Challenge to Financial Advisers

JohnWinder

'Do you question whether using SPIVA analysis is truly independent and unbiased'

Yes, I'd say those reports are as far from independent as you can go, and any bias as a result I would expect to favour the trackers, so it is a problem. Further, we generalise from those reports to all trackers, but SPIVA uses SP indices for comparison I think; every tracker following a MSCI, FTSE or Solar index could underperform active competitors, and SPIVA wouldn't measure that I guess.

Alternative sources? Morningstar have their 'active passive barometer' which does the same sort of thing and gets similar results. https://assets.contentstack.io/v3/assets/blt4eb669caa7dc65b2/blt8825debf4c0e5cfb/6401c49a4fd99f36ebe22b4e/European_APB_FY2022.pdf

They sell advertising, so they can't be independent, but they need to appeal to 'active' and 'passive' readers so they risk being blatantly biased at their peril, but fudging the analyses at the edges wouldn't be unheard of amongst researchers. Only recently we learnt 10,000 health science papers in academic journals were withdrawn last year alone for fraud. https://www.theguardian.com/science/2024/feb/03/the-situation-has-become-appalling-fake-scientific-papers-push-research-credibility-to-crisis-point.

The UK FCA has an interest in customers getting a better deal from investment products, their focus seemingly on fees recently. I don't know if FCA has looked at whether active or passive is better (other than by fees which is clear), but the passive investor can only get market returns (before fees) so if the average active UK investor can only and must get market returns (before fees) which seems logical perhaps the FCA would be right to focus on fees (for passives too). 

'Last year we committed to publishing data on long-term underperforming active funds, after fees. Due to other priorities we will not produce this data at this time but will continue to consider appropriate metrics to assess progress in delivering value for fund investors.;'

https://www.fca.org.uk/data/investment-management-data-annual-report-2020-21

Bostonerimus1

OP, smile and be concise - you'll be a lot more persuasive. US Government agencies like DOD, DARPA and NASA use the "Quad Chart", which is a single landscape Letter or A4 page divided into quadrants where a project or proposal is described. It forces the presenter to be concise and clear. Use that philosophy when presenting your ideas.

You seem to have put a lot of effort into your analysis, but be assured that there are many thousands of analysts doing much the same and plotting Efficient Frontiers and IMO also pretty much wasting their time. Your comments about what IFAs do for their fees is well taken as most certainly do not understand investing in detail and subcontract that to an investment firm so the level of individual service is dubious IMO. I look forward to your analysis of the various retirement withdrawal algorithms and their interaction with asset allocation. Please include notes and references to any academic papers you are using as there is a lot of previous research.