An introduction to some basic principles and themes repeated throughout the book.
IRS Approved: The Internal Revenue Service in the US collects taxes on behalf of the government. The UK equivalent is Her Majesty’s Revenue and Customs (HMRC). Of course tax rules differ significantly between the two countries – and that’s an important distinction. Making tax-efficient investments is a key component of Tony’s advice, so I’ll be trying to figure out what that means as a UK taxpayer.
Dow Jones Industrial Average: A price-weighted average of the stocks of 30 US blue-chip companies (Disney, Coca-Cola, General Electric, Microsoft) traded on the New York Stock Exchange. It was invented by Charles Dow back in 1896 as a shortcut way to judge how the entire stock market was faring.
If the index goes higher, the overall value of those 30 important stocks went up (on average) and, by implication, all stock prices (in the US) rose.
The UK equivalent is the FTSE 100 – an index of 100 of the most highly capitalised companies traded on the London Stock Exchange (British Airways, Cadbury-Schweppes, Rolls-Royce, GlaxoSmithKline). Although the companies are British, many conduct significant portions of their business internationally.
The purpose of the FTSE 100 is identical to that of the DJIA – to provide a single number that conveys how the weighted average value of companies listed on the London Stock Exchange is changing
Federal Reserve: The Fed is the central bank of the US and was created in 1913. The Bank of England is the UK’s central bank and was created in 1694 – one of the oldest banks in the world. It’s current governor is Canadian!
Bridgewater Associates: A US investment management firm founded by Ray Dalio in 1975 serving institutional clients – foreign governments and central banks. I’m sure there are UK equivalents but I didn’t look because I’m not an institutional investor and, if I were, I would (hopefully) know enough not to need to write this blog!
Stronghold Wealth Management: A Securities and Exchange Commission (SEC) Registered Investment Advisor (RIA).
The SEC in the US is responsible for regulating the securities industry and for enforcing federal securities law. It is meant to protect the public against fraudulent and manipulative practices in the securities markets.
In the US, Investment Advisors (IA) also exist which are not registered with the SEC. IA’s and RIA’s both have fiduciary responsibility which means that they are legally obligated to offer advice serving the best interest of their clients.
An IFA, might be restricted in the products and services they can advise about. If you go to a high street bank for financial advice, chances are that they’ll only be able to talk about their own products.
The FCA has a register of individuals and companies authorised to act in this capacity in the UK. If something goes wrong and an FCA registered IFA can be shown to have neglected their fiduciary duty, you can get the FCA to investigate and possibly award damages via the Financial Services Compensation Scheme (FSCS) with the help of the Financial Ombudsman Service.
I have some second-hand experience of this process actually working! A family member was mis-advised about the suitability of a financial product and (eventually) received a financial settlement. So, as unwieldy as it seems and however paperwork and form-filling intensive the claim process, I think it’s better to have this kind of protection than not.
In a nutshell, it seems prudent to look for a non-restricted IFA who is authorised and registered with the FCA and is based in the UK. Stronghold Wealth Management isn’t registered in the UK, so they’re a non-starter from my point of view.
HighTower: Another SEC registered RIA. Somehow similar but different to Stronghold – but the same issue for me – no UK presence or regulation.
For both Stronghold and HighTower, as my knowledge and understanding improve (hopefully), I’ll see if I can explain their do-different’s and possibly find some UK equivalents.