The Private Investor: A friendly word of warning in your ear

I'm not a great one for campaigns, but I think I may be on to something. Last week I wrote about the very disappointing returns on my 10-year modest savings plan with the Family Assurance Society, a friendly society based in Brighton.

Somehow, over such a long period and with every opportunity to gain from seven years' participation in the longest bull market in history (admittedly followed by three years of declines), the society actually contrived to give me less than I put in in cash terms. I subscribed a total of £1,080 and will receive £982.90 back. I would, in other words, have been better off putting the cash under the mattress, then taking it out and spending 10 per cent of it on a great, big booze-up. Not the best example of the benefits of thrift and the finest traditions of the friendly society movement, I fear.

I have received interesting correspondence from readers with similar experiences from Family Assurance and others. Like them, the thing that really adds insult to financial injury is the way the societies employ what I consider sharp practice, and the inertia-selling techniques which brought the investment industry into disrepute.

I have a feeling an awful lot of friendly societies – although I'm sure not all – fall a long way short of their "friendly" image. One thing is for sure, I don't recall being shown any "illustrative" figures in 1993 that I would get less back after a decade than I put in, and that the rate of growth would be negative. Any other readers with friendly policies and similarly sorry tales are welcome to share them with me.

Anyway, as you can tell, I'm very annoyed about it (although not that surprised) and I'll be taking up my complaints with the society in the first instance then the Financial Ombudsman Service. I doubt I'll get very far, but I think I ought to persevere because I have the strong feeling lots of small savers with the friendly societies just limp away from the experience.

In a slightly neglected and under-reported corner of the investment jungle these societies, with their front-loaded fees and appalling performance have been getting away with it for too long. I'll let you know how I get on.

All the more reason, I always think, to try to look after your investments yourself, if you can. At least you have no one else to blame for the mistakes you make, painful as they may be, and of course you don't have to charge yourself a huge management fee, although it must be admitted that the paperwork for self-assessment can be a bit of a bore.

Talking about mistakes, I've made a few, but too few to mention. I was both right and wrong about Marks & Spencer, for example. Observing how well the Marks stores I visited seemed to be doing before and after Christmas and a simple count of the number of "Magic and Sparkle" carrier bags being carried around various high streets, I made the correct guess that the M&S sales revival was proceeding apace. What of course was not visible, except in the sense that there were savage markdowns in the January sales, was the extent to which we now discover the retailer's margins have been squeezed, especially in clothing.

So when I took my modest profits in Stagecoach (bought at 22p and 15p and sold at 31p) and ploughed them into M&S (at 317p) all seemed to be going well (up to about 335p in seven days) until M&S made their trading statement and the shares slumped to just over 300p.

They've now bounced back to where I bought them. Fun as it is, this is, of course, an absurdly short-run view. Looking further out, the key thing I would have thought about M&S is the way the overall resilience of the store, its new management (Mr Radice) and the way the emphasis is very gradually but surely moving from clothes to household goods and food.

In other words, M&S is a brand that still has a good deal of strength to it even after the mauling it suffered a couple of years ago. In any case I have more faith in Marks and Spencer plc, symbol of popular capitalism, than the average friendly society, mutually owned but decidedly unfriendly.

sogrady@independent.co.uk