Innappropriate Investments

Meeper

darkpool wrote: »

congratulations on sidestepping a rather difficult question for an IFA. You really are a credit to the fund management industry.

I'm not a fund manager,and I didn't side-step anything. You assert that trackers and unit trusts are mututally exclusive and I have pointed out that they are not, highlighting your lack of understanding. Don't try to turn it back on me as side-stepping to deflect away from your deficiency. We all see right through you.

what i really want is for the IFA industry to put the interests of their clients ahead of their own interests. ok, i'll admit it's a bit of a pipe dream, but we all have to dream.

That's not what you want at all. You want to smear and abuse. Your lack of knowledge has been pointed out and highlighted for all to see, yet still you persist. It is a worthy goal - I want all IFA's to put the interests of the client first also. Most do, some do not. I want ALL to do so. Not a perfect world, sadly.

of course, an IFA will respond to this saying he can only sell products that he has a remit to sell, but how come IFAs always seem to be only authorised to sell things that generate commission?

Because that is the authorisation afforded by the FSA. Will you please get your head around the fact that products that generate commission can also (in the main) have that commission set at zero and the client charged a fee for the work involved. What you mean by commission is very very rare these days. You demonstrate your lack of understanding of the current market, once again. Commission is simply an alternative payment method, as I have illustrated before. I shall illustrate again, for the sake of clarity:

If a client has £100,000 to invest, and I deem that the charge will be £1,500 this can be taken in one of two ways. Firstly, I can send the whole £100,000 to the product provider who will deduct the £1,500 and send it on to me, investing the remaining £98,500. The £1,500 he sends to me is called a commission because it comes from the provider. It doesn't attract any additional charges or costs for the client, however, it's simply labelled as commission because it comes from the provider.

Now, if the client gives me two cheques, one for £1,500 for my fee and one for £98,500 for the investment, the net effect to him is exactly the same - he ends up with £98,500 in an investment. This payment of £1,500 is classed as a fee because the client has paid it directly instead of the provider.

Please explain to me - what is the difference, and why is commission a bad thing here?

What you mean by commission is a product that pays the adviser a lump sum and recoups this by levying higher charges on the clients' contract for a set period of time, and I'm telling you (again) that this type of product is very very rare these days.

I've said before that long term stockmarket growth is likely to be 5%, yet IFAs sell products that charge 3% a year in fees. ie leaving circa 2% for the investor. So the fund management industry makes more from the investors money than the client

Which stock market would that be? There are hundreds to choose from. If you mean the FTSE-100, then I would say that any IFA which invested client funds 100% in the FTSE-100 is not doing his job. You have also not provided anything substantive to arrive at your oft-quoted 3% annual charges.

Meeper

darkpool wrote: »

changing the subject slightly. how come so many IFAs post here? No other profession seems to feel the need to come on MSE and champion their profession.

Because people ask for guidance, and if we don't, they are left with people who show their lack of knowledge and understanding time and time again. The IFA's who post on here do so to help the general population and we derive no material gain from it. Leaving the forum in the hands of you and your ill-informed brethren scares me, because people might think "ooh, big post-count, he must know what he's talking about". Consider it a public service from the IFA community.

darkpool

Meeper wrote: »

I'm not a fund manager,and I didn't side-step anything. You assert that trackers and unit trusts are mututally exclusive and I have pointed out that they are not, highlighting your lack of understanding. Don't try to turn it back on me as side-stepping to deflect away from your deficiency. We all see right through you.

That's not what you want at all. You want to smear and abuse. Your lack of knowledge has been pointed out and highlighted for all to see, yet still you persist. It is a worthy goal - I want all IFA's to put the interests of the client first also. Most do, some do not. I want ALL to do so. Not a perfect world, sadly.

Because that is the authorisation afforded by the FSA. Will you please get your head around the fact that products that generate commission can also (in the main) have that commission set at zero and the client charged a fee for the work involved. What you mean by commission is very very rare these days. You demonstrate your lack of understanding of the current market, once again. Commission is simply an alternative payment method, as I have illustrated before. I shall illustrate again, for the sake of clarity:

If a client has £100,000 to invest, and I deem that the charge will be £1,500 this can be taken in one of two ways. Firstly, I can send the whole £100,000 to the product provider who will deduct the £1,500 and send it on to me, investing the remaining £98,500. The £1,500 he sends to me is called a commission because it comes from the provider. It doesn't attract any additional charges or costs for the client, however, it's simply labelled as commission because it comes from the provider.

Now, if the client gives me two cheques, one for £1,500 for my fee and one for £98,500 for the investment, the net effect to him is exactly the same - he ends up with £98,500 in an investment. This payment of £1,500 is classed as a fee because the client has paid it directly instead of the provider.

Please explain to me - what is the difference, and why is commission a bad thing here?

What you mean by commission is a product that pays the adviser a lump sum and recoups this by levying higher charges on the clients' contract for a set period of time, and I'm telling you (again) that this type of product is very very rare these days.

