The bank I had joined as a trainee fresh from law school has disappeared long since, after countless mergers and rebranding. But I still remember vividly the lessons I was taught at the time.
The banking world was much simpler then, particularly in the banking back-waters of Vienna in the 1980s. People who wanted to save had a comfortably small range of products to choose from: it was either a Sparbuch, as the anonymous savings account was called, chosen by 99 per cent of all savers young and old; or a term deposit, with the minimum amount of half a million Schillings (€35,000), which was way beyond the means of most savers; or participation certificates of investment funds set up by the bank itself; or bonds – again, mostly the bank’s own – and shares.
The latter were considered outlandishly adventurous and came with a standardised health-warning like the instruction leaflet of a medicine.
This is a far cry from the dazzling array of investment opportunities on offer today. Erstwhile arcane instruments, like options, futures or ‘structured’ products have entered the mainstream, and many over-the-counter goods like ETFs had not even existed at the time.
Yet, some of the investment advice given to customers in the branch I was assigned to still holds valid today: “The higher the risk, the higher the return.” “Only invest money you will not need any time soon.” “Don’t expect to get wealthy when you still run credit card debts.” “Don’t invest in another currency than your own.” “Understand who you hand over your money to.”
The banking world was much simpler then, particularly in the banking back-waters of Vienna in the 1980s
Quite a lot of things I learned at the time make not much sense anymore: “When shares go up, stocks go down.” “Shares are more risky than bonds.” “Always put some money in gold.” “Real estate is safe.” “Never let money idle” and such.
And some advice ladled out never made much sense at all. Like the age-old adage, “Buy cheap and sell expensive.” Nobody, no matter how much of an expert, can ever be sure that a thing will not get even cheaper or may be sold at a higher price. Only with hindsight can we be unfailingly clever.
Times have become trickier too, as we all know. Neither governments nor banks are ‘firm as a rock’ anymore, and ‘investment grade’ has become a rather flexible term, often disastrously so.
We live in a time of savings nobody seems willing to put to good use, and interest rates are therefore firmly tending towards zero and beyond. The lure of better returns and unexpected riches become an almost irresistible siren song. Multi-coloured brochures and cunning salesmen promise returns from the realm of fairy tales and too many gullible savers are tricked into investments which are built on sand or outright fraud.
Solid and selfless financial advice is hard to come by these days – in many cases with the best of intentions. What can a bank clerk really tell his customer when in truth there is not much of a sensible investment around? Many will feel compelled to tell us what we want to hear, or will wish to sell us what they are told to, before they are made redundant. In times like these, The Sunday Times of Malta has decided that it is high time to make life safer for our savers. We invite you to write to us about your concerns, to share your past experiences, to report about offers which may be too good to be true. I want to act as a financial agony aunt, explaining financial products with common sense rather than haughty obfuscation.
My aim will be to improve good judgement. After all, money not lost is as valuable as money made. And perhaps we will together stumble over some really good investment ideas. Who knows?
The purpose of this column is to broaden readers’ general financial knowledge and should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.
Please send in any queries, concerns or ideas that you would like Andreas Weitzer to discuss in his fortnightly column to: editor@timesofmalta.com – Subject: Personal Finance.
Andreas Weitzer is an independent journalist based in Malta. He reports on the economy, politics and finance.