This article was originally published more than two years ago, but the details haven’t really changed and the ad is running heavily again and generating questions — so we’re republishing it, with no changes (it’s not a stock, so it hasn’t had the regular quarterly updates or news flow). What follows has not been updated or revised since January 7, 2013… enjoy!
I’ve gotten quite a few questions lately about this “Phi Account” teased by Unconventional Wealth, so we’re going to take a quick look at it today.
And no, we’re not going to hold it against Aaron Gentzler that the ad starts out with the threat that the stock market would have incredible single-day losses on January 2 … that would be unfair hindsight, and I think we all knew that the “Fiscal Cliff” stuff presented risks that there could have been some very bad news on that day (instead of the “kind of good” news that we did get, spurring the market higher).
(Gentzler, by the way, is the editor of this newsletter … apparently they’ve now jettisoned Andrew Snyder, who helmed it for a while — Unconventional Wealth has been through a few name and personnel changes since I last wrote about them.)
So here’s how the ad gets us interested:
“Now available to yield-hungry investors…
“The 12% ‘Phi Account’
“This unique investment has gone up every year since 1950 without touching the stock market.
“Since the 19th century, everyone from queens to mechanics has used this kind of ‘account’ to build their fortune — and now so could you. You could earn 12% per year without the risks of stocks, bonds, gold, oil or any other traditional investment.”
Yes, we’ve all been around for long enough to know that when a copywriter puts something in quotes it means “not really.” So these aren’t just normal “accounts,” I’m sure, but that doesn’t mean we don’t want to know the details.
Here’s some more of the spiel:
“Since 1950, the majority of ‘Phi Accounts’ have never earned less than 5% in any year.
“And since 1998, they’ve gone up 12% per year.
“Even better, ‘Phi Accounts’ have nothing to do with the stock market….
“where do you sign up for a ‘Phi Account’?
“Don’t call up a broker, that’s for sure.
“The ‘Phi Account’ is not what you would call a ‘mainstream investment.’ Regular stockbrokers aren’t authorized to trade it.
“In fact, it’s safe to say most brokers have never even heard of it.
“Only a few small firms around the world have the expertise and experience to run a ‘Phi Account’ successfully.
“The company behind the 12% ‘Phi Account’ has been around since 1846. It even holds a royal warrant.
“It’s one of only 850 in the entire world — and it means the company is a preferred business partner of the monarchy.
“That’s right. The queen has a ‘Phi Account.’
“Queen Elizabeth, the longtime head of the British royal family, opened her ‘Phi Account’ in 1956.
“And while the queen won’t disclose her gains, it’s interesting to note that the crown jewels, and most other royal assets, technically belong to the people.
“Not the queen’s ‘Phi Account.’ It’s privately held on the tiny Channel Island of Guernsey….
“Phi Accounts” have nothing to do with stocks, bonds, ETFs, mutual funds or options. They’re not subject to government manipulation or the whims of the Federal Reserve.”
So what are they teasing?
Well, according to the mighty mighty Thinkolator it looks like they’re pitching rare stamps … and specifically, this sounds like the rare stamp investment “accounts” offered by Stanley Gibbons in the UK (Stanley Gibbons is indeed a royal charter company, and the royal family has had a few avid and successful stamp collectors over the years … though I have no idea whether or not Queen Elizabeth’s relatively modest personal collection is kept in the Stanley Gibbons vaults in Guernsey or not). And yes, Stanley Gibbons actually started in 1856, not 1846 … and the Queen apparently started her stamp collection in 1852 from what I read, but I suspect those are either intentional errors to throw off the mighty Thinkolator, or differing interpretations.
Stanley Gibbons has set out recently to turn rare stamps into a real alternative “asset class” comparable to gold or equities or real estate — they offer a number of different investment accounts, and some of those accounts, which are basically managed accounts that invest in baskets of rare stamps, are guaranteed by Stanley Gibbons to not lose money. In exchange, Stanley Gibbons does not charge a management fee but presumably they do earn something like a “commission” on the spread between buy and sell prices on the stamps, and they also earn a share of the investment returns over time — so if you hold the account for more than five years Stanley Gibbons gets a hedge fund-like 20% of the profits when you sell (percentage is higher if you sell earlier). I have my qualms about whether the folks who invest $500 a quarter with Stanley Gibbons are going to do as well as the investor/collectors who commit far more money, but that’s not based on anything I know — just a worry.
That all sounds fine and dandy, but it’s also pretty opaque — prices, including historical price claims, are based on the Stanley Gibbons catalog prices, and I have no idea which stamps will become more valuable over time so I certainly wouldn’t want to get involved in selecting stamps myself (that’s one of the options) … but I also don’t know how their account management works, and whether they have conflicts of interest in who gets the “best” stamps in their account. Probably some of that information is knowable if you research it further, it’s not the sort of alternative that I’m particularly interested in but it is, at least, a pretty uncorrelated investment in collectibles — we’ve seen this pitched before by Steve Sjuggerud over at True Wealth, who has a soft spot for alternative assets and collectibles in general, and I’m sure there are some stamp enthusiasts out there in Gumshoedom who know far more about it than I do. It may continue to be a useful way to diversify a portfolio for many people, but it’s not my cup of tea.
You can see the investment presentations from Stanley Gibbons here if you’re interested in learning more, and there’s a good critique here that was published in The Guardian a couple years ago that might help to give you more reasonable expectations.
The “guarantee” of the value of your stamps that they offer for some accounts is, as far as I can tell, backed by Stanley Gibbons itself — so you have to count on them continuing to exist (they’re also publicly traded, the stock has done well in recent years), as well as their ability to back all of the accounts of investors to meet that “won’t lose money” guarantee should the rare stamp market take a tumble for whatever reason.
And the big picture, of course, is completely unknowable: Rare stamps will continue to be rare forever, but will wealthy people continue to want to collect the rarest of them, and will modest investors continue to upgrade their collections to get better and better stamps, creating a rising market for these little pieces of paper over time? That has apparently worked pretty well over the last 100 or so years … whether it continues for a hundred more (or ten more, or 20), is a question you’ll have to answer for yourself.
So there you have it — Phi Accounts = rare stamps. Interested? Think it’s crazy? Let us know with a comment below.