys, a rap on the knuckles and onward ho. Facebook lies, lies, and lies. Oh but I’m sorry I promise not to do it again!

Blue Sky Investments is the most recent ‘fleece your shareholders business’ to be caught out effectively paying itself inflated fees on inflated investment values. Here the activist investor is taking to task these companies valuations because it certainly wasn’t going to happen from our highly paid research houses and stockbrokers who analyse, research, endorse and then pander to these companies, or the sadly under resourced ASIC policeman.

To put it simply it’s a mess and nothing has changed since the GFC or in fact for many years before. It is just sometimes they get caught then things blow over again and the status quo resumes. Money is the root of all evil and that will never change. In fact in the entire history of the stock market insider trading, deceit and market manipulation has been rife. Bitcoin brokers provide the latest ‘fad’ opportunity luring in investors and lining their own pockets with fees. Yes they’re smart they won’t invest they’ll just take clip your ticket along the way. This is the known path to riches throughout the industry. Lure the sucker in and of course there are so many more just waiting in line teased by the lure of the dollar.

Fund management is probably the next target for a reality check. Yes there has been a token fee war but do they really provide real value. Do you know of the double dip? I give my money to the institution; they then give the money to the fund manager. As it comes back in the way of returns, which my or may not be positive, the fund manager takes their chunk which could be say 1.5% of FUM, then the institution who you deal with reports to you and takes another fee which may be another1.5% and all in a year when returns were in fact negative for the year. Is there something wrong with this equation? I think so. Somebody is making a lot of money for very little work and it isn’t the retail investor. It seems the reason for giving financial advice and managing peoples money has been lost. Growing clients equity while receiving an appropriate fee for that service would seem to be the common sense outcome.

I have approached many institutions with my absolute return capital preserved strategy but the hard fact is that my ‘style’ doesn’t stack up on performance basis against the ASX/200. They don’t seem to be interested in absolute returns that often hold large amounts of cash despite the good returns it generates, and doesn’t go down when the market does. It’s a sad indictment on the ability of many of our ‘index tracker’ fund managers. My approach is also low activity; low cost (good for you bad for them!) again another no-no for the institutions. It’s not a gripe because I understand that’s how it is but a better balance must be struck. It is more a sad frustration with the way the deregulated industry has developed. I have my own business with my own members who know and trust me for what I do.

In the end I believe there is a clear mismatch between institutional needs and retail needs. Alas in our unbalanced world it appears the institutional needs are more important and that’s why we have that ‘unique feature’ where you still pay them even when you lose money. That’s a mighty fraud. But investors still hand over their hard earned money. Amazing. It’s a case of the ‘buyer being not very aware’ or simply living in mistaken hope. Many of our big institutions have unfortunately lost the way and their original purpose, such as AMP, which is to look after and care for the investor with integrity, honesty and transparency.

Make no mistake there are good fund managers out there but the current trust and credibility issue being generated by the high profile institutions makes it very hard for all of us. There is still the mentality by the retail investor of the biggest is best and of course safe. Question mark! In fact smallest is probably better now.

What’s the solution?
Transparency, trust and integrity are the key to a long lasting partnership that can generate steady growth in your equity.

This is done best in a smaller entity where you can communicate with a real person and on a partnership basis where both parties are winners, and develop a real and mutually beneficial relationship. As service providers we must charge for our services and expertise if they serve the purpose that are intended. This endears long term relationships and successful partnerships with expectations managed correctly.

Make hay when the sun shines and preserve your capital when it doesn’t shine just like the last 12 months. The stock market has gone nowhere in a year but astute price analysis devoid of fundamental misinformation points us in the direction of the recent big winners such as ACX TWE A2M CPU NXT FLT SBM NST WSA BPT NEC CIM ORG PTM CGF SRX and ALU. Yes the list is long and strong if you understand how to follow trends use stops and manage your expectations. The banks and most leaders (ex the miners) are trending down now and thus the index struggles.

We can divorce ourselves from the muck and stand tall and proud and follow our own beliefs and in turn make steady returns. If you have the right tools and common sense it becomes a very special and rewarding challenge.

‘the only stock market advice you can trust is the price action’ – the price never lies