Investment Service that only charges a percentage of growth

masonic

I could produce you a report showing the top 10 funds for growth over the past 5 years and it would be 100% accurate.

Archi_Bald

This service is ridiculous. Anyone can compile reports of best performing funds over the past x years as the data is freely available, at no charge.

They don't know any more than anybody else what will be top performing in the future.

On a practical point, if they don't hold your investments, you still need a platform, so would not save a single penny.

It doesn't sound too good to be true, it doesn't sound good at all.

masonic

OP, you might also take note of the 0203 "London" phone number. Anyone can buy these numbers and have them divert to a mobile or landline somewhere completely different. Although some London-based businesses have to use them because they can't get an 0207/0208 number, they are also commonly used by scammers.

dunstonh

s there any such thing as an investment / advice company that charges a portion of the growth they achieve on an annual basis, rather than a percentage of my total investments every year, whether my investments rise or fall..

Why would you want such an expensive charging method?
Why would you want to create a bias into the charging that would encourage risk taking?

I have been using a financial adviser now for 12 years, and I just calculated what they charged me, for completing very little work, and at no risk to them.

No risk? Not possible.

redbuzzard

So they know what the top performing funds are going to be?

Why would they need clients if they could do that? Their superpowers would presumably enable them to predict the winning lottery numbers too.

If you want to know what the best performing funds have been for the last 1,3, or 5 years, it's easy enough to look them up yourself.

Utter drivel. I won't be sending for the "complementary" (sic) report.

chewmylegoff

Their website is littered with spelling mistakes and grammatical errors.

There are over 5,000 companies with the same address as their registered office, so they don't have any office premises.

They aren't authorised by the FCA.

Looks like a scam to me, although it's not clear how they get their hands on your money from their website. I'm sure you'll find out in you become a client though (although I expect you already know how it works).

bowlhead99

johnnyhandsome wrote: »

My investment portfolio has increased every year the last 5 years, so maybe it is just a smarter way of working, they say they take 10% of growth. I downloaded their free best investment funds report, and they highlight the best funds in each sector. I compared a few of mine and I am definitely not invested in the best funds!! Missed out on loads of growth.

You don't need to download any 'best investment funds' advertising to see the best fund in each sector over 1, 3, 5, 10 years because you can just go to trustnet.com or morningstar.com and rank in order by 6 months performance or 1 year or 3 year or 5 year or alphabetic or whatever.

The stockmarket has been increasing every year for the last 5 years. So, you can make money whether or not you had a crystal ball to find the absolute best fund possible. There is no such thing as a best fund anyway - there are funds offering high returns at high risk and funds offering lower risk but lower rewards. The only thing to do is to try to avoid the high risk funds with the low rewards.

But you don't need to worry that you didn't find the absolute highest performing funds or even a top quartile fund. Tell me, how could anyone possibly be expected to have invested in the highest performing fund over that period when the highest performing fund cannot be known until you wait for the 5 year performance and see what the best fund actually was, with hindsight?

Also, you said later you are a medium risk investor. Therefore your own adviser acted correctly in not putting you into the fund that would deliver the best performance in a 5 year bull market. The way to maximise returns in a 5 year bull market is to invest into the riskiest, most volatile and equities-heavy funds that you can find. That is not compatible with medium risk, where you want to achieve steady growth and not lose too much in a downturn.

The funds that delivered the best returns in 2012 and 2013 were UK and UK smallcaps which had lost a huge amount in the credit crunch and boomed when coming out of recession, such that they were teetering at all time high valuations earlier this year and would not have been the smartest choice for a medium risk investor at the beginning of this year when they started to give up some of those gains and normalise compared to other investment choices. By contrast, some focused emerging markets funds had a poor time of it during 2012 and 2013 and then in the last 6 months have rebounded nicely. As a medium risk investor you would not use emerging markets for more than a small part of your portfolio but they would have been a good place to be for the last half year.

So, there are all sorts of sectors it is good to be in over time, and the top funds chop and change over time. Your adviser probably selected a broad portfolio. You said you did not lose anything like 40% in the credit crunch from 2007-2009. However, the US S&P500 index lost 35% as did the equivalent Europe index, while UK lost 40%+. The MSCI Emerging Markets index lost 53% during 2008 in USD terms. Simply investing globally in equities would not have helped you as the whole all-world index delivered a loss pretty similar to the US market (which is after all the major component of world stock markets). However, if your adviser which you were using for 12 years, including that time period, avoided all that for you, then you should probably thank him rather than saying he has done nothing.

Presumably if you had lost 40% while only being a medium risk investor, you would be complaining to the advisor and accusing him of misselling investments to you. But now you are looking at the funds that performed the highest in a rising market and complaining that he has not put you into them. You can't have it both ways. Meanwhile your newfound friends at Blackknight would presumably have charged you zero in the year when you lost 40% and then charged you 10% of 100% gain when you recovered the next year. Resulting in a double digit percentage charge, versus the ~1% charge your IFA would be charging you for ongoing servicing on a 100k porfolio over a couple of years.

johnnyhandsome wrote: »

I read in their blog they are not regulated and do not handle clients money, they provide an information service.

