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Wish I’d Stuffed My Cash into the Mattress

Even back in the 1980s, this notion rang alarm bells with some of us. I suggested to a financial journalist friend that most people were neither eager to accept responsibility for their own money, nor fit to do so. He, a good Thatcherite, shrugged and said that 
we would just have to grow up, 
wouldn’t we?

My own experience through the ensuing decades merits no sympathy, because I am better placed than most to protect my interests. Even now, approaching pensionable age, I remain capable of earning a living amid the wreckage of my investments, as some contemporaries are not. But the story helps to explain why many of us feel such rancour towards the financial services industry, and accelerate when a banker walks in front of our wheels.

As a freelance writer, I started making decent money from books back in 1980. I told my accountant, a character fashionable among authors, that I wanted to start saving for a pension. Easy, he said. Just send us a cheque for as much as you can afford.

Knowing less about fund management than about koala bears, I sent the money, and several subsequent amounts, and was told thereafter that I should think myself “well pensioned”. In my innocence, it was years before I understood that the accountants took a commission on the deal, and longer still before I discovered that Target Life, the fund they chose, was one of the worst performers in the market.

Eventually there came a day when I realised first, that the accountant charged extortionate fees, and second that my fund looked sad. After seeking advice from - yes, again - a financial journalist friend, considered one of the smartest on the block, I acquired a new adviser, who was charmingly reassuring. At his suggestion, through my years of editing newspapers, under the newly liberated pension regime, my contributions were paid not into a staff scheme but into my personal fund.

Be cautious, I urged my adviser. I prefer to underperform market upswings rather than risk losing my shirt on the downturns. Thus, I never moaned about modest returns in the long bull market, though I made one foolish intervention of my own. In the late 1990s, a friend said he thought the stock market very overvalued. I told my financial adviser to transfer most of my fund into cash. Thus, through six silly months, I missed an uplift. When the dotcom boom came, I said that I did not want a penny invested anywhere near it. I sighed with relief when the crash followed, knowing that I was safe. Or not. When the dust cleared in 2002, my fund had fallen by 45 per cent. Even my adviser was a trifle embarrassed, and said that it seemed sensible to switch fund managers. Indeed, he said that some of the shares which the previous regime had put me into seemed so weird that he was inquiring about whether there was a case against them for malpractice. There was not, of course.

Four years ago I decided that I had been a patsy long enough. I shifted my pension fund to the “wealth management” division of a blue-chip bank. Its people have a terrific bedside manner, and rolled their eyes in sympathy when they heard my history. Do not despair, they said. Henceforward, even a cautious strategy should double your money in 10 years. Two years on, I asked a numerate friend to look at my portfolio. Having done so, he asked a string of questions. Did I realise that I was paying two sets of management fees - one to the bank, and another to the various funds in which most of my money was invested? How could they justify an “active management” charge for National Savings holdings?

Did I know that the portfolio was underperforming the markets? Yes, I said, but at least the money was cautiously invested. Up to a point. Today, my fund is worth 30 per cent less than in 2001, and significantly less than the face value of cash that I have paid into 
it since 1980.

I told the highlights of this story at dinner to one of the financial world’s grandest panjandrums. He said: “I can’t think why people like you don’t simply manage your own money online. Financial advisers charge absurdly extravagant fees, and are almost universally incompetent.” I reeled before that blanket indictment, from somebody who should know. Yet today I remain a rabbit in the headlights. My fund is still with the bank.

I am incapable of managing my own money online or anywhere else. All I can do is write. Whenever I follow the share tips of allegedly smart acquaintances, the consequences are disastrous.

Friends anxiously inquire what I have invested in, on the principle expounded by Jeeves, when Bertie Wooster said that people kept inquiring who his tailor was, “doubtless in order to avoid him, sir”. I am a failed insider trader. I may thump the next rich man I meet who says smugly that he himself sold out of the markets a year ago, and put all his money in dollars. One such character added words of comfort: “Don’t kid yourself that, if you wait patiently, the markets will pick up and the 
money you have lost will come back. 
A lot of notional wealth has simply 
gone for good.” To repeat my assertion at the outset: nothing above is designed to elicit sympathy. Nobody forced me to make wrong choices again and again. My own experience - which many others can match - merely helps to demonstrate the limitations of “financial self-empowerment”.

At every stage since 1980, I have put my old age in the hands of allegedly respected partnerships and institutions. I have never allowed, far less encouraged, them to gamble high with my fund. At the end of the story, how can my kind fail to feel rage towards those who have enriched themselves while achieving less for many of their clients than if we had stuffed cash into the mattress?

What thousands of bankers have done - for the case of Sir Fred Goodwin is only the most conspicuous - is fraudulent in the eyes of most laymen, whether or not legally indictable. They have looted huge booty based on financial achievements that have proved fictitious, leaving the nation to pick up the bill. When it comes to money, many of us are unfit to be let out without a nanny. But who can be trusted to 
push the pram?

© Guardian