12 February 2009

Educate yourself and take personal responsibility for yr money

there is no other option.

"DISILLUSIONED with so-called market experts and downright distrustful of financial planners, investors are taking matters into their own hands.

The plunge on world stock markets in the past 15 months has shattered investors' faith in previously reliable sources of information.

"I don't know who or what you can trust,'' one investor told the Crosby|Textor focus groups last month.

Investors said they now turned to stockbrokers for only general advice, with many preferring to trade online rather than deal with their broker.

They said media commentators were too often seen as fence-sitters, and friends had stopped swapping stock tips for fear of losing other people's money.

The biggest criticism was reserved for financial planners, whose advice was tainted by the fees and commissions they generated from clients.

"I don't accept anything on face value from an adviser any more,'' one investor told the focus groups.

Another said there were "thousands of nobody financial planners'' who clearly did not know what was happening on the markets.

"If I did the opposite of what I was advised I would have been doing well,'' another said.

One investor summed up the mood of many: "It's bad enough losing money on your investments but it's worse to pay somebody to lose money on your investments.''

The only group of experts that has came out with any credibility are the academic economists, who were dismissed as doomsayers when they began warning several years ago that there was too much debt and complexity in financial markets, pointing to a potential crisis.

Investors said that when they were ready to start share trading again - if there were concrete signs of recovery in 12-18 months - they would no longer rely on single sources of advice, such as their broker or financial planner.

Instead, they would scour the media, analysts' and economic reports, picking up as much information as possible to provide clues on the economy, the market and individual stocks.
Increasingly, they would also go to the "primary source'', seeking to decipher information provided directly to the market by companies themselves.

"There is a certain responsibility on each of us to educate ourselves rather than go to a financial planner, because it is your money,'' one investor said.

If investors were to trust companies, they said, they needed to see honesty, transparency and leadership from management and boards. "Before I would have been numbers-focused, but now I put more time into management - the track record of the board and the management team,'' one said.

Too often, however, bad managers and directors were not being held accountable for their mistakes, they said.

The one impediment to investors' plans to rely on information from companies was the ability to trust their financial statements.

There was little faith in the ability of auditors and accountants to detect and report inaccuracies in company statements. "We have put a lot of trust in auditors and they haven't done a very good job,'' an investor said.

There was even less faith in the ability of the Australian Securities and Investments Commission's to police the auditors and ensure companies' financial reports were accurate. "The Australian Prudential Regulation Authority understands its role, but I don't think ASIC understands what it does,'' one investor said. "ASIC doesn't use its powers. It seems to be spineless.''

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