There are oodles of free tip sheets out there and also comprehensive information services that give you the historic performance of every fund, share and investment trust out there. Trustnet and Morningstar are examples that I mentioned above.

They offer a free portfolio review, and do not charge anything until after the first year. Its too good to be true, but what can I lose!!

They are going to suggest that you to buy specific funds, even though they are not regulated to any professional standard in carrying out an assessment of your needs while the UK investment marketplace is full of legitimate companies that do follow the rigourous standards set by the FCA under threat of having their licence taken away and being fined. These guys didn't even bother applying for a licence, hoping to avoid cost, regulation, training and ethics and knowing that some misguided suckers might still buy their products. So, one thing you can lose, is your shirt.

What can they lose? If you lose money, it is no skin off their nose because they had already produced their analysis of previous funds performance and will send it to anyone who asks, costing them virtually zero. If the funds don't perform, you will walk away and they'll send their tip sheets (sorry, free portfolio review) to some other sucker, again at minimal cost (because they have no obligation to provide a tailored service suitable for any of their customers, because they are not regulated). If they are lucky and the funds go up you will probably think they gave you great tips, and want to start giving them a slice of your future profits forever! For them it is a win win. They can't lose. You can.

johnnyhandsome wrote: »

Look guys thanks (and not to sound spammy) I get this. If I grow 15% in 1 year on 100k, they make 1.5K.

Yes, and a simple US tracker delivered a total return of just over 30% from summer 2012 to summer 2013. So that would have cost you 3k. Your normal regulated professional adviser would probably have charged you £0.5k. When the same tracker drops 30% in another year, they make £0k while your adviser still charges you £0.5k. So, over the two years, your adviser took only 1/3rd of what they did. Of course, the professional regulated adviser wouldn't have invested you entirely into a fund that could go up a lot in some years and lose a lot in others, because he is trying to find you a medium risk portfolio. They have no such qualms because they are not subject to regulation. They are just seeking to find the thing that might go up the most, and they will do their damnedest to find it because they stand to make the most if it comes off.

They will have no interest in finding you a low or medium risk asset. If something goes up 100% they make 10% and if it loses 50% they lose nil. So they are always going to shoot for a risky set of holdings because it is much more lucrative for them than finding a lower risk fund that delivers 10% in a good year and loses 5% in a bad year. In that low risk fund, they would only make 1% of your money over the two years instead of 10% of your money.

Some investment managers charge performance fees - it aligns their interests with their investors. However it is only sensible to sign up to pay them if they have to significantly outperform a benchmark in order to charge you and then have a high-watermark system so that if they fall behind the benchmark you don't pay again while they are catching back up to it. Also you would perhaps want some sort of clawback system for if they fell behind the target that had triggered a payout to them and were never able to recover it.

Generally you should be suspicious of any firm that charges performance fees only. It is like saying you will work for a company all year with no salary only bonus. Why would you do that when in a large number of years, which could happen before the good years, you might underperform due to the state of the markets which were out of your control? If they don't get fee income to pay the rent in the bad years they will go bust and will no longer be around to help you turn around your poor investments.

So the only thing they can do is invest into risky investments right from the start, hope to get lucky and make enough money to see them through to the next load of good years. But actually if they have a bad year they can just close down their company and open up a brand new one, Blackknight2, and start all over again with some fresh sucker's money. As they are not regulated and idiot suckers (sorry, 'customers') are greedy and don't care about the lack of regulation, there's nothing to stop them.

I have also looked at a few free reports they have released on fund managers in their blog. They seem to know their stuff, would love you guys to have an opinion.

I could write a blog with a report on fund managers and seem to know my stuff. To a naive investor, most financial blogs seem to be written by people who know their stuff, because the naive investors are not financial experts themselves and assume what they read to be true. If I were writing a 'report' on an investment management company and was not representing a regulated group I could pretty much write whatever I wanted. Even if it was outright lies I would just say it was 'opinion' or a 'review' and hopefully then avoid being done for libel.

If I were writing a tipsheet I could do the raw research myself or simply plagiarise it from other stuff I read on the web. I bet you I could make it sound like I knew what I was talking about (especially as I do generally know what I am talking about, but it doesn't mean you ought to pay me a slice of your profits forever if you listen to me from time to time).

I looked at a repot on M&G funds, and I have a 4 M&G funds, from their report 2 of them are rubbish, and the other 2 are just ok..They know their stuff

I only own one M&G fund, their Optimal Income strategic bond fund. It has returned 51% in the last 5 years compared to the IMA Sterling Strategic Bond sector average of 42%. Even better, it lost only half as much during the 2008-9 credit crunch crash as the sector average. So over a 7 year period it has delivered a return of ~85%, while the sector average is under 45%. So I would rate this as a damn fine fund. Seriously, these guys seem to know what they are doing even if you go back further than the boom times post crunch.

