Independent Financial Advisers fees vs Novice Investor!

Linton

darkpool wrote: »

so what is your academic experience to guess which sectors are likely to do well? maybe you're a professor of economics? or maybe you have a crystal ball?

millions of analysts watch the market to look for future growth areas, what ability do you have that the rest lack? premonition? second site?

No, I keep in touch with the news and look at things in the long term.

8 years ago after a holiday in China it was obvious to me that this was going to be a major growth area that would change the world. It was also obvious that the size of that country would put pressure on raw materials. So two highly advantageous investments made.

Perhaps even you can make a lucrative prediction. Over the next 10 years do you expect the Far East economies to perform better or worse than the FTSE? Are companies focused on high technology going to do better or worse than the overall market? Make a half dozen of those sort of predictions and on average I believe you will beat the standard mature economy indices.

The downside of looking at things from this point of view is that it needs a long period of time for historical trends to become more significant than day-to-day events, or even year to year events, which is what the analysts focus on.

For example, from the long term point of view the current Euro events are pretty irrelevent. However in the short/medium term they have had and will continue to have a major impact. So you need to balance your portfolio with much more stable investments so that you can ride the intermediate ups and downs.

dunstonh

Banderman wrote: »

Stop this madness. You are being right royally ripped-off. You are paying a massive amount of money to these shysters for the benefit of them losing you money. Do it yourself, you seriously couldn't do much worse than these charlatans. The government needs to act and stop people being ripped off by these so-called financial advisors, they're the only people making any money out of it.

Please explain how it is a rip off? Or do you prefer to post pointless, unqualified rants without any basis of facts behind them?

BTW, what do you do for a living? Most that post like you have occupations that can be pulled apart in the same way you are doing.

Lokolo

Banderman wrote: »

Stop this madness. You are being right royally ripped-off. You are paying a massive amount of money to these shysters for the benefit of them losing you money. Do it yourself, you seriously couldn't do much worse than these charlatans. The government needs to act and stop people being ripped off by these so-called financial advisors, they're the only people making any money out of it.

Not everyone has the time/will power/can be bothered to learn and DIY.

If everyone did for every profession, there would be no need for plumbers, electricians, builders, mechanics, IT technicians etc.

Banderman

dunstonh wrote: »

Please explain how it is a rip off? Or do you prefer to post pointless, unqualified rants without any basis of facts behind them?

BTW, what do you do for a living? Most that post like you have occupations that can be pulled apart in the same way you are doing.

Now, let me have a wild guess - you're not by any chance one of the aforementioned financial advisors? I'm not far wrong , am I?

Seriously, the government need to act and curtail this bloated and devious 'industry'. The hard-working people of this country are being shafted by these no-good vultures creaming an extravagant living off their hard-earned income and getting nothing in return.

dunstonh

Banderman wrote: »

Now, let me have a wild guess - you're not by any chance one of the aforementioned financial advisors? I'm not far wrong , am I?

Seriously, the government need to act and curtail this bloated and devious 'industry'. The hard-working people of this country are being shafted by these no-good vultures creaming an extravagant living off their hard-earned income and getting nothing in return.

On that basis that would get rid of accountants, solicitors, builders, decorators, plumbers, electricians, mechanics, chefs etc etc etc.

Example of where an IFA can prove worthwhile. Just this morning, I saved over £90,000 in charges, £40,000 in tax and ensured that the children of an individual will get around £95,000 on death compared (on current values) to the option that the person was going to use. So, he will save £225,000 compared to what he would have done if he had done what he planned.

Ark_Welder

You seem to think 'UT' without thinking 'IT' or 'OEIC'. You should understand that investment trusts are also actively managed funds - except for the few index trackers - and they also have transaction costs as an expense. The rebates available from some fund platforms can make the AMC for a UT/OEIC either comparable to, or in some cases cheaper than, ITs that have a similar investment remit.

darkpool wrote: »

i've also found other sources of info that says typical annual fees for a UT are nearer 3%. can you find any more evidence to back your 2% claim?

The claim is being made by Which?, being a publication that you have previously quoted on a number of occasions as evidence of 3% average charges. The article to which I have linked is from that very same organisation and is dated 28th October 2011. It looks as if Which? have researched further into the matter and have updated their own data. If you believe their data to be incorrect then you should take it up with them and get it changed.


You have previously quoted a Schroder fund with a PTR of 400% and guessed that the annual charges were around 9%. I don't have the figures for 2009, but the latest available report does have the figures for 2010:

PTR: 221%
TER: 1.78%
Net Assets at year-end: £55,185,000
Transaction costs (commissions and taxes): £328,000
Percentage of transaction costs of net assets: 0.594%

TER+Transaction costs: 2.374%

I would expect the previous year at the higher PTR to come out substantially closer to this figure rather than to yours. If you do have the figures from the relevant annual report to show that you are correct then I would be happy to see them.

If this fund was held through the fund platform provided by ATS then 0.5% of the AMC would be rebated, which would have brought the costs to the individual down to 1.874%

If you are able to provide calculations of 3% charges using real data rather than generalised estimates then please do so. A link to the appropriate fund report that contains the relevant data would be appreciated.


Trustnet: IMA hits back at high-turnover myth


As it is, I do happen to have a fund that has had a TER of 4% - the last time that I looked. It happens to be a closed-end investment company and not an open-ended, commission-paying OEIC. Actually, 4% is less than the management costs, as a percentage of net assets, of running Berkshire Hathaway according to its 2010 annual report.

darkpool wrote: »

so before you buy a UT you study the reports etc? so why not just study the reports of plc companies and invest direct?

