Haiti’s latest tragedy makes many people think that more foreign aid will help in the long term, but Jo Figden’s report on BBC Radio 4’s From our own correspondent http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/default.stm makes me doubt this. Her programme dealing with Non-government Organisations (NGOs) in Zambia (formerly Northern Rhodesia) suggests that too much foreign aid is self-serving and little more than political vanity. Only 500,000 out of 12 million people have jobs in Zambia, the size of UK and France combined and there are few decent roads. My father-in-law told me many years ago that the structural weakness in Zambia is that the fertile food producing regions are a long way from the markets. Previous BBC Radio From our own correspondent programmes have mentioned that Zambia’s agriculture when managed properly, could feed the whole of Africa.

But instead of roads or investing in Zambia’s crumbling railway system that would solve this problem, we have workshops hosted by NGOs in new hotels all over Zambia where delegates are entitled to a generous daily allowance. They are well attended in the morning but only the jackets remain in the afternoon and the fluent jargon is not about implementation. The path to hell really is paved with good intentions. Well-meant advice from America nearly kills a successful business feeding 6,000 families selling high quality food to Europe. Mosquito nets prove to be more profitably employed in fishing which nearly wipes out the previously plentiful fish stocks in lakes nearby. The old saying “If you can’t beat them, join them” is proved when a local nurse decides to concentrate on setting up his own NGO, rather than use his training improving the health of his countrymen. He is not paid his meagre wages very often in a hospital which has only half the staff it needs, and justifies his actions perfectly logically “How else am I going to get a car?”

Farmers get compensation if crops fail, leading some farmers to neglect their crops and has a curious echo from the days of Communism in Europe “They pretend to pay me, so I pretend to work”.

Back in more developed Blighty, someone gives me a brochure for Sure Investment www.sureinvestment.net as they are thinking of investing? Always glad to help or listen, but free financial advice? sets some alarm bells ringing. Have not looked at the website, but the brochure is very well produced with pictures of yachts, diamonds, race horses and other wealth clichés while text is minimal. Based in Bournemouth, Sure are not “Authorised & Regulated by the Financial Services Authority” so are not covered by the Financial Services Compensation Scheme see http://www.georgeemsden.co.uk/2009/11/interesting-times-how-to-spend-14bn-in-a-weekend/

Nothing wrong there as long as the client (and adviser) understand this. Text mentions modestly that it is towards the high risk end of a balanced investment. Part of the return is generated by short selling, a strategy used by hedge funds for example which can be very high risk. Most people understand that if you buy a fund/commodity/share and sell it at higher price, then you can make a profit. This can be done in the same trading day or a longer period if you have the patience and the resources. Have met a few people who do this as a job and set themselves a profit target of say, next month’s living expenses and when they have made enough, switch off their laptop and go down the pub. They don’t make a profit every month, but seem to know what they are doing and are usually honest enough to admit that there is a learning curve here.

But a profit can also be made the other way round – SELL now at a high price and BUY back later at a lower price. This is sometimes called a bear transaction. However, there is a crucial difference here. If you buy shares and the value plummets, the most you can lose is your purchase cost and expenses. If you have sold shares and have to buy them back, the potential losses are infinite as the price could go up to any level. Most traders with more than a couple of brain cells would limit any potential losses by setting a maximum price movement, but it is not for amateurs.

The potential investor in this case has no savings, is unemployed and no knowledge of investments. It would be common with this type of investment for the investor to meet the definition of a Sophisticated Investor http://www.meteorical.co.uk/glossary_sophisticated_investor.php Business Angels for example, who invest in a start ups or other fledgling business, would have to sign such a declaration, see last week’s http://www.georgeemsden.co.uk/2010/01/fat-angels-or-too-much-of-a-good-thing/ This puts everyone on notice that this is not an everyday investment and outside any investor compensation scheme.

But minimum investment here is £10,000 for a minimum of 6 months so would this have to be borrowed? A key issue in recommending any investment is Suitability, so is this investment right for this client?  In this case, hard to imagine a more unsuitable one.

Another year and it is time for my favourite networking group www.3Cscommunity.com meeting this time at UCL Advances, the entrepreneur arm of the huge University College London http://www.ucl.ac.uk/advances/ The Dragons’ Den format allows 3 or 4 presentations in 2 and half hours with time for questions. After this, networking carries on at a pub nearby where some of the most useful contacts are often made.

