Liquid Millionaire – My response to Investor Chronicles review of Liquid Millionaire

By Stephen Sutherland, author of Liquid Millionaire.
Posted in the Category of ISAS, SIPPS, Investing, Stock Market, Psychology of Investing, Wealth Building on 13th June, 2011.
Tags: financial services, fsa authorised, fsa regulation, investors chronicle, isaco, liquid millionaire, retire rich, shadow investing, stephen sutherland.

Liquid Millionaire – My response to Investor Chronicles review of Liquid Millionaire – Part 2

Hello,

Yesterday I mentioned that since writing my book Liquid Millionaire I have received lots of feedback both positive and negative. I also said that Investors Chronicle had recently wrote a negative review about Liquid Millionaire.

As well as many of my clients being angry about the inaccuracies of the review, I also felt that parts of the review were false. This of course is my opinion and you may think differently.

But just like in a court of law, you have to hear both sides of the story.

Below is a copy of the negative review.

You can also find it on the Investors Chronicle site.

Investors Chronicle Article

Why we didn’t recommend the Liquid Millionaire

Created: 10 May 2011
Written by: Moira O’Neill

Everyone wants to be a millionaire. That’s why people apply to go on game shows, and why investors buy Premium Bonds hoping to win the monthly jackpot of £1 million. So when Investors Chronicle reader Peter Austin received an email promoting a book called Liquid Millionaire by Stephen Sutherland, he was interested enough to read it.

“Mr Sutherland’s Isa trend investing strategy seemed quite sound,” he says.

“But taking the process forward and chatting to one of their reps, I was somewhat surprised by the cost of the service - several thousand pounds for five years payable up front.
“I thought you may have heard of this and could shed some light on whether it is a good established format that works for pension and Isas?”

Yes, I have known about the Liquid Millionaire book since it was launched in January 2009, and I thought it would quickly disappear into investment obscurity. It is not a serious investment book (although it has an eye-catching title), but a marketing promotion tool for Mr Sutherland’s investment services.

He didn’t manage to get any endorsements from the Investors Chronicle, despite engaging a public relations firm to target myself, Dominic Picarda and Maike Currie.

Mr Sutherland claims to be “the UK’s leading authority on Isa Trend Investing”. What does he mean by this? The book explains that by using an Isa (individual savings account) you can make gains when the market is in an uptrend and then bank those profits - without paying any tax - when the market trend changes. He prefers to invest in funds rather than stocks as they are “not as risky as stocks but just as powerful”.

Thus far, so good. However, “Retire Rich in Just 3 Minutes per Day” is one of the chapter headings. As is “Turning Your First Million into £75 Million”. This puts the book firmly into the “get rich quick” category, which should always be viewed with a healthy dose of suspicion. (You can also read the book for free at http://www.isaco.co.uk/media/liquid_millionaire_free.pdf)

I spoke to Stephen, who says his 250 clients take him on trust. He has lots of high-profile endorsements and numerous good testimonials. However, unless you want to take a high-risk punt, I would concentrate on doing your own investment research.

While he may have made decent money investing in Isas (and he offers no proof that he has or that his system of investing actually works), that is not in itself a reason to go for his services. The book states that his single-year package used to cost £3,000, which seems totally out of proportion when you consider that he is advising on how to invest your annual Isa contribution of £10,860. Paying several more thousand pounds up front, committing yourself for five years is way too much for any service, let alone one that is unregulated and hardly transparent. He says he is applying for Financial Services Authority (FSA) regulation, something we could not confirm with the FSA as its policy is not to confirm or deny applications.

Any decent independent financial adviser would give you a free initial consultation. But Mr Sutherland is not giving investment advice - he is merely offering a shadow trading service. I see ISACO Ltd (his company) was previously called ‘FILTHY RICH ENTERPRISES LIMITED’. To my mind that says it all, really.

Yesterday I responded to the first five of the comments made and below are the final points.

6. Moira O’Neill: While he may have made decent money investing in Isas (and he offers no proof that he has or that his system of investing actually works, that is not in itself a reason to go for his services.

Stephen Sutherland: This is incorrect. To clarify, people tend to talk about and measure my financial success in two areas. The first is individual trading of stocks and options and the second is ISA investing. To be clear, the premium service we at ISACO offer is a shadow investing service that allows you to shadow invest my private Stocks and Shares ISA account activity.

It is NOT a service that allows you to shadow my individual stocks / options trades. I have always conducted my stocks and options trading through Ameritrade and my ISA trading through Fidelity.

