Transcript: Investment Masterclass — An insider’s view of the City of London

This is an audio transcript of the Money Clinic podcast episode: ‘Investment Masterclass — An insider’s view of the City of London’

Claer Barrett
Hi, it’s Claire here. You’re used to hearing me on Money Clinic, but now you can find me in your inbox teaching you everything you need to know about money with my new sort-your-financial-life-out course. Over six weeks, I’ll help you to make smarter money decisions with tips on budgeting, tax breaks, property, pay rises and investing. In short, everything you wanted to know about managing your money but were far too busy to ask. To find out more and sign up for the course, visit ft.com/moneycourse. That’s ft.com/moneycourse.

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If I asked you to think of what an investor might look like, chances are you might conjure up the image of my guest on the podcast today. A man, of course, sharply dressed as befitting a stockbroker in the City of London, with a pair of bright red braces holding up his pinstripe trousers. I am talking, of course, about Justin Urquhart-Stewart known to millions as Mr. Red Braces thanks to his many TV appearances over the years, explaining the ups and downs of the investment world. However, don’t let appearances deceive you. Justin might look like a city insider, but he has long argued that investing is something that should matter more to all of us, no matter how much or how little we have to invest. Plus, his views on the investment industry are bound to surprise you. Welcome to Money Clinic, the FT’s weekly podcast about personal finance and investing. I’m Claer Barrett, the FT’s consumer editor.

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I’ve often shared a radio or TV studio with my guest today, but this is the first time I’ve shared the full podcast studio with him, and he’s joining us for an investment masterclass. Welcome, Justin.

Justin Urquhart-Stewart
Thank you. This is very exciting. Yeah.

Claer Barrett
It is very exciting. And I mean, you have a long and distinguished City career, which we’re going to shortly. But it’s the red braces and the red tie that people really remember for you. And I’m glad to see that you’re sporting them today. But where did this start?

Justin Urquhart-Stewart
It keeps his trousers up, to start with. So the main thing, of course, is actually making sure it’s not actually being cheap and available. For everyone who tries to comment, try and do that. No, it’s a part of me, some of the braces of my father’s. But then you suddenly realise that you would have got these braces that because they actually buttoned on to the trousers, once they’re there, they stay there forever. And so, you know, once you just have more trousers, more red braces turn up. And so it turns almost into a sort of brand. So I suppose don’t knock it if people notice these red braces. I’ve been called a lot worse.

Claer Barrett
Well, more recently, you’re known as the finance expert with the cats. Tell us about that one.

Justin Urquhart-Stewart
Well, yes. This is one of the issues that comes about when you start trying to do filming from home and, filming from home with my dear Burmese cats, who for some reason, seem to have an amazing ability to identify when an interview is about to occur, particularly on a Zoom. And so there’s no sign of any cat anywhere. But within five minutes of a Zoom starting, I’m aware of some paws trying to go up my trouser leg. Now, either I can try and deal with a cat, in which case I’ll get reported to the Cat Defence League, or I have to lift the cat up, and he or she, because there are three of them, will sit on my shoulder and hopefully purr quietly. But, will sit there, and if I’m going on too long, will start putting their claws into me. In which case the answers tend to get shorter, as does my patience with them as well.

Claer Barrett
Well, a fantastic piece of branding, red braces and a Burmese cat. Now let’s talk about the career of the person, the cat and the braces who are attached to you. Now, you started off training as a barrister, but you ended up entering the financial world. You spent much of your career at Barclays, where you specialise in personal investing. How did this journey happen?

Justin Urquhart-Stewart
Well, I would have been the world’s worst barrister had I actually done it at all. My pupil master when I was doing my training said, Justin, you realise there’s more money in crime than defending it? So on that basis, I thought, well, where’s the best crime you can go to? Well, quite obviously, financial services, that sort of, you know, polite crime, if nothing else. And also my family was never been known for much of doing to the financial services. So I thought, it’s about time I should try and learn something about it. And actually, it’s interesting because when you come with it a completely as a novice, a new and objective view of it, you don’t come with all the baggage and actually what’s happened before, because what you find when you go into the city in those days pre-big bang, you suddenly come across this old history. Oh, this is the way we’ve always done it, and this is the right way of doing it. It was a cartel, self-serving and, frankly, ripe for revolution.

