Alvin Hall on money, savings and the credit crunch
In good times and bad there’s one man who knows how to get more bang for his buck – and that’s Alvin Hall.
This independent financial expert first appeared on British TV screens back in 1999 as the presenter of the BBC 2 series Your Money Or Your Life. The concept was simple: people in financial difficulty turned over their household bills to Alvin.
After crunching the numbers the results were rarely pretty, and hapless participants were made to face reality.
But week in, week out Alvin’s solution to their financial woes, delivered with his special brand of charm and no-pain no-gain approach, somehow managed to soften the blow.
But for the man whose take home pay is ‘well into six figures’ it wasn’t a case of to the manor born. One of seven kids, he grew up on a farm in rural Florida.
‘It was a very hand-to-mouth existence,’ he says. ‘My mother worked as a day maid, cleaning houses in the city about 26 miles away. And you’re getting up at 5.30am knowing that before you start school you’ve got to hoe your rows, you’ve got to feed the cows, you’ve got to feed the pigs, and when you came home from school you had more farm work to do. A couple of times we had to go on benefit because we didn’t have any money.’
When Alvin was 15 years old integration occurred in the States, and he entered a programme called Project Upward Bound, designed to help people from disadvantaged backgrounds.
‘From that I did very well and it was decided that I should apply for another programme called Yale Summer High School. And that’s how I got out.’
Inspired by his summer at Yale, Alvin grasped the opportunity to get a university education and ran with it, funding himself with a combination of grants, loans, scholarships and taking work where he could. He left Bowdoin College in Maine with a BA in English, and the University of North Carolina with an MA in American literature, and a mountain of debt. ‘I left school with about $17,000 worth of loans, which was a lot in those days.’
Despite the dire state of his finances, Alvin still had no thought of pursuing a career that would make him rich quick. Instead, he got a job teaching literature. And this love of the arts remains his spiritual home. ‘I don’t get up in the morning and read the business pages first. I read the art section first, because it’s what I love. I enjoy Wall Street, but it’s not my passion. When it comes to talking about money in Wall Street I never feel the same sense of being overwhelmed that I get when I see a piece of art that I have to have.’
Nor, did he have a natural head for finance. ‘Money was never instinctive for me because I never learned about money growing up. Money was never taught at school. Anything I learned about money was strictly from my own experience – trial and error. And I’ve made some classic errors. I’ve gotten in credit card debt, which I then bailed myself out of by taking on an extra job working in a department store, in what was then known as men’s furnishings – men’s underwear,’ he explains, breaking into an infectious fit of giggles. ‘It’s that wonderful American thing of creating these crazy euphemisms! And a couple of times in my life I actually ran out of money. And that was frightening because I was living in an apartment, I had a car, but I didn’t have money to buy gas, so I’d walk. I remember I got a job in a teashop packaging tea, simply because I had no money, and it was the quickest job I could get.’
But then he began to read about friends who’d attended the same small all-male college in Maine who’d become very wealthy. ‘It became interesting for me to think, what did they know about money that I did not? From then, it became an intellectual pursuit to discover how money worked.’
New York, New York
‘In December 1982 I moved to Wall Street to work with my oldest friend, who’d been my college roommate, and his father. That was really the beginning of what I call my intellectual pursuit. I was gonna make the right decisions and continue my life as my life was. I recognised that I could no longer go through life and ignore money.
‘Part of my job – designing training programmes teaching about investment – was to go around and learn from old timers on Wall Street and read books about investing. And this is where being a good student ended up being my great strength. Having received a liberal arts education, I learned to think different ways about things and I was able to adjust the way I thought about the material. I found it fascinating. It wasn’t boring to me at all. And then I discovered the secret that money had a creative side, which was not making money grow, but creating new products to appeal to people. And given the fact that I am essentially always a student, that I enjoy learning new information continually and I enjoy the process of translating that new information – it was a perfect place for me.
‘I soon learned more secrets that were completely life changing. These secrets were always about saving. What I didn’t know was that these people were earning enough money so they could always put something aside. And they were always quietly saving. So when they said: “I’m broke” they weren’t broke; that money was sacrosanct. At that point I began to save. I reduced the amount of money that I lived off to 85% of what I earned and put 15% away. And if somebody asked me for money – I was always broke.’
