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My BS detector is fully functional, how about yours?

07 March 2006 Angelo Coppola

The financial services reporting season is almost over phew. Its been a long and difficult period, what with the cricket, Tsotsi winning an Oscar as the best foreign language film in the world, the cricket, the spate of results presentations and all that

I mention the cricket in passing because the Sunday result is a prime example of what investors and people, looking to build their nest eggs, do when it comes to making decisions. They loose concentration. The loosing cricket teams, on different days used strategies that worked for them previously, expecting the same outcome on a completely different pitch.

See the comparison in investment terms?

Well, investing in a fund, country or asset manager, based on how they performed in a completely different set of circumstances doesnt guarantee the same result. And yet we are all guilty of following the winners, and betting on them.

Ask any punter who goes to the horse races. Study the form, check the results on similar tracks, look at the other runners and understand where their strengths lie, and then make an educated guess because thats all it is, a guess.

Im not equating horse racing to investing. Im saying that punters dont always win, but at least there is a little satisfaction in knowing that they did their homework. Investors rely on intermediaries to take some of the guesswork out of investment decisions.

After all thats why the intermediaries earn the big bucks, right? Wrong. Intermediaries have an obligation to do their homework and then advise their clients accordingly. It would be morally indefensible to offer advice, of any nature if the unbiased research hadnt been done.

But who has time to do the research, what with chasing those appointments, watching the cricket, going to new product launches, being taken on trips with your spouse to coastal cities, under the guise of a conference, the cricket and of course listening to an entertaining presentation by the ombudsman for short term insurance?

Im getting side-tracked again - back to the research. As contractors or consultants or brokers or tied agents or staff, we rely on people to provide information with is factual and unbiased.

We assume that the request for information will be answered with the best interests of the client in mind and not those of the shareholders. Now that would be a big mistake, I would venture to say.

So where do intermediaries turn for unbiased research? The answer is nowhere, because very simply everyone has an agenda, and everyone wants to make a living.

The very best intermediaries can do is sift through the marketing speak and develop a relationship with the supplier of the information hoping that at least some of the information is devoid of noise

Good luck.

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