Wealth management performance and charges

Thrugelmir

Easiest to comment in bullet point form.

• I made no reference to Vanguard being incompetent investment managers. Appears you are misconstruing my factual observation that other investment managers have better performing multi asset funds. 
• If the funds cannot be benchmarked. Then they have to be actively not passively managed. As the asset allocation differs to any of the published major indexes that true passive funds follow.  
• Been a rumbling discussion about bonds for a number of years now. Not least that bonds have been in a 40+ year bull market. The imminent rise in interest rates and unwinding of Central Bank balance sheets has set the bond market on a different future course. 
• The largest global indices cover around 7,000 of the largest qualifying/screened/risk adjusted stocks. To give that number perspective there are 4,500 micro and small listed companies on European (excluding the UK) exchanges alone. S&P operate some 200,000 indexes globally. It's their business to provide whatever their clients want. 

OldMusicGuy

Thrugelmir said:

My gut instinct is telling me that the era that lies ahead is going to be both new and exciting. Putting aside the issue of whether IFA charges are reasonable.  A lot of criticism directed at them. Eminates from the perspective that investing and making money is easy, and therefore what value do IFA's add. To me it's no different to engaging a solicitor in a specialist field, i.e employment, company or family law.  I could read and research for hours and hours. Instead I prefer to use my time for what I do best. 

The problem I have with this is that you seem to be implying that IFAs add some "secret sauce". IMO they don't. Simple investing is easy. Complex investing isn't easy, but then you don't have to do that. IFAs have no value add for me. I have a fire and forget portfolio that is working very well for me. And I have also found that Pensioncraft is the most valuable resource for helping me make decisions about what I do. I have seen a couple of posts recently from people saying how their IFAs explained the recent market movements which were way wide of the mark, confirming again for me that most IFAs have no value add. But I am probably suffering from confirmation bias.....

GeoffTF

Cus said:

@GeoffTF your comment earlier:

"Nobody can beat a tracker in risk adjusted terms except by chance."

Forgive me, trying to understand. Are you saying that any active fund must be increasing risk to purposefully beat it's index?

To beat the index an active fund's holding have to differ significantly from those of the index. The active fund can sometimes overweight stocks that the metrics suggest are low risk low return and get lucky. If an active manager is trying to beat the index, he is more likely to overweight stocks that the metrics suggest are high risk high return. That increases his chance of actually beating the market. Active fund managers know that most potential buyers look at past performance, and do not understand risk, let alone know how to assess it. They also know that potential buyers do not understand that funds that have done well in the past are no more likely to do well in the future than funds that have done badly, despite a weakly worded warning to that effect.

GeoffTF

Thrugelmir said:

Easiest to comment in bullet point form.

• I made no reference to Vanguard being incompetent investment managers. Appears you are misconstruing my factual observation that other investment managers have better performing multi asset funds. 
• If the funds cannot be benchmarked. Then they have to be actively not passively managed. As the asset allocation differs to any of the published major indexes that true passive funds follow.  
• Been a rumbling discussion about bonds for a number of years now. Not least that bonds have been in a 40+ year bull market. The imminent rise in interest rates and unwinding of Central Bank balance sheets has set the bond market on a different future course. 
• The largest global indices cover around 7,000 of the largest qualifying/screened/risk adjusted stocks. To give that number perspective there are 4,500 micro and small listed companies on European (excluding the UK) exchanges alone. S&P operate some 200,000 indexes globally. It's their business to provide whatever their clients want. 

The past performance of other multi-asset funds tells us nothing about the future. The only requirement is that VLS is a suitable investment, nothing more.

It does not matter one jot whether anyone thinks VLS is active or passive. It is not fully either.

The market clearly believes that equities and bonds are fairly priced relative to each other.

The market weight global indices used for trackers do not include the smallest stocks, but those stocks do not have much influence on the overall value of the index. There are lots of other indices. Is investing in a liquidity index active or passive investing? Again, I do not believe that it really matters.

