“Joy multiplies when it is shared among friends, but grief diminishes with every division. That is life.”
R A Salvatore
Capitalism’s reputation remains deeply challenged in the public eye, notwithstanding Boris Johnson’s spectacular success at the polls a month ago. To most people, it speaks of wealth inequality, of a cold and hard approach to business success and failure, of elitist and inaccessible power brokers, and of failing banks. The news that the number of flotations on the London Stock Exchange fell to just 35 last year compared to 79 in 2018 bears out the fact that capitalism is becoming more and more private, and the public feel it.
We therefore need to re-awaken a popular taste for capitalism. It cannot be done by privatisations, as in Margaret Thatcher’s day: there isn’t much left for Government to sell. But there’s a much more sociable and enjoyable way to do it, in pubs and clubs across the United Kingdom, and at all levels of society - including those ‘Red Wall’ constituencies - and it’s called the Investment Club.
So in this commentary we make a radical new proposal, for Chancellor Sajid Javid to introduce an ‘Investment Club ISA’; and light the touch paper for large numbers of people to start enjoying straightforward investing.
The Investment Club is a very simple concept: it’s just a group of people finding company and enjoyment in researching, discussing, selecting and investing in a portfolio of shares and funds. It’s not regulated by the Financial Conduct Authority, and it doesn’t have to be an incorporated company or any other formal body. It helps to have a simple written agreement between the members to ensure everyone shares fairly in any gains and losses, and they need to choose one of their number to control the account, although all members should be able to login and view what’s there, and the values of the account and its underlying investments.
A typical Investment Club will have 5-10 members, but they come in all shapes and sizes. Some meet regularly in a local tavern, others communicate by Skype or teleconferencing, some have particular expertise in different fields or businesses, some are just a group of close friends having fun: it’s also a great way for older folk to keep in touch. Whereas individuals on their own are often anxious about getting started with investing, the Investment Club helps to build each member’s confidence through teamwork and good companionship.
The Share Centre operates accounts for over 2,000 Investment Clubs, and particularly enjoys the high level of engagement that they bring. It’s not just their interest in investment dealing and account values, it’s also keeping in touch with public companies in which they’re invested: through shareholder communications, attending annual meetings and voting - all things made possible as a result of Part 9 of the Companies Act 2006, for which The Share Centre lobbied so hard to secure.
A small amount of Government encouragement would really get Investment Clubs moving across the United Kingdom. So we propose that a new ISA is introduced in the Budget this March, the ‘Investment Club ISA’. It would run on the same basis as the standard ISA - maximum annual subscription of £20,000, and all investments held within the wrapper tax-free. Any authorised ISA manager would be able to offer these accounts, and would certify to HM Revenue & Customs that they meet the rules. These could be that there would need to be at least five adult members of the Investment Club, and that the residency and identity of members were in line with regulatory requirements. Nothing complex - just as we hope that retail investment will become much more straightforward post-Brexit.
Investment Clubs are not just an enjoyable and social interest in themselves: they are also a gateway to individual investing. Once their members get the taste of, and some familiarity with, investing, their appetite grows to have their own personal account or ISA. With 5-10 members all sharing the experience in each club, it doesn’t take long for that interest to spread.
The trade association for retail investment firms and financial advisers, PIMFA, is embarking on a series of discussions over the next few weeks to explore what changes should be made at HM Treasury, the Financial Conduct Authority, and the London Stock Exchange in order to move to a much more inclusive form of capitalism. We hope our proposal for an Investment Club ISA will attract their support and that of their member firms, and that we can look forward to a new dawn for popular capitalism based on individual share ownership.
Gavin Oldham OBE