Anyone been to an IFA and not been advised to buy Unit Trusts?

gadgetmind

darkpool wrote: »

anyway i'm personally a little sceptical that emerging markets will deliver what some think they can.

I think they stand a good chance of medium/long term outperformance and am therefore prepared to overweight them. I'm also overweighting companies with good global/EM exposure, but I'm also going to be exposed to Europe, US, Pacific, Japan, and much more.

Look at a chart of which assets/sectors have done best/worst in each year of last decade and then tell me you can predict which will do best next year, and the year after.

I can't, you can't, and neither it seems can very well paid fund managers, which is a shame really as that's what people pay them for.

Linton

gadgetmind wrote: »

I think they stand a good chance of medium/long term outperformance and am therefore prepared to overweight them. I'm also overweighting companies with good global/EM exposure, but I'm also going to be exposed to Europe, US, Pacific, Japan, and much more.

Look at a chart of which assets/sectors have done best/worst in each year of last decade and then tell me you can predict which will do best next year, and the year after.

I can't, you can't, and neither it seems can very well paid fund managers, which is a shame really as that's what people pay them for.

Why do you overweight them then?

Perhaps it doesnt actually matter which does the very best on a year to year basis. If there is a long term trend it will predominate, despite day to day, or even year to year, "events" and random variation.

fairleads

dunstonh wrote: »

That isnt how it is done. You recommend to the risk profile of the client. Not raise the risk profile of the client to match what you want to do.

Which confirms what i've said previously, that the risk assessment transfers the consequences of investment decisions from the IFA to the client. Risk profiling is a cop out.

Meeper

Risk profiling tools form the basis for a discussion, nothing more or less.

My risk profiling tool compares tolerance, capacity and goals. The clients tolerance is obtained by assessing their opinions and feelings about their previous investments and attitudes towards their future dealings. The capacity is obtained by assessing their net asset position, checking their income and outgoings situation and gaining an understanding of how much they would be able to lose. The goals are assessed by a series of calculations in order to ascertain what lump sum they will need in the future to provide for their plans along with the relative amount of risk that you would expect to need in a portfolio in order to obtain the returns to reach the target figure.

If, for example, you have a tolerance of 4, a capacity of 6 and a goal which required an asset allocation on your scale as a 5, you need to have a discussion with your client that they have the capacity to take sufficient risk to potentially reach their goals, however their attitudes are not compatible with the requirement. The options to discuss with the client then revolve around either reducing their goals to fit their tolerance with the understanding that their investment will likely not get to their target amount, or alternatively that they need to adjust their tolerance a little and take a little more risk (one setting higher up the scale) in order to stand the best chance of achieving the target return.

So, risk profiling provides a discussion point. At the end of the discussion, you will present the options to the client and in the example above my general recommendation would likely be that the client should take an asset allocation corresponding to my level 5 in order to have the best chance to achieve their goals. I would make this recommendation to the client because taking a slightly higher amount of risk would still be within their capacity and give them a better chance to achieve their target return. Make no mistake thought, it would be my recommendation, with the results of each of the 3 sectors documented and the nature of the ensuing discussion also documented in the Suitability Letter so that the client has a record of what has happened and how we got to the place where we end up.

None of that process puts the consequences of investment decisions onto the client, so please, if you're going to spew such nonsense, at least try to back it up with something substantive instead of just churning out the same old yawn-worthy tat.

dunstonh

fairleads wrote: »

Which confirms what i've said previously, that the risk assessment transfers the consequences of investment decisions from the IFA to the client. Risk profiling is a cop out.

So what do you do? Pick investments at random and cross your fingers hoping it will be ok?

Linton

fairleads wrote: »

Which confirms what i've said previously, that the risk assessment transfers the consequences of investment decisions from the IFA to the client. Risk profiling is a cop out.

So if you were advising someone you would take no account of their understanding of and propensity to accept the degree of likely fluctuations in the value an investment?

fairleads

You're missing the point. The problem is with the format of the risk profiling tool. After all, people go to you for advice and i know for a fact that it is easy for a novice to misinterpret a question when the questions comprise terms and descriptions unfamiliar to the client.
Incidently, the rhetoric, the barbs, really enhance your argument.

fairleads

Linton wrote: »

So if you were advising someone you would take no account of their understanding of and propensity to accept the degree of likely fluctuations in the value an investment?

Missed the point

fairleads

dunstonh wrote: »

So what do you do? Pick investments at random and cross your fingers hoping it will be ok?

No. But even this method might be better than paying for poor/ biased advice from a person who has little practical knowledge of life and even less investment experience.

Meeper

You know for a fact? You have shown time and again that you know nothing. I have explained exactly how the process works in succinct detail, and your response is "you're missing the point"?? I've never heard anything so ridiculous. Your assertion was that risk profiling was a ruse to put the consequences squarely on the shoulders of the client. I have indicated how this is not the case with a compelling description of the process and blown your premise out of the water.

It is indeed easy to misinterpret a question. That is why the questions in my risk profiling tool do not comprise terms and descriptions that are unfamiliar, and they are extremely clear in their wording, suitable for the lay person. Unless, of course, you know otherwise. Have you seen my risk profiling tool? The first question, for example, is "I have knowingly been extremely risky in my previous financial dealings" with responses ranging from "Strongly Disagree" to "Strongly Agree". The wording is simple, and the rest of the questions have similar simplistic concepts.

None of the questions are asked verbally. This is specifically done so that I don't inadvertently emphasise a particular word or verally lead the client down a particular direction. It is as objective as it is possible for it to be.

So, now that your "putting the consequences back onto the clients" has been blown away, why don't you admit defeat instead of saying that I've "missed the point" and pointing towards my "barbs". I'm afraid I'm pretty barbed when greeted with people who spread misinformation and cast aspersions on the profession that I have spent many years in obtaining a high level of qualification. Forgive me for getting defensive against a no-knowlegde loudmouth who thinks he knows better but offering ZERO substance other than "you are all dishonest and corrupt liars".