Thrugelmir

OldMusicGuy said:

Thrugelmir said:

My gut instinct is telling me that the era that lies ahead is going to be both new and exciting. Putting aside the issue of whether IFA charges are reasonable.  A lot of criticism directed at them. Eminates from the perspective that investing and making money is easy, and therefore what value do IFA's add. To me it's no different to engaging a solicitor in a specialist field, i.e employment, company or family law.  I could read and research for hours and hours. Instead I prefer to use my time for what I do best. 

The problem I have with this is that you seem to be implying that IFAs add some "secret sauce". IMO they don't. Simple investing is easy. Complex investing isn't easy, but then you don't have to do that. IFAs have no value add for me. I have a fire and forget portfolio that is working very well for me. And I have also found that Pensioncraft is the most valuable resource for helping me make decisions about what I do. I have seen a couple of posts recently from people saying how their IFAs explained the recent market movements which were way wide of the mark, confirming again for me that most IFAs have no value add. But I am probably suffering from confirmation bias.....

I'm merely attempting to maintain a balanced neutral outlook. Horses for courses so to speak.  There's the excellent, indifferent and awlfull in every walk of life.  Not wishing to burst any bubbles but with a 12 year bull market. How many people are currently remaining grounded and are not assuming that it was their superior investment skills that generated the paper investment returns. Pensioncraft is indeed a usefull resource. Though if you wait for their videos to be published you'll be behind the curve. Topics reviewed there in will have been comprehensively covered in the FT (for example) possibly some months earlier. Be interesting to see what they produce when markets become choppy. 

What's simple investing?  Hopefully not a reference to behavioral finance, where investment decisions are made on the bias of a herd mentality. Investors having a tendency to follow and copy what other investors are doing. In essence they are largely influenced by emotion and instinct, rather than by their own independent analysis. As a result retail investors are not always rational.  Herds of course have an inclination to stampede at signs of danger. When everybody decides to head for the exits there's often no where to hide in the crush. 

When it comes to markets. Every new generation of investors falls into the same old traps. To sum up - 

"Financial disasters happen when the last person who can remember what went wrong last time has left the building. "

OldMusicGuy

Thrugelmir said:

I'm merely attempting to maintain a balanced neutral outlook. Horses for courses so to speak.  There's the excellent, indifferent and awlfull in every walk of life.  Not wishing to burst any bubbles but with a 12 year bull market. How many people are currently remaining grounded and are not assuming that it was their superior investment skills that generated the paper investment returns. Pensioncraft is indeed a usefull resource. Though if you wait for their videos to be published you'll be behind the curve. Topics reviewed there in will have been comprehensively covered in the FT (for example) possibly some months earlier. Be interesting to see what they produce when markets become choppy. 

What's simple investing?  Hopefully not a reference to behavioral finance, where investment decisions are made on the bias of a herd mentality. Investors having a tendency to follow and copy what other investors are doing. In essence they are largely influenced by emotion and instinct, rather than by their own independent analysis. As a result retail investors are not always rational.  Herds of course have an inclination to stampede at signs of danger. When everybody decides to head for the exits there's often no where to hide in the crush. 

When it comes to markets. Every new generation of investors falls into the same old traps. To sum up - 

"Financial disasters happen when the last person who can remember what went wrong last time has left the building. "

I'm not worried about being behind the curve because I am not trying to make any gains in the short term through leverage. I am a long term investor, so I need to know if there are any headwinds coming that may mean I need to reassess my strategy. For example, inflation may be an issue in the future. I personally don't think it will be but I am monitoring the situation. Ramin has posted some excellent videos on the subject and I have found those helpful. But I won't need to rush into any decisions on that front. 

Simple investing is what I do. Low cost multi-asset funds, no single shares, no multi-sector portfolios, no sector specific funds or anything like that. It's working for me, it may not work for others.

If it's of any interest, I was a tech industry analyst when I was working so used to follow some tech companies very closely. Based on that experience, and also my experience of massaging the numbers for a FTSE 250 company when I worked in corporate accounting, I would never risk investing in individual shares except for a gamble. And I don't gamble.

