Vanguard direct to customer offering confirmed

bostonerimus

Linton wrote: »

Also, from what I have seen tax allowances and the limits on tax free investing are far more generous in the UK than in the US. Unles they are presented with a large lump sum most people can carry out all their investing within an entirely income/CGT tax free environment.

That's true. ISAs and tax free allowances are more generous in the UK than the US. In the US there's the Traditional and ROTH IRA and various DC employer "pension" accounts. If you have less than about $38k in income qualified dividends and capital gains are tax free,

However, in the US investing is far less expensive and DC pension accounts are far more transparent and easily managed than in the UK. If I wanted to move my DC pension account from Vanguard to Fidelity or Charles Schwab today I could do it for no cost with a simple phone call and minimal paperwork.

jamesd

bostonerimus wrote: »

I think describing a study by a Nobel Prize winning economist as "misleading junk" is a bit excessive.

Unfortunately it ignored what matters for active fund performance but purported to be a useful comparison between active and passive. Sadly that does mean that it is misleading junk when it's considered for its potential value in comparing the two.

Linton

bostonerimus wrote: »

I think describing a study by a Nobel Prize winning economist as "misleading junk" is a bit excessive.

"Misleading junk" is often a fair description of a journalist's or marketing guy's summary of academic results as they focus on quotes out of context that happen to suit their agenda ands neglect caveats in the original papers. Sadly it is often difficult to get hold of the original papers, one can be pretty sure that the people who quote the jounalists have never read them. Having found the original papers the language needs some deciphering if you are mathematically competent but unfamiliar with the jargon and implicit assumptions in the field. It would be nice to have someone capable of responding to doubts on the methodology used.

As an example, a recent paper I read which I think you referenced was on the performance of UK fund managers investing in the UK. To get the base set of data what the authors seem to have done is collected all funds in any of the UK equity sectors - ie UK All Companies, UK Income & Growth, UK Equity Income and UK Small Companies and compared the lot for growth against the FTSE All share index. That seems really stupid to me (misleading junk?) - how can the total return of a fund that focusses on providing high equity income be usefully compared with an index that doesnt? What does it mean if the performance of an Income fund is lower?

jamesd

bostonerimus wrote: »

However, in the US investing is far less expensive and DC pension accounts are far more transparent and easily managed than in the UK. If I wanted to move my DC pension account from Vanguard to Fidelity or Charles Schwab today I could do it for no cost with a simple phone call and minimal paperwork.

If I wanted to move my workplace pension from Standard Life to Hargreaves Lansdown today I could start it with a single phone call and be paid £500 by HL for doing it. The transfer itself would probably take a week or two via an electronic transfer system.

That's not universal, particularly for workplace pensions, but it's also not uncommon for personal non-work pensions.

There's a lot to like about the US system - I lived there for more than a decade at various times - but the UK is catching up or in some cases has been ahead for a while already. Things like few second transfers between checking accounts at different banks - Faster Payments - and automated bill payment systems with a consumer protecting guarantee - the Direct Debit system - are very convenient.

dunstonh

However, in the US investing is far less expensive and DC pension accounts are far more transparent and easily managed than in the UK. If I wanted to move my DC pension account from Vanguard to Fidelity or Charles Schwab today I could do it for no cost with a simple phone call and minimal paperwork.

Yet I have seen some clients with US holdings and their charges were higher than the UK. Both the US and UK have examples of pricing at either extreme.

Also, what you describe as a transaction is just as easy in the UK.

BananaRepublic

Linton wrote: »

"Misleading junk" is often a fair description of a journalist's or marketing guy's summary of academic results as they focus on quotes out of context that happen to suit their agenda ands neglect caveats in the original papers. Sadly it is often difficult to get hold of the original papers, one can be pretty sure that the people who quote the jounalists have never read them. Having found the original papers the language needs some deciphering if you are mathematically competent but unfamiliar with the jargon and implicit assumptions in the field. It would be nice to have someone capable of responding to doubts on the methodology used.

I seem to recall reading not so long ago a paper, or rather quotes from a paper, which concluded that some fund managers do have a history of outperformance which cannot be explained by chance alone. That was when trackers were starting to get a lot more publicity in the UK. Maybe someone here knows the paper I am referring to, assuming my memory serves we well.

