An IFA who knows Monkey with a Pin

mj62mj62

Hi Linton,

Thanks for your reply.

I haven't read Tim Hales, but the book I'm referring to by Pete Comley does site Deutch bank which says 'buy and hold' isn't going to work at the moment - so if Tim Hales is recommending a passive approach, then I too may disagree with it. The research in "Monkey with a Pin" shows only 15% of fund managers beat the market, so you've got to be sure (how?) you've got one of the right ones.


I will try to re-align my IFA expectations given you what you said. Hopefully someone can still recommend an excellent IFA to me.

..and hopefully even if that person cannot give direct advice, hopefully there can at least be discussions about my potential plans.

My hope is (was) that if I had an IFA who had read the book, even if they cannot legally give advice, that they would be on the correct page when it comes to doing what is right for their customers.

grey_gym_sock

"monkey with a pin" isn't that similar to tim hale.

"monkey" has a fresh perspective, but isn't always correct.

for instance, i think he suggested that 1 reason investors would tend to underperform relative to indexes is that indexes include some kind of survivorship bias. which seems to show a misunderstanding of how indexes are calculated.

a number of the figures he used when estimating typical underperformance were a bit arbitrary.

coming back to IFAs, i'm not too surprised you want to talk to 1, since "monkey" gives you things to think about, rather than a strategy to implement (unlike tim hale).

i think debating the likely future direction of the stock market, gold, etc, is really so much hot air: nobody knows what they will do. it's to IFAs' credit if they won't engage in that.

diversification is a reasonable way to deal with not knowing what markets will do.

the bond bubble? yes, i reckon there is 1. but no idea what course it will take. you can always buy fewer (or shorter-term, or higher yield) bonds than you might otherwise. dunno whether that will work out better, though.

BLB53

I think most people who want to take more control of their finances would benefit from a read of the book - now available as a free download from Amazon.

I cannot imagine IFAs would be too keen for their high charging industry to be held up to the light in the way Comley goes about doing this but investors are becoming a lot more savvy (well some!) and even the pension services trade body (NAPF) has admitted charges are too high and eye-wateringly complex.

Rather than looking for a monkey-friendly IFA, you might be better taking responsibility for your own pension/sipp and going down the DIY route.

Some sites that may help are www.monevator.com and www.retirementinvestingtoday.com also www.candidmoney.com

Good luck!

xylophone

http://www.money.co.uk/article/1005407-the-secret-to-finding-an-ifa-you-can-trust-with-your-money.htm

I'm not sure I'd want to "shoot the breeze" with an IFA - a waste of time and money.

I think you need to define your objectives, decide what level of experience and qualification you require, then have a look on a website like unbiased to see who is available. You can then make a shortlist and make initial enquiries before making your decision. You could even ask whether they have read MWAP although I'm not sure that I would make a decision on that basis!:)

Linton

mj62mj62 wrote: »

Hi Linton,

Thanks for your reply.

I haven't read Tim Hales, but the book I'm referring to by Pete Comley does site Deutch bank which says 'buy and hold' isn't going to work at the moment - so if Tim Hales is recommending a passive approach, then I too may disagree with it. The research in "Monkey with a Pin" shows only 15% of fund managers beat the market, so you've got to be sure (how?) you've got one of the right ones.


I will try to re-align my IFA expectations given you what you said. Hopefully someone can still recommend an excellent IFA to me.

..and hopefully even if that person cannot give direct advice, hopefully there can at least be discussions about my potential plans.

My hope is (was) that if I had an IFA who had read the book, even if they cannot legally give advice, that they would be on the correct page when it comes to doing what is right for their customers.

A passive approach is one that starts with the assertion that "fund managers cannot beat the market" based on US evidence so which fund to chose is a complete gamble and concludes that a tracker fund with low fees is the way to go. Here isnt the time and place for me to say why I think the theory is over-simplistic and in some cases wrong, and the conclusion more so. It sounds very much like what Monkey with a Pin is talking about from the reviews I have read and your comments.

I dont think an IFA would be concerned too much as to how the fund manager chooses his shares, even if it were with a pin. What is more important are things like the volatility, what the fund invests in, its history etc, ie the top level characteristics, not the internal details, and how these fit in with the customer and his overall money allocation.

grey_gym_sock

mj62mj62 wrote: »

the book I'm referring to by Pete Comley does site Deutch bank which says 'buy and hold' isn't going to work at the moment

that statement doesn't lead to any helpful strategy, though. it's fine to draw attention to the uncertainties of investing. but it doesn't give you a better alternative - for long-term money, that is. for short-term money, you can choose to save instead of investing.

"monkey" was (IIRC) suggesting that the outlook for investing in the next 10 years was poor because the returns in the last 10 years have been poor. which doesn't follow at all. there may even be a case for expecting higher future returns because of low recent returns ("reversion to mean").