Claer Barrett
Obviously happened with the Big Bang in the 1980s under Margaret Thatcher, I mean, the Big Bang is a phrase that listeners might have heard about. Why was it important? What does it mean?

Justin Urquhart-Stewart
Well, what it did was actually broke apart the old cartel of stockbrokers and jobbers, stockjobbers, we know them as now as market makers and this cosy little world that they had between themselves and started bringing in outside investments. So what does that mean? Well, it meant banks, who else would be stupid enough to invest in these firms, and so primarily the American banks, and they could see, oh, well, here’s the London market, very international, much more international than anyone else in the world, we’ll invest into this. And then also being able to put together merchant banks or investment banks with these stockjobbers, with broking firms. And so you had all the main banks actually pouring large amounts of money in comparison with today, which sounds relatively small, but in those days there’s a lot of money investing in things they didn’t really understand. So whether it was Barclays or NatWest or whatever, they spent a fortune buying these broking firms, jobbing firms and putting together with a, with a merchant bank as well, and they nearly all failed. Absolutely dismal. Why? Because the bankers themselves didn’t know what was going on. They didn’t understand it. And I even know one particular broking firm who, when they sold themselves to, I shouldn’t say it but Barclays, didn’t actually disclose all their assets, so they hadn’t got much in the way of assets because they were all partnerships. In fact, the only asset they had was a very large wine cellar. But because Barclays never asked about it, they never told them about it. So Barclays didn’t even get that. So it was a fiasco. It opened up the market, and it became much more international, put more capital into it.

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Claer Barrett
Now, you’re naturally suited to working in businesses that a client facing with retail investors, but usually love to explain what investing is and why it’s important. And you do it in a very witty and amusing way on the television in your red braces. But your career took a bit of a turn just after 2001, where you decided to leave Barclays where you’ve been there for many years, very successful, and set up with seven others your own firm, 7 Investment Management. Now, tell us a little bit more about that. And also if it’s true that to get the money together, you all remortgaged your houses and hoped for the best.

Justin Urquhart-Stewart
Well, I’ve always had a bit of an interesting history at Barclays over the years. Originally I joined Barclays DCO, Dominion, Colonial and Overseas, so you get sent over to other parts of the world almost carrying a solar topi and a big book on how to run a bank. And I ended up going to Uganda. And you sit there and hang on, there’s a war going on and you have to go and see one of these directors of Barclays, they said, exactly. We need more people out there, it’s like an edition of Blackadder. Unfortunately, I had a slight technical hitch there, and after a few months, I had to come back because there was a coup. And unfortunately, I got caught up in the coup. So with one leg slightly shorter than the other, I returned back to Britain. It wasn’t a very good idea. And then about a couple of years later when they put me back together again, I ended up in Singapore. But that allowed me to understand more about international trade and how that worked. And again, not investment, but really understanding of the importance of how to simplify trade so people understand it. So coming back to Britain, this was then when Big Bang was coming through, it was obvious then to get involved in the retail side of that because we had the privatisations and again with privatisations people didn’t really understand what was going on and the government’s priced the goods to go. So just about going to make money.

Claer Barrett
This is buying shares in British Telecom.

Justin Urquhart-Stewart
Exactly. And tell Sid to go get some more British Gas shares. And people did it because they made short-term money out of it. Unfortunately, what happened, so they bought and then promptly sold them again and made a quick profit. And they thought, well, maybe that’s what a stock exchange, stockbroking is about. Of course, it’s not. But you could educate people and say, here’s a start. Now, let’s take it further. And another good idea was setting up the investment clubs so people would actually save relatively small amounts of money, not because they’re going to make a fortune out of it, but if you lose £50, it’s fine. If you lose £2,000, that’s not fine. But you can understand how shares worked.

Claer Barrett
Learning by doing.

Justin Urquhart-Stewart
Learning by doing . . . and with a group of chums doing it, we started off as chums anyway, and meeting once a month, having a drink, that actually became really quite successful. And, you know, it’s gone off out of fashion now. But again, it’s one of those things I would always urge people to have a go. Not treating it as a game. You can enjoy it and engage in it without taking a huge amount of risk.