Which stock market would that be? There are hundreds to choose from. If you mean the FTSE-100, then I would say that any IFA which invested client funds 100% in the FTSE-100 is not doing his job. You have also not provided anything substantive to arrive at your oft-quoted 3% annual charges.

wow! what a long post.

i'm just genuinely interested in what you would say to a client that asked why you advised active fund management when the vast bulk of academic research says active management is not worth the fees.

how about just answering?

magpiecottage

darkpool wrote: »

i'd say most professions carry a liability until they die

Then you would be wrong. ALL professionals EXCEPT Independent Financial Advisers are entitled to rely on Section 14B of the Limitation Act 1980 which prevents claims relating to events that took place more than 15 years ago being pursued - even if the problem did not come to light before then.

You are also wrong to infer that an IFAs are paid by commission. Some, like DunstonH, are ONLY paid by fee. Others MUST offer an alternative of a fee - even if they offer commission as an alternative.

Salesmen representing insuers can be commission-only but, by definition, they are not independent financial advisers.

dunstonh

how come so many IFAs post here? No other profession seems to feel the need to come on MSE and champion their profession.

There are four IFAs posting on the board. There are currently 9023 people viewing the board and 995,000 board members. 4 out of nearly a million. Wow, that is massive!

How many builders, plumbers, accountants, solicitors etc do you think post to the board?

i'm just genuinely interested in what you would say to a client that asked why you advised active fund management when the vast bulk of academic research says active management is not worth the fees.

It doesnt though. it produces some strong arguments in some areas but ignores equally strong arguments in other sectors. However, this is not a passive vs active thread. You seem to want to turn every thread on this board into one. Personally I use both trackers and active managed funds where I think it is best. It doesnt make one penny difference to me which I use. So, I see no point on discussing active vs managed on a thread that is not on that subject.

darkpool

Meeper wrote: »

Because people ask for guidance, and if we don't, they are left with people who show their lack of knowledge and understanding time and time again. The IFA's who post on here do so to help the general population and we derive no material gain from it. Leaving the forum in the hands of you and your ill-informed brethren scares me, because people might think "ooh, big post-count, he must know what he's talking about". Consider it a public service from the IFA community.

ahhhhh, public service. tbh for a while i thought you might have been part of some secret IFA public relations plan.

ill informed? i'm involved in financial markets that are beyond the comprehension of most IFAs....

my advice for people here is to get a book from the library and do some research on different investment types. if they do go to an IFA they should look at things with a critical eye.

tell you what, to show i'm not a bad guy i'll share my expertise with MSE. so anyone that has ever been curious about road construction now is your chance. just ask any question about road design/ construction and i will answer it. PSV values, stone grading, safety barriers, compaction, just bring those questions on....

darkpool

dunstonh wrote: »

There are four IFAs posting on the board. There are currently 9023 people viewing the board and 995,000 board members. 4 out of nearly a million. Wow, that is massive!

Meeper and yourself are IFAs. Magpiecottage (he just posted) works in the IFA industry.

It does type of feel like that most of the pro IFA argument comes from IFAs or people who work in the IFA industry.

Meeper

darkpool wrote: »

wow! what a long post.

I like to be thorough. It's my green personality.

i'm just genuinely interested in what you would say to a client that asked why you advised active fund management when the vast bulk of academic research says active management is not worth the fees.

how about just answering?

Certainly. I have been answering your questions, but this is a new one which you haven't asked before. I was previously busy trying to correct your mistaken assertions that unit trusts and trackers were mutually exclusive, a point which you conveniently now are trying to veer away from.

So, in response to your question:

I have advised a mixture of active and passive funds in the investment. I have chosen the passive funds as the return you are seeking is expected to be achieved by those particular sectors in the long-term and therefore there is no basis for recommending more active management and the costs associated with that as there is no requirement to out-perform those markets. The few active funds I have chosen are because, in their respective asset classes, the historical performance of the funds over a significant period has been such as to vastly outweigh the additional layer of management charges that are incurred.

Simple as that.

dunstonh

Meeper and yourself are IFAs. Magpiecottage (he just posted) works in the IFA industry.

Magpiecottage does not work in the "IFA industry". His company offers services to multiple areas of which IFAs may choose to take advantage of but so can others.

It does type of feel like that most of the pro IFA argument comes from IFAs or people who work in the IFA industry.

And most of the anti IFA posts come from a handful of trolls on the board who know very little about what they are talking about or have such a chip on the shoulder that they cannot have balanced discussions.

Given the amount of misinformation and rubbish you post and the selective information you choose to exaggerate in your responses, it is no surprise that you get different views back from those that know what they are talking about. In reality, most things are shades of grey. You want it black and white with just two outcomes for everything. Good or bad. yes or no. Life isnt like that.

darkpool

Meeper wrote: »

I have advised a mixture of active and passive funds in the investment. I have chosen the passive funds as the return you are seeking is expected to be achieved by those particular sectors in the long-term and therefore there is no basis for recommending more active management and the costs associated with that as there is no requirement to out-perform those markets. The few active funds I have chosen are because, in their respective asset classes, the historical performance of the funds over a significant period has been such as to vastly outweigh the additional layer of management charges that are incurred.

Simple as that.

so what proportion of passive/ active do you typically advise?

you really think active fund outperformance persists?