could this 'pensions theft' be valid in the UK

andybev

I tried to post a link but since my account is new I cannot so I cut and pasted. Views Please:

''2% management fee, compounded over the long term, will “cut your returns in half or more. If you would normally have $100,000, you could end up with, say, $30,000 or $40,000 because of what fees eat up.”
In a shocking interview with PBS, billionaire mutual fund icon Jack Bogle, revealed that Wall Street is unapologetically stealing from millions of hard-working Americans. Bogle showed how “70% of your market returns” go straight to the pockets of Wall Street, and only 30% actually goes to you, the investor.

And Bogle should know.

Bogle, who founded the Vanguard Group in 1974, has had a decades-long insider’s view of the entirely corrupt fee structure on Wall Street.

So he knows how American retirees are being fleeced by hidden fees that most investors never see.

And at a recent private event, Steve Forbes echoed this same shocking claim.

Forbes pointed out that these fees are compounding, and over time are devastating to retirement nest eggs.

The typical Wall Street 2% management fee, compounded over the long term, will “cut your returns in half or more. If you would normally have $100,000, you could end up with, say, $30,000 or $40,000 because of what fees eat up.”

Of course Bogle and Forbes aren’t the only industry icons sounding the alarm.

Warren Buffett made it clear that the only way to make money over the long term is to invest “without paying fees to a mutual fund manager.”

Forbes took these comments even further when he and industry veteran John Shubert exposed the biggest threat to your retirement during the exclusive Investment Crisis Summit held by Newsmax Finance.

During the summit, Forbes and co-host Shubert revealed groundbreaking research that proves Wall Street’s compounding fees are only part of a larger “flaw” in the financial system.

It’s this “flaw” that makes it completely legal for Wall Street to siphon off up to 70% of your profits.


Before you dismiss the notion that Wall Street could legally take your profits as a matter of course, consider the facts Forbes and Shubert revealed during the summit.

Citing new research from the Harvard Business School and London School of Economics, they pointed out that this industry “flaw” is a “permanent condition” of the market.

Meaning it can’t be fixed.

And investors who don’t take steps today to overcome this flaw could lose more than just 70% of their profits. They could end up losing their ability to retire altogether.

At the summit, attendees also discovered how outdated regulations actually force Wall Street fund managers to underperform their benchmarks.

Shubert showed how 80% of the stocks held in mutual funds are nothing more than dead-weight stocks, providing no excess return for investors.

That means for every $100 you invest, only $20 is actually working for you to generate market-beating returns. The remaining $80 is simply fodder for Wall Street’s fee machine.

To drive the point home, Forbes and Shubert clearly illustrated how dead-weight stocks and fees make it mathematically impossible for fund managers to beat the market.

Summit attendees were fuming after learning how the system is working against them. But they became overwhelmingly confident once they learned how to take simple steps to avoid the financial carnage that unwitting mutual fund investors could experience in their retirement years.

kidmugsy

It's not theft, of course. It's people going shopping and buying poor value stuff. Happens all the time. Anyone who's happy to pay 2%p.a. in charges or fees on his investments is just being extravagant.


"Summit attendees were fuming after learning how the system is working against them." Idiots: have they been paying no attention for the last twenty years?

An obvious analogy is with those buffoons who insist on buying brand new cars, or on changing their car every two or three years. Wild extravagance.

dunstonh

''2% management fee, compounded over the long term, will “cut your returns in half or more. If you would normally have $100,000, you could end up with, say, $30,000 or $40,000 because of what fees eat up.”
In a shocking interview with PBS, billionaire mutual fund icon Jack Bogle, revealed that Wall Street is unapologetically stealing from millions of hard-working Americans. Bogle showed how “70% of your market returns” go straight to the pockets of Wall Street, and only 30% actually goes to you, the investor.

2% management fees will not cut your returns in half unless you are consistently getting low returns. I suspect it is the SPIN on taking future money terms and applying them back to todays money terms. A common media trick to make the charges look bigger than they are. £1000 in 40 years time will not have the same buying power as £1000 today. However, by presenting charges that are taken in future as if they were being taken today is misleading but frequently used by those trying to make out charges are too high.

That means for every $100 you invest, only $20 is actually working for you to generate market-beating returns. The remaining $80 is simply fodder for Wall Street’s fee machine.

Thats complete BS.

Typical UK annual charge is closer to 1%. However, lets use the 2% figure. If you invest £100 then £100 gets invested. However, over the year they will take £2 (assuming no growth). So, that is £98 fully invested assuming no growth. Not £20

sandsy

It makes no sense. If 70% of profits are siphoned off, then surely you'd still be 30% better off than you were before?


The big issue in the UK right now is hidden charges - the transaction costs that aren't routinely disclosed but can typically add on another 0.5%-1% to the disclosed charges.

Orwell

I had a section 332 (or whatever they were called) pension where the "initial" units had an annual 4% change.

dunstonh

Orwell wrote: »

I had a section 332 (or whatever they were called) pension where the "initial" units had an annual 4% change.

Would either be a section 226 retirement annuity contract or a section 32 buy out bond.

Initial units is going back a few decades. However, a lot of plans from that era were priced to reflect the economy at the time. e.g. high inflation, boom/bust. By todays standards they look expensive but back then, they were the norm. it should also be pointed out that many plans from that era also had valuable guarantees which cannot be matched today. So, maybe the rush to lower cost at the expense of decent options is not necessarily a good thing (saying that with devils advocate hat on).

Triumph13

I wonder what the headline of the piece was? 'Major provider of passive funds slags off managed funds'?

EdSwippet

dunstonh wrote: »

2% management fees will not cut your returns in half unless you are consistently getting low returns...

Not nominal return, but perhaps real return. If we assume 7% total return and 3% lost to inflation then a 2% charge is indeed eating half of the real return.

dunstonh wrote: »

That means for every $100 you invest, only $20 is actually working for you to generate market-beating returns. The remaining $80 is simply fodder for Wall Street’s fee machine.

Thats complete BS.

I think you're misinterpreting the article. It seems to be stating (albeit rather poorly) that on average some 80% of holdings in actively managed funds are the same as holdings in passive trackers. In other words, you only get 20% actual active management, but pay the full active management fee on the entire balance.