Pensions. Is an IFA really worth it?

Thrugelmir

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I'll probably give it a miss in that case. As interesting as it is , I doubt that there's little of value to the small retail investor. 

BritishInvestor

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I'll probably give it a miss in that case. As interesting as it is , I doubt that there's little of value to the small retail investor. 

I think it's an excellent book for the retail investor as it helps to build a picture of the headwinds an active fund manager faces 

Prism

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I reckon this is spot on for those fund managers that base their strategies on any form of trading or shorter term valuations. It does seem that the only ones to have done reasonably well over the last 10 years are so are the long term buy and hold types. Hard enough to beat the market nevermind all of the quants and private hedge funds. The recent success stories haven't tried.

[Deleted User]

Taking the above as read, those investing with a pin will do better, overall, than those entrusting their fortune to an adviser or fund manager.

If there is no expectation of beating the market then, all else being equal, paying added "management" fees ensures you end up poorer than someone who doesn't.

Cus

I guess I'm missing the point but if the headwinds are against fund managers due to quant hedge funds, then surely retail investors are even further down the food chain?

BritishInvestor

Prism said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I reckon this is spot on for those fund managers that base their strategies on any form of trading or shorter term valuations. It does seem that the only ones to have done reasonably well over the last 10 years are so are the long term buy and hold types. Hard enough to beat the market nevermind all of the quants and private hedge funds. The recent success stories haven't tried.

Once you adjust for the factor tilts the "success" tends to disappear. So then you'd have to ask yourself did they pick the right tilts by luck or skill. If the latter (and I'm not aware of anyone that can reliably time factors) it goes back to my earlier point, they'd start a hedge fund and close to external investment.

Even Rentech struggles to do well from long term holdings - see RIEF 
https://www.institutionalinvestor.com/article/b1l98yt4p0bvr4/The-Famed-Medallion-Fund-Is-Crushing-It-Other-RenTech-Funds-Not-So-Much

[Deleted User]

Cus said:

I guess I'm missing the point but if the headwinds are against fund managers due to quant hedge funds, then surely retail investors are even further down the food chain?

Only if the retail investor trades more often than the fund manager, which is highly unlikely, because the fund manager has to keep within certain parameters to meet expectations. 

Thrugelmir

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I'll probably give it a miss in that case. As interesting as it is , I doubt that there's little of value to the small retail investor. 

I think it's an excellent book for the retail investor as it helps to build a picture of the headwinds an active fund manager faces 

Unwise to read one (US orientated) book and apply the same principles to the entire global investing universe.  A couple of decades back LTCM thought that had mastered the markets by employing rocket scientists to design their fool proof trading algorithms. History tells otherwise. Nor is a hedge fund going to be tinkering around in the illiquid segment of the markets. 

cfw1994

t8769 said:

I have a simple savings requirement, not a huge amount of money to invest.
Just need a pension, and to invest other finds in a mix of high, med and low risk.
Could I do this myself  or is it worth paying an IFA?
Would they get higher returns to make their fees worthwhile?
Nothing complicated about my requriements.

Thanks

This thread has drifted off topic a lot, as IFAs batter terms about.
I suspect you may be terrified to take the steps to manage your pot without their guiding hands now, due to discussions of alpha and retail v consumer etc etc.......but as someone just reminded us: yes, you could do it yourself, and yes, it might be possible you could benefit from IFA help!
Let us know how anyone here can more specifically help you before the thread explodes 

BritishInvestor

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Linton said:

BritishInvestor said:

cfw1994 said:

It is very easy to suggest “what if your Vanguard doesn’t manage to do as well as an IFA could?” with a knowing wink, suggesting IFAs will always “beat the market”,whereas the majority probably won’t.

I'm always interested to see examples of portfolios that "beat the market" given that I have visibility of a large number of offerings from numerous providers. 
The latest fad is to have a concentrated portfolio loaded with US large-cap/tech stocks, and as these tended to perform reasonably well in the recent downturn, investors have taken this as a cue that it's the holy grail, great returns with limited downside. 

Have you looked at the Great British Invest-off threads where a range of active and passive portfolios have been submitted and followed over what is now 3 years?  You may find it enlightening.

It seems to be me that people are missing the whole point of serious investing.  "Beating the market" is irrelevent.  What is important is to achieve an objective both regarding time and return,  That requires control of the risk level and returns of your investments. Any IFAs who focus on beating the market are simply not doing the job they are paid for.  Anyone who goes to an IFA with that aim is going to be disappointed, though perhaps the IFA would get them to see the wider picture assuming he/she  was willing to take them on in the first place.

The term "beating the market" is highly questionable anyway.  I hold a globally diverse growth portfolio based on active funds with only 40% US which is split 50% large companies and 50% small. Which market am I invested in?  How do I compare my returns with "THE market"? If I were able to put together a set of trackers that held the same allocation presumably the returns would  be very similar. What does that prove?

I haven't but I'm not sure what you could glean out of 3 years worth of performance.

We are not fund managers. We don't have to justify our decisions to anyone. We have no constraints as to how we mix and match our investments as the picture changes. We have no comparison tables to be concerned with as portfolios have no benchmark.  Our individual portfolios likewise reflect where we are in our personal investment journeys and our ultimate objectives. Nor is it a competition. Certainly no envy when others do well. Whether they be passive or active investors.

 I said from the outset of the that thread, that active management is more suited to volatile market conditions. Passive to placid ones. Nothing since has altered my long term held view.  

I'm not sure how active management (in the context of active fund managers) would be more suited to volatile conditions, given how far down the food chain (in terms of knowledge, market data, talent etc) fund managers are relative to the others "competitors" in the market. 

Why do you perceive active fund managers to be down the food chain?  Who are the competitors you refer to? 

The Masters of the Universe. A great book if you've not read it
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?

Not one I have. Will add it to my list. My unanswered questions still stand though. 

The competitors being the quant hedge funds such as RenTech that have petabytes worth of data and employ the best talent in an attempt to find tiny edges in the market. 
https://blogs.cfainstitute.org/investor/2020/05/01/book-review-the-man-who-solved-the-market/

"The message for the average money manager could not be more clear: When you transact, it is likely against Jim Simons or someone like him (D.E. Shaw being the most obvious alternative example), so trade as little as possible."

"Another lesson for investment professionals: The most truly skilled investment managers privatize their returns; they do not want or need your money"

I'll probably give it a miss in that case. As interesting as it is , I doubt that there's little of value to the small retail investor. 

I think it's an excellent book for the retail investor as it helps to build a picture of the headwinds an active fund manager faces 

Unwise to read one (US orientated) book and apply the same principles to the entire global investing universe.  A couple of decades back LTCM thought that had mastered the markets by employing rocket scientists to design their fool proof trading algorithms. History tells otherwise. Nor is a hedge fund going to be tinkering around in the illiquid segment of the markets. 

RenTech are just one example (and a highly successful one, hence why the book was written about them), but you will find the markets littered with similar firms doing very similar things (there's plenty in London for example) - the end result being small inefficiencies are probably removed before active fund managers can react.
Of course one of these firms could have a similar fate to LTCM, but that's not really the point .
Agreed that hedge funds aren't potentially going to be in the illiquid segment, but then neither are a lot of fund managers, and if they are you want to ensure you are being compensated appropriately.