Financial Adviser pension investment... can I get out?

dunstonh

EdGasket wrote: »

Yes this year the IFA would probably use Brexit as an excuse no doubt. There will always be possible excuses for poor performance and high fees.

There are always reasons for market drops. That is obvious to any investor.

Concerns over Brexit are creating a drag on the markets this year. it is not the only thing but if someone was asking about 2016 issues, you would expect that to get a mention.

Fees have nothing to do with Brexit unless you are a UKIP supporter. In which case everything has to do with Brexit and everything will be better if Brexit occurs.

mania112

I love how 'fees' are blamed for fall in investments when an IFA tries to explain the real reason. It shows a complete ignorance and lack of intelligence to say it.

If an investment had fallen by 5% over the course of 12 months - not unreasonable during 2015, the IFA would only be taking 1% maximum, the provider maybe another 1% maximum. So where's the rest gone? Wouldn't you like to know if you were this client?

Or should we just say 'it's all gone because we're charging you too much, you'll be so much better off investing this yourself'.

Investments don't fall because of fees. It's a historical fact that a balanced portfolio will make a return (yes, despite the fees) - so any IFA worth his fee should be able to explain short-term concerns.

bigadaj

mania112 wrote: »

I love how 'fees' are blamed for fall in investments when an IFA tries to explain the real reason. It shows a complete ignorance and lack of intelligence to say it.

If an investment had fallen by 5% over the course of 12 months - not unreasonable during 2015, the IFA would only be taking 1% maximum, the provider maybe another 1% maximum. So where's the rest gone? Wouldn't you like to know if you were this client?

Or should we just say 'it's all gone because we're charging you too much, you'll be so much better off investing this yourself'.

Investments don't fall because of fees. It's a historical fact that a balanced portfolio will make a return (yes, despite the fees) - so any IFA worth his fee should be able to explain short-term concerns.

So what are the reasons for next years stock market profit or losses?

All these explanations are made with hindsight and with a selective view of the individual impact of all events, whether positive or negative.

Not really an ifa point so much as a city analyst, they tend to have more hands than a Hindu god.

Fees are totally separate, but minimising them is a sure fire way of maximising returns.

dunstonh

So what are the reasons for next years stock market profit or losses?

Nobody knows until they happen. You cannot predict the unpredictable. However, can explain after the event what caused it.

All these explanations are made with hindsight and with a selective view of the individual impact of all events, whether positive or negative.

Have you been present in all those discussions?

Discussions have to be within the understanding of the individual. So, how the info is presented will depend on the individual in question. A few simplified lines may be the most beneficial way of explaining it to someone that has little interest. Whilst someone else may want greater information.

Fees are totally separate, but minimising them is a sure fire way of maximising returns.

No its not. If it was, you would just stay in cash (ignoring the implicit vs explicit charging side of things). or you would have inexperienced investors doing no research and have no understanding picking investments they know nothing about. Paying to get something done right is better than paying nothing and getting it wrong. Same as all walks of life.

bowlhead99

bigadaj wrote: »

So what are the reasons for next years stock market profit or losses?

All these explanations are made with hindsight

Well, the OP was asking with hindsight about why their portfolio had failed to grow much in 2014 and then later about why their portfolio had and fallen from Apr 2015 to Oct 2015.

In other words looking back at events for clues as to why the returns in those particular timer periods did not equal the hundred-year average for the sectors in which they were invested. How else would you expect someone to explain the returns that were actually achieved, if not by reference to the events that actually occurred?

The IFA could probably adequately explain why 20 funds had been used - and how using the 20 funds ensured that the return achieved over the time period was not simply the worst of the 20 results that might have been achieved by having the OP select one fund from the list of funds at random but was instead some less-scary average of them all aggregated together in their relative proportions and rebalanced periodically.

Fees are totally separate, but minimising them is a sure fire way of maximising returns.

If a fund charges a 20% performance fee on gross profits and 0.15% a month on the NAV, the total fee will be considerable in a year when the fund makes a gross return of 50%.

It is a much bigger fee than you would pay on a fund that only charged a straight fee of 0.1% a month on the NAV, and only achieved a gross return of 5% over the year. However, the net return is better in the first fund than the second.

The fee in the second fund is a much bigger fee than you would pay on a fund that only charged a fee of 0.01% a month and whose NAV tracked the index down by 25% over the course of the year. However, the net return is better in the second fund than the third.

So the concept that minimising fees will maximise returns does not hold up to scrutiny. What you mean is if you can get the same gross results with lower fees then of course it is better to do that.But maybe you can't. The difference in relative returns between asset classes will generally be several multiples of the annual fee, so a priority should be to invest sensible amounts between the asset classes, with cost of access being a lesser (but not ignored) concern.

TheTracker

bowlhead99 wrote: »

Well, the OP was asking with hindsight about why their portfolio had failed to grow much in 2014 and then later about why their portfolio had and fallen from Apr 2015 to Oct 2015.

In other words looking back at events for clues as to why the returns in those particular timer periods did not equal the hundred-year average for the sectors in which they were invested. How else would you expect someone to explain the returns that were actually achieved, if not by reference to the events that actually occurred?

Because all that explains is correlation (btw I do not see there is even any correlation of market performance across 2014 and a balanced portfolio!)

The advisor should only explain returns through events that actually caused the performance, not events that occurred during the period.

Sometimes we can confidently claim causality. For example, a finance related crisis with geopolitical underpinnings like the GFC. Or black swan events like 9/11.

Unpredictable geopolitical events do effect markets, although mostly in terms of volatility rather than lasting effect. But such is their nature it is very difficult to judge where the market would have been in the absence of a specific event. Yet the advisor was sure enough to say the performance of the investors 'balanced model portfolio ... has been subdued by events in the Ukraine' and was even confident enough to predict 'this should turn around shortly.'

On the macro scale, the Ukraine crisis was a blip. I don't think a year has gone by in the last 15 where there wasn't a geopolitical crisis of equal magnitude. It seems extraordinary to call it out as THE key cause of why an investors portfolio returned x%. I would love to see the advisors previous yearly updates, I can imagine a string of excuses, eg the russia-georgia crisis of 2008.

There is a nice chart here that shows some historical 'days for the S&P to recover after major events', the only ones worth calling out are the GFC, the 87 crash, the nixon affair (likely a local market impact), pearl harbour, and even these recovered within a year.


And if we look at more academic research, we find little cause for concern. Take a look at this.


I had a trawl on google for 2014 year end market performance retrospectives. Journalists are keener than anyone to sloppily claim x caused y. I couldn't find any mainstream articles that said the ukrainian crisis caused a drag on the yearly performance, certainly not a consensus of opinion in that regard. Yes, lots of volatility in March, and some in August, but nothing lasting.

If I was the OP I'd be seeking advise as to whether my portfolio really was balanced to suit my needs. e.g. Perhaps it held an inordinate amount of Neptune Russia as some proxy for EM.

Linton

TheTracker wrote: »

And if we look at more academic research, we find little cause for concern. Take a look at this.

What an interesting graph. It seems to me to show that in the 2 year period leading up to the conflict the market was uncertain perhaps thinking it was going to happen. 6 months before it happened the market got excited, prices shot up and then fell just before day 0, only to rise quickly subsequently. Did someone know in advance!

Also perhaps it would be rather more enlightening if both lines had started at the same base.