However if you take a short term view, which is stupid for a long term strategic bond fund, you would say that in the last 12 months, Optimal income has 'only' returned 7.6%, bang on the IMA average for the sector, so it is only mid table (41 of 76 funds). That's third quartile, just.

So on the blackknight site when they give a damning review to M&G and say "From the 51 funds analysed only 4 performed in the top 25% quartile consistently over the most recent 1, 3 and 5 years.", I guess they are including Optimal Income in the ones that failed their test of being a superstar fund because it was 'only' in the top quartile over 3 and 5 years and not in these last few months. But going on performance over 3 and 5 and 7 years it is most definitely a good fund, delivering consistent low volatility performance with an FE risk score of only 25 and blowing most of the other strategic bond funds out of the water if you include a period long enough to include the credit crunch as well as the post-credit crunch boom.

I am not going to give these guys my email address to receive the full report on M&G as I don't need it, I can bring up a list of all their 55 funds at http://www.trustnet.com/Investments/Perf.aspx?ctr=QS&univ=O&Pf_Manager=MAG and then I can compare and contrast with sector averages and other specific funds I'm interested in, getting pretty much as many years' data as exists, for free.

Let me just dip into another one. M&G North American Value. Oh, it's ranked 6th out of 113 funds in the IMA North American sector on 1-year returns. That doesn't seem so bad does it? Over 3 years it's still 6th, out of 102 funds running that long. Over 5 years, it's returned over 100% and beaten the average. If I extended the analysis back to 7 years it would be lagging the average because it has done much better in the boom times than it did in the slump. Such is the case with risky or highly concentrated funds. But I guess Blacknight are only looking at recent data <5years anyway.

How about a more specialist fund like their M&G Japan Smaller Companies? Placed 1st out of 5 in the IMA Japanese Smaller Companies sector over the last 1 year and the last 3 years. Over 5 years, it's returned 75% versus sector average of 58%. Yeah, these guys at M&G really suck. :cool:

So, it seems ridiculous to decide that your independent financial adviser has performed incompetently by buying M&G funds which are "rubbish or just OK", on the say so of these guys who are just running a few stats and making bold conclusions. If your adviser used M&G Optimal Income for your bond exposure as part of a medium risk portfolio he is probably a hero that made you plenty of money (or saved you losing lots of money), I consider myself quite lucky for finding it myself.

Of course, it will be much less of a return over the 5.5 years from the bottom of the credit crunch than you would have got from the M&G Smaller Companies fund which has tripled in that time because it is much higher risk. Incidentally the M&G Smaller Companies fund did marginally better than the UK Smaller Companies average in that period and is not a bad fund at all. You could go back 10 years and it would still be better than the UK Smaller Companies average (although interestingly, not as much of a return as you'd have got from Optimal Income over that time, because Optimal Income has been so damn good)

Their damning of a whole bunch of mainstream investment groups is symptomatic of a bunch of scammers who want to scare you into going with them and motivate your greed to outperform without regard for risk.

I agree with them saying St James's Place are poor value for the average investor but I didn't need to go to their site and have them earn money by displaying ads to me to learn that; you can read it on tens of threads on this forum. I disagree with them damning Vanguard for 'only having one or two funds in the top quartile' when Vanguard as an index fund manager are quite deliberately not trying to outperform or get to the top quartile. It's also quite silly to criticise Vanguard LifeStrategy 40% equity for being bottom quartile, presumably in a mixed investment category where active managers would probably have been much higher exposed to equities in recent years while VGLS40 is fixed and passive.

As I look back above I realise I've invested quite a bit of time trying to justify why people should not invest with unregulated advisers. This would be obvious to most on this community and someone who genuinely thinks otherwise is likely on their payroll or else very naive. But hopefully it helps other newbies.

I have not downloaded any reports as I don't want to be spammed or chased to make an investment with them, but I understand from OP that they have put together a list of funds that were the top in respective sectors over some historic date ranges. Clearly anyone can do that with hindsight. The critical question is whether they can do it with foresight. Would they have told you 3 years ago to invest in those 'top' funds that you have 'lost out' by not investing in? Of course they wouldn't!

How can I know this?
a) Nobody can see the future.
b) They only registered their cheapo domain name in 2013. So if they have been in the game longer than a year or so, it was under a different name which in itself should set alarm bells ringing.

If they are vastly experienced why are they not running their business under whatever name it was before, and why have they not gone legit and got regulated and got their own .uk web domain and a physical office address if they are professionally competent and have their investors interests at heart?

Nobody should sign up with any unregulated outfit to pay a one-sided performance fee driven by the riskiness of your own investments. Even if that unregulated outfit appeared more slick and competent than this bunch of muppets.