Sunday, January 29, 2012

"Grab that cash with both hands and make a stash"

Sometimes it's hard for the man in the street to understand what is happening in the financial world simply because there is a huge gap between our experiences and expectations on a day to day level. Most people relate the cost of living and wages to, well the cost of living - petrol, food, beer etc. This week there have been two stories demonstrating how far removed the man in the street is from the man with money.

First off there is the general hoo-ha about the RBS bonuses (see above), the one that has been turned down and the one that has been deferred. Then there has been Harry Redknapp and what amounts to a show trial as far as I can see. I suspect that for most people the thought of not knowing that you hadn't been paid for eighteen months is something that wouldn't pass you by and yet Harry only discovered that the Sun hadn't been paying him for his column when his accountant pointed it out to him.

Trust me, this is not unusual. For most of us our lives are dictated by the sort of financial constraints familiar to Wilkins Micawber in David Copperfield, "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

Experience of more than thirty years in the accountancy profession however indicates that the more money people have the less control they have over it and when the twenty pounds, which allowing for inflation has become millions their grip on the finer points of their fiscal guardianship loosens.  As incomes increase beyond the dreams of most of us the rich and the famous employ a small team of personal bankers, advisers and professionals to look after everything down to organising direct debits for the utilities. We've had clients who have forgotten they haven't been paid and not chased payment, we had one client who purchased a house and forgot about it because it was handled by his financial advisor at the Queen's bank. When your finances are controlled by a third party it appears to be easy to miss what in terms of your whole fortune are small amounts, although that argument can always be countered if you decide to open a bank account in the name of your dog.

I will be surprised if Harry is found guilty but stand to be humiliated if he is. It's often been suggested in the past that financial trials should have a jury of people who were experts, or at least familiar with, financial matters, as I said to a colleague this week there are pros and cons to that argument. The pro being that you would know how the whole financial world worked and the con being that you know how the whole financial world works. The old saying about the man on the Clapham omnibus being able to understand went out of the window when money laundering regulations were introduced a decade ago. Now, in financial reporting matters at least, you are required to report at a level that somebody with a similar knowledge or background would be able to understand, I can't help thinking that something along those lines would be favourable in fraud or tax evasion cases. After all the financial affairs of an individual who can spend £60,000 on a chandelier for their hallway are bound to be a little more complex than those of somebody for whom £60,000 is three years salary.

p.s any similarities between the title of this thread and the lyrics  of "Money" by Pink Floyd are purely accidental.


A Northern Bloke said...

Never mind the man on the Clapham omnibus...what about Harry Redknapp? He appears to have only a sketchy knowledge of taxation matters.

Span Ows said...

Thanks for the link...Owsblog on a link that says "financial world" whoa...! :-)

I think you're right: when people don't HAVE to worry they don't worry. Like the people that say a lottery win wouldn't change them...well it would because the first thing anyone would do, presumably, is pay all the bills, pay off mortgage, whatever, this alone will change you no matter what you think; this is what "the rich" don't understand, the monthly grind that most suffer.

Paul said...

I think Harry only has a sketchy knowledge of anything beyond football.

Yes you've made it Span!

Agree about lottery winners, interesting piece in the Times recently about how lottery winners actually react to their millions.

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