Claer Barrett
Hmmm Workspace, the modern-day equivalent, when some of my younger friends are in WhatsApp groups to talk about investing. And one of them will have an idea and they’ll send it to the group and it will either get shot down in flames or people will start doing their own research on it, saying, well, actually, that’s not a bad argument for buying this company, but let’s look at some of the reasons not to buy it.

Justin Urquhart-Stewart
Exactly. So all of that then meant, you could see we didn’t have the technology in those days, so the 2000 to 2001, my business partner, myself, we were running Barclays Stockbrokers, and Barclays Stockbrokers (inaudible) had taken over a business with set up called Broker Services, which was a white-labelled version of people running different stock brokers and didn’t know how to run it so we just put our label on their label on the front of it. Barclays then ended up buying it, which was fine, but it meant that was the third time I was working for Barclays. I resigned three times for them, and so unfortunately, they decided they wanted to introduce an inactivity fee, which is quite clever, to get charged for doing something and you get charged for doing nothing. So Tom and I thought, (inaudible). So we sort of say . . . 

Claer Barrett
Tom is . . . 

Justin Urquhart-Stewart
. . . My business partner who’s a very un-American American. And, he, so he’s decided that was the wrong thing to do. So yes, we tried to go and set up 7 Investment Management. We all had to, yes, had put mortgages on our house. Luckily, I’d actually bought a flat a few years before as well, so I had to actually sell that. And there you are. You start from scratch, and you have to sit down and have a discussion with the family and say, by the way, chaps, if I don’t have a great deal of money for a while because these were difficult times, you didn’t pay us a fortune. And it’s a very interesting exercise to test people as to how well their understanding and patience and, really, are they willing to be with you to go through those bad times? How do you cope with the other side and you get your money back? And that’s fine. And it teaches you about the tough side of capitalism, but how successful it can also be.

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Claer Barrett
Now, it’s been more than 20 years since you did quit your job at Barclays and set up 7 Investment Management. Of course 7 Investment Management, the firm, carries on although you sold out a couple of years ago, which is one of the reasons why you do have more time to focus on your big passion topic, financial literacy because you love talking about money and investing. That is what makes you a great broadcaster. Then I’ve seen you at events just talking to people in the room who were investors, asking them questions, finding out what their experiences are and listening to what they want. If you had to go into a school for Flic, that’s the FT’s financial literacy and inclusion campaign or charity, and deliver a money lesson to a class of indifferent teenagers, shall we say, what would you talk about to them?

Justin Urquhart-Stewart
Two things you can go about, a, just talk about some of the history of financial cock-ups over the years. And these go right the way back to Roman days and things like that, or even the Dutch getting so excited that they actually managed to invest in tulip bulbs and what happened there. And the host went disastrously wrong. So there’s nothing new about financial disasters. We’re very good at finance disasters. Actually, the Romans were actually much better at managing their banks far more effectively because it’s very simple. If you’re the person running what their equivalent as a bank was and they weren’t doing it very well, you were killed.

Claer Barrett
I can’t see the FCA introducing that.

Justin Urquhart-Stewart
Well, no, but it would have meant actually part of the Royal Bank of Scotland would have had that same problem. And probably the chap running it who, you know, probably would be a little more circumspect over what he’s going to be doing with the investments. Now, but the point is, I’m afraid investment corruption and theft and such like is not new at all. So go back and teach people actually what happened with that. But then also say, right, let’s take our position of your family and you just draw a picture of your family. And what does the average British family consist of. Now, as individuals, you’ve only got a certain amount of money. Actually, how much is your family worth if you put it together? They may not speak to each other, but OK, let’s just imagine what they’ve, some have got houses, and as a family, you could actually manage your debt far more easily. A lot more people are going to be sitting there saying I can’t get a mortgage, I don’t qualify, I don’t have a deposit for a mortgage. The family does. So actually start saying, right, draw me your family and we’ll just actually take your family, take it through this and see actually what your families worth. Then what we’ll do is take some of those assets and we’ll pretend that we can actually get a return of x per cent, 7 per cent and what that’s going to be worth over time. And over time, we’re going to get to that figure. And what’s that going to give you as a family in terms of your pension for the next 10 years. And so you can make it into something which is fun, interesting, turn into a game, but behind it is something which is logical and sound. And nearly all the times I find myself in schools talking about it, I find myself talking to the parents of the kids because they once told them do that. And then it comes, it comes alive to become something which we’ve all had to experience. But without the technical language or the patronising get, particularly patronising getting very (inaudible).

