What will a financial adviser do for me?

Jon_W

As a show of gratitude to Bowlhead and dunstonh I'd like to make a donation to charities of your choosing. Where would you both like me to donate to?

bowlhead99

Thanks, no problem, but make the charity of your choosing. And don't forget to check the box for gift aid

stoozie1

Snakey wrote: »

Intriguing. I could definitely do with a crash course. But I note that "[t]he course is up-to-date and covers the current reforms to UK pensions due to be rolled out in 2015..." - I don't want to waste my time on out-of-date legislation.

Have you done this course? Is it any good? (Is it just the blurb that hasn't been updated, or is the whole course 3-4 years old?) What do you spend your three hours a week doing - is it reading, or watching somebody talk, or what?

Just a quick update to say that I enrolled on this course, and the material has all been updated to March 2017.

It is so far very informative and well-written. I am really enjoying it.

The only (very small) gripe I have with it is that every example used is of male savers, investors and fund managers. Which does lead to a bit of accidental switch off if you are female.

Jon_W

I must admit I got lost at week 3 on things like Beta, Alpha and CAPM. I also stopped there because I don't need to work out some of the complicated stuff, I just want to understand index funds investing.

Also, the course is introductory, but still requires some background knowledge. I might dip-into the later weeks though see if there's anything useful that I can grasp!

bowlhead99

I wouldn't write it off entirely.

It's worth understanding the basics of portfolio theory and what the role of "betas" might be in managing risk and so on, when you are trying to build a portfolio. When you have simple needs and are going to just get a fund manager to build you a portfolio to a risk rating, it is less important to understand some of the concepts that the course will cover. Although they may/ will get referred to later at different points in the course.

However, it shouldn't require much in the way of background knowledge as it's a standalone course. You are supposed to read and digest the articles and videos as you go, and they say the time commitment is three hours a week. I'm sure that someone already familiar with the materials can do it in rather less, and not bother reading the user comments or discussions. But the idea is not to simply read every word on the page in order as fast as you can and then get to the end and go, "phew, finished, but I stopped understanding after paragraph two and am not going to go back and look at it again because I'm busy".

Then you'll only get the same poor results you would get if you enrolled in an A level and never did the homework or asked any questions. You have to take time to stop and digest.

Later weeks cover things like "investment strategies in practice", "measuring the performance of investments", "lessons from history" "pension planning", "behaviour and risk taking". All of that stuff is useful to have in your head as you start an investing journey even if you are getting an advisor to do the leg work and/or starting with something simple in terms of product type, with the portfolio construction done by someone else.

Another poster suggested way up the thread that you don't need a course, or a book, as you can start small and read websites and ask on forums like this as you go. There is probably some truth in that. However, when you are not "starting small" because you already have a lifetime worth of cash that you want to invest, there's plenty of sense in trying to do some free structured learning rather than just winging it and having to keep asking basic questions here to get comfortable with different concepts you come across.

The same bloke on the futurelearn website does a bunch of other ones in related areas. So for example if you're doing "managing my investments" there was also a general "managing my money" and then some "financial fundamentals" courses as part of a different series: managing the household balance sheet ; financial planning and budgeting ; investment theory and practice.

Jon_W

I *sort of* have a grasp of the absolute basics of portfolio theory. In essence, it is that by combining assets of different classes you can keep return levels higher whilst diluting the risk of a pure equities portfolio by adding bonds. At least I think that's the essence.

Investing Demystified does a decent (but still a bit to complex to a non-stats type like me) job of explaining. But I don't think I'll be giving lectures on the efficient frontier anytime soon!

Following on from that, Lars Kroijer in that book says an excellent portfolio would be comprised of (via tracker funds)

1. World equities

2. World corporate bonds

3. World (Sub-AA) government bonds

4. UK Government bonds (short term, though I suppose inflation-linked would also be okay as his biggest concern is inflation

His 'best' portfolio would be comprised of the first 3 classes, however, held in proportion to their market value. Not sure I'd want to be without a safety net of UK government binds though, in there somewhere.

