Tag Archives: Financial Services

Jun 27 2013

On a scale of 1 to 10…

Risk

Risk (Photo credit: avyfain)

If you ever want investment advice – especially if you reside in the UK, an advisor will ask you to fill in a survey all about risk. I understand why these surveys exist, after all, the advisor needs to make sure you understand the concept of risk versus reward and pitch investment advice to you that is appropriate to how you feel.

By necessity, the survey is relatively simple consisting of statements like “Compared to the average person, I would say I take more risks” and you then tick a box to show how strongly you agree or disagree with the statement.

But who’s the average person and what do you consider a risk? I wouldn’t try anything like skydiving and I’m not too keen on the idea of deep-sea diving, but I do recognise that any kind of reward comes with risk. There’s even a risk of doing nothing because depending on your situation, the lack of action could leave you considerably worse off. If you’re standing in a burning building, you probably take a different view on the risk of jumping out the window.

I find such forms very difficult to fill in because my answers to the questions can vary wildly depending on which aspect of my life you are talking about. I have a very different attitude to the risk I take when I buy a £2 lottery ticket compared with one of those £50 tickets at the airport to win a car. It depends on so many factors; the amount of outlay, the potential reward and the likelihood of winning (or as is more often the case – losing).

When it comes to investment, it’s even more complicated. My attitude to risk changes with timescale, so I have a different attitude about the investment that’s supposed to pay off my mortgage compared to my retirement fund. The age at which you can retire in this country is galloping over the horizon so I’m fairly relaxed about taking some risk because a lot can happen between now and then.

It also depends on where in the world you are talking about. We have people in the western world doing essentially the same job as their counterparts a few thousand miles to the East, but we earn orders of magnitude more money. There is a considerable rebalancing that’s going to play out over the coming years which will affect the likelihood of growth in each area. Asser class makes a difference too. We have a saying “safe as houses.” I imagine many people across Europe and America take a very different view about the relative risks of investing in housing since the sub prime market imploded five or six years ago.

And it interest rates start going up or America decides that what the world really needs is another war – it will all change again. Maybe I’ll fill out 10 different forms.

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Apr 8 2013

Cash or cheque?

Money Queen

Money Queen (Photo credit: @Doug88888)

I looked at my first full-time payslip in disbelief. More money in one month than it would take me all year to earn on my paper round. At that precise moment, I felt rich. What am I going to do with all that money?

It’s a shame that every payslip doesn’t come with that feeling. Unfortunately, as time goes on, we get mortgages and cars and other such commitments to mop up all that disposable income. Money felt very different to me back then.

It was more difficult to get at for starters. To make a withdrawal, you had to actually go to the branch. I can’t remember the last time I went to a bank branch. Once in the branch, you had to queue up to see a teller. Once you reached the front of the queue, you wrote out a cheque to yourself, handed it over and in return, they gave you some cash. You could only get cash during your bank’s extremely limited opening hours which meant that almost everyone went at lunchtime. That meant the queues were enormous.

Along came the ATM. Suddenly with your plastic card and a PIN number, you could get your cash when you liked. At first, you were limited to your bank’s own branches still, but it was progress. Mine had a weekly limit of £50 which was just too low to eliminate the tedious trips to the branch.

If you wanted to pay someone else some money, you would write them a cheque. For it to be worth the paper it was written on, it needed to be backed by a cheque guarantee card. I can’t remember the last cheque I wrote out but for some strange reason, my cheque book still lives in the back pocket of whichever trousers I happen to have on. Old habits die-hard.

I remember applying for my first loan. It was for the princely sum of £2,000 to buy a new car. I had to go down to the branch for an interview with the bank manager. I remember dressing up smartly and turning up early, eager to make a good impression. That was over 20 years ago and was probably one of the last times I ever saw a bank manager.

Today, I can pay for my tube ticket with a swipe of my card. I can lend money out to other people without ever leaving my armchair. From that same armchair, I can place bets or invest in the stock market. Some would say that they are one and the same thing. I can also launch a project and ask strangers to invest in it. I can find almost anything I want on the Internet and pay for it there and then. I could probably list off half a dozen different ways to pay someone some money. I bought my last house without seeing a soul (apart from the estate agent).

And yet, despite all that, our financial system seems very antiquated. I still have a pocketful of change and a wallet full of paper money. If I go to a different country, I need to change those coins and notes for different ones. I have a number of plastic cards, each with their own provider, credit limit and statements. I probably have accounts with dozens of institutions, from Amazon and eBay, through to utility companies and banks.

If I want to work out exactly where I am with everything, it’s up to me to collate all the information and do so. I can’t wait for the day when all I carry is my phone and I’m able to see everything about my finances in one place without breaking sweat. Maybe one day.

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Jul 3 2012

Life without the internet

Current Canadian Yellow Pages logo.

Current Canadian Yellow Pages logo. (Photo credit: Wikipedia)

Thirty years ago, most people shopped in the town in which they lived. They might have made the occasional foray further afield and they might have made use of mail order catalogues, but the chances are that the goods that were available to them were limited to what was in the local vicinity. If they wanted to find something, they would reach for the yellow pages that sat under the phone and look for suppliers of that product or service. Once located, they would “let their fingers do the walking” and phone the number listed using their landline.

Taking out a loan or a mortgage meant hopping on a bus into town to visit your not so friendly bank manager. Rates weren’t advertised like they are today so unless you had seen a comparison article in a recent newspaper, the chances of the being clued up about the market were minimal. Besides which, people tended to be very loyal to their bank.

Credit cards were not common so the majority of transactions would be paid by cash or by using a cheque backed by a cheque guarantee card. Cashpoint machines or ATMs were still relatively rare and you were limited to the machines in your bank’s network (which often ran out of money). Most people still went into the branch to withdraw money. The teller would not have a computer, but they would have a naughty list. If your name was on the list, you were unlikely to get your money and were often invited for a bit of friendly financial advice from the bank manager.

Social networks tended to revolve around churches, pubs or places of education. Social interactions would be face to face or over the telephone. For friends and relatives lying further afield, a handwritten letter was the order of the day and everyone allowed 28 days for delivery of anything delivered through the postal system.

If you wanted to know what was going on in the world, you read a newspaper. Booking a holiday meant visiting a shop called a travel agent where you looked through brochures and selected your ideal destination. The assistant would then book it using the phone. Avid readers would pack a stack of paper backs. Music enthusiasts would pack a Walkman together with a pile of cassette tapes.

Schools were unlikely to have computers and if they did, they would not be connected up to other computers. Computer science was a niche subject. Most computing was done overnight. The results would be printed off onto huge piles of paper which would then be processed manually the following day.

It’s fair to say that the Internet has revolutionised the way we socialise. It has also fundamentally changed the way we research and buy products and services. There is a downside to this. Many traditional bricks and mortar businesses have crumbled as the internet as rendered their business model quickly obsolete. The upsides though are hard to ignore. Within seconds, any product or service can be located and purchased no matter how obscure or where it is made. Individuals can start companies, raise capital, publish books, form friendships and find the answer to just about any question in the world.

In my view, we are only scratching the surface. As more open data initiatives take off and the semantic web takes shape, the online possibilities are likely to explode and I for one can’t wait.

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