Aegis

I've downloaded it to see what I think, but it's in a queue - 4 more fairly big books and I might have time for it.

Just to clarify further, as an IFA I feel my job is very different to that of an asset manager. Asset managers with unconstrained investment mandates can choose to invest in areas of the world or assets in which they have confidence, as long as it falls within the overall mandate of their portfolio (which might be "no more than 60% in equities, or targeting average annualised volatility of no more than 8% over a given 3 year period), and they will spend a long time assessing the economic and political situations around the world to try and help them make that decision.

In contrast, my role as an IFA revolves around a client and their personal circumstances, including cash flow management, long term planning, protection for them and their family, use of various tax wrappers and oversight over the managers they use, whether in the form of a discretionary portfolio manager or the range of funds they have invested into. I follow legislative updates and advise clients how those will affect them, I work out ways for them to legitimately pay less tax in a variety of circumstances and, where appropriate, I perform scenario analyses to show what they might have in the future if certain assumptions hold true.

I'd feel very uncomfortable trying to wear both hats at the same time, as I can only really commit to one of these roles or the other. Either is very much a full-time job!

Linton

grey_gym_sock wrote: »

that statement doesn't lead to any helpful strategy, though. it's fine to draw attention to the uncertainties of investing. but it doesn't give you a better alternative - for long-term money, that is. for short-term money, you can choose to save instead of investing.

"monkey" was (IIRC) suggesting that the outlook for investing in the next 10 years was poor because the returns in the last 10 years have been poor. which doesn't follow at all. there may even be a case for expecting higher future returns because of low recent returns ("reversion to mean").

And returns in the past 10 years havent been that poor. I'm happy!

gadgetmind

Lokolo wrote: »

You may find PMing some passive investors (gadgetmind is usually helpful and nice) with a link to this thread and get his view.

That's very kind of you, but I've decided to be unhelpful and grumpy on this occasion so as to prevent people from taking me for granted.

I am now predominantly a passive investor but I do a little "dark side" fiddling around the edges for less efficient markets and sectors mainly via Investment Trusts. I have no idea yet whether this actually helps my returns long-term because I've also been committing the additional sin of looking for mispriced (in my view) areas and so have done very well from Europe, banks and some dodgy subordinated debt over the last year or so.

However -
1) I'm 80% plus passive in most portfolios and 90%+ in my largest one.
2) My overall fees are sub 0.5% and it's mainly the fees of active management that I object to more than the approach itself.
3) However, I really CBA trying to predict tomorrow's superstar and the evidence shows it's just as likely to be today's has been as anyone else, and vice versa. Most I know who have been investing over multi-decade periods also tend to share this POV and therefore concentrate on low-fee passive investing.

I haven't read monkey with a pin (ISTR requesting the email version and never getting it) but may give it a whirl as I have a lot of long-haul flying coming up.

Tim Hale's work I have read and it's helped steer many aspects of my investing, mainly diversifying, rebalancing and keeping the fees low. The latter currently means passive but I think active investing is going to keep getting cheaper.

Since taking control of my own investments, I have ditched IFAs entirely. I can see little reason for someone with a clue to use an IFA to invest BUT I do think an IFA's deep knowledge of pensions, taxation, trusts, IHT and much more should be used as and when required.

I do intend to use an IFA at various key future stages but I have no interest in letting them see anything regards the make-up of my various pots other than a helicopter view of the asset allocation. Similarly, my accountant helps me minimise tax and keep things in order, but we work hand-in-hand with me doing a fair bit of the detailed research, and he has nothing to do with actually earning the money.

I recommend you read Hale's "Smarter Investing" and Bernstein's "Intelligent Asset Allocator" and after that decide if you're happy doing your own asset allocation, rebalancing, and selecting of investment vehicles. If you don't after reading those two, then perhaps you never will, but if you do, I'm sure you'll get loads more advice hereabouts.

However, financial advice is about more than managing pots so don't think you have to totally ignore IFAs just because you know one end of a balanced portfolio from the other.

dunstonh

I have an IFA who has helped me with financial products over the years, she is lovely and friendly, but she isn't interested in discussing the market and tbh, doesn't seem to have the knowledge about topics like the bond bubble.

You would expect an IFA to have knowledge of these things but IFAs are not investment managers. We cannot be. Going back years ago, IFAs would get involved more because effectively they were the only ones that could for the average retail investor. Today, things have moved on. We can advise on investments but you should not expect an IFA to tell you when to time the markets. We don't know any more than the next person. Anyone that claims they do is deluded. The IFA is more about planning, management of tax wrappers, risk profiling doing due diligence on the investments, rebalancing investments and maybe the odd tweak when required (but typically using data that the IFA has sourced rather than created in-house) and report and supply the right investments for the objective. If you want micro-management then you need a discretionary investment service. Not an IFA service.