Poor Financial Advice in Newspaper?

jimjames

I know there are sometimes posts on here where some suggestions are considered to be inappropriate or not taking sufficient account of personal circumstances but I've noticed a number of articles in the Telegraph where the chosen Financial adviser/planner has made what I would consider some very poor recommendations. I know there probably has to be some dumbing down or generalisations for appearing in print but the one today particularly stood out as bad advice. You might not be able to view whole article as paywall https://www.telegraph.co.uk/money/money-makeover/money-makeover-do-invest-56000-18-year-old-daughter/

The scenario was of someone who took out a Child Trust fund for their child in 2004, added to it over the years and it's now worth £56k, invested in the HSBC .UK Growth and Income fund. Obviously that fund isn't a great option as a single fund but the suggestion from a financial planner seemed on the verge of being ridiculous.

The question was raised as "Ms Alderson said she was unsure whether she should leave the money in the Child Trust Fund, move it into an Isa or transfer it to a Lifetime Isa, a state-aided savings scheme aimed at helping first-time buyers on to the property ladder."

The Chartered Financial planner (Hayley North at Rose & North) recommended " We suggest choosing 15 to 20 actively managed funds, which will spread the risk across different fund managers, geographies and types of investment."

Can anyone see any justification for using 20 different funds for a £56k pot? I can't see any scenarios where the additional complication of £2-3k in 20 funds is a good idea with all the rebalancing etc that will be needed along with the fact they want to continue adding money and would have to choose where to add it. I'm generally supportive of using advisers for those that want someone else to manage their investments for them but very surprised that an CFP would make a recommendation like this for a newspaper article.

eskbanker

Remind me not to engage with Hayley North at Rose & North!

Maslow's Hammer springs to mind, i.e. "if all you have is a hammer, everything looks like a nail"....

Albermarle

Can anyone see any justification for using 20 different funds for a £56k pot?

It  makes investing look complicated , and so in that case the poor reader will  clearly feel that they need  a chartered financial planner to help them through this jungle . One from Hayley North maybe ?

dunstonh

Can anyone see any justification for using 20 different funds for a £56k pot?

None whatsoever.

but very surprised that an CFP would make a recommendation like this for a newspaper article.

Anecdotally.... I have seen some CFPs over the years intentionally overcomplicate things to make their recommendation seem more advanced than a mainstream option. Less so nowadays than in the past but it would appear from this article that it still exists.

Most of the advisers I know use either fully passive or hybrid (of active and passive).  Only the wealth managers seem to go fully active nowadays.

Malthusian

Can anyone see any justification for using 20 different funds for a £56k pot?

I can't see any justification for using 20 different funds for a £5.6 million pot.

Albermarle said:

It  makes investing look complicated , and so in that case the poor reader will  clearly feel that they need  a chartered financial planner to help them through this jungle . One from Hayley North maybe ?

I don't know if they still do but the Telegraph used to funnel readers to a "Telegraph Money" white-label DIY investment platform. It's in the interests of DIY platforms that investors believe in active funds so they chop and change their portfolios constantly based on what's at the top of the performance charts and spend lots of money on dealing commissions.

To be fair to the Telegraph, the article did contain some good advice including taking out student loans rather than spending the CTF on university costs. But the paragraph singled out here is gibberish.

Even the relatively sensible first adviser from Raymond James still used the "pull some random active funds out of a bag" approach beloved of Saturday newspaper money articles.

I honestly can't see why Saturday newspapers still love to recommend random active funds. Fund selection is a relatively unimportant part of the answer to the reader's question, and if the adviser had said "keep costs and complication low with a simple multi-asset passive fund" you would think it would go down well with the Telegraph's readership. But maybe not their advertisers.

Aegis

jimjames said:

Can anyone see any justification for using 20 different funds for a £56k pot?

The only justification I can see is that the firm has done its research and decided on a strategy of 20 funds which fit pretty much any portfolio size, then they apply it to all investments regardless of size.  It's not my approach, but maybe there's something there.

For a retail investor looking at their child's JISA, I don't see it as necessary at all.

talexuser

I read the Borisgraph and the Guardian to try and see a sensible middle ground in reporting, but would never use any of the Borisgraphs' fund recommendations. They are generally useless, as the end of the year portfolio updates show.

DiamondLil

(Sigh)  Journalism ain't what it used to be....

Brie

DiamondLil said:

(Sigh)  Journalism ain't what it used to be....

It never was!

dales1

Reminiscing isn't what it used to be, either, nowadays.

bostonerimus

I think another howler is 

"We would consider using a multi-asset fund such as Trojan Ethical, which aims to deliver returns regardless of market conditions and has an ethical investment outlook, which is an increasingly important requirement for younger investors."

At least the caveat of saying "aims to deliver" is included, but the inexperience investor might see this as a "safe bet" and what's that about "regardless of market conditions". What markets and what returns?..it's gibberish. FYI the fund is 32% non uk equities 5% UK equities and has 28% US index linked bonds.