Professional Finance people no better than amateurs

darkpool

ehhhmmm well

in this case alpha is the return that the manager achieves over the normal return in the index he invests in. For instance if the index goes up 10% (beta return) and the fund goes up 15% the alpha return is 5%.

But often (mostly?) alpha return is due to luck, the study referenced filters out the returns due to luck. it found 20% of funds had negative alpha, only 1.9% had positive alpha - a ratio of 10 to 1.

Doesn't really inspire much confidence in the fund management industry does it?

I think James had some good points regarding the study you referenced, are you going to respond to him?

GeorgeHowell

jem16 wrote: »

From 2013 under the RDR, IFAs will be required to hold qualifications at Diploma level. Any IFA intending to be in business from 2013 is likely to have those qualifications now.

Basically see an IFA and avoid all FAs.



Not really or the Tech boom and bust wouldn't have happened.

I don't think the diplomas etc are rigorous enough -- it's essentially a tick box exercise to show they know which end is up in the financial world. Nothing remotely like a genuine professional qualification. Whether it qualifies anyone to actually offer advice to others is debatable.

The tech boom happened because greed and fear (of missing out) overwhelmed sound judgement and common sense. This is sadly a very prevalent human trait and without it the world would be an immeasurably better place. I wonder how many financial advisors told their clients in the strongest possible terms to avoid tech stocks at all costs because it was a bubble which had to burst.

GeorgeHowell

jem16 wrote: »

Does that matter though if following that advice is very costly to yourself?



Darkpool would like no IFAs to post on this site as he sees it as a consumer site. Without the balance being provided by both IFAs and other knowledgeable posters, some unwitting soul might just be tempted to follow his "advice".

Anyone who follows any advice by anonymous posters given on an internet forum is very much in be it upon your own head territory. Especially if they don't get it corroborated, and it goes pear-shaped then they have no right to criticise the poster.

I kind of have a bit of sympathy with the view that this is supposed to be a forum for the punter, not the professional, but it's a free country (just). However I don't like the tone that I sometimes see from professionals which savours of "I'm an IFA, so here is the gospel and anyone who contradicts it is an idiot or a scoundrel". There is also a fair degree of IFA propaganda, regarding for example the need to use IFAs and the alleged folly of trying to do it on your own, and the alleged folly of not being heavily into equities etc. I guess they are entitled to push their wares, especially the ones who own up to being an IFA, but those of us who do know which end it up and are sceptical also have a right to say so, and why we think that way.

jem16

GeorgeHowell wrote: »

I don't think the diplomas etc are rigorous enough -- it's essentially a tick box exercise to show they know which end is up in the financial world. Nothing remotely like a genuine professional qualification. Whether it qualifies anyone to actually offer advice to others is debatable.

Presumably you have then studied for and completed the relevant exams to make such a pronounced judgement? How did you get on and what use are you now making of those qualifications?

The tech boom happened because greed and fear (of missing out) overwhelmed sound judgement and common sense. This is sadly a very prevalent human trait and without it the world would be an immeasurably better place.

Yes I agree. However for those unskilled in making their own financial decisions, do you not think that they would have been tempted? Most would buy in at high and panic at the first sign of a loss and sell low.

I wonder how many financial advisors told their clients in the strongest possible terms to avoid tech stocks at all costs because it was a bubble which had to burst.

Good question. Perhaps some of the IFAs could comment?

GeorgeHowell wrote: »

Anyone who follows any advice by anonymous posters given on an internet forum is very much in be it upon your own head territory. Especially if they don't get it corroborated, and it goes pear-shaped then they have no right to criticise the poster.

I doubt that anyone would criticise the poster as they wouldn't want to come on here admitting they were foolish to follow that advice.

However there are many people who do come on here for advice and are really not very knowledgeable (through no fault of their own). Many take what is given at face value and assume it to be correct.

I kind of have a bit of sympathy with the view that this is supposed to be a forum for the punter, not the professional, but it's a free country (just).

It is a consumer forum. Does that mean we can't gain from the knowledge of those with experience, be it professionally or from those who have an interest in the subject?

However I don't like the tone that I sometimes see from professionals which savours of "I'm an IFA, so here is the gospel and anyone who contradicts it is an idiot or a scoundrel".

