Virgin money

jem16

bigadaj wrote: »

The gfc obviously showed that the majority of these large institutions couldn't beat the market. But if your fund manager had more skin in the game then it might focus things a bit more, alignment of interests and all that.

This isn't the job of an IFA though. An IFA's remit is to provide advice - it is the fund manager's job to provide performance.

However with anything the provides guarantees, there comes a price which is usually higher.

jamesd

bigadj, start a fund with a performance fee. Use high levels of leverage. Wait for an upturn and take the performance fees. Next sign of a downturn, close the fund. Repeat regularly, with lots of different funds. Or just set it up so that once money is paid out it doesn't have to be repaid if the value drops and keep the fund around during the downturn.

Performance fees are a bad idea for investors, they make it easier for fund management companies to unreasonably take their money based on just the normal ups and downs of the markets. Fees unrelated to performance are safer.

bigadaj

jamesd wrote: »

bigadj, start a fund with a performance fee. Use high levels of leverage. Wait for an upturn and take the performance fees. Next sign of a downturn, close the fund. Repeat regularly, with lots of different funds. Or just set it up so that once money is paid out it doesn't have to be repaid if the value drops and keep the fund around during the downturn.

Performance fees are a bad idea for investors, they make it easier for fund management companies to unreasonably take their money based on just the normal ups and downs of the markets. Fees unrelated to performance are safer.

Arguments both ways and this can obviously be manipulated but for many years the consistency of 1.5% active charges looks like a cartel, and performance by an active manager should relate to their confidence in the market.

Things have improved in he uk in terms of charges over the last few years, but we have been behind the states for decades on this. My opinion is that ina year when values decrease the average investor would be happier seeing the money manager taking some pain in those years. Long term returns are often quoted as say 6-8% so. Performance fee of 20%-25% of growth might lead to much the same costs in the long term.

This is obviously for fund mangers but historically part of this went to the ifa so no reason why the split couldn't be made similar (apart from Rdr) but surely such a choice may be of interest to some. Never suggesting this should be for all funds, just a potential option for some of the bigger institutions to put their money where their mouth is.

jamesd

Then have a bonus set at say 0.25% or cap potential performance fee at that level, so it's not so easy to exploit a proportional calculation.

taking_stock

i've heard a few people who are very happy with their experience of virgin, including a number who are happy paying 1% charge, for what is at best mediocre.

***rightly or wrongly*** - it does illustrate that people are prepared to pay extra (technically) for the trust they place in a brand they know of, with *what they see as* a simple charging structure - ie no up-front fee and just the ongoing 1%.

dunstonh

taking_stock wrote: »

i've heard a few people who are very happy with their experience of virgin, including a number who are happy paying 1% charge, for what is at best mediocre.

***rightly or wrongly*** - it does illustrate that people are prepared to pay extra (technically) for the trust they place in a brand they know of, with *what they see as* a simple charging structure - ie no up-front fee and just the ongoing 1%.

Look at Iphone. They are nowhere near the best phone. They are not the best computer either. They have the best package and Apple the "cool" brand. It is those which sell it.

Although with Virgin, what experience of service do these people actually have. Its a basic pension offering virtually no choice with a basic high risk investment which sends out a periodic statement. There isnt much service involved.

The problem is that people buying the Virgin pension dont realise how bad it is. And you can see from this thread that when you point it out, they frequently get defensive because they dont want to be seen as buying something bad and look for something to justify it or slag off those who do point out how bad it is.

It wasnt bad in 2001. (still expensive but better than 1990s products). In 2013 it is dire.

atush

Will they get better, now they have an actual banking practice? Or are these areas not linked?

jamesd

They know that people trust their brand so it's likely that they will continue to look to exploit that trust with products that can be beaten elsewhere.