Changing Cofunds advisers

Linton

Some points to consider in response to Rollinghome

1) With RDR trackers and other passive funds will be hit proportionately more by increased cost of ownership than managed funds as investors in low charge funds start paying for things that managed fund investors are already paying for.

2) In the coming years many people with no financial understanding and a great fear of any dips in their capital will be having to manage very large sums of pension money. Such people are quite capable of losing far more from their diy investing than the cost of advice.

3) I am not clear whether Bill Mott's (who's he? just checked - he's a managed fund manager who we are told cant do any better than a monkey with a pin) prediction is global or purely UK or somewhere in the middle . It seems to me that in the environment being suggested niche, focussed investing will provide the best chance of reasonable returns. There is no point in cutting charges to the bone if the investments one buys are stuck in a 20 year stagnation.

bigadaj

Well paying lower fees in general will mean that returns are better, or less bad with a pessimistic approach.

I agree with lintons first statement but are statements two and three not somewhat contradictory, it appears that we need to pay someone for advice, can't trust the people who are paid for advice, or is this just fund managers rather than IFAs. Oh and we need to invest in those niche areas that will outperform, and were so obvious in hindsight.

Linton

bigadaj wrote: »

Well paying lower fees in general will mean that returns are better, or less bad with a pessimistic approach.

I agree with lintons first statement but are statements two and three not somewhat contradictory, it appears that we need to pay someone for advice, can't trust the people who are paid for advice, or is this just fund managers rather than IFAs. Oh and we need to invest in those niche areas that will outperform, and were so obvious in hindsight.

My comment in point 3 was a roundabout way of pointing out it was a bit strange that Rollinghome was believing that a fund manager could predict the long term future when he also believes that a fund manager cannot advantageously chose shares. I personally dont believe anyone can predict the long term future particularly self-promoting gurus.

Chosing which niches to invest in isnt an exact science though some such as technology and small companies are fairly obvious. However you can apply a bit more thought and logic to it than in choosing which particular company is going to do well in the long term or which fund manager has golden hands. Also niches tend to have more of a basis in long term economic trends whereas individual companies and funds can come and go.

By focusing on a number of particular niches that have the potential of performing extremely well you benefit from the fact that even a very poor niche cannot do worse than losing 100% of your money whereas a good one could easily multiply your initial investment many times in say 10 years.

Rollinghome

Linton wrote: »

My comment in point 3 was a roundabout way of pointing out it was a bit strange that Rollinghome was believing that a fund manager could predict the long term future when he also believes that a fund manager cannot advantageously chose shares. I personally dont believe anyone can predict the long term future particularly self-promoting gurus.

I’m not going to go through your “response” line by line but let me try to help you a little (in a non-roundabout way I hope).

There is nothing in my post to say that I believe or disbelieve Bill Mott. I said: “If the period ahead is one of low returns as many forecast” and followed that with a quotation from a fund manager, Bill Mott.

Mott is clearly not predicting the future. He’s suggesting various possibilities that are no more than his opinion and which may differ from that of others. Trustnet describe him as "one of the best known equity income fund managers in the UK" though it comes as small surprise that you had never heard of him and needed to check.

Further, I did not say that no fund manager can advantageously select shares as you suggest. I said: “the majority of managed funds actually return less than you’d expect from random chance”. If you do not understand the difference then find someone to explain to you.

Neither were you told that Mott can’t do better than a monkey with a pin as you claim. I have no idea of his particular investment record or how it compares and said nothing to suggest otherwise. He is listed by Trustnet as one of their "Alpha Managers".

You say that you don’t believe that anyone can predict the future and that is surprisingly sensible of you. If you have read my other posts then you will know that I frequently make the same point especially when people assume the future for investors will be much as it has been for the last 100 years. It’s impossible to know.

Linton wrote: »

By focusing on a number of particular niches that have the potential of performing extremely well you benefit from the fact that even a very poor niche cannot do worse than losing 100% of your money whereas a good one could easily multiply your initial investment many times in say 10 years.

So a “poor” niche is bad and a “good” niche is good (provided it isn’t really another bad niche presumably) and we benefit from not being able to lose more than 100% of our money you say. Funnily enough, you may be struggling to say something reasonably sensible about risk in there.

talexuser

Bill Mott used to manage Credit Suisse Income funds where he was pretty successful. I had some family members in those funds for some years for diversification, never consistently top of table, but used to beat the index to justify the fees most of the time, so top quartile at least pretty consistently. He then left Credit to set up with this Sigma outfit and lost his touch, last I heard, or just couldn't keep up with the changed world so well.

talexuser

Rollinghome wrote: »

There's no Fidelity switching fee for clients of CavendishOnline.

I suppose to change from Cofunds will involve a sell and buy of all the holdings? So it might be worthwhile to take the out of market risk of a change to Fundsnetwork next time I want a switch that will cost more than £40-50 with Cofunds.

Sago48

Now I'm wondering if the move to Cofunds was wise. We bought ISA products via Torquil Clarke for many years, but nearing retirement wanted advice and review. We then took on Chase de Vere on the advice of our accountant and they recommended Cofunds. On their advice we added corporate bonds to the portfolio and swapped out one of the equity ISAs for another. We now have around £100K. Since when we have sat back and not bothered much - as indeed have AWD. Was this a costly error? I liked Cavendish because like TC they do not advise, but as they won't take us on with Cofunds, perhaps we should transfer to their Fidelity equivalent? - leaving the market, albeit briefly? Would this matter? It sounds as though if we stay with AWD we will be paying a fair bit in fees, but less with Cavendish. Perhaps I just need to learn more before deciding?

grey_gym_sock

there are other discount brokers who will take you on with Cofunds, though their rebates are not quite as good as Cavendish (i think) - see this summary: http://candidmoney.com/actionplans/actionplan3.aspx ... another option to consider

talexuser

Sago48 wrote: »

perhaps we should transfer to their Fidelity equivalent? - leaving the market, albeit briefly? Would this matter? It sounds as though if we stay with AWD we will be paying a fair bit in fees, but less with Cavendish. Perhaps I just need to learn more before deciding?

I strongly suspect the change from Cofunds to Fundsnetwork will require a sell and re-buy. You will be out of the market for 1 day or less, phone Cavendish to check up on exact procedure. If your funds move up in the afternoon you may lose some if re-buying the next day.

Conversely If you want to swap a fund within Cofunds it costs 0.25% so my average single fund of around 20K will cost me £50 to swap.... free with Fundsnetwork.

Personally I don't swap funds that often, chosen for the long term hopefully!, and have no plans for a swap, so have not dropped Cofunds yet and am waiting to see how the new charging structures work out next year before making a move.

On your 100k Cavendish will give you back £500 a year to reinvest in funds effectively for free if you are choosing your own funds at the moment anyway. This is not insignificant as a return compounded over several years. Compared to no rebate at all I would swap as long as you are happy with choosing your own funds.