Pensions. Is an IFA really worth it?

The_Green_Hornet

Cus said:

Be great to see that chat forum you mentioned.  As discussed, it's just in your internet history.  Why don't you have a look?

I remember seeing on a passive investment fund manager forum how they have 100% proof that active investment always beats their passive funds but they didn't want anyone to find out and ruin their easy life. I don't have the link anymore 🙂

Maybe they clear their internet browsing history every time they exit their browser. 

BritishInvestor

fred246 said:

It's not rocket science. IFAs use their choice of funds as the 'mystique' that the customer thinks he has to pay a lot for.
Your Vanguard Lifestrategy is performing well. £2K please.
Instead they have to invest in numerous funds then they can write a load of blah blah blah and fiddle with it to justify their £2K.

You have to be careful not to overgeneralise.

BritishInvestor

Cus said:

Be great to see that chat forum you mentioned.  As discussed, it's just in your internet history.  Why don't you have a look?

I remember seeing on a passive investment fund manager forum how they have 100% proof that active investment always beats their passive funds but they didn't want anyone to find out and ruin their easy life. I don't have the link anymore 🙂

Always happy to see examples of this. Usually you can explain the "outperformance" in a matter of seconds. 

Malthusian

cfw1994 said:

fred246 said:

An IFA could put most people on a simple investment strategy that wouldn't involve the IFA 'servicing' it. But they won't do that. They have to take their money every year. These fees mount up. So the IFA may save you £4k but then charge you £20k over 10 years for 'servicing'.

Any luck looking through your search history for the mythical comment you made earlier?    Which forum might that be on?  

Fred246 might have more luck looking in his sock drawer.

[Deleted User]

Cus said:

Be great to see that chat forum you mentioned.  As discussed, it's just in your internet history.  Why don't you have a look?

I remember seeing on a passive investment fund manager forum how they have 100% proof that active investment always beats their passive funds but they didn't want anyone to find out and ruin their easy life. I don't have the link anymore 🙂

Good story, but mathematically impossible. By definition a passive fund performs as an average of all active investment plus the delta in fees which typically favours passive investments. Say, its 1% advantage in costs... Thats a lot. Every year there will be some active funds beating your passive fund but it will be a minority. Over longer periods of time there will be very few in this category. 

 

coyrls

Wooosh.....

Prism

coyrls said:

Wooosh.....

How dare someone make a joke that touches on the active/passive debate... don't they know its a serious matter.

Prism

Deleted_User said:

Cus said:

Be great to see that chat forum you mentioned.  As discussed, it's just in your internet history.  Why don't you have a look?

I remember seeing on a passive investment fund manager forum how they have 100% proof that active investment always beats their passive funds but they didn't want anyone to find out and ruin their easy life. I don't have the link anymore 🙂

Good story, but mathematically impossible. By definition a passive fund performs as an average of all active investment plus the delta in fees which typically favours passive investments. Say, its 1% advantage in costs... Thats a lot. Every year there will be some active funds beating your passive fund but it will be a minority. Over longer periods of time there will be very few in this category. 

 

I would suggest that many investors make big mistakes that means that almost nobody beats the index. I include individual stocks investors, active funds and passive funds in that. Lots of reasons for it. Most people can't value an individual company but some still try, most fund managers can't do it that well either but charge for it anyway, and even with passive investment many people are in and out of themes and regions trying to get some form of advantage - from my perspective index fund investors can be worse than active managers in messing about with their allocations.

To bring this back to the original question, if an IFA can help an investor avoid many of those mistakes they can help overcome that additional 0.5% fee that the IFA charges.

BritishInvestor

Prism said:

Deleted_User said:

Cus said:

Be great to see that chat forum you mentioned.  As discussed, it's just in your internet history.  Why don't you have a look?

I remember seeing on a passive investment fund manager forum how they have 100% proof that active investment always beats their passive funds but they didn't want anyone to find out and ruin their easy life. I don't have the link anymore 🙂

Good story, but mathematically impossible. By definition a passive fund performs as an average of all active investment plus the delta in fees which typically favours passive investments. Say, its 1% advantage in costs... Thats a lot. Every year there will be some active funds beating your passive fund but it will be a minority. Over longer periods of time there will be very few in this category. 

 

I would suggest that many investors make big mistakes that means that almost nobody beats the index. I include individual stocks investors, active funds and passive funds in that. Lots of reasons for it. Most people can't value an individual company but some still try, most fund managers can't do it that well either but charge for it anyway, and even with passive investment many people are in and out of themes and regions trying to get some form of advantage - from my perspective index fund investors can be worse than active managers in messing about with their allocations.

To bring this back to the original question, if an IFA can help an investor avoid many of those mistakes they can help overcome that additional 0.5% fee that the IFA charges.

Yep, think that's a fair assessment.

Cus

Prism said:

coyrls said:

Wooosh.....

How dare someone make a joke that touches on the active/passive debate... don't they know its a serious matter.

Should have used gold..