Portfolios must be getting decimated.

1echidna

GeorgeHowell wrote: »

As of this moment the FTSE 100 index is 30% below its all time high, nine years ago. The fall in real terms is obviously considerably more than 30%. Even allowing for dividends there is a fall. This surely destroys the myth that equity based investments are a sure fire hit if you wait long enough. Who knows when even the 1999 level will be reached, let alone a long-term gain. Same applies to real estate as an investment. Financial advisors always point people towards equities, because otherwise their services would not be required, be they independent or tied, commission or flat fee.

Yes I certainly had the patter from some financial advisors when I did the rounds. For one reason or another 'now' is always the right time to plunge in deep and if things turn sour it will always be 'unforseeable' and just hang on in there. There is of course a shared benefit to all those selling and holding equities to promote others to buy, after all it increases their wealth if as much money as possible is diverted into the market and raises prices. Some will think this unreasonable but if I am going to pay a financial advisor I expect some foresight on timing not a line of patter which whatever the state of the markets, encourages one to go in deep immediately. As this current crisis has unravelled I have heard independent analysts warn from the beginning of it causing deep seated problems to be poo pooed of course by market acolytes and politicians and others whose jobs never enable them to paint too gloomy a picture. It is not hard right from the beginning, as now to see whom to trust, this is not just a banking sector problem, there will be profound effects on the wider economy.

campins

"must be catastrophic consequences for peoples portfolios, pensions etc." My endowment is worth £2k less and the pension of 5k is now down £800 !!! :eek::mad: :mad: :mad:

Oblivion

dunstonh wrote: »

You mean how the last one went down 43.5% and this one has gone down 30%? or perhaps you mean that we now have 24 hour media coverage that no longer reports the news but helps make it and then milks it for everything it can?

Sadly media manipulation is a fact of life now ... you either learn to roll with it and turn it to your advantage or ........ become a redundant IFA?

Dave.

dunstonh

and the pension of 5k is now down £800 !!! :eek::mad: :mad: :mad:

Well done. That has gone down only 16%. The UK stockmarket has gone down 29%. You should be pleased with that.

GeorgeHowell

1echidna wrote: »

Yes I certainly had the patter from some financial advisors when I did the rounds. For one reason or another 'now' is always the right time to plunge in deep and if things turn sour it will always be 'unforseeable' and just hang on in there. There is of course a shared benefit to all those selling and holding equities to promote others to buy, after all it increases their wealth if as much money as possible is diverted into the market and raises prices. Some will think this unreasonable but if I am going to pay a financial advisor I expect some foresight on timing not a line of patter which whatever the state of the markets, encourages one to go in deep immediately. As this current crisis has unravelled I have heard independent analysts warn from the beginning of it causing deep seated problems to be poo pooed of course by market acolytes and politicians and others whose jobs never enable them to paint too gloomy a picture. It is not hard right from the beginning, as now to see whom to trust, this is not just a banking sector problem, there will be profound effects on the wider economy.

Indeed. If share prices are low/falling they say 'get in now and benefit from the inevitable rise which is to come'. If share prices are high/rising they say 'get in now because you can't avoid to miss out on this boom'. It's exactly the same illogic that persuades small/medium investors to buy property as a form of investment. To be honest I have never heard anyone describe the advice they have received from an IFA and been particularly impressed with it. I'm not saying that they're all drop dead useless, or crooks. But considering their fees/commission I think that any reasonably intelligent small/medium investor who reads the financial press and uses all advantages and facilities that the internet provides could not do at least as well or better on their own. For a start nobody knows your own attitude to risk better than you do yourself. Naturally I have not had first hand experience of the sort of financial advice that the seriously wealthy can muster. This may well be in a different league, but it no doubt comes at a very high price.

dunstonh

Naturally I have not had first hand experience of the sort of financial advice that the seriously wealthy can muster. This may well be in a different league, but it no doubt comes at a very high price.

You are probably right. Adviser groups are typically split between low net worth (but high volume), medium net worth and high net worth. I would say its a given that the quality of the adviser varies across that (certainly reflective in the advisers I know). The low net worth/high volume stuff isnt going to get the quality of research that a medium or high net worth client will get. Of course, what often happens is that some medium or high net worth clients see the bottom end advisers and get a bottom end style recommendation. Not bad advice, just basic.

Cost though typically gets less as you invest more and charges have been going down in real terms over the years. So the cost of using an adviser for medium to high risk clients as actually often not a lot different from DIY.

To be honest I have never heard anyone describe the advice they have received from an IFA and been particularly impressed with it.

Most consumers have never used an IFA. So, its surprising you get anyone able to describe the service. The tied salesforces get the majority of customers. Although research has shown that over half think their tied adviser is an IFA (when they are not).