Claer Barrett
Well, Justin, I’m just going to play devil’s advocate here a bit. I mean, obviously, we all know about how the Bank of Mum and Dad is funding a good number of first-time buyers to get on the housing ladder. I think more and more in the cost of living crisis people are having problems. They are going to their families, to their parents, their grandparents, their siblings and asking to be helped over a financial bump in the road. But then there are some people whose families can’t help them, can’t afford to. They aren’t there. There are a single-parent family, could be somebody who’s recently arrived in this country and is having to send money home. I mean, how would you make that kind of lesson relevant for them?

Justin Urquhart-Stewart
Same thing in many ways in terms of that, let’s scale it right way down to you as an individual. I’m on my own. I’ve arrived here all I’ve got, hopefully I got somewhere to live, but I’ve got to pay some rent on that, I got a job going. What are the priorities I’ve got to have? Do I have people to look after here or back in my home country, and do I have to send money back? So what I need to be able to do is just start writing down a little financial plan because what it does is once you’ve written down in terms, what have I got to achieve, what have I got coming in, what I’ve got going out, it gives you that one word that runs any economy, whether you’re ICI or whether you’re just I, that is confidence. And you have that confidence to say, at least I know what I’ve got.

Claer Barrett
I know where I am.

Justin Urquhart-Stewart
(Inaudible) I know I haven’t got. At least I know what have I got. So then you can say, right, OK, so if I start putting that much aside I’ve got a little bit more money saved. I can actually start doing some more with it. And over actually a few months it starts building up, and it’s amazing actually. Oh, just over a few months, suddenly the things begin to change. You suddenly start having a bit more confidence. I’m not wealthy, but I’m a bit stronger than I was before. And it gives them control of it as opposed to the fear of actually say, oh, I’ve got to pay off the, that other loan coming through, or someone’s going to be banging on the door for it and getting people away from that, from the, that financial scum you don’t want to be dealing with. But also there are people who could be really helpful, like some of the credit unions, which you barely ever get to hear about. You can provide you with not information, but good access to cheap finance and reasonable saving and savings (inaudible) and you start having a better understanding yourself. Give you some of that confidence. So start building up you as an individual doing it and maybe talk to some friends about it, and you’ll find exactly the same position. And very quickly, and it will just take several months, and suddenly you got a few hundred quid building up, and you think, actually, I could start doing this.

Claer Barrett
Now, people who are investing regularly, we know that that’s lots of people who listen to this podcast do, even if it is small sums of money. But another problem that I’ve talked to you a lot about over the years is the advice gap. These people who have some money to invest, but they can’t afford the services of a financial adviser or a wealth manager to give them help and advice about what to do. Now, to all of the people listening who are going down the DIY route, what pearls of wisdom would you impart to them?

Justin Urquhart-Stewart
What you need to be able to have, actually, in my view, is actually a financial planner, helps you plan doing things. So not so much in investing, what are the bits you need to have in place, what are the Lego bricks I need to have in order to start growing things, insurance, mortgage protection, all those sort of things as opposed to just straightforward investing. So you can’t afford the advice yourself, the wealth manager, so number one, maybe it’s the family that could actually do so. Certainly, a family in Scotland, used to be an old, used to be the sort of family lawyer was the, we used to go to who tried, they weren’t very good, but at least it co-ordinated some of the legal aspects together. Certainly you could do that with financial planners now to co-ordinate that family, and so the cost is shared across them. Now, if you’re an individual, you can’t afford that, good news is actually there are a lot of good places you can go to, like the FT to be able to get information which is credible information and directions what to do and advice lines where you can write in or call in and get some views and opinions. So you have to put in some homework. But the good news is never before have you had quite so much information and commentary available. The bad news is you’ve actually got to go and find it and make sure you’re talking to the right people. And again, that’s where AI comes in, you’re never quite sure are you always talking to the right people? Check it, and you will find out quite quickly.

