Gyroscopic Investing

Got a letter from HSBC today. They've decided that since

* Some of the investments on our sharedealing service are 'complex' and we didn't have the procedures in place to make sure they were appropriate for you

* Some of the information we provided about Exchange Traded Commodities and Exchange Traded Notes was unclear on our sharedealing service and could have mislead some of our customers

Now they're right that PHGP is 11.58% down since I got it in 2010. The whole portfolio is 5.89% up though. Now in a sane world people would be free to buy financial investments and if they went down that would be their problem.

In the wacky world of the UK the FSA have forced HSBC to pay me compensation. And God knows how they've calculated it.

They've decided to compensate me 38% of the initial investment in PHGP. Which is only down 11.58%? Does that make any sense to anyone?

Don't look a gift horse in the mouth.

I certainly won't. It still seems a very odd decision to me. The state giveth and the state taketh away I suppose and since you don't really have any choice when they decide to take stuff, you shouldn't worry too much about their rationale for giving you cash.

Incidentally you can't buy things like PHGP in the UK via my bank's share dealing service anymore. Also they won't let me use it anymore since I'm not resident in the UK for taxes. So I transferred the whole lot to the US.

Hi Kev

i am assuming that HSBC as a sharedealing service had to compensate, and not HSBC as custodian of the gold right?

You can buy PHGP through Hargreaves Lansdown but like any share dealing service their spreads leave much to be desired.

i am a UK Based financial services professional looking to work with firms that adopt the permanant portfolio - none of them do adopt this strategy, and when i try to explain it, it's a nightmare - god help us - lol

Mitul

Observer wrote: i am a UK Based financial services professional looking to work with firms that adopt the permanant portfolio - none of them do adopt this strategy, and when i try to explain it, it's a nightmare - god help us - lol

Why is it a nightmare?

its not necessaily a nightmare , but it is a big challenge so far because advisers here mainly focus on volatility as a measure of risk, and so when they meet clients they fill out a risk profiling questionnaire, and if a client comes out at high risk, this would entail a higher allocation to equities, and if they come out at lower risk there would be a higher allocation to bonds. There is no real focus on correlation between these asset classes. Advisers here still rely on investment committees to set and adapt their strategic allocation regularly, ie when they perceive a changing economic environment. So the PP is radically different to how they have been used to doing things, and what the industry teaches them to do

MachineGhost wrote:

Observer wrote: i am a UK Based financial services professional looking to work with firms that adopt the permanant portfolio - none of them do adopt this strategy, and when i try to explain it, it's a nightmare - god help us - lol

Why is it a nightmare?

Anything financial in the UK is a nightmare. Most of the people you talk to are working on commission to sell some dodgy financial product and won't talk about anything else except in very dismissive terms. So you need to sit through a lot of bullshit before realising that they won't actually do what you want them to do. The Government has bizarre rules about not selling 'complex financial products'. The definition of this is hard to get but both PHGP and XASX count. So HSBC for example wouldn't sell me XASX when I was trying to set up a 70% bond 30% stock portfolio for my Mum. They won't sell PHGP and in fact were forced to compensate me for buying it.

They reckoned they could sell me  HUKX, another FTSE 100 tracker ETF. However after I got back to Taiwan they called my Mum and told her they couldn't.

There's an irony here. If you buy a bunch of uncoordinated assets - bonds, stocks and ideally gold too you're safe. If you buy a subset of those assets you're less safe.

So there's a fair chance that my Mum's portfolio will have been rendered less safe by an action that was supposed to make it more safe.

Of course the precedent for this is that you can apply for compensation.

I suspect that HSBC will just stop offering a share dealing service at some point because it can't be profitable for them to operate like this.

Observer wrote: i am assuming that HSBC as a sharedealing service had to compensate, and not HSBC as custodian of the gold right?

Yeah.

Observer wrote: You can buy PHGP through Hargreaves Lansdown but like any share dealing service their spreads leave much to be desired.

All my stuff is now via a US or Swiss bank - I've essentially given up on the UK.

Observer wrote: i am a UK Based financial services professional looking to work with firms that adopt the permanant portfolio - none of them do adopt this strategy, and when i try to explain it, it's a nightmare - god help us - lol

Mitul

Oh I can imagine. Compared to the US it's really frustrating.