First presentation is by Hugh Stewart Managing Partner of Shackleton Ventures www.shackletonventures.com who has been in the venture capital (VC) business for 26 years and has lost count of how many £millions he has raised. Best ever investment returned 37x his investment while the worst lost everything after 4 rounds of funding. The USA seems much more switched onto VC than Europe. Google and Amazon had a 5 year time span from launch to floating the shares – something that would have taken at least twice as long in Europe. Business failure in the USA is not viewed as a personal failure with a lingering stigma. In Europe, people are shy about mentioning business failures although this is slowly changing. Failure is often an essential part of success – not my words, rather those of author J K Rowling  http://www.youtube.com/watch?v=pucdJHjZaqs

Cultural differences show up in business plans, where a Russian one had two pages of introduction and 78 pages of equations – German & Swiss plans also do this sometimes.

Curiously, uniqueness in a product or service is rare, and may not not make things easier as there is nothing to compare against. Classic exception here is Edwin Land and his Polaroid camera, where his 3 year year old daughter wanted to see the pictures immediately after he had taken them   http://edhelper.com/ReadingComprehension_54_1182.html Legend has it he worked out the solution in an hour after this incident, but getting it to the commercial stage took a bit longer.

Investors don’t like surprises – openness works better. Again, something that is very much part of American culture – we like to keep things to ourselves in Europe.  Main time when Americans seem to keep things quiet, is when playing poker, but I digress. Small business adapt, move and do things more quickly than a big business and can often grow more quickly. Something this Government doesn’t realise, where the quickest way to create growth and have real green shoots of recovery would be to stimulate or deregulate the small business sector, but I am not holding my breath.

Best time to start a new business is in a recession like now, as if you can survive and grow in current conditions, then you ought to be able to survive in better times. Most important thing in any business is management. Next most important thing is still management. Third most important thing in a business is – don’t be surprised – management. Investing in a Class A management team in a Class B business will generally make money, while the opposite will generally lose it.

Commitment or “skin in the game” matters and reminds me of a VC story from a few years ago. A £2 million VC deal was ready to be completed with a bankers draft ready on the table. VC guy asked the entrepreneur if he would put a token amount into the venture? His polite but negative reply killed the deal.

Being able to establish rapport in the first minute is essential as most people make up there minds in that time, even if on a subconscious level. Bit like the estate agents’ saying that people decide whether they are going to buy your property or not, within 15/20 seconds of walking in your front door. Hence all the advice about having the smell of freshly-baked bread or coffee in your home when people come to view.

Investors work on IRR or Internal Rates of Return rather than Annual Rates of Return like Financial Advisers, for example. To get the mindset here, think of the old Indian legend about the invention of chess where the inventor asked to be paid in grains of wheat  http://en.wikipedia.org/wiki/Wheat_and_chessboard_problem with on the first square, two grains on the second square and so on. The number of grains that would be on the 64th square would be 1.84 to the power 19, or a very, very big number – ask your kids if you have forgotten your maths.

Shackleton do not invest in everything (no one does) but they still get approaches from people who have not looked at their website. This clearly states what they are and are not interested in. Same situation with www.angelsden.co.uk featured in  http://www.georgeemsden.co.uk/2009/07/im-an-investor-get-me-out-of-here/ where people who don’t pay the £500 registration fee, don’t get any help no matter how brilliant their idea supposedly is.

Some businesses can actually manage without VC funding and get going on lumps of cash from family and friends. This can be a bit of a pain when a business is finally sold, as in one case, 38 signatures from family and friends had to be got within two days. The entrepreneur here took a year off and is now looking at his next idea, but using his own money this time. Do Without is a simple and cheap option, although not appropriate for every business. Guests on the BBC Dragon’s Den are regularly asked why they need the money? Some don’t really need it, and probably have their eye on the publicity from appearing on the show at peak viewing time. Entrepreneurs nearly always underestimate the amount of time taken to get funding. If the owner has started a business and is spending half his time making fundraising phone calls, the business will suffer. Better to employ someone to do this.