Malthusian

Jon_W wrote: »

I *sort of* have a grasp of the absolute basics of portfolio theory. In essence, it is that by combining assets of different classes you can keep return levels higher whilst diluting the risk of a pure equities portfolio by adding bonds.

Close although it depends what the missing words after "higher" are. (Higher than what?)

There's not lot wrong with the portfolio you list, which is mostly because it is quite vague.

Given your level of knowledge you should be leaving asset allocation to professionals, either by taking advice or by using a risk-targeted multi-asset fund if you are going to DIY. If you are deciding your own asset allocation then it should be based on your own knowledge of investment principles and current economic conditions. If you are going to let someone else decide your asset allocation, it is pointless taking an out-of-date portfolio from a book when you can get an up-to-date allocation from a professional at minimal extra cost.

Jon_W

Malthusian wrote: »

Close although it depends what the missing words after "higher" are. (Higher than what?)

There's not lot wrong with the portfolio you list, which is mostly because it is quite vague.

Given your level of knowledge you should be leaving asset allocation to professionals, either by taking advice or by using a risk-targeted multi-asset fund if you are going to DIY. If you are deciding your own asset allocation then it should be based on your own knowledge of investment principles and current economic conditions. If you are going to let someone else decide your asset allocation, it is pointless taking an out-of-date portfolio from a book when you can get an up-to-date allocation from a professional at minimal extra cost.

I mean that the returns by adding (quality) bonds are higher than a pure equities portfolio would be for the same level of risk. (I think!)

Believe me, I am not putting a portfolio together!! Ideally, I would like a multi-asset fund but one which isn't UK heavy so I'm researching that. Or, at most, say a global equities tracker and a UK bonds fund. I was thinking of adding in a corporate bonds fund but I am not sure the diversification benefits are worthwhile because, if equities tank, the corporate bonds are likely to, too.

Smed

Malthusian wrote: »

People on this forum say things like "just put it in Vanguard LifeStrategy 80/20" because Vanguard 80/20 is a decent option for anyone who can tolerate a normal level of stockmarket volatility, and will probably work out OK 80%-90% of the time. We don't need to worry about the 10-20% who buy it, panic in the next stockmarket crash and cash it in, as they can't sue us. IFAs however have to recommend the best option for your circumstances as they are responsible for the advice and if they get it wrong they have to pay redress.

You touched on the problem but I agree with your appraisal of I.F.A.s. The problem as I see it is that this is a price comparison website where the lowest cost and the highest return is compared. That's fine when considering interest paying bank accounts, bonds and insurance where the return is guaranteed and can be determined in advance. But the problem in appraising medium to long term investments is that the return is not guaranteed and cannot be determined in advance. So the result of the price comparison of investments is then confined to a comparison of cost alone so the fund or fund manager with the lowest fees is seen to be best regardless of the personal circumstances of the person being advised.

bigadaj

Smed wrote: »

You touched on the problem but I agree with your appraisal of I.F.A.s. The problem as I see it is that this is a price comparison website where the lowest cost and the highest return is compared. That's fine when considering interest paying bank accounts, bonds and insurance where the return is guaranteed and can be determined in advance. But the problem in appraising medium to long term investments is that the return is not guaranteed and cannot be determined in advance. So the result of the price comparison of investments is then confined to a comparison of cost alone so the fund or fund manager with the lowest fees is seen to be best regardless of the personal circumstances of the person being advised.

Though there are two conflated issues here.

First there is the option whether to use an ifa or diy.

Secondly there is the passive versus active debate.

On the first issue then it's largely personal choice and knowledge, or the ability to accrue it.

In terms of active versus passive then there are no guarantees but there are historical track records, which stretch across individual managers, funds, fund houses, sectors etc

Good managers can have bad stretches and short term outperformance can disappear, but it does appear to me that varying between passive and active across different sectors may well be worthwhile. It's rare for an active manager to do well in large cap us stocks for example, but passive funds seem to underperform in uk equity income, and also equity income more widely.

You pays your money, to a greater or lesser extent, and take a your choice.