Thrugelmir

OldMusicGuy said:

Thrugelmir said:

I'm merely attempting to maintain a balanced neutral outlook. Horses for courses so to speak.  There's the excellent, indifferent and awlfull in every walk of life.  Not wishing to burst any bubbles but with a 12 year bull market. How many people are currently remaining grounded and are not assuming that it was their superior investment skills that generated the paper investment returns. Pensioncraft is indeed a usefull resource. Though if you wait for their videos to be published you'll be behind the curve. Topics reviewed there in will have been comprehensively covered in the FT (for example) possibly some months earlier. Be interesting to see what they produce when markets become choppy. 

What's simple investing?  Hopefully not a reference to behavioral finance, where investment decisions are made on the bias of a herd mentality. Investors having a tendency to follow and copy what other investors are doing. In essence they are largely influenced by emotion and instinct, rather than by their own independent analysis. As a result retail investors are not always rational.  Herds of course have an inclination to stampede at signs of danger. When everybody decides to head for the exits there's often no where to hide in the crush. 

When it comes to markets. Every new generation of investors falls into the same old traps. To sum up - 

"Financial disasters happen when the last person who can remember what went wrong last time has left the building. "

I'm not worried about being behind the curve because I am not trying to make any gains in the short term through leverage. I am a long term investor, so I need to know if there are any headwinds coming that may mean I need to reassess my strategy. For example, inflation may be an issue in the future. I personally don't think it will be but I am monitoring the situation. Ramin has posted some excellent videos on the subject and I have found those helpful. But I won't need to rush into any decisions on that front. 

Simple investing is what I do. Low cost multi-asset funds, no single shares, no multi-sector portfolios, no sector specific funds or anything like that. It's working for me, it may not work for others.

If it's of any interest, I was a tech industry analyst when I was working so used to follow some tech companies very closely. Based on that experience, and also my experience of massaging the numbers for a FTSE 250 company when I worked in corporate accounting, I would never risk investing in individual shares except for a gamble. And I don't gamble.

I understand your reluctance to invest in individual shares. Personal experience over our entire lifetime defines our outlook. I was fortunate in that mine has given me the confidence to be bold but not reckless. When you have a natural apptitude and enjoyment for something it certainly helps.  As a consequence many doors opened and I never declined a challenge. 

Albermarle

The problem I have with this is that you seem to be implying that IFAs add some "secret sauce". IMO they don't. Simple investing is easy. Complex investing isn't easy, but then you don't have to do that. IFAs have no value add for me.

It is worth repeating a comment earlier in the thread that IFA's do not just offer investing advice . As important is advising on tax issues, inheritance issues, overall family finances etc. A large majority of the public are clueless on these issues.

Apparently many well paid clients turn up at the IFA office for the first time  having never claimed higher rate tax relief ,just as one example .

Zadumbreion

Albermarle said:

It is worth repeating a comment earlier in the thread that IFA's do not just offer investing advice . As important is advising on tax issues, inheritance issues, overall family finances etc. A large majority of the public are clueless on these issues.

Apparently many well paid clients turn up at the IFA office for the first time  having never claimed higher rate tax relief ,just as one example .

That's exactly where I am; I would be prepared to pay someone for the tax planning knowledge whilst I set up a simple passive portfolio. However I don't think I need ongoing advice - our circumstances are unlikely to change that much now  - and I suspect a lot of advisers won't want to give advice on an occasional / transactional basis.

Ella_fella

Can I jump into this thread please rather than start a duplicate one - I've recently been to see an IFA at Reeves to enquire about managing investments for me. Was quoted 2.5% consultation fee together with a 1.99% annual admin fee. Seemed extremely high but wasn't sure whether this was the standard or not.

I said my risk profile was low to medium, they gave me an example of a fund they manage on this  basis which returned circa 22% over 5 years or about 4.4% per annum on average. If you deduct the annual admin fee from this and spread the 2.5% fee over 5 years then this equates to an actual return of 1.91% per annum.

Is my maths right? If it is then its marginally better return than sticking the money in a fixed 2 year account where the interest will be guaranteed, any thoughts or comments please.