I find very few of the regular IFAs adopt this tone. Most are happy to have a reasoned debate and often help those who are contemplating or following a DIY approach.

Where most of the regular IFAs take issue is with the small (thankfully) core of posters that make unfounded accusations without actually knowing what an IFA does and have often never even consulted an IFA.

There is also a fair degree of IFA propaganda, regarding for example the need to use IFAs and the alleged folly of trying to do it on your own, and the alleged folly of not being heavily into equities etc.

Most of the posters suggesting the use of an IFA are not actually IFAs themselves.

Perhaps you could point to some actual posts where the IFAs are pushing being heavily into equities?

but those of us who do know which end it up and are sceptical also have a right to say so, and why we think that way.

I agree.

Anyone who feels that a DIY approach would be good has a right to say so and why.

However I also feel that this can be done in a way that is reasoned and is not simply an attack on the profession. That way people can make an informed judgement on what is the correct approach for them.

dunstonh

Good question. Perhaps some of the IFAs could comment?

Tech funds fall under specialist sector and you typically find the allocation to specialist sector doesnt tend to get any higher an 10%.

The phrase "fashion investing" has been used frequently on this forum over the years. It is very easy to get carried away with what the media are reporting as the current "fashion". Stuctured portfolios should avoid that which is why there has been so much emphasis on structure over the years rather than single sector investing with near random allocations which used to occur in the past (although the data and tools was not available in the past to allow it to be done for the average consumer cost effectively).

HelpWhereIcan

darkpool wrote: »

ehhhmmm well

in this case alpha is the return that the manager achieves over the normal return in the index he invests in. For instance if the index goes up 10% (beta return) and the fund goes up 15% the alpha return is 5%.

Thank you

darkpool wrote: »

I think James had some good points regarding the study you referenced, are you going to respond to him?

That is one of the things I am trying to do with your assistance.

If you recall, let's assume the benchmark returned 76.2 over 3 years.

FTSE All Share Tracker Alpha: -1.19

Active Managed Fund Alpha: 3.67

So to take the next step, given the calculation for alpha you give and the figures above, what would you estimate the return for the two funds to be?

robmatic

HelpWhereIcan wrote: »

Thank you



That is one of the things I am trying to do with your assistance.

If you recall, let's assume the benchmark returned 76.2 over 3 years.

FTSE All Share Tracker Alpha: -1.19

Active Managed Fund Alpha: 3.67

So to take the next step, given the calculation for alpha you give and the figures above, what would you estimate the return for the two funds to be?

Is this a really long-winded way of showing that in a hypothetical situation where you pick an actively managed fund that has outperformed the index, it would have outperformed the fund tracking that index?

This isn't telling me a great deal, and I don't even have a QCF Level 3 qualification in selling financial products.

Lokolo

robmatic wrote: »

Is this a really long-winded way of showing that in a hypothetical situation where you pick an actively managed fund that has outperformed the index, it would have outperformed the fund tracking that index?

This isn't telling me a great deal, and I don't even have a QCF Level 3 qualification in selling financial products.

I don't think its entirely for your benefit though

jem16

dunstonh wrote: »

Tech funds fall under specialist sector and you typically find the allocation to specialist sector doesnt tend to get any higher an 10%.

So depending on the risk profile of the investor, anywhere from 0% to 10% could have been allocated?

Would Tech funds still have been advised in the specialist sector at the height of the "boom" era or had advisors started to use other specialist funds?

fairleads

GeorgeHowell wrote: »

I kind of have a bit of sympathy with the view that this is supposed to be a forum for the punter, not the professional, but it's a free country (just). However I don't like the tone that I sometimes see from professionals which savours of "I'm an IFA, so here is the gospel and anyone who contradicts it is an idiot or a scoundrel". There is also a fair degree of IFA propaganda, regarding for example the need to use IFAs and the alleged folly of trying to do it on your own, and the alleged folly of not being heavily into equities etc. I guess they are entitled to push their wares, especially the ones who own up to being an IFA, but those of us who do know which end it up and are sceptical also have a right to say so, and why we think that way.

Hammer, nail, head just about sums it up from my 40 + yrs of fending, and investing, for myself and my wife.