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Pension Funds v Direct Shares
Comments
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Most funds only publish their top ten holdings regularly in their factsheets, but some investment trusts publish a full list of holdings.
You are correct that the publication of the holdings would allow someone to attempt to replicate a fund, but the funds only publish their holdings every three months or so, and you would have to compare the full list of holdings to see what had been added and what had been sold. It is quite a bit of work to do this on an quarterly basis (especially for a professional who would probably need to do this for a number of funds). It is easier for a professional to charge their clients the AMC for the real funds. Any attempt to mirror a particular fund will always be behind on sales and purchases, so the performance of your tracker won't exactly match the perrformance of the fund.The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.0 -
For example they said that if my pension consisted of 10 funds, then each would be investing in about 100 companies, and that an IFA could not answer a straightforward question such as, 'how much of my portfolio is invested in UK companies'?
Absolute rubbish.
Its a false statement. This is what you expect from salespeople though.Additionally, they questioned, given the last statement, what value an IFA can actually give if they do not know where the cash is invested?
I can press a button and it will generate which sectors the portfolio is in but more importantly, what areas the underlying investments (industries, countries etc). No magic involved and the software we use is the most common one used by IFAs. There are several major suppliers of software to IFAs and all do a similar job.You seem to be telling me that IFAs do know the specific holdings of funds, which surprises me because that would mean that others could easily replicate them? Am I missing something here?
The IFA needs to know the underlying assets. Get that wrong and its an upheld complaint at the FOS. The individual companies within the fund is not within the remit of the IFA and it is quite right that it isnt. That is correctly left to the fund house.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I have not named the company because the question is more about the claimed 'value add' rather than whether it is a good or bad company.
Chris - it would be useful if you did name them, not to take a pop at them as such, but because many 'naive' (and I use that in the literal, not critical, sense of the word) posters come to this forum for help and knowing who to avoid can be just as valuable as knowing who to go to!0 -
Brynsam, the company is Fisher Investments, who have already received a thorough (dare I say) 'slagging' from the IFA community on this site. However, as I tried to explain I am more interested in the claimed 'value add', and whether they are correct, than who said what. It is so unhelpful to a newcomer to the forum when individuals simply post derogatory comments about a company or a statement without explaining why. To be honest, although there have been some extremely helpful comments, I am still not sure whether the statement that 'IFAs do not actually know what shares their clients actually hold' has an element of truth to it, when compared with companies that invest directly into shares. I'm not making any assumptions as to which type of service is better overall, but just commenting on that one point.
Many thanks for your help.
Chris0 -
I am still not sure whether the statement that 'IFAs do not actually know what shares their clients actually hold' has an element of truth to it, when compared with companies that invest directly into shares.
It isnt the IFA that controls the individual shares within the funds. It is the fund manager. The IFA has no say in what the share holdings are. The IFA is there to decide what sectors are invested in. The IFA leaves the share purchases to the fund house. So, you should not expect an IFA to be involved in the daily trades. That isnt what the IFA is for.the company is Fisher Investments,
Well, that explains a lot.who have already received a thorough (dare I say) 'slagging' from the IFA community on this site.
There is a good reason for that. And your thread is one of them.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Brynsam, the company is Fisher Investments, who have already received a thorough (dare I say) 'slagging' from the IFA community on this site. However, as I tried to explain I am more interested in the claimed 'value add', and whether they are correct, than who said what. It is so unhelpful to a newcomer to the forum when individuals simply post derogatory comments about a company or a statement without explaining why. To be honest, although there have been some extremely helpful comments, I am still not sure whether the statement that 'IFAs do not actually know what shares their clients actually hold' has an element of truth to it, when compared with companies that invest directly into shares. I'm not making any assumptions as to which type of service is better overall, but just commenting on that one point.
Many thanks for your help.
Chris
Fisher Investments uses a similar sales pitch in the USA.
https://www.bogleheads.org/forum/viewtopic.php?t=221050
A good IFA will design a portfolio to meet your needs and will be easily able to tell you the largest individual share components of each fund. Also I'm sure that all the shares are published in a prospectus that is easily available.
Your salesman is doing his job by using bogus arguments because he is selling something that doesn't make much sense. Buying individual shares is expensive, particularly if you do it through Fisher, and makes it hard to produce a portfolio that is diversified across sectors and geography. You have been warned and it would be foolish to continue talking to the guy.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Brynsam, the company is Fisher Investments, who have already received a thorough (dare I say) 'slagging' from the IFA community on this site. However, as I tried to explain I am more interested in the claimed 'value add', and whether they are correct, than who said what. It is so unhelpful to a newcomer to the forum when individuals simply post derogatory comments about a company or a statement without explaining why. To be honest, although there have been some extremely helpful comments, I am still not sure whether the statement that 'IFAs do not actually know what shares their clients actually hold' has an element of truth to it, when compared with companies that invest directly into shares. I'm not making any assumptions as to which type of service is better overall, but just commenting on that one point.
Many thanks for your help.
Chris
Thanks Chris. I think you need to ask a slightly different question, which is this: does it matter if an IFA knows the exact companies in which a client's funds are invested - would they get a better return if he/she did? The answer is a resounding no.
The IFA's skill and knowledge come into play in assessing which funds are the most suitable for a particular client, based on information supplied by that client, particularly in terms of the risk(s) the client is prepared to take. It is relatively uncommon to hold direct purchases on shares (some SIPP holders have tried and lived to rue the day) because it has such a limiting effect on diversification, not to mention trading costs.
A good IFA is going to know how particular funds are performing, what their charges are, any significant changes at the top in terms of key managers and a whole host of other things which added together provides the 'value added' you are paying for.
It isn't the IFA's role to stock pick within those funds - that's the highly specialised role of the fund managers, who throw huge resources at trying to stay ahead of the competition. The time to worry is when the fund managers don't know which stocks they've invested in.0 -
I am still not sure whether the statement that 'IFAs do not actually know what shares their clients actually hold' has an element of truth to it, when compared with companies that invest directly into shares. I'm not making any assumptions as to which type of service is better overall, but just commenting on that one point.
Many thanks for your help.
Chris
Private investors typically have access to the top 10 holdings of most funds. Every six months most funds also release a report including their full holdings, although these are usually about 3-4 months after the statement date.
Morningstar has a tool called holding overlap which can reveal holdings in a fund when compared to another, even outside of the top 10. From this, and other data, I assume Morningstar has access to the full holdings of funds. I also assume Morningstar can sell this information on.0 -
That makes a lot of sense, and I agree that you have posed a far more useful question. The debate has really focussed my mind on what advice/services 'I need/want' regarding my pension. I will have a think about it, do some research and gain a full understanding on what my IFA's current 'value add' actually is. I will also see what his response to the question, 'what companies am I currently invested in is?' and 'why have you selected the current funds for my pension?'
Many thanks for all of your help. It is vey much appreciated.
Chris0 -
That makes a lot of sense, and I agree that you have posed a far more useful question. The debate has really focussed my mind on what advice/services 'I need/want' regarding my pension. I will have a think about it, do some research and gain a full understanding on what my IFA's current 'value add' actually is. I will also see what his response to the question, 'what companies am I currently invested in is?' and 'why have you selected the current funds for my pension?'
Many thanks for all of your help. It is vey much appreciated.
Chris
I think an IFA will be a far better option for you than Fisher; cheaper and not as prone to sales hyperbolae. I strongly suggest you do some reading around this subject so you have the knowledge to see through Fisher like sales tactics and also evaluate your IFA's value.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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