Friday, August 31, 2007

Nanny State Gone Mad

I love our American cousins, I really do. Land of the free home of the brave and all that, but what I admire most about them is their stoical attitude towards, what amounts to, a nanny state gone mad.

I read this from investordailyedge:

"I have been investing with Franklin Templeton for 25 years. The $ total grew to more than $100,000 and comprised 11 funds in all, the income of which I have been using in retirement now, and, when expenses permitted, for additional investment. I’m the kind of investor mutual funds appreciate - I’m committed to the long term, and didn’t care if the market was up or down at any particular moment.

Suddenly in January of this year, I phoned through to Franklin Templeton to have them tell me that I was now subject to “Blue Sky Law” and my accounts were virtually frozen in place because my address of record was not in the U.S. of A.

The fact that I had a track record with them for 25 years didn’t seem to matter.

In a subsequent letter from them I was informed that: “In keeping with the U.S. investment company industry practice, an account’s address of record is the primary basis of determining the legality of a securities transaction, rather than investor tax status or citizenship.”

I’m well aware of these changing times (due to terrorism) but the point I make is that I have not changed.

What has changed, however, is a shift in government understanding of where the world’s problems are coming from. With so much going on in the world today, I’m singled out as the only bad guy here, or so I’ve been led to believe. Doesn’t seem to matter that I am a U.S. citizen, born and raised there, educated there, and even carry a valid U.S. passport. Let’s not forget that I served in the U.S. Army for 3 years. Want to put my record up against any of the 12 million illegals? And yet, any one of these 12 million can open an account with Franklin Templeton … even Osama Bin Laden himself, if he uses a U.S. address … but I cannot!"

This really did cement my thoughts that the US government has gone quite barmy. I understand that the US has to lead the world in the fight against terror and for too long the financial system has been used to fund illegal activities but come on, an Army veteran that has been investing for 25 years is now singled out for censure because he moved out the country. A little extreme, perhaps?

I live outside of the UK, in Switzerland, obviously. If a UK fund manager froze my accounts because I do not live in the UK anymore after investing for 25 years I think I would be inclined to do a little more than 'remove my funds'.

The thing is, however, that UK expats may be subject to similar situations, but under the table. I myself served in the forces many moons ago and transferred a pension from the forces scheme to a private scheme. I have recently tried to get this moved, but it appears that the criteria for doing this is going back in time and not transferring it in the first place. As I am not in possession of a time machine at this stage it looks like this company will continue to invest the funds badly and continue taking their fees. My transfer was £1500 into a property fund in 1989. In eighteen years they have turned this into £3500 around 133%. Sounds impressive but that is annualised 7.33% not taking into account compounding..

So in the greatest property boom of all time my money has returned probably less than than if I had put it in a interest bearing account, and now they want me to bend time to get it back...

I am in favour of regulations to help clean up the financial system, however, if you are going to put a system in place then it cannot be all encompassing, it has to be tailored to individuals so that everyone is not lumped into the same basket. If this costs too much to implement for practitioners, then they should not be allowed to practice, simple as that. I say this as a practitioner myself, and so this comment will, no doubt, come to bite me in the backside, but implementing legislation is one thing, making sure those in the industry can afford to roll it out correctly and fairly, is quite another. I am girding my loins for a post on MIFID, I apologise in advance.

No comments: