Professional Finance people no better than amateurs

vax2002

All you need to know can be summed up by one very old saying.
jam tomorrow.

brasso

GeorgeHowell wrote: »

Most people could do just as well by reading the financial pages of newspapers etc, taking their advice about a balanced portfolio with appropriate risk/non risk for their situation, and reviewing it regularly, and following recommendations about which funds & accounts to go for, as they would by using a financial advisor. Newspapers generally publish unbiased advice because they have nothing to gain by doing otherwise.

I sort of agree with the general sentiment, but a couple of points --

It's true that people can find all the info they need from other sources, but equally, I could probably find all the tools and equipment I need in Halfords to service my car -- and all the information required is on the Internet. But I don't do that because I'm just not the practical type and because I just can't be bothered to spend the time required to learn and practice. Would rather pay someone else to do it, though of course I would ask around for recommendations first for a good garage.

Many people have a similar attitude towards investment strategies and pension planning. You explain it yourself: "Financial advisors survive largely because many people do not want to do that. They are either too frightened, too lazy, or too ignorant to carry out these tasks on their own behalf". Yes, that's correct. They want a service that they can't or won't do themselves. Seems fair to me that if there is a market for this service, then it's supplied by others.

Regarding newspaper stories and financial pages I disagree strongly. I have lost loads of money in the past by listening to hacks enthusing about the next big thing. You say "Newspapers generally publish unbiased advice because they have nothing to gain by doing otherwise."

Well, what they have to gain is advertising and (I suspect) the odd very good free lunch from fund managers. They also have readers to gain, because if they published only sensible middle of the road advice e.g. long term buy and hold, avoiding speculation etc, the financial pages would be very tedious!

gadgetmind

brasso wrote: »

But I don't do that because I'm just not the practical type and because I just can't be bothered to spend the time required to learn and practice. Would rather pay someone else to do it

Me too, if I could be sure they'd do it as carefully as me.

I've had so many garages, including main dealers (Audi, BMW, etc.) mess things up and/or misdiagnose simple faults, that I now do most things myself.

They employ relatively unskilled spanner-monkeys yet charge top dollar.

Yes, you should be able to easily find reliable mechanics (and IFAs) who can run rings around shade tree dabblers such as myself, but it doesn't seem to work that way.

dunstonh

Newspapers generally publish unbiased advice because they have nothing to gain by doing otherwise.

Newspapers tend to favour advertisers and those they use to write articles dressed up as news but are really promotional.

The Mail is infamous for encouraging pensioners out of corp bond funds into tech funds at 90% of the peak.

bigfreddiel

now look here everyone - i tried toend this thread that i started ages ago but it just keeps on rolling on - quite pointlessly.

we all know there's no competition - professionals are only looking out for one person - themselves - you the amateur needs to learn just a few basics and you can play them at theur own game.

don't believe me when I say the professionals are only looking out for themselves - well I have 3.5+ billion examples to back his up = ppi misselling! and guess what the same people are still selling other stuff - would you trust them?

think about it

cheers

fj

HelpWhereIcan

darkpool wrote: »

but i think the true gap is closer to 2% than 1%. which makes the matter a little more black and white.

But that is not what the evidence says - managed to take a look yet? Again,

http://www.investorschronicle.co.uk/2012/02/07/funds-and-etfs/isa-funds/the-true-cost-of-investing-in-funds-oUc8VLh2BcMBacjws7u9UM/article.html

gives the figures as

TOTAL ANNUAL COST OF OWNING A FUND (based on investment of £10,000)

actively-managed fund - 2.00% (£200 per year or £16.67 a month)

low-cost active fund - 1.45% (£145 a year or £12.08 a month)

index tracker fund - 0.39% (£39 a year or £3.25 a month)

Source: Fidelity as at 27/01/2012

With the tracker fund being their own Moneybuilder so giving the cost for advice and platform charge as nil. Hardly accurate as Vanguard, HSBC etc would have a platform charge on Fidelity and they would all have the advice charge (0.5%) if taken through an IFA e.g. HL etc If the IFA (HL etc) sacrifice it, none would have it at all.

There is also no allowance for Tracking error which has the potential to increase the cost of the Tracker again.

darkpool wrote: »

are you after advice on derivatives? if you think the market is going to rise you should buy (not sell as you said) call options. you could consider the financials or the miners, or maybe even a FTSE100 call (though obviously that is strictly a CFD)

Ah, I assume you refer to

HelpWhereIcan wrote: »

This does not guarantee success by any means - no more than you having faith in your ability to write call options on volatile stocks does

I am Undone - Damn! Every bit of sense undermined by one word! Damn, Damn, Double Damn!

If only I could find a precedent that darkpool would accept which would allow me to claim that it's ok to use the incorrect term in a post (ideally multiple posts) because I know what I meant and so do others so it means nothing...

If only ...

Aha

darkpool wrote: »

well you enlightened me there, i did not know that technically a tracker was considered a UT.

but in everyday conversation most people realise that UTs are shorthand for actively managed funds and trackers are a passive investment tracking an index.

so how about answering my question, do you think an investment over 15 years with 3% annual fees is likely to be that good?

jem16 wrote: »

Well that's very odd considering Meeper and I enlightened you back in December.

darkpool wrote: »

yeah, ok you did tell me. tbh i think the problem was i wasn't very interested than and i'm still not very interested now.

darkpool wrote: »

i just don't see what point you are trying to make, everyone knows what UTs are, everyone knows what trackers are.

Phhheeeew

So, how about answering any of the questions posed to you?

Or is your next tactic to criticise spelling and grammar or to invoke Godwins Law??

dunstonh

don't believe me when I say the professionals are only looking out for themselves - well I have 3.5+ billion examples to back his up = ppi misselling! and guess what the same people are still selling other stuff - would you trust them?

PPI is not considered to be a problem with advisers. a few exceptions will apply but the UK's largest IFA network and compliance company only had 16 PPI complaints with the FOS in the last monitoring period (6 monthly). Most of those were rejected.

PPI was generally sold by unqualified and regulated staff. Had it been required to be sold under advice then the issue would not have happened.

bigfreddiel

...................but at the end of the day the finance industry is all geared towars making money for themselves - customers come second - and here are just a fw examples:

ask yourself, how many times has a finance peson tried to sell you something - otc staff always try it on, telesales, emails - you name it they're selling.

do they warn you about bonus rates ending - well they're meant to but is nevr happened to me - but its trivial to keep track of it yourself.

ifas have access to products we don't - why because they want to make money

in the 70'si was sold a pension by the top salesman of a national company - now i know why he was the top salesman - his commission out my contributions were outrageous

and i'm sure this thread will throw up more examples,,,,,,,,,,,,

dunstonh

ask yourself, how many times has a finance peson tried to sell you something - otc staff always try it on, telesales, emails - you name it they're selling.

do they warn you about bonus rates ending - well they're meant to but is nevr happened to me - but its trivial to keep track of it yourself.

Nothing to do with this thread though.

ifas have access to products we don't - why because they want to make money

It is called retail and distribution.

n the 70'si was sold a pension by the top salesman of a national company - now i know why he was the top salesman - his commission out my contributions were outrageous

Wow, 40 years ago you bought a financial product which had no commission disclosure but you know what the agent earned and still go on about it now.

darkpool

HelpWhereIcan wrote: »

actively-managed fund - 2.00% (£200 per year or £16.67 a month)

low-cost active fund - 1.45% (£145 a year or £12.08 a month)

index tracker fund - 0.39% (£39 a year or £3.25 a month)

Source: Fidelity as at 27/01/2012


With
Ah, I assume you refer to

but the evidence you provide shows that there is a difference in annual costs of 1.61% between a tracker and a normal fund? Nearer to 2% than 1%...

that article also says this about fund costs -

Research by funds data provider Morningstar has shown fund expense ratios as strong predictors of performance. In a study of US funds, it found that in every asset class over every time period, the cheapest quintile produced higher total returns than the most expensive quintile. A study by TCF Investments (Low cost funds outperform) has similarly highlighted fund fees as a predictor of future returns, while a recent survey for FTMoney found that 80 per cent of investors thought fund charges were opaque.

So how can any IFA justify recommending the highest charging funds?

i pointed out that writing a call is the last thing you would do if you thought the share was going to rise. if you want to know more about derivatives you should get the FT guide to Investment, they have a chapter on it.

perhaps you should be thinking of reasons why it's worthwhile to pay an IFA 160 an hour instead of going through my posts?