My stocks and options Ameritrade account is and always has been denominated in dollars and not sterling. In my book Liquid Millionaire, Chapter 1 describes in great detail the story of how my Ameritrade account jumped from $31,409 into $1.28 million over a 38 month period. Our celebration of the achievement of the goal has been documented in more than one newspaper and this was when Paul and I decided to buy our Dad his dream car, a Bentley Continental with part of the profits I’d made.

I always mention this figure in dollars and not sterling because this gain was made in US currency and not the UK’s. With my ISA investing I have detailed statements from Fidelity that provide evidence of my success with ISAs. I have been investing in Stocks and Shares ISAs (formerly PEP’s) since 1997 and have been fortunate to build up a six figure tax-free account. From 1997 to the end of 2010 the growth on original capital was 1688%.

My brother Paul, the managing director of ISACO also has a six figure ISA account. It pleases clients to know Paul and I have our own money invested. Paul shadow invests me. ISACOs team also shadow invest me. Paul, our team, our clients and I are all in this together. We build wealth together. When I have a good year, our clients do. If I have a poor year, our clients have a poor year.

With my money being on the line, you can imagine why it’s in my best interest to achieve the best possible return for myself, my brother, my team and my clients. That’s what people who shadow invest me buy into. They want to achieve exactly the same returns as I am getting in a time friendly hassle free way. That’s exactly what the Shadow Investing System does.

I feel humbled that my brother, our team and our clients believe in my ability to “beat” the market over the long-term. Beating the market is something 90% of investment managers fail to do. However I’m lucky enough to be one of the 10% that does beat it. Although there is no guarantee, my brother, our team and our clients understand the probability theory.

They think “If Stephen has beaten the market in the past he’s likely to beat it in the future.” I’d love to say that I beat the market every single year but I don’t. However, that does not worry me as long as overall I’m ahead of the market and that’s exactly where I am, ahead of the Nasdaq Composite over the long-term and that pleases me, our team and our clients. The last two years, although not typical have been particularly kind to us.

In 2009, I made a 62.9% gain and in 2010, 27.2%. In the same period, the Nasdaq Composite, the index we use as our benchmark made a 43.9% in 2009 and a 16.9% gain in 2010.

7. Moira O’Neill: The book states that his single-year package used to cost £3,000, which seems totally out of proportion when you consider that he is advising on how to invest your annual Isa contribution of £10,680.

Stephen Sutherland: In this sentence there are two points I’d like to comment on. The first is the mention of the £3000 price tag for a single year package. Yes its true ISACO used to offer single year packages priced at £3000 per year. In 2007, ISACO came to the conclusion that single year deals were forcing people to think too short-term.

To remedy this situation, in 2008 ISACO made a radical change to its business model. Instead of the minimum term being twelve months, the minimum term became five years. A five year period was chosen due to the minimum time individuals should be invested when investing in Stocks and Shares ISAs.

ISACO switched from a business model of offering single year packages to a model offering multi-year packages. With the one year deals costing £3000 back in 2007, some people now expect to pay circa £15,000 for a five year shadow investing package. However, the price of the five year package calculates at just £1539 per year. Clients who sign up for the package obviously see our price as good value. They vote with their wallets.

Clients gain peace of mind knowing ISACO has in place a no questions asked guarantee. Here’s how it works. During the first 30 days, if for any reason the package does not meet your expectations, you ask for a refund and you receive one no questions asked. ISACO’s policy is to make each and every unsatisfied client happy.

This means if you came on board and made a claim outside the 30 day window, your case would be reviewed and refund payments would be made on a pro-rata basis. For example, if you claimed after twelve months and had four further years to of premium service outstanding, ISACO would refund the price of four years of service rather than a full five year refund.

The second point I’d like to comment on is the rationale behind paying £3000 and the annual ISA contribution of £10,680. People who join us are normally aged between 45 and 65 and already have a substantial amount of tax-free wealth built up in their ISA and pension accounts. A typical client might have something in the region of £250,000 in tax-free wealth when they speak to us for the first time.

These affluent high net worth types often have the intention of continual adding the maximum allowed each and every year. Most of the time, they intend to add the maximum into their partners account too.

Let’s look at a hypothetical situation. Sticking with the £250,000 example, John and Jane Smith make a decision that they intend to add the full ISA allowance each and every year whilst shadow investing me. That means as well as the £250,000 they already have as a lump sum, they plan to invest a further £106,800 over the course of the five years.

ISACO’s aim is 12% annual growth over the long-term and so in this situation, if we achieved our aim, at the end of the five year term, John and Jane’s combined portfolio would be valued at £587,411. This would net them a profit of £230,611. If my maths is correct it would mean after paying for our service, the client would make a clear profit of £230, 611. After paying £7700 for a five year package and making close to quarter of a million pounds, the service in this case would appear to be good value.