Claer Barrett
Now, your style of dress, Justin, people might associate you with conventional investments like stocks and shares. But I wondered what you think of bitcoin.

Justin Urquhart-Stewart
Oh, I’m absolutely outrageous. There is something which has been dreamt up as a computer algorithm. Highly expensive to run and develop, takes an enormous amount of electrical power, so environmentally it’s dreadful. It’s tradable, but it goes up and down like a yo-yo the entire time. The regulators are being sort of forced to try and run it. But unfortunately what’s happened is because youngsters have come in and said, look what I could do with this, I could trade this very easily goes up and down. They think this is investing. No, it’s punting, and it’s punting on something which is potentially very dangerous.

Claer Barrett
But they think it could make them rich.

Justin Urquhart-Stewart
Exactly. So, but I’d regard that as financial version of horseracing without the fun. No, investing does have various disciplines to it, some which may say in comparison sounds quite dull, but it’s slow and steady over time. I have no problem at all with some wants to go and have a punt on something, say even bitcoin if they wish, but it’s with a tiny amount of money. What’s the definition of tiny amount of money amount? Amount they can afford to lose. So we need much more education to people understand what goes on, and the regulators need to be sharp as well. We need regulators to be proactive.

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Claer Barrett
In reality, every investor makes mistakes. How can we learn from these?

Justin Urquhart-Stewart
Me too. Do I buy things which have gone wrong from time to time? The answer’s yes. And so the answer is from experience, listening to others who asks you what’s happened? Also some common sense. Too good to be true and all that usual line. And so it is that, that sort of experience, the more you can learn from others, which is why things like investment clubs can be useful, you can actually learn to steer clear of it. Quite often you see every year there will be another area of the market or geographical area where suddenly everyone’s pour money into. Over the past few years. China was a great place to invest in until you actually saw actually how China was running some of their markets.

Claer Barrett
ESG more recent.

Justin Urquhart-Stewart
Oh, ESG, yes. You have the environmental, sustainable and governance. Everyone says that’s a great thing to have. Or does it turn into a sort of greenwash? It’s just become a fashion fad.

Claer Barrett
These vogue investment. What about AI? It’s a more recent buzz word.

Justin Urquhart-Stewart
Yes. And of course so, AI, but what do you actually mean? And I was terrified when I actually looked at some of the school kids, and they had already been using AI for the past year or so, the chatbot and things like that, to be able to actually get their essays written. I thought this was for the future. No, it’s already operating now. And so AI takes things into a different dimension where you have to be really careful about what you’re reading, where it’s from, and who’s to say that someone isn’t actually going to be using AI to rewrite what you’ve just been saying? So how do you regulate it? I have to say, I don’t have an easy answer to that. You’re just going to have to make sure your cynicism levels, antenna, are very, very sharp indeed.

Claer Barrett
And any rules of thumb for investors that you like to highlight?

Justin Urquhart-Stewart
Basic, basic things. I know, first of all, do you understand what’s going on? If you don’t understand it, don’t do it. Some simple, straightforward logic, not as an investment adviser or anything like that, just sit there and say this needs to make sense to me. So you remain such a common sense. Just follow your nose and be surprised what happens. If it doesn’t smell right, then also check with other people. There are lots of other people you can check things out with just to say, does this sound right?

Claer Barrett
With more conventional investments, tell me about the rule of 72.

Justin Urquhart-Stewart
There are some basic rules like this that I think are quite fun. The rule of 72 is divide into 72 the sort of percentage return you think you’re going to get. So let’s assume, we’re not going to get this, but let’s assume we get 10 per cent return. Fantastic. So 10 into 72 goes roughly 7. What it means is my money’s going to double in seven years. So I can actually sit there and say, well, if I got this amount of money, then, so every seven years I’ve certainly gone for £100 as I got £200, £400. Now, if you’re going to use this as a pension scheme, and you’re going over 10 years, 20 years, 30 years, 40 years, 50 years. This makes a huge difference. So suppose you’re getting, let’s say 4, 5, 6, 7 per cent return after charges, which is quite feasible, say about 5 per cent. And if you can get getting 5 per cent, and over those decades, you can see with a rule of 72 how quickly it’s growing, that’s going to give you the comfort of knowing that by the time you do want to retire or have to retire, to actually say, actually, I got a reasonable sum here, and I can then see how long that’s actually going to last me. So a simple little number like that can suddenly take away the horrors of, oh, I was thinking about the calculator. I don’t know what I’m doing here. Just some simple maths like that, and actually, life becomes a lot easier.