When I was building up assets I did not have sufficient spare time to dedicate to the task of selecting individual companies: I was too busy doing the day job. I am not a believer in just relying on historic performance data for making an investment (well, not for a long time...:)), and that is what dividend yield and P/E ratios largely are. And a large part of that era was in pre-internet days, so reports were the only way to go - as it still shoud be - but at least they can be easily downloaded these days.

In those days, investing small amounts in individual companies would also have been uneconomical: broker commission costs were higher then, than those available now through online dealing. Using a fund for small investment amounts also reduces an individual's investment risk by spreading their cash across a greater number of investments.

ISAs have their contribution limits, so investments outside either these or SIPPs could be subject to CGT. Holding investments in a collective fund is a way around this consideration.

Equities are not the only asset class, nor is the UK the only geographic region. Holding equities that are incorporated abroad can involve witholding taxes, so declaring them and reclaiming or paying any difference needs to be done. Holding them via a fund removes the need to do this... ...except for the funds that I hold which are incorporated in the Channel Islands, that is...

The minimum dealing size for many corporate bonds is £50k. Some newer issues require a £100k minimum holding. Using a fund allows a smaller investor to get a decent spread of underlying bonds - more than just the retail bonds available on ORB. Foreign bonds, both corporate and sovereign, can be easier to access via a fund. I have holdings in a fund that invest in index-linked debt on a global basis, and one that holds floating-rate debt (meaning that the distributions should rise once interest rates start to rise). Funds spread my risk and allow me access to the asset class, whereas the minimum holding sizes would mean concentration of risk.

Venture capital and private equity. Whilst it is possible to make investments into single entities, using funds spreads risk. Whilst VC/PE might not be an asset class for everyone, that does not mean that it is an asset class for no-one.

Commercial property. I could buy one building to let out. I do hold one or more funds/REITs that give an increased spread at a lower capital outlay.


The nearest that I have to a bog-standard UK equity fund is a holding in Temple Bar. My largest non-pension holding, and vies with RIT Capital Partners as being the largest holding overall. Excluding REITs and individual retail bonds, its value is double the total value of my individual company holdings. Sometimes, it underperforms against its benchmark. Sometimes, it underperforms against its peers. I don't feel the need to get hung up about it when it does. Reading the report for this one fund takes up substantially less time than reading all of the individual reports of the underlying companies. I find that I spend more time reading up on macro issues rather than the micro - even in the autumn and winter when there is less be done do in the garden, etc. So I'm getting a good spread of investments for substantially less work.

Reading reports and prospectus is always important. For instance, some funds open themselves up to additional risk by lending out their stock, so they open up the fund investors to counterparty risk. And that risk is taken by some index tracker funds too.

Froggitt

Any views on this?

Bold new Vinculum fund will not charge fees if it doesn't beat the market

http://www.thisismoney.co.uk/money/investing/article-2067289/Vinculum-Bold-new-fund-charge-fees-beats-market.html

A bold new investment fund that will only charge fees if it beats the market is set to be launched.
It will match stock-picking - of companies ‘only of the very highest economic quality’ - with a tracker-style low charge of 0.25 per cent.

But the catch is that a hefty chunk of any outperformance above its benchmark will be claimed, in a similar style to hedge fund charges

darkpool

Linton wrote: »

No, I keep in touch with the news and look at things in the long term.

8 years ago after a holiday in China it was obvious to me that this was going to be a major growth area that would change the world. It was also obvious that the size of that country would put pressure on raw materials. So two highly advantageous investments made.

so your source of inspiration is watching the news and going on holiday? all those financial analysts and professors are complete fools by studying forecasts and economic data. they should all just switch on the telly and watch the news. genius.

darkpool

dunstonh wrote: »

Linton you should dump it as you are paying charges.

Far better for you to get 5% after little or no charges rather than 13% after 2% charges. :cool:

Wow 13% a year! If I thought there was any way you could get these types of returns I would sell my portfolio and house and invest with you.

But the thing is you plucked 13% out of thin air of course if you have any evidence that you can deliver 13% a year I will persuade my family to invest with you. just think, you'd get 20k per year for each million we have..... go on just provide the evidence....

darkpool

Ark_Welder wrote: »

The claim is being made by Which?, being a publication that you have previously quoted on a number of occasions as evidence of 3% average charges. The article to which I have linked is from that very same organisation and is dated 28th October 2011. It looks as if Which? have researched further into the matter and have updated their own data. If you believe their data to be incorrect then you should take it up with them and get it changed.


You have previously quoted a Schroder fund with a PTR of 400% and guessed that the annual charges were around 9%. I don't have the figures for 2009, but the latest available report does have the figures for 2010:

PTR: 221%
TER: 1.78%
Net Assets at year-end: £55,185,000
Transaction costs (commissions and taxes): £328,000
Percentage of transaction costs of net assets: 0.594%

TER+Transaction costs: 2.374%
As it .

so you believe the cost of buying and selling 60m (ie 120m in total) is 328k...... ehhhmmm ok. i suggest you are someone else better off in managed funds..... FSA talks about 1.8% for a "round trip"

the article below is from the FSA. why would you need 1.50 pounds in a UT to get the same return as 1.00 pound invested directly in the market? maybe there is a big conspiracy against unit trusts?

"Examining the price of investing through broad equity unit trusts and life offices
in the UK, I find that, on average:

· One must invest about £1.50 in an actively managed unit trust or through a
life office in order to obtain the market rate of return on £1; and that

· Obtaining the market rate of return on £1 requires an investment of about

£1.10 to £1.25 in an index tracker."