Professional Finance people no better than amateurs

darkpool

dunstonh wrote: »

No point. Every time a fund has been mentioned previously you dismiss it.

don't be like that!!

you said you had some academic evidence that IFAs pick funds that outperform the relevant benchmark. well you post it up!

put all this active/ passive argument to bed once and for all.

afterwards we can all get on with our lives.

dunstonh

ou said you had some academic evidence that IFAs pick funds that outperform the relevant benchmark. well you post it up!

No i didnt.

darkpool

dunstonh wrote: »

No i didnt.

ohhh, i'm like a deflated ball now. i was so looking forward to seeing some evidence that active management worked. ohhh well, i suppose it doesn't matter.

your post did seem to indicate you had some academic evidence though,

"How does the academic evidence explain that i (like many advisers) manage to pick more funds that exceed benchmark than those that do not?"

dunstonh

"How does the academic evidence explain that i (like many advisers) manage to pick more funds that exceed benchmark than those that do not?"

I was asking how this academic evidence you have explains that people do come in better if its not possible.

jem16

darkpool wrote: »

ehhhhmmmm, 160 pounds an hour ... no thanks

Therin lies the problem.

You, like many others, don't want to pay a fee to an IFA. They would rather the IFA gets paid through commission as they don't see anything coming out of their own pocket. Most don't realise that they do pay but in a different way. We saw exactly that happen on the Pension board where someone said that it was important that they didn't pay upfront even though a fee would have been cheaper.

You decry the commission system but won't pay a fee. Your Dad paid £50k in commission to an adviser, which you rightly say is terrible Yet if he had paid a fee it would probably have cost less than £2k.

RDR will simply see all of these people going to a bank's adviser with a lower degree of knowledge as they perceive it to be cheaper.

psychic_teabag

In post #5 of that thread, dunstonh said that the work can be for an agreed fee, yet still collected from the commission. I was wondering how that would work : if working for an upfront fee, the IFA can presumably charge for the time whether or not the advice is taken; but if it's taken from the commission, they'd be paid only if the client goes ahead with the advice ?

darkpool

dunstonh wrote: »

I was asking how this academic evidence you have explains that people do come in better if its not possible.

without getting too technical you'd expect the returns from a selection of UTs to follow a normal distribution based on average market return minus co... oh i forgot that i'm talking to someone that uses a single UT as "evidence" that fund management works.

to answer your question - chance. how many UTs are there? 4000? it's not really surprising that a few do well to chance. just in the same way if 4000 people bought lottery tickets you'd expect some to win a prize.

jem16

psychic_teabag wrote: »

I was wondering how that would work : if working for an upfront fee, the IFA can presumably charge for the time whether or not the advice is taken; but if it's taken from the commission, they'd be paid only if the client goes ahead with the advice ?

It would normally mean that if you go ahead with the advice then you can have it paid from the product.

However if you don't take up the advice you have to pay the fee by cheque.

darkpool

jem16 wrote: »

You decry the commission system but won't pay a fee. Your Dad paid £50k in commission to an adviser, which you rightly say is terrible Yet if he had paid a fee it would probably have cost less than £2k.

i'm not anti adviser, it would surprise you what my family pay in an average year for professional fees. but to pay an adviser 160 an hour to recommend financial product like UTs seems to lack sense.

gadgetmind

jem16 wrote: »

You, like many others, don't want to pay a fee to an IFA.

Back when I was young and foolish, and naive in the ways of the financial industry, I used an IFA to sort my investments. Yes, it needed doing, and I'm fairly happy that my outcome is better having done it, but ...

It was a decade ago, but my memory is that I asked for projections on both a fee basis and commission basis, but was told that he'd need a cheque up front for the fees, which I'd only get back if I went ahead on a commission basis.

I guess I should have walked, but I didn't. No regrets, well not many. Losing 5% up front, 0.5% pa in trail, and yet more in fund fees does sting, but I'm never going to get this money back, so let's move on.

When most people (including myself) deal with an IFA, they're in a situation when information asymmetry is present in spades.

http://en.wikipedia.org/wiki/Information_asymmetry

Yes, punters can be offered the choice, but the IFA can (not "will" but "can") use a variety of methods to influence the choice they make.