BananaRepublic

hennerz wrote: »

Don't take it personally. I'm just presenting the research to a alternative strategy to your own. Do whatever you like, but when you give advice or make posts like you did I don't want your post to come across as fact to someone less knowledgable.

Your snide tone made it personal. What I wrote was fact, something you would have realised had you thought a bit more deeply. The other posts have made some good points which I hope you have at least considered.

I find it ironic that you complained about my response to the forum moderators. A case of double standards.

bostonerimus

jamesd wrote: »

If I wanted to move my workplace pension from Standard Life to Hargreaves Lansdown today I could start it with a single phone call and be paid £500 by HL for doing it. The transfer itself would probably take a week or two via an electronic transfer system.

That's not universal, particularly for workplace pensions, but it's also not uncommon for personal non-work pensions.

There's a lot to like about the US system - I lived there for more than a decade at various times - but the UK is catching up or in some cases has been ahead for a while already. Things like few second transfers between checking accounts at different banks - Faster Payments - and automated bill payment systems with a consumer protecting guarantee - the Direct Debit system - are very convenient.

The US banking system is a bit of a joke. It's very segmented and slow to change. However, the brokerage side of things is really good with large low cost companies like Vanguard and Schwab pushing things, but there are also many expensive and bad brokerages.

US pension regulations are uniformly followed because no one wants to anger the IRS and it's easy to transfer and get at both personal pensions like the ROTH and employer based DC pensions without administrative charges or much (if any) paperwork

TheTracker

BananaRepublic wrote: »

I seem to recall reading not so long ago a paper, or rather quotes from a paper, which concluded that some fund managers do have a history of outperformance which cannot be explained by chance alone. That was when trackers were starting to get a lot more publicity in the UK. Maybe someone here knows the paper I am referring to, assuming my memory serves we well.

Of course they do! I don't think any passive investor considers that all fund managers have purely random performance. The issue is that the statistical significance of this outperformance is drowned by the natural volatility of the market. Studies may find these managers after the event, not at the early stages of their careers. I am aware of no study that provides a formula to identify such humans at a stage where it would be useful to an investor like you and me. jamesd may feel he can spot them, but no one has produced a peer reviewed paper to spot them early enough to achieve guaranteed outperformance.

Note that outperformance is an odd measure itself. When we talk about lack of outperformance we don't mean lack of skill. Each fund manager may be highly skilled. They select companies that produce the best returns against their objective. When we talk outperformance we talk of relative not absolute performance. There will always be that bell curve around absolute performance, but most of the relative position amongst that bell is random, even (or especially) for those in the top few percent.

BananaRepublic

TheTracker wrote: »

Of course they do! I don't think any passive investor considers that all fund managers have purely random performance. The issue is that the statistical significance of this outperformance is drowned by the natural volatility of the market. Studies may find these managers after the event, not at the early stages of their careers. I am aware of no study that provides a formula to identify such humans at a stage where it would be useful to an investor like you and me. jamesd may feel he can spot them, but no one has produced a peer reviewed paper to spot them early enough to achieve guaranteed outperformance.

Note that outperformance is an odd measure itself. When we talk about lack of outperformance we don't mean lack of skill. Each fund manager may be highly skilled. They select companies that produce the best returns against their objective. When we talk outperformance we talk of relative not absolute performance. There will always be that bell curve around absolute performance, but most of the relative position amongst that bell is random, even (or especially) for those in the top few percent.

The easiest way to see if any fund managers do outperform is to do a basic statistical analysis of historical performance. Bayesian statistics will suffice, and the conclusion I came to is that many do indeed perform in a manner that cannot be explained by pure chance. I'll try and provide some simple figures later on when I get some time. But if you are impatient, just go to one of the fund comparison sites and look at the performance over 10 years expressed as a percentage per year. Then draw your own conclusions.

Can one pick the good fund managers (if one accepts such an entity exists)? Well I chose my funds in that manner. I don't change my strategy without proof that it is not good, and I haven't seen any such evidence. yet. As far as I am concerned, my 20 years of investing is enough to learn from.