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Comment: Why IFAs can support a socialist society

Comment: Why IFAs can support a socialist society

On many occasions I have argued contemporary issues from a position described as politically ‘on the left’.

In response I have frequently been called a ‘Champagne socialist’. Presumably this is on the assumption that a strong belief in social and economic justice is incompatible with any form of successful career. My suitability as a financial adviser has even come into question.

Ahead of his time

Debating opponents usually start their arguments with history.

Many people unfavourably compare Labour’s current leader, Jeremy Corbyn, to Labour’s leader in the early 1980s, Michael Foot. Usually the only thing people know about Foot is the Gerald Kaufman quote in which he described Foot’s 1983 election manifesto as being ‘the longest suicide note in history’.

That manifesto is primarily remembered for being anti-nuclear and ‘tax and spend’, yet it included many impressive progressive policies. For example: disability rights in the workplace; equal pay for women; equal rights for all LGBT people; environmental protection measures; acknowledgement of animal rights; protection of ethnic minorities through the definition of hate crimes and racist offences; devolution for Scotland, Wales and Northern Ireland; and reform of the European Economic Community (now the EU)…or a vote to exit.

Eventually we have caught up!

Balancing act

Achieving social justice requires rebalancing. Usually rebalancing is achieved by state provision of common requirements such as healthcare, education, security, law and order, and infrastructure. We all benefit collectively from this, including the most powerful chief executive.

These provisions are collectively funded by a state that is exercising, through a social contract, the democratic will of its people. The consideration in that social contract is the payment of tax.

Here we run up against a common attack on socialist policies: tax and spend. But governments do not tax and spend. They first campaign to be elected on a number of spending commitments and then, if elected, they seek to implement them.

Next, they raise the money to do so by whatever means at their disposal, which does not necessarily require any taxation at that stage. There is always money available to a sovereign nation.

Finally, they must maintain inflation control by restricting the broader money supply, finance any debts and maintain confidence in the currency by collecting taxes.

Rather than the phrase ‘tax and spend’ it should really be ‘commit, create, collect’.

Spending commitment

As advisers, we know there is always only so much money in circulation in multi-faceted debit and credit arrangements. In left-wing economies, most of the debt is with governments. In right-wing economies, most of the debt lies with individuals and is owed to the banks. In a world of tax-avoiding corporations and globalisation we need to rebalance power to governments away from banks to protect the majority.

I believe in being prepared to commit money to fund state investment to stimulate growth. I believe in strongly funded education. I believe in much larger state investment in housing. And I believe in a strongly supported healthcare and pension system to protect everyone who is currently, or has previously, contributed to our collective wealth. I also believe that, like the best investments, the returns will justify themselves.

Part to play

How do I reconcile all this with being an IFA? There are areas of inequality that cannot be addressed by the state alone. As IFAs we can address this because we are in the ‘money at the right time’ business.

We are educators. We teach the power of good credit ratings, cash reserves and having insurance to replace what you cannot afford to replace otherwise. We help clients utilise incentives to do what is in their own best interests, such as ISAs or pension saving.

Financial planning does not have to be only about avaricious wealth accumulation for the richest. It can be about protecting financial independence, investing ethically and helping rebalance an unequal society by helping everyone. Especially those who need our help the most.

Steve Buttercase is principal of Verve Investment Planning

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