However, if for example somebody is just starting out with ISAs who didn’t intend to add the full ISA allowance each and every year, the mismatch would be spotted fast and dealt with accordingly. In other words, the prospect in this case would be rejected due to a clear misfit between the price of the service and the amount of money they have invested.

If we did sell to these people, it would be miss-selling. In other words, it would be classed miss-selling because the deal wouldn’t work for the prospect financially. Another way of saying it would be the exchange of money for service would not make financial sense due to their lack of starting capital and intended capital additions. When packages are sold to the correct people who have the correct levels of wealth, it always makes sound financial sense. Bob Liddell, one of ISACO’s premium clients is a good example of why it’s extremely good value to some but not to others.

Bob paid £10,000 for 10 years of shadow investing and in less than two years, he was showing a healthy profit on his account of nearly two hundred thousand pounds. As a reminder, Bob said: “I am at a new high, £481,938, a tremendous result and £185,938 up overall in 19 months, what a fabulous result. If I had all my investment placed from day one just think what it would have been! When I consider I paid £10,000 for 10 years of your service, it is without doubt the best investment I have ever made.”

8. Moira O’Neill: Paying several more thousand pounds up front, committing yourself for five years is way too much for any service, let alone one that is unregulated and hardly transparent. He says he is applying for Financial Services Authority (FSA) regulation, something we could not confirm with the FSA as its policy is not to confirm or deny applications.

Stephen Sutherland: ISACO are FSA regulated (525147) but I can confirm that at the time Moira wrote the article we were in the later stages of the regulation process. What is frustrating to many of my clients is that when I spoke to Moira just prior to her writing this review, I explained that we were midges away from attainment of FSA authorisation and yet she failed to mention it.

9. Moira O’Neill: Any decent independent financial adviser would give you a free initial consultation. But Mr Sutherland is not giving investment advice - he is merely offering a shadow trading service.

Stephen Sutherland: This is untrue. The FSA class the shadow investing service as financial advice. Because the FSA say the shadow investing service constitutes as investment advice, my brother and I have recently taken and passed our IFS Level 3 Certificate for Financial Advisers. Attaining these qualifications were part of the criteria set by the FSA during the authorisation process.

10. Moira O’Neill: I see ISACO Ltd (his company) was previously called ‘FILTHY RICH ENTERPRISES LIMITED’. To my mind that says it all, really.

Stephen Sutherland: If my skin wasn’t as thick as it is, I would probably be offended by such a statement. To some people, this statement implies ISACO not to be a credible financial services business. Moira called me two days prior to publishing this article and during the ten minutes we spent together I made sure Moira got all the facts.

At first she believed our business had only been in operation for two years however this is not the case and I corrected her accordingly. I explained that ISACO has been around since 2001 meaning November 2011 is its tenth birthday. But we haven’t always been ISACO. The business was originally called Filthy Rich Enterprises. Calling our business Filthy Rich was a big mistake. Businesses do make mistakes and this was one of our first and a large mistake at that.

As soon as we realised the name Filthy Rich was creating an inaccurate and negative perception of our company, we changed our name to Fast-Track Education. This was a better choice but still way off the mark, mainly because the name Fast-Track was too generic. We all knew we needed to be called something that was unique and at the same time said what we did. ISACO came as a combination of ISA and CO as in Company. ISACO plans to keep this name indefinitely.

With me mentioning the history behind the ISACO name to Moira when we spoke, I’m surprised she didn’t mention it in her article and even more surprised that she would end her article with what some might think as a low blow comment.

I’m sorry that Moira O’Neill and Investors Chronicle have a negative view of me, my book Liquid Millionaire and our company. I have always had a lot of respect for Investors Chronicle and still do.

Now that you’ve seen the review and heard from both sides, it’s now up to you to decide.

My philosophy is this: Power to the people. Single individuals no longer have the power. It’s the crowd what decides who is good and who is not so good.

Until the next time my friend.

If you would like to get more detail about what you’ve just heard, you can request a FREE Telephone Consultation (£1,997 value) by simply contacting us.

In your free over the phone consultation, you’ll learn about a first class investment opportunity– aimed at affluent people who have Stocks and Shares ISAs, a personal pension or a SIPP.

As well as booking your free session, you can also obtain a copy of my book Liquid Millionaire (RRP £21.97) for just 99p. I have just 99 copies to give away so be quick.

The number of telephone consultations (and free book giveaways) available is always limited.

You can email us or call 0870 757 8554 if you prefer.

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