Professional Finance people no better than amateurs

darkpool

HelpWhereIcan wrote: »

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?

i think you know you've made a mistake by referencing a document that showed active management was worthless, and you're now trying to change the topic?

why don't you just answer the points brought up by James?

earlier on you said that cost was one factor to consider when choosing active managed UTs, what are the other ways to choose a UT? Maybe try and answer in less than a hundred words, with no multiple links?

darkpool

jem16 wrote: »

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.

by debate you mean people post documents that show active management doesn't work, then the IFAs ignore all the evidence and try the "some people have done OK with UTs in the past" argument.

Or how about IFAs posting misleading quotes from research that shows active management is not cost effective? You mean that type of debate?

I expect more from a professional.

You stick with your UTs though.

darkpool

If you do feel lucky why not try investing in Unit Trusts? A whole 1.9% chance of getting some alpha return*

*according to research presented by one of the IFAs here.

Rollinghome

jem16 wrote: »

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

Indeed, the most vociferous advocate for IFAs on this board, with thousands of posts to his name, is a young man in his first job, who has never seen an IFA because he has virtually no money to invest.

It seems that those keenest on IFAs are those who have never actually encountered one or have never been able to invest their own money and have very little understanding of the process. And of course the IFAs who patrol this forum.

Lokolo

Rollinghome wrote: »

Indeed, the most vociferous advocate for IFAs on this board, with thousands of posts to his name, is a young man in his first job, who has never seen an IFA because he has virtually no money to invest.

It seems that those keenest on IFAs are those who have never actually encountered one or have never been able to invest their own money and have very little understanding of the process. And of course the IFAs who patrol this forum.

I wouldn't say £5k is virtually no money, but I will agree it's not a huge amount.

However at no point do I tell people not to do something by themselves? If people come here wanting to learn, I answer their questions and I quite happily suggest HL (especially for those starting out, apart from nowadays if people want to use trackers) for people to DIY. But for those that don't want to do it themselves, what do you think I should suggest? Stick it all in gold? Go to the bank? Or go and see an IFA?

I also have on numerous occassions suggested to members that if they do go and see an IFA they can come back, post their findings and people can comments on it.

And as for "having not encountered" doesn't mean that I don't have friends who also haven't.

p.s. it's not my first job.

p.p.s. or perhaps I should recommend what the Daily Mail suggests......

HelpWhereIcan

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?

Hardly, if that's why I had wanted to do; that's what I would have done.

Again, bearing in mind I have already said I am largely convinced by the Passive argument, I would not be asking darkpool to discuss the alpha if I was looking at simple nominal returns.

This is about calculating and interpreting alpha ... and hence how it can affect how we interpret documents which quote alpha figures.

darkpool wrote: »

i think you know you've made a mistake by referencing a document that showed active management was worthless, and you're now trying to change the topic?

Not at all, just - with your help - discussing the interpretation of that document - a discussion that will help answer most of the queries James raised.

Problem is, you know I'm going somewhere with this but can't work out where and I don't want to put words in your mouth.

Tell you what, let me try again.

Benchmark over 3 years - 76.2

Tracker Alpha: -1.19 = return of 75.01
Active Fund Alpha: 3.67 = return of 79.87

Would that be how you would interpret those figures?
A simple Yes or No with a correction if you would do it differently will do

MrMalkin

Can we please move on past the 'my investment knowledge is bigger than your investment knowledge' willy waving contest?

Mine is bigger than both of yours anyway

GeorgeHowell

jem16 wrote: »

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?

I don't think that's a fair comment. Many of us are convinced that GCSEs and A-levels have been dumbed down in various ways, but we don't have to have sat them recently to make that observation. I believe it to be the case that qualifications for IFAs are nothing remotely like as rigorous as for the established professions, and I haven't seen anyone level a credible argument to dispute that. I reckon the analogy would be someone being able to practice medicine with a GCSE in human biology.

Some of us could probably pass the IFA qualification now, with minimal preparation, just from the experience years of managing our own affairs, reading the financial press etc. But does that make us qualified to advise others for a living ? I don't think so. And I certainly would not purport to be so qualified. I might make a suggestion on a forum like this but I would not expect anyone to act upon it without getting it corroborated at least.

Aegis

GeorgeHowell wrote: »

I don't think that's a fair comment. Many of us are convinced that GCSEs and A-levels have been dumbed down in various ways, but we don't have to have sat them recently to make that observation. I believe it to be the case that qualifications for IFAs are nothing remotely like as rigorous as for the established professions, and I haven't seen anyone level a credible argument to dispute that. I reckon the analogy would be someone being able to practice medicine with a GCSE in human biology.

Not really. It's more akin to being able to practice accountancy with a foundation degree in accountancy, as that's much closer to the new requirements. The basics of the profession don't require a full on degree to advise on, and in a lot of cases the qualifications are overkill (the vast majority of advisers don't require advanced tax and trust qualifications, for example).

Some of us could probably pass the IFA qualification now, with minimal preparation, just from the experience years of managing our own affairs, reading the financial press etc.

As someone in the middle of them who has been managing his affairs for some time and has worked in finance for a few years, I thoroughly disagree. The exams go into far more depth than you need to manage your own finances or, for that matter, to advise the majority of clients. I've had to put a lot of time and effort into passing my exams (11 so far, 4 more to go until I'm at the level I want).

But does that make us qualified to advise others for a living ? I don't think so. And I certainly would not purport to be so qualified. I might make a suggestion on a forum like this but I would not expect anyone to act upon it without getting it corroborated at least.

This is why getting qualified requires an additional process on top of the exams. You need to go through a period of internal learning with a firm followed by an assessment by the training or compliance officer within the firm before being allowed to advise clients, after which you are usually on pre- and post-advice checks until the firm is convinced that you are competent. On top of that, there's an ongoing requirement for Continuous Professional Development, a large proportion of which must be "structured" (i.e. not just reading up on something).

dunstonh

Some of us could probably pass the IFA qualification now, with minimal preparation, just from the experience years of managing our own affairs, reading the financial press etc.

Not a chance in hell. Despite what some people posting may think, there is far more to it than they realise. It would actually be very interesting to see what some of them score. I would take a guess it would be around 10-20% probably. Some of the basics are easy to follow for someone with an interest. However, could they really discuss say the merits and limitations of the main investment theories (and that is just one chapter in one of the exams). e..g MPT, CAPM, Multi-factor models, EMH, Behavioural finance.

Here are two questions from a recent J05 exam:

1 - Regulatory update 55 (RU55) sets out the areas of knowledge that advisers are expected to have an awareness or understanding of to advise in teh income withdrawal market. List there areas.


2 - Members of Occupational, Parliamentary or Statutory schemes who had a contractual right on 5 April 2006 to take pension benefits between the ages of 50 and 54, may do so even if this is after 5 April 2010.

(a) Explain, in detail, the conditions that must be satisfied for a scheme
member to take advantage of this concession. (7)

(b) Outline the circumstances when this concession would not be lost in the
event of benefits being transferred.


Do you see many non advisers being able to answer that? (to be honest, I dont see many tied FAs being able to answer it and probably a good proportion of those advisers that wont be here in 12 months either)

Some of it is simple. How much is the annual ISA allowance but knowing a few simple things does not make you an expert.

There is also one big big difference between a novice and a self employed/partner IFA. The IFA is putting their own personal finances on the line when they give advice. How many enthusiastic investors would be willing to bet their house that their knowledge is strong enough to match an IFA?