A tale of 4 IFA's... (subtitle - why is it so hard?)

RedVulpine

Daniel_Elkington wrote: »

Not at all, we use an independent firm who build asset allocations for a living. Most of these individuals have a Phd or equivalent in their specific fields.

Which company is this? I don't want to dismiss you claim out of hand, but taking Proxy's point, do you really mean MOST of them have Phd's? You have to understand that a high concerntation of Phd's/equivalents (as you have implied by saying "most") in any company outside of accademia sounds improbable. They may be very credible and have first or masters degrees, additional post graduate qualifications or even high level professional qualifications, but Doctorates? REALLY???

bigadaj

RedVulpine wrote: »

Which company is this? I don't want to dismiss you claim out of hand, but taking Proxy's point, do you really mean MOST of them have Phd's? You have to understand that a high concerntation of Phd's/equivalents (as you have implied by saying "most") in any company outside of accademia sounds improbable. They may be very credible and have first or masters degrees, additional post graduate qualifications or even high level professional qualifications, but Doctorates? REALLY???

Many people now have doctorates, many because they can't find employment in their area of interest, others because the appeal of a extended period of academia is attractive. Possessing a phd means someone has a good knowledge of a tiny area of expertise and is normally no better than many others won't equivalent professional qualifications, actuarial training is actually longer than a phd in any case, I'm not an actuary but have friends who are.

Daniels original post concerned me somewhat from a number of angles. He seems to be happy to put blind faith in experts feeding numbers into black boxes, with no evidence of out performance. If the IFAs job isn't to select funds pr predict the performance of markets and funds then surely it is to interpret this to a layman client, and ther is precious little evidence that this is the case.

Specifically returns on absolute return funds have been very poor yet this is an allocation hat has been recomme ded apparently.

Finally there are few that would not agree that a primary factor in investment retrurns and investment performance is charges, Daniels preferred methodology seems to palace at least three layers of charges which must have a significant impact on long term performance.

I'd be happy to hear a response on this.

In relation to fair leads posts then surely this is a simple factor of not considering the compounding effect of reinvesting dividends, performance of stock markets where dividends aren't reinvested may well be worse than cash.

atush

i am a scientist, not a maths/economics graduate.

I do think a blanket statement about PHD's w/o qualification is extremely un-warrented.

Any decent university, a PHD grad has to have exceptional knowledge in their subject, and are peer reviewed.

RedVulpine

bigadaj wrote: »

Many people now have doctorates, many because they can't find employment in their area of interest, others because the appeal of a extended period of academia is attractive.

Fair enough, I'd still be suprised if there would be a concentration of phds of phds outside of scientific research or academia which is why I was curious about the company. Perhaps I was wrong

bigadaj wrote: »

Possessing a phd means someone has a good knowledge of a tiny area of expertise and is normally no better than many others won't equivalent professional qualifications, actuarial training is actually longer than a phd in any case, I'm not an actuary but have friends who are.

Sure and many other professions take a long time in training such as medicine and [real] architecture. The difference with a Phd is precisely because it is down to very focussed peer reviewed research at the top end of academia. Many highly qualified people may have a better range of skills overall without having a Phd, but it is the expertise of the doctorate in the small area that cuts the mustard. When one says "equivalent" apples should not be ocmpared to oranges.

bigadaj wrote: »

Daniels original post concerned me somewhat from a number of angles. He seems to be happy to put blind faith in experts feeding numbers into black boxes, with no evidence of out performance. If the IFAs job isn't to select funds pr predict the performance of markets and funds then surely it is to interpret this to a layman client, and ther is precious little evidence that this is the case.

I agree. One should always challenge received wisdom, but I suppose there is nothing wrong with someone in his job coordinating other experts for the people he deals with. He just needs to avoid "blind faith" as you say.

bigadaj wrote: »

Finally there are few that would not agree that a primary factor in investment retrurns and investment performance is charges, Daniels preferred methodology seems to palace at least three layers of charges which must have a significant impact on long term performance.

I'd want to know the combined effect too and how it compares

bigadaj wrote: »

In relation to fair leads posts then surely this is a simple factor of not considering the compounding effect of reinvesting dividends,
performance of stock markets where dividends aren't reinvested may well be worse than cash.

That's what I suspect, but let us see what is forthcoming....

Daniel_Elkington

bigadaj wrote: »

Finally there are few that would not agree that a primary factor in investment retrurns and investment performance is charges, Daniels preferred methodology seems to palace at least three layers of charges which must have a significant impact on long term performance.

I'd be happy to hear a response on this.

Charges are very important, which is why it is a good idea to use a core/satellite approach.

In terms of charges, usually this client pays a total expense of about 1-1.3% per annum. This includes platform costs, fund costs and our costs in reviewing daily.

RE: asset allocations, it is actually cheaper to pay a sub to a research team and charge each client an extre £5 per hour than charge the client £200 per hour for two-three hours of agonising over the strategy that is hopefully going to last their entire life!

We do ignore the asset allocations if necesssary - they are the start of the process. For instance they generally want a bricks and mortar property fund in them, however this is because it is a different asset allocation to the usual bonds/stocks. Although with the potential second coming of property round the corner I may start adding a bit of property into the portfolio.

We also look at the client's circumstances and re-arrange the asset allocation accordingly. For instance if they work in a construction company with French contracts, we minimise exposure to construction and france by using funds underweight in those sectors.

Finally, we do the whole tax wrapper stuff semi-automatically with our clients, so bed and ISA happens every april and they get a letter telling them how much CGT and ISA allowance has been used this year - ideallly 100% of both.

DavidLaGuardia

fairleads wrote: »

What i'm saying is that an investment into cash over the period in question would have given a better end result than a similar amount invested in the Ftse 100 tracker when held with in a pension fund.

Goodness me, you are certainly wrong. I have read this thread and I am a little more than amazed. You must be doing something wrong in your calculations. I suggest you respond to the requests of other posters and they may be able to help you out with your maths.

DavidLaGuardia

fairleads wrote: »

http://group.barclays.com/corporates-and-institutions/research/equity-gilt-study

There may be a fee though

You quote your soruce then say "There may be a fee though". If you do not know this how have you sourced the information to draw your own conclusions?