The Comfort Factor
Robin Currie

OK, you need to realise that what I’m about to write isn’t entirely in line with normal Financial Services Authority practices when it comes to portfolio planning. It doesn’t actually breach any regulations of course, but this isn’t the way that the FSA would normally go about things.

The usual way to plan your finances is to use your mind and (to a lesser extent) your emotions. And I regard this as hugely insufficient. There’s another major factor to take into consideration.

I was reminded of this recently when speaking to my client Jodi about investing some money over the medium term. She had prepared for our meeting by reading the financial press and had very clear ideas about what areas were currently producing high yields. But she had no real sense about what to invest in.

Like most people, Jodi wanted an excellent return on her investment without any appreciable risk. However she was clear that this was unlikely, even in the kind of screened, environmentally-sensitive holdings that I specialise in. So the question was how best to create a portfolio which was the closest match for her overall investment criteria and risk profile.

It was clear that there were certain exemptions. She didn’t want to invest in companies who dealt in obvious negative areas such as child slavery or third world exploitation. We also agreed that she was in favour of constructive engagement – for example, while she had an extremely negative view of companies which had a poor record on environmental degradation she was willing to support those which could demonstrate a board-level commitment to improvement.

However it still wasn’t clear to Jodi how we should proceed until I quoted something said by Michael Bloomberg. He was asked how he made so much money. ‘Simple’ said the entrepreneur. ‘I get greedy when other people get scared. And I get scared when they get greedy.’

What he meant was that there tends to be a pattern to the investment choices that most people make. But he follows his own path.

So most people like to buy on a rising market although it means that the shares are more expensive and you therefore get less value for money. But we are herd animals. We like reassurance. We tend to argue that if someone else is doing something and seems happy and successful, it must be a good idea. So we follow their lead and do the same.

Unfortunately the basic rules of supply and demand tell us that if something is becoming more desirable then the price will go up. And if we’ve just invested in it and it’s now apparently worth more than when we bought it, we’ll start to feel good. And we’re tempted to do more of the same thing.

But there’s this thing called the market cycle. This means that prices will tend to go up, and in due course they’ll go down, and eventually they’ll go up again. But if our sense of security and satisfaction depends on share price, it will disappear when the market drops.

Bloomberg suggests that it’s better to buy when the market is down because you’re getting the same thing at a better price. But mostly we don’t do this. Instead we get scared. We panic. And in some cases we sell up and convert a notional loss into an actual one, lose faith in the overall market and vow only to stick to nice safe things like Premium Bonds.

Now none of this was a revelation to Jodi, but it established a context for her.

So we then went on to discuss the fact that there are about a dozen different classes of investments, each with its own level of volatility, and which are appropriate for specific purposes.

As Jodi wanted a fairly high level of security in her funds, we agreed to put the bulk of her investments in low- and medium-risk holdings which didn’t do any of the things she didn’t like. At our next meeting though, she wasn’t happy. It wasn’t that there was anything wrong with what I’d suggested, she said. She liked all the constituent parts. It just didn’t feel right.

I could almost have cheered. What had happened was that Jodi had bypassed her brain and her emotions and allowed some other part of her to surface.

You see, the conventional way of establishing a portfolio is through intellect and occasionally some element of emotion. What you get as a result may be clever but it doesn’t really belong to the client. It belongs to the adviser.

And in this case, Jodi had been asking for what she thought she ought to want, not what she did. The result was, well, bland.

However, when we talked it through it was clear that she was willing to take a much higher risk with some of her funds, although only if the investment inspired her. And what she was passionate about was renewable and sustainable energy. And together we were able to develop an investment strategy that was hers, and hers alone.

I’m not suggesting that this means that she will automatically make huge amounts of money with no risk, but that the investment strategy she is pursuing fits her. It specifically matches her criteria, but there’s more than that. It’s not a generic product. It’s special. It’s a Bloomberg.

There’s a common theme in mediaeval stories that this reminds me of. A pilgrim arrives at a hilltop and is shown two roads. The first is straight and narrow, steep and hard and uncompromising. In the tales this is the road to Heaven although I think of it as the road of Thought. The second is broad and easy to walk and slopes invitingly downwards. I associate it with Emotion, but in the stories it’s the road to Hell.

And if you look hard, there’s a third. This winds away over hill and dale. It’s overgrown with flowers and you can’t see where it ends up, but it’s hugely attractive and in a curious way, it’s right. This is the road to Faery, and for me it is the road of Feeling and Intuition.

And that’s the one that I favour.


Robin Currie is an Independent Financial Adviser specialising in green, ethically-screened and environmental-sensitive financial products. For an appointment call 01392-411630 or e-mail robin.currie@btconnect.com. You can also log on to the website www.barchestergreen.co.uk. Robin also runs the highly acclaimed workshop Making Friends With Money (www.makingfriendswithmoney.com).