Most surprising danger is having too much cash. Loadsamoney can lead to precious funds and time being wasted on fancy furniture and planning, meaning the time when you actually get on the phone to try and get business is delayed, and delayed. All successful small businesses have to be sales driven – they don’t last otherwise.

For a weekly view on entrepreneurship see Mike Southon’s FT column http://www.ft.com/comment/columnists/mikesouthon and next 3Cs meeting is 23rd March.

Referrals from professional introducers are always interesting and latest one is basically “Can you raise some money for my client?” We meet at Institute of Directors in Pall Mall which is busy as usual and the client tells me his story. A modern languages degree from Oxford and continued study, now allow him to work in 26 languages in his translation and international business consulting work. Know people with translating agencies who handle this number of tongues, but never met one person who can handle so many. Story unfolds and alas, credit history scuppers the chance of raising additional funds but there is plenty to be positive about. He knows how to write feasibility studies etc for the next stage of his business growth, but needs other professional advice too which my contacts can provide. Not least is the requirement for his own website to get him a profile in cyberspace.  Just to remind me of my own limitations, he already receives his State Pension and runs marathons.

Study time needed to be able to use a new language is 100 – 200 hours so anyone intending to do that evening class to acquire a language for their Summer holiday needs to get started.

Trawling through a library catalogue leads me to a classic guys’ read – the memoirs of test pilot Eric “Winkle” Brown – Wings on my Sleeve http://www.amazon.co.uk/Wings-My-Sleeve-Worlds-Greatest/dp/0297845659 Part of my continuing fascination with some military/war matters is the sheer insanity that occurs. End of WW2 and he test flies various captured German aircraft including the exotic Messerschmidt 163 and weird Dornier Do-335 http://www.squadron13.com/do335/DO335.htm Former is deadly (to the pilot) with its volatile fuel mixture while the latter has an engine at the front and the back.

Bail-out instructions for the Dornier are the most complicated ever: i) press this button – BANG goes the rear propellor (don’t want to end up as mincemeat, do we?)  ii) press next button – BANG gets rid of the tailfin (don’t want to get sliced in half either)  iii) PULL hard on these two red handles to jettison the canopy, but the exit of the canopy is so swift that a crashed example found the (dead) pilot in the cockpit with both his arms missing! Another theme that comes out from reading any books about the history of the UK aircraft industry is that Government interference and mismanagement, is not new. If you want to read a real rant on this subject, see Plane Speaking by Bill Gunston ISBN 10: 1852601663 who makes me look quite tame really.

Record gold prices prompt a rash of TV adverts but it still pays to shop around http://www.bitterwallet.com/have-you-said-bye-bye-lovely-gold-hello-tiny-little-cheque/19640?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bitterwallet+(BitterWallet) If you still have some and want to talk to the buyer face to face, contact Lewis Malka of Hatton Garden http://www.joseph-sterling.com/about_us.html

Recent long-term care enquiries include one where the client is in good health but over the age of 75 so unable to purchase a pre-funded plan. As they are not receiving any care currently, they are not able to purchase an Immediate Needs Annuity either, which would cap the cost of future care. So if care in their home is needed or if they need to move into a care home, they will have to self-fund.

One of the exceptions where the NHS will pay for care is if continuing care is needed. Care in hospital is paid for by the NHS. Care outside is subject to a means test. But if treatment still needs to be provided by the hospital, then the NHS can pay for this although they are not an in-patient. This avoids the means test etc and surprise, surprise, expenditure on continuing care has shown a sharp increase which the Government is now looking at closely.

Final meeting of the week is with www.carehomeselection.co.uk Started 10 years ago by a GP, it helps families find a care home by telling them what questions to ask, for example. Coordination between the care home and the hospital can mean more efficient use of hospital beds, while knowing what to ask and look for when a relative or client is going into a home, can make the process less stressful.

Seem to have had a record number of appearances on BBC Radio London 94.9 FM this month where an Estate Agent and I spoke on Jonathan Lampon’s programme last Saturday evening. Subject was “Are mortgages or is the house market getting any easier?” to which the answer is a definite  No!

Main point that I was picked up on, was that your credit file can pick up how quickly you pay your bills. This is used in Credit Scoring and decides IF you get a mortgage and how much. Thinking of applying for credit in the next 12 months? Pay your bills on time. Doesn’t matter so much if you pay the minimum on your credit card, but pay it in good time.

