PrefaceIt is hard to escape the need for personal investment and financial planning. In many advanced economies, the affordability of state support during periods of unemployment, infirmity or old age is being questioned, driven in large part by the need to adapt to the demographic challenge of ageing populations. At the same time, decades of economic growth have raised societies’ expectations about living standards throughout life. As a result, individuals and households are finding that increasingly they must organise their own financial security, and personal investment has become the main route.
The first objective of this book is to raise your understanding and confidence in making personal investment decisions. These will be affected by some factors outside your control (for example, inflation and the setting of interest rates) and others within your control (such as choices about the mix of assets that you hold). All financial planning requires an understanding of how the local context – your own particular situation – is part of a wider context, including the role of the economy and governments. In helping you to better understand both the local and wider context of investment planning, the book will help you to become more knowledgeable and thoughtful about your own investment decisions.
Some of you reading this book will be doing so as part of a university or college course covering personal investment and financial planning, for which this is a core text. You may be following, or preparing for, a career in financial services, an industry in which selling and giving advice about personal investment products plays a key role, and is going to increasingly require higher level study. In the UK, Level 4 of the Qualifications and Credit Framework in England, Wales and Northern Ireland or Level 7 of the Scottish Credit and Qualifications Framework has already been set as the new minimum qualification level for investment advisers from 2012 onwards, with a requirement for ongoing continual professional development. So a second objective of this book is to make a major contribution to that professional development for people working in the financial services industry.
The book explores the landscape of the financial services sector: how financial innovation creates new products and may change the nature of existing ones; how savers interact with providers and other players, such as banks, life companies, fund managers and advisers; the different incentives and conflicts involved; and the role of financial regulation. It will be useful for anyone who wants to know more about ways of planning for the financial future, and what happens to money once it leaves the hands of savers and investors.
Personal investment: financial planning in an uncertain world crosses traditional disciplinary boundaries to bring together economics, finance, statistics, history, business and sociology. It also draws on a wealth of relevant and topical examples from the everyday world around you, including bank runs, asset bubbles and changing pension provision. We hope that this book will not only empower you with a new understanding about how to plan your personal investments, but also give you a passion for understanding the fascinating subject of personal finance.