GeorgeHowell

dunstonh wrote: »

You are probably right. Adviser groups are typically split between low net worth (but high volume), medium net worth and high net worth. I would say its a given that the quality of the adviser varies across that (certainly reflective in the advisers I know). The low net worth/high volume stuff isnt going to get the quality of research that a medium or high net worth client will get. Of course, what often happens is that some medium or high net worth clients see the bottom end advisers and get a bottom end style recommendation. Not bad advice, just basic.

Cost though typically gets less as you invest more and charges have been going down in real terms over the years. So the cost of using an adviser for medium to high risk clients as actually often not a lot different from DIY.



Most consumers have never used an IFA. So, its surprising you get anyone able to describe the service. The tied salesforces get the majority of customers. Although research has shown that over half think their tied adviser is an IFA (when they are not).

I can't pretend that the hearsay that I've picked up is extensive -- can be counted on the fingers of one hand probably. So I freely admit that it's anecdotal evidence. Neverthless the fact appears to be that IFAs always overstate the importance and benefits of equities in the light of the experience of the last nine years. Everyone would love to draw an income and also protect their capital against inflation all at the same time. But the only thing that can deliver that for mere mortals with limited resources is good luck, and a lot of it. However some people have been led to believe that property or equities will achieve those joint objectives. One couple of our acquaintance, who had fairly recently inherited, went to an IFA (about whom I have no information), and as may be expected were persuaded to major on equity-based investments. This is for what I imagine is a nest egg comfortably into six figures. I gently pointed out the risks, and the fact that the myth of equities being the best long term bet has surely been exploded -- and this was all before the credit crunch kicked in. Their reaction was "Well we're into the stock market now, so we'll see." I haven't seen them since the last big FTSE dives, and when I do I won't raise the subject unless they do, but they can't be feeling too rosy. Fortunately one of them is still in paid employment. But I feel even more sorry for those dependent largely on equity investments to supplement low, or non-existent, pensions. Many of these will have been seduced by the advice of IFA's and others. It's not just the IFA's -- let's face it much of the financial press has peddled the same stuff, although many have turned turtle (wise after the event) and are now recommending cash as a safe haven. A bit late for those pensioners, and others, who have taken the advice to go mainly into equities, and who are now faced with capital losses in double figure percentages, which they may never recover.

dunstonh

Neverthless the fact appears to be that IFAs always overstate the importance and benefits of equities in the light of the experience of the last nine years.

Depends on what you mean by overstate. Remember that investing doesnt have to mean stockmarket. The assumption by many is that the minute you talk about investing you are talking about stockmarket. Even when it is stockmarket, then relying on the FTSE as a guide to real stockmarket performance is unreliable. Especially if you are just using the FTSE100 index value.

I haven't seen them since the last big FTSE dives, and when I do I won't raise the subject unless they do, but they can't be feeling too rosy.

Bear markets happen on average once every 5 years. The current decline is typical for a bear market. Certainly a long way off the drops that were seen in the early part of the millennium. If you invest on the basis that it will go up all the time in a straight line then you are in for a shock.

Many of these will have been seduced by the advice of IFA's and others. It's not just the IFA's -- let's face it much of the financial press has peddled the same stuff, although many have turned turtle (wise after the event) and are now recommending cash as a safe haven. A bit late for those pensioners, and others, who have taken the advice to go mainly into equities, and who are now faced with capital losses in double figure percentages, which they may never recover.

Typically, most portfolios have only seen fairly minor losses in the short term. There is nothing to suggest that markets will not recover. The fundamentals are good, there is no bubble that has burst (commodities perhaps), net asset values are good and dividend yields are currently higher than gilt yields for the first time since 2003.

Whilst you may be critical of IFAs, it should be noted that IFAs only account for 4% of complaints to the FOS. Considering the level of transactions that is very low. Obviously consumers in general dont have problems with IFAs to the same level that some seem to perceive.

GeorgeHowell

Fair comments. I think most people who use IFA's realise that taking their advice is something of a gamble in itself and would not think of complaining formally unless there was suspicion of malpractice, which I'm sure in the vast majority of cases there is not. Personally I would have to be in the fortunate position of having very substantially more to invest than I do, and thus feeling out of my depth, before using any kind of financial advisor or portfolio management. Then I would want someone with great experience, a track record of success, and access to intelleigence that was not available to me by any other means. Clearly many people however do feel out of their depth in deciding what to with what I would term relatively modest amounts and feel that they need help.

StevieJ

cogito wrote: »

This has a very different feel from previous 'events like this', don't you think?

That old chestnut 'it's different this time' I think people probably think that everytime. I remember in 2003 Bloomberg had dragged some expert out that advised that the market was going to fall to 1700, we all know what happened next.