Call today 041 988 8043 Email
client login

Good on the outside & Rotten on the inside Blog 185

informed decisions blog

Good on the outside & Rotten on the inside Blog 185

13th September 2021

Paddy Delaney


Some collective thoughts this week – perhaps naive of me, but I hope something resonates with you & gets you thinking productively!

Cynicism of Investment Companies!

As someone who is relatively new to the fifth decade of life I don’t intend to sound aged, but as I age my level of cynicism of most things is on the rise sharply! Maybe it is a combination of curiosity and fairness that drives that cynicism, or maybe it’s something that happen to us all as we ‘mature’!?

Speaking of mature cynics, Charlie Munger is 97 at the moment, and is someone who is not afraid to share his views openly! David Clark compiled a book of Charlie Munger quotes, which are all supported with interesting stories and background. The book is called:

‘The Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice President on Life, Business, and the Pursuit of Wealth with Commentary by David Clark’.

That must be the longest book title many of us have seen! It was published in 2017, when Charlie was a sprightly 93 years of age, at which point he had literally provided enough soundbites to fill a book! I’m only now getting around to read the book.

Charlie is an avid cynic of financial firms in particular, when it comes to investing in them (buying stock of the company as opposed to investing in their offerings, but I guess that too!). The book says of Lehman Brother:

You could have read Lehman Brothers’ annual report a hundred times and never realized that it was borrowing hundreds of billions of dollars short term and lending them out long term to finance subprime mortgages that they then used as collateral to borrow even more money…Charlie’s rule for financial firms is really simple: what looks good on the outside may be seriously rotten on the inside.

The Tao of Charlie Munger

Lehmans of course filed for bankruptcy in 2008, having previously been the 4th largest financial firm in the world, with c25k employees. It looked good on the outside but was in hindsight seriously rotten on the inside.

This type of carry-on is hopefully on the decrease, but can we be sure? If you are cynical, then your antennae are likely on the alert all of time when it comes to financial firms and indeed advisors! And stories of the magnitude of the supposed misdemeanours of Geoffrey Edward Armin in the UK would make your blood boil.

Geoffrey Edward Armin of a firm called ‘Retirement and Pension Planning Services’ in the UK was fined £1.3m by the Financial Conduct Authority (FCA) recently. He was fined for what was described as ‘Seriously Incompetent’ defined benefit transfer advice given to c422 clients. He advised on approx £125m for these clients apparently, and generated fees of over £2m in the process of transferring these people out of their Defined Benefit Schemes.

We’ve written about Defined Benefit transfers in Blog98 to highlight the significant cons and potential pros of doing a transfer. The FCA alleged that he didn’t do any of that as part of his advice process, hence the ‘seriously incompetent’ allegation. Personally speaking, I can’t see how a firm can actually advise on 400 individual client cases, and NOT offer any kind of clarifications or education for any of those people. Even if I for some reason tried to do something like that, I’m pretty sure our Compliance Consultant Paula would literally arrive at the office and beat me over the head with a dead fish until I corrected the error!

To his 400+ clients perhaps Mr Armin did look good on the outside, but based on the FCA fines, it seems that the inside was pretty rotten.

So, is cynicism a healthy behaviour? I guess a healthy level of it is – once we don’t go overboard with it! Maybe it’s the laws of attraction or maybe it’s coincidence but the majority of people that chose to work with Informed Decisions Financial Planning are people who like to be educated, to know the ‘how’ and ‘why’ and are curious-minded. I guess we all have an above-average degree of cynicism. What I really like about that is that once we make a decision about a provider/strategy/life choice, we move on and take comfort in our joint due-diligence. We’re in it together.

Too Much Free Time??

It has been confirmed, according to several pieces of statistical research, that too much free time reducing our level of perceived wellbeing. Having too much free time was associated with lower levels of wellbeing; driven by a lack of purpose and productivity.

In numbers; one of the studies found that if we have more than 5 hours of free time, our level of wellbeing decreased. So if you are transitioning from full-time employment/action with very limited ‘free time’, to a position where you suddenly have more than 5 hours per day of ‘free time’, you might struggle.

I actually bumped into a guy out walking this morning who retired 3 weeks ago. I hadn’t seen him since so I enquired as to how ‘retirement’ was suiting him. I was surprised when he gave what appeared a candid response. He said ‘It’s OK but it’s taking a lot of adjustment’. The typical response we usually expect might have been ‘yeah it’s great’ or something of that order. But here was a guy, fit and well and on his way to the gym who openly admits to finding the adjustment less than easy. We didn’t have the opportunity to chat any further so I didn’t get to ask him about his preparation for the transition, or his plans for ‘what next’.

The summary of some of the statistical research might seem obvious to us, but valuable to really consider depending on which end of the ‘free time’ scale you sit;

“People who feel they have too little free time should not quit all of their obligations, but instead try to find a couple of leisure hours a day. Meanwhile those with empty days should try spending their time with purpose, be it connecting with others or doing something productive.”

Speaking of ‘free time’, I came across another quote recently on twitter that I really like, and lines up so well with the Eisenhower Matrix, which I encourage everyone to get into a habit of using at least weekly. The ‘free time’ quote, which applies moreso to those who feel they might not have as much of it as they would like is:

“What you do today when you have free time determines how much free time you will have a few years from now.”

@orangebook_ on Twitter!

Personally speaking, this makes so much sense, particularly when you really look at the free time most of us ‘busy people’ actually already have yet squander!

Knowing What You Don’t Know!

The final musings of this weeks sermon!

The concept that every day we have presents an opportunity to learn something new is an interesting one. Would you prefer to be a ‘know-it-all’ or a ‘learn-it-all’? Satya Nadella, CEO of Microsoft, who has overseen such a hugely successful period of that company’s history gave the following example:

“If you take 2 kids in school, let’s say one of them has a lot of innate capability but is a know-it-all. The other person has less innate capability but is a learn-it-all. You know how that story ends. Ultimately, the learn-it-all will do better than the know-it-all. And that, I think, is true for CEO’s. It’s true for companies.”

Satya Nadella

HIs linking of the kids in school, to CEO’s and indeed to companies might encourage us to apply it to our own reality; in our personal lives, in running our own business, or in our work with our peers, colleagues and customers. If we’re not seeking input and genuinely trying to learn from others, maybe we’re wasting some great opportunities?

Speaking of asking questions. As a financial advisor, I deal with a very sensitive personal topic of people’s financial lives. There is a great responsibility in guiding people professionally, accurately and with great care. However, I don’t believe that any one financial advisor knows everything there is to know about all aspects of personal or business financial planning. It’s impossible for one person to know that. They must rely on specialists experts to get anywhere close to having all the answers. The same can be said of mechanics, doctors, tree surgeon or any other profession you care to think of.

In summary, if your financial advisor doesn’t at least occasionally say “I’ll check that out and come back to you”, then you might have cause for concern! Final word to Charlie Munger and David Clark on this topic:

“I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.” The problem here is one of trust. If people don’t have the integrity to admit when they don’t know something, how can one ever trust them? It is much better to jettison such a person and find someone with a bit more intellectual honesty. Again, Charlie shows that he is as interested in knowing what is unknown as in knowing what is known. The opinion of someone who can’t tell the difference is useless. 

Pretending that you are indeed all-knowing is perhaps another fine example of looking good on the outside but being really rotten on the inside!?

Thanks for reading.


Looking For Independent Financial Advice?

If you seek a source of trusted, truly independent expertise on your investments, pensions & financial life, we can help.