Signs that a business is in trouble often show themselves in corporate vanity – expensive new offices, rising executive expense claims, new departments and rebranding. Personal Accounts, the Government’s complusory pension scheme http://www.georgeemsden.co.uk/2009/11/do-you-know-what-day-it-is/ has had a £360,000 rebrand to NEST http://www.padeliveryauthority.org.uk/documents/press-release-nest-07-01-2010.pdf as people find the P-word or Pensions, boring. There is even a video for people whose reading attention span is a bit short and a rare piece of honesty http://www.padeliveryauthority.org.uk/nest-video.asp as it starts off “Workplace pensions are changing”. Trouble is, there has been non-stop pension change since 1997 which has compounded the confusion the new measures claim to solve. It’s about as honest as someone who mugged you offering you a cheap loan.

Not mentioned of course, who will provide the back-up system to run the scheme for it’s 3 – 6 million members? There is only one bidder left now  http://www.ifaonline.co.uk/ifaonline/news/1566067/gwrs-withdrawal-leaves-bidder-personal-accounts One also wonders what sort of pension the staff at NEST will have? Defined contribution/money purchase - where the employee carries the investment risk? Or will it be final salary like most of the the public sector (and of course MPs) where the employer takes the investment risk – supported by the taxpayer? Don’t be surprised if the admin is all done overseas to save money – call centres could be busy.

To be fair, there is some good news here. The idea of the members’ pensions being run as a not-for-profit corporation is a good one so you will have your Personal Account after all. But unless people save enough for retirement it will be pointless, and the average amount you need to save to get a decent fund for your pension is about 15 per cent of earnings. If you don’t believe me, come and see me for a pensions chat.

But there is more dishonesty and contradiction here.

a) Taxes are rising so how are people supposed to save more when real incomes are falling? OK you get the tax back with pension contributions, but a huge turn off for many would-be pension investors is having to buy an annuity. Haven’t had a request from a hard up 30 or 40 year old to “cash in my pension” lately, but all IFAs get them.

b) We are all living longer thanks to the NHS but the maximum annuity purchase age of 75 has been unchanged for decades. Government has really dug its heels in here. The Association of British Insurers is now suggesting  http://www.trustnet.com/News/DisplayStory.aspx?id=53251 that it should be raised to 80. Logic behind refusing to raise the maximum annuity purchase age is that pension or annuity income is taxed as earned income and the Government starts getting its tax relief back.

c) At the same time, the State Pension Age  is being raised to 67 in 2024 and then 68 in 2046 - again because we are living and working longer. And some think it should be raised to 70 http://www.pensionsadvisoryservice.org.uk/news/2009/july/lord-turner-pension-age-should-be-70

d) Saving 15 per cent of earnings may solve someone’s own pension problem but would have dire consequnces for the rest of the economy. The current recesssion is caused by a lack of spending and people are saving more now. Anglo-Saxon countries do not generally save much – the savings ratio in the USA was negative not so long ago – in contrast to Europe and Asia where the propensity to save is much stronger. In fact, these people have often expressed puzzlement when they have moved here and been amazed how little people save in the UK – and this was when times were better. A huge jump in savings would cripple the leisure industry for example, not to mention the restaurant business.

Some leadership from MPs might help? How about if they had money-purchase pensions and took the same risk as the millions of NEST members? Would the next Government be so daring? Waiting for hell to freeze over is not usually a worthwhile exercise, so don’t expect much here – except maybe another rebranding.

Exciting end to the year when I am in the studio on Eddie Nestor’s Drivetime show on BBC Radio London 94.9 FM to talk about pensions. Most talk is about drug smuggler Akmal Shaikh’s execution in China so my contribution is reduced, but for an enlightening counter to the “how awful!” chorus, see   http://www.dailymail.co.uk/debate/article-1239051/LEO-McKINSTRY-Sorry-join-liberal-wailing-heroin-traffickers-deserve-die.html