Four years after he started on Wall Street, Alvin felt ready to start investing: ‘Disaster. I made the classic mistakes – rather than doing my own research I relied on a friend who was very impressive, and I saw only the upside and not the down. I lost about half the money that I had saved.’
He stayed away from investing for a time, to focus on writing. His first book, a training manual called The Uniform Securities Agents State Law Exam did so well he wrote another book on mutual funds investing, which also did very well. Then in January 1990 he got laid off from his job, and a friend suggested he set up on his own.
So he launched his consulting business and decided to write a book for Joe public about the stock market. ‘I put a huge amount of myself into writing it. I wanted to make sure that everything I had learned up to that point, and that the average person could benefit from, would be in that book. I remember getting up, as always, at 5.30am and writing, writing, writing. It proved to be an incredible book. It just took off; it got great reviews and it bought me my apartment.’
Riding the financial storm
Given his knowledge of the stock market, had he sensed all was not well with the economy? ‘Luckily, my key experience was the tech bubble meltdown of 2000. And I still remember, the sinking, horrible feeling I had as $300,000 in my portfolio disappeared. So, yes, I had a sense of foreboding about it. You had the pervasive wisdom that people thought that property prices were going to continue to go up, that the stock market would continue to go up. And it had gone on too long. When you watch the news and it becomes that pervasive – it’s not a good sign. And that’s what I remembered about 2000. That same sense that we had somehow discovered the Holy Grail – that things would continue to go up. I was very uncomfortable with the numbers and so was my own financial adviser. And so in 2007 going into 2008, we gradually started to liquidate share holdings and move as much as we could into cash.
‘Many people feel that holding cash is being dumb. I hear that a lot. You know what, during volatile times cash is your friend (with a chuckle). You have liquidity. People assume that you’ll always be able to borrow against your property; they’ve seen that banks are cutting back on the number of loans they’re making. People assume that they’ll have credit lines available; but how many people have had their credit balances or loans called in by banks. When things begin to tighten, the access to credit is tightened also. The one thing you can count on is money in the bank if you have it dispersed so you are protected if one bank goes bankrupt.’
So does he feel the American and the British experience are very different? ‘Yes I do. In Britain you do see a stronger emphasis on trying to give the consumer more protection than you do in the States. If you look at what Gordon Brown has done with credit card regulation, preventing companies from raising interests rates overnight, it was much more consumer oriented. In the States, the credit card lobby was able to get it delayed until 2010.
‘I think it was interesting that Brown decided to create state ownership in the banks and that the US followed. No politician is perfect, but I think Brown is more in touch, in his own peculiar way perhaps [chuckle], with the average person than a lot of decision makers in America. I think Obama is much more in touch with the average person, but I don’t think many of the people he surrounds himself with are. A lot of them are comfortable, rich people.’
Never one to fight shy of prickly issues, Alvin’s next book tackles pensions. So how does he make a case for them particularly to those burnt or put off by the Equitable Life experience? ‘You can only blame Equitable Life for so long, and I’m sure that those people are not losing sleep over this stuff. You have to become your financial best friend. It was a hard book to write because I come across so many people who are cynical about pensions, who have been burned by pensions or who just didn’t realise that they needed to be a bit more involved in the pension they have.
‘So writing about pensions is about explaining how to monitor them over a period of time. A lot of people see pensions almost like a fairy tale, sleeping beauty-type investment. Something you don’t have to worry about. So, you put your money in and then just wait till age 65… and they think they don’t have to monitor it in between. If I did that I’d be a nervous wreck. I look at my pension once or twice a year to make sure it’s on target. I am so involved in trying to make the right decision, changing the mix that’s not on schedule. I tell everybody to start by setting a number you want to retire with and then figure out how to make that happen with your state pension, your occupational pension and savings. And you monitor it over the years.’
Without a pension you have to think of another way to fund your retirement, explains Alvin. ‘Are you going to sell your property and move into smaller accommodation? Do you have other assets you can sell? Something has to happen.’
So, will his extensive art collection supplement his pension? ‘Oh, no,’ he says, dismayed at the thought. But then that kernel that is forever pragmatic kicks in. ‘Of course, I’ll sell some of it as I get older. Simply because I don’t want to pay storage for 375 pieces! It’s a maintenance cost I would not want in later years. But I don’t view it as part of my pension. I have set aside investments and cash for my pension. And I have a savings account where I keep a year’s worth of living expenses, because as a freelancer you never know what will happen.’
Interview by Marie Farquharson