Claer Barrett
But, I mean, I think even people listening who are investing into stocks and shares ISAs, they’re being their own investment manager now in their 20s, 30s, 40s, they’re building up this knowledge. It’s not going to come the day where they’re in the 50s and 60s and starting to access pensions or think about managing them in their retirement, where investment management is going to be a new thing for them. It’s something that they’re going to feel more comfortable and confident doing.

Justin Urquhart-Stewart
Absolutely. And of course, that they are the first generation who are actually in that position because their parents were never in that position. Now things have changed. Good news. We’re loving living longer. Bad news we’re living longer because now we’ve actually got to start actually paying for it. Because someone’s changed the pension rules again, and they always do. So those pension responsibilities aren’t down to the company, down to you. So you’ve got to now learn how to try and manage it. So everything that was there for your parents has now changed radically. So you can’t blame them for not understanding it because it wasn’t the same.

Claer Barrett
They didn’t have anything to understand.

Justin Urquhart-Stewart
And it was a nice little world to live in, a little bit shorter lifespan. So now you’ve actually got to spend a lot more time trying to do it. And the good news is you’ve got more choice of things to do. But again, more choice means you’ve got a more understanding of what to do. What you want is something which is a predictable even, dare I say, as boring as possible. What you wanted to be able to do is get whatever pension plan or investment plan you’ve got trails up to go to ta-da . . . What? Where’s it going? So taking the risk and mystery out of it, putting some fun into it, but fun only for a little bit because this is not, as I say, horseracing, but for help learning doing things. But the rest of it just giving you and your family some confidence that you’re going to be OK. It may not be perfect, but it’s a better state when I have done nothing at all.

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Claer Barrett
Now, we’ve talked a lot about making financial plans, but of course, if there’s one thing we can’t plan is the ups and downs of life, and you are, Justin, somebody who really knows what it’s like to be hit by a curve ball from accidents that you’ve had on archaeological digs in Uganda to more recent events, perhaps in your personal life. It’s important to plan for the worst happening, but we also need to make sure that we enjoy life while we have it.

Justin Urquhart-Stewart
And this is where your investment is, to me, one of the most important things that liberates you to be able to say, I can have some fun and enjoy myself for this. Doesn’t mean you’re going to blow the whole lot, but you could then start spending, making sure I can book time aside and money aside to go do the things I want to do. None of us are going to sit there and just turn into some terrible Scrooge sitting there, putting money aside entire time and just hopefully having a pile of coppers actually rising. But you won’t be able to use it, have some fun with a family of friends or socially and going out and doing some positive things. It’s good for you. It’s good for your family. A dare I say, sounds awfully it’s a blurry, it’s good for society as well.

Claer Barrett
Well, Justin Urquhart-Stewart, thank you very much for joining me today on this investment masterclass.

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Justin Urquhart-Stewart
Thank you. It’s been a great pleasure.

Claer Barrett
That’s it from Money Clinic today. And we hope you like what you’ve heard. We’re always looking to chat with people about their money issues through the show. So if you’re interested in being part of a future episode, then email us. Our address is money@ft.com. You can also take a peek at our website ft.com/money. Grab a copy of the weekend newspaper or follow me on Instagram. Money Clinic was produced in London by Persis Love and Tamara Kormornick. The sound design is by Breen Turner, and our editor is Manuela Saragosa. You heard original tunes this week by Metaphor Music. And Cheryl Brumley is the FT’s global head of audio. And finally, our usual disclaimer, Money Clinic podcast is a general discussion around financial topics and does not constitute an investment recommendation or individual financial advice. For that, you’ll need to find an independent financial adviser. That’s all the small print for now. See you back here next week. Goodbye.