As we saw last week, biotechnology firms fall into the category of high risk – and in more serious ways than simply as investments. But as we point out in sector of the week, biotechnology also offers opportunities for high financial returns and products that can improve our lives.
Independent financial advisers (IFAs) also want to make life better, and five of them came in to discuss the changes to the UK pension regime set for 6 April, so-called ‘A-day’ – you can read their comments here: How A-Day will affect your pension plans.
Of course, there are reasons to be sceptical. There have long been complaints about the financial industry. Former heroes have been forced to hang their heads in shame, or once miracle high-yielding products have been exposed as toxic.
The catalogue of grievances in recent years is depressing. We’ve suffered misselling of personal pensions, endowment and with-profit life policies, split-capital investment trusts and stockmarket-linked bonds – sold by IFAs tempted by juicy commissions from product providers.
We worry about deceptive investment fund performance histories, which are either the responsibility of a collective process, or of a “star” or fourth-division individual manager – who knows? We fear hidden unit-trust and Oeic charges, conflicts of interest, incomprehensible investment statements, product complexity, and tipsters who give advice that is at best second-hand, at worst too late.
And then there is the myriad of opinion in the financial press, often written by journalists armed with liberal arts degrees, but who struggle with a calculator. No wonder, as Ron Sandler said almost four years ago in his UK Treasury-commissioned report on the retail savings industry, “Consumers are reluctant to engage with an industry that they don’t really understand and perhaps don’t really trust”.
But a clear message that comes across from our discussion with the IFAs is that not only is A-day an opportunity for savers to plan for their futures, based on a clearer and more flexible system, but it is also a chance for advisers themselves to a “have a fresh start”, by providing more “holistic advice”.
Pensions should be part of an individual’s general savings and investment strategy, which ought to adapt to changing life circumstances. Younger people should be prepared to take more risk with the objective of growing their capital – perhaps by investing in biotechnology shares. So the fear of getting hurt again should not make people blind to the opportunities for progress – both in human and financial terms.
By Rupert Walker, Associate Editor of MoneyWeek