If you’re surprised by the Chinese reaction, go to Google and search with “opium wars”. My favourite book here is the classic Foreign Mud by Maurice Collis  http://books.google.com/books?id=DK78eANlr-AC&dq=foreign+mud+collis&printsec=frontcover&source=bl&ots=vBNcl-5RI_&sig=GecSuwuzNtGh7KhlT3JWFQhkZxw&hl=en&ei=TsZBS-GZBI6i0gTJ-tGSBQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CAgQ6AEwAA#v=onepage&q=&f=false

Another highlight is a relaxing day spent with friends in the beautiful village of Ickwell, home of clockmaker Thomas Tompion. Two surprises there. Firstly, after-dinner whisky is Welsh http://www.welsh-whisky.co.uk/ and very drinkable too while the village is one of few in England with a permanent May pole http://www.bedfordshire.gov.uk/CommunityAndLiving/ArchivesAndRecordOffice/CommunityArchives/Ickwell/ThomasTompion.aspx 

Christmas Day itself finds me at church after some years. A daughter’s parents-in-law are over from Italy and Dad wants to go to church. Choice is between the Italian Church in Clerkenwell Road   http://www.italianchurch.org.uk/  and St George’s, Hanover Square  http://www.stgeorgeshanoversquare.org/  As friend www.georgemetcalfe.com is reading the epistle at the latter, it is St George’s where apart from being a beautiful church, the choir is stunning and worthy of another visit. Three daughters and their two grandsons make the family gathering everything such an event should be. Eldest grandson is now a toddler who finds the sofa, grandad’s paunch and other seated members a useful climbing frame. In true child tradition and for part of the time, the clear packaging that fits nicely over his and grandad’s head, is more appealing than the contents. Youngest grandson now three months old, smiles when you talk to him and has a look of bewilderment when strange sounds come out of his mouth. Hunger is indicated when he slobbers over and sucks hard on the end of my nose – time to hand him back to mum.

But let’s get serious. Final business meeting of 2009 is with Partnership Assurance attending a workshop on how to develop long-term care business – something which is now more topical after the monumental indifference I found in the 1990s. Being twelve years older and the credit crunch have sharpened people’s minds, it seems.

Most readers will be able-bodied and capable of washing, dressing, feeding themselves etc. When you start to need help with these, start to forget what day it is or dare I say it? can’t recognise members of your own family, you need what is commonly called long-term care. We all like our independence and no likes to be a burden, but this can change overnight perhaps with a fall, hence the title. A lively debate always follows when this subject comes up with “Someone else should pay!” at one end and people who can afford to take a better off view at the other. If care has to be paid for and you haven’t got insurance, you have six choices:

i)    Cash – use your own money. Nice if you have it, but even if you do, do you wish to burn it all up living in a home?

ii)   Get the Local Authority to pay for it (What everyone wants) There are also Deferred arrangements with a few councils (live now, pay later). Here they pay for care now but take a charge on an elderly person’s home and only get repaid when the person concerned has died or their home has been sold. Councils cannot charge interest in this situation so few allow this option, and you can’t blame them.

iii)  Rearrange your portfolio to produce income. Needs to be a big portfolio if the yield is say, 5 per cent p.a.

iv)   Equity Release to get a lump-sum or income. Realistic BUT being based on annuity rates (which in turn are based on life expectancy and interest rates) these are low currently. Even five years ago when interest rates were much higher, the rates were not great, even at age 70. Falling house prices has led to an exodus of providers here.

v)     Buy an Annuity. Often the only option but many people leave it for too long and there is not enough cash or equity left when they finally do get round to looking at it. The cost of care can be capped. The insurance company that provides the annuity income takes on the risk of the person concerned living a long time. The risk of someone dying say 2 months after buying one can be insured separately.

vi)    Renting out your own property. Fine in theory but do you really want this? Beneficiaries might not be happy either. Rent you get from renting out your own home is unlikely to be enough to pay for care in a residential home.

Seventh option might be to give one’s career to care for a parent for example, but this can be the most expensive.

People with no money will probably get their care paid for by the local council while few have enough to pay for everything. Most common situation is a shortfall in the cost of care which planning for now will make it easier to cope with, and perhaps safeguarding someone’s inheritance.

There are other issues too and equity release for example, will involve a solicitor. The following might be worth a visit as well  http://www.georgeemsden.co.uk/2009/10/your-worst-nightmare/