Friday 15th of February 2008

You may think Blue Chip and the financial advisory industry have little in common. Think again. One of the things that struck me is the similarities to what has been happening in the finance company sector. Obviously people were investing in these things to save for their retirement and they thought they were safe (as houses). Another thing is that Blue Chip and the likes (I'm not sure what you call them - managed property investments maybe?) are quite a big sector. Reports are that Blue Chip alone had 3-4000 investors. There seem to be plenty of these schemes, big and small, so the total number of investors is substantial. Then I pondered how do you pick a good one? Here, my guidelines for choosing finance companies come into play. You need to be able to understand how the investment works, the backgrounds of the people involved and the structures. It seems when you get either complicated investment structures, or complex corporate structures, there is a higher probability of trouble. Also these complicated structures often provide a great way for the provider of the investment to clip the ticket multiple times. That is fine, as long as the investor knows. Often they don't know and by the end of the line, the ticket has been clipped so often there is little left for investors. This seems to be the case with Blue Chip as it has been with other types of investments, including some from big financial planning firms. All this leads me to a growing belief that the simpler the investment product, the safer it is.