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Independent Financial Advisers fees vs Novice Investor!
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People need to ensure that their TER+platform comes to way less than 0.5% pa.
Not going to happen. Most of the unbundled platforms are priced around 0.4-0.7%. Whilst that has been coming down over the years as they get more assets on platform, you cant see it falling much lower for small values.
Conversely, why would someone what to pay less to get less?Why on earth would someone pay more than this?We can also model the "drag" that 4% to 5% up-front charges will cause, and how 0.5% to 2% annual charges will hobble long-term gains.
Thats a bit old fashioned though. Not many suffer that sort of charge nowadays. (The FSA found the average to be 1.8%)I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
gadgetmind wrote: »Perhaps we all need to avoid arm waving and name calling and instead used evidence-based arguments.
Evidence is good. We have lots of historical data, we know how UTs/funds have performed versus trackers, we know what percentage of funds fold every decade, and we know what the fees for actively managed funds are.
We can also model the "drag" that 4% to 5% up-front charges will cause, and how 0.5% to 2% annual charges will hobble long-term gains.
Anyone with an in-depth understanding of the markets, investment products, and the financial services environment will know that you need a balanced (and rebalanced) portfolio of assets, in as low a fee environment as you can achieve.
If an IFA can deliver this, then great, if they can't, then where is their value add?
Yep but also looking at the evidence we can say that darkpool is financially illiterate and thinks he knows everything by Googling for what he wants to see.
By all means I could google and find an article which says Manchester City are the best team in England, yet we all know that it's Manchester United.0 -
Why 4%-5%? The online brokers rebate most of any initial charges.gadgetmind wrote: »Perhaps we all need to avoid arm waving and name calling and instead used evidence-based arguments.
Evidence is good. We have lots of historical data, we know how UTs/funds have performed versus trackers, we know what percentage of funds fold every decade, and we know what the fees for actively managed funds are.
We can also model the "drag" that 4% to 5% up-front charges will cause, and how 0.5% to 2% annual charges will hobble long-term gains.
YesAnyone with an in-depth understanding of the markets, investment products, and the financial services environment will know that you need a balanced (and rebalanced) portfolio of assets,
Not if it means over-riding any of the other factors.in as low a fee environment as you can achieve.
All the evidence I have seen on management fees suggest that the average return for managed funds is much the same as the average return for trackers - ie the fund managers on average pay their way. If trackers really have an annual 2% head start you would expect them after 10 years to be near the top of the table - they are marginally above the middle in sorted order. You can get trustnet to show you - clear evidence like what you wanted.0 -
Thats a bit old fashioned though. Not many suffer that sort of charge nowadays. (The FSA found the average to be 1.8%)
In just the last few days, we have seen at least one person here quoted such fees, and I have been quote the same myself lately.
I'm wise enough to say "no thanks" (spelt FO) but not everyone is, and I haven't always been.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
All the evidence I have seen on management fees suggest that the average return for managed funds is much the same as the average return for trackers - ie the fund managers on average pay their way.
Please provide references.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Please provide references.
Cant find it. It was one of the conclusions in a highly academic paper quoted by someone (possibly darkpool, though he didnt quote that particular point) in the past few weeks.0 -
gadgetmind wrote: »People need to ensure that their TER+platform comes to way less than 0.5% pa.
Why on earth would someone pay more than this?
To hold the funds that suit their requirements. For instance, RCP has a TER of 1.3% and PNL has a TER of 1.09%, which is slightly higher than the OEIC equivalent Trojan 'O', which comes in at 1.04%
http://www.theaic.co.uk/Search-for-an-investment-company/Geographical-sector-search/Conventional-companies/Company-list/?sector=GG&structure=0
http://www.trustnet.co.uk/Factsheets/Factsheet.aspx?fundCode=LAF05&univ=ULiving for tomorrow might mean that you survive the day after.
It is always different this time. The only thing that is the same is the outcome.
Portfolios are like personalities - one that is balanced is usually preferable.
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In just the last few days, we have seen at least one person here quoted such fees, and I have been quote the same myself lately.
That is the thing with averages. You get some above and some below.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
gadgetmind wrote: »So, what do you consider? Past performance? Good luck with that, because the evidence shows that you'll need it.
All investing styles have their critics and supporters who can both point to 'evidence', what matters is what works for you and in this instance I am happy to not be using trackers at this time.
As an example, use your favourite tool to create a 5 yr chart of the FTSE All Share, then add PNL to it and tell me which would you rather have - a tracker linked to the ftse or PNL :-) 5 years gives you around a 40% advantage to PNL.
Of course you can replicate this across whichever sectors you like, use trackers where you are uncomfortable but if you have time for research then be more active in your choices if you want outperformance.0 -
All the evidence I have seen on management fees suggest that the average return for managed funds is much the same as the average return for trackers - ie the fund managers on average pay their way. If trackers really have an annual 2% head start you would expect them after 10 years to be near the top of the table - they are marginally above the middle in sorted order. You can get trustnet to show you - clear evidence like what you wanted.
Gadget wanted a reference - "False Discoveries in Mutual Fund Performance"
For those not wanting to read it all I will just quote the abstract:
"we find that the majority of funds (75.4%) pick stocks well enough to cover their trading costs and other expenses, producing a zero alpha, consistent with the equilibrium model of Berk and Green (2004)."
Editted to ad a clearer quote:
"Most actively managed funds provide either positive or zero net-of-expense alphas, putting them at least on par with passive funds."0
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