So why is the FTSE 100 nearly at a 52w high?
Discussion
No fall out here 
A costly yet underperforming fund manager will soon be facing a very real form of responsibility as ratings get slashed, inflows dwindle and ultimately he/she gets the heave ho.
But as pointed out earlier, funds have some fixed costs so they can't very well give everyone a free ride in the years where markets move lower.
Benchmarks exist for your benefit and if you're not happy with a particular fund then move to another - there's plenty of choice on this island they call Great Britain.
A costly yet underperforming fund manager will soon be facing a very real form of responsibility as ratings get slashed, inflows dwindle and ultimately he/she gets the heave ho.
But as pointed out earlier, funds have some fixed costs so they can't very well give everyone a free ride in the years where markets move lower.
Benchmarks exist for your benefit and if you're not happy with a particular fund then move to another - there's plenty of choice on this island they call Great Britain.
Edited by DoubleSix on Thursday 11th August 22:00
DoubleSix said:
No fall out here
A costly yet underperforming fund manager will soon be facing a very real form of responsibility as ratings get slashed, inflows dwindle and ultimately he/she gets the heave ho.
But as pointed out earlier, funds have some fixed costs so they can't very give everyone a free ride in the years where markets move lower.
Benchmarks exist for your benefit and if you're not happy with a particular fund then move to another - there's plenty of choice on this island they call Great Britain.
Of course you are correct on one's freedom to move to another fund.A costly yet underperforming fund manager will soon be facing a very real form of responsibility as ratings get slashed, inflows dwindle and ultimately he/she gets the heave ho.
But as pointed out earlier, funds have some fixed costs so they can't very give everyone a free ride in the years where markets move lower.
Benchmarks exist for your benefit and if you're not happy with a particular fund then move to another - there's plenty of choice on this island they call Great Britain.
And your argument vis a vis fixed costs is also correct.
But I just feel that the pain of failure should be spread more evenly.
Anyway I'm banging on a bit .....
So....
avinalarf said:
What I said was this,..........
I agree Ozzie and on that basis I don't have a problem paying for advise on how to put my financial house in order.
What I find difficult to accept is the heads I win tails I win that goes with the territory of the management costs.
I would gladly pay a % of my profits in the good years but I'm very unhappy to pay anything when the funds make a loss.
Will you please explain to me the financial logic behind that ?
I was plainly referring to management costs,and not referring to the fee I gave the IFA and assumed it would be recognised I was referring to FUND MANAGERS
The main thrust of my argument is the lack acceptance of any responsibility in the financial sectors,thats as I perceive it.
Anyway I don't want to fall out with you over this,it's only a forum debate,and so I wish you goodnight ,sleep well.
It's the same lack of understanding that always comes up and despite explaining it time and time again, the same nonsense gets repeated every time.I agree Ozzie and on that basis I don't have a problem paying for advise on how to put my financial house in order.
What I find difficult to accept is the heads I win tails I win that goes with the territory of the management costs.
I would gladly pay a % of my profits in the good years but I'm very unhappy to pay anything when the funds make a loss.
Will you please explain to me the financial logic behind that ?
I was plainly referring to management costs,and not referring to the fee I gave the IFA and assumed it would be recognised I was referring to FUND MANAGERS
The main thrust of my argument is the lack acceptance of any responsibility in the financial sectors,thats as I perceive it.
Anyway I don't want to fall out with you over this,it's only a forum debate,and so I wish you goodnight ,sleep well.
For the record...
1. An IFA's job is to advise you on produce suitability and to understand your risk appetite to suggest a (high level) investment strategy - IFA's cannot and should not be expected to predict the investment future, If the markets fall that's not the IFA's fault!
2. Most investment managers are asked to perform relative to a benchmark - the relevant measure of success is therefore relative performance not absolute performance. If the benchmark goes down by 15% and the fund is down 12%, the manager has done a superb job. Many people fail to understand this.
3. You can of course purchase a fund that aims to produce absolute performance - this tends to give the manager much more flexibility in the areas they can invest, but these are much more expensive given the significant amount of extra expertise that is required.
4. Fund management is expensive - there are significant costs incurred in managing any investment. In the institutional space often there is a trade off between a higher fixed fee (irrespective of performance) and a lower base fee alongside a performance fee (10% of outperformance).
Unless you are willing to give up 50% (say) of outperformance, it makes no sense for a manager to enter into a contract where they don't get paid if they underperform in any particular year.
This is only aimed at the penultimate rung of the finanical food chain:
Old-skool IFAs sold you financial products, got a sales commission and trail commission, and every year would reappear and sell you some more.
New-skool IFAs make a plan, sell you financial products, charge a percentage, and every year reappear to 'review' the plan and charge a percentage.
Same meat, different gravy.
Old-skool IFAs sold you financial products, got a sales commission and trail commission, and every year would reappear and sell you some more.
New-skool IFAs make a plan, sell you financial products, charge a percentage, and every year reappear to 'review' the plan and charge a percentage.
Same meat, different gravy.
sidicks said:
Fund management is expensive - there are significant costs incurred in managing any investment.
This is the one part of fees which IMO can deliver good value. I never mind paying the fund managers even though I'm aware that tracking is a lower cost option. Paying a premium for the "hope" factor! 
Ozzie Osmond said:
sidicks said:
Fund management is expensive - there are significant costs incurred in managing any investment.
This is the one part of fees which IMO can deliver good value. I never mind paying the fund managers even though I'm aware that tracking is a lower cost option. Paying a premium for the "hope" factor! Conversely, for credit exposure, alpha can contribute a significant proportion of the overall return, beta less so. Personally. in this case I'd happily pay a premium for active management.
Clearly for absolute return products then alpha is the main source of return and hence you tend to pay a large premium for active management.
Having said all that, for most people looking at long-term person investments, I would probably recommend low cost tracker funds.
Bond and Fixed Interest based funds are priced in more pragmatically than equity based ones. I'm seeing a lot of VG defensive biased Equity income funds (ever do slowly) quietly bolstering cash reserves. I like Equity income funds, they allow options. Quite a few clients are salting away gains and modestly derisking already - attitude to risk and capacity for loss change with many events - and making large gains in a relatively short period of time is certainly one of them.
Focusing on 'XYZ fund' or 'ABC Index' because it's currently doing well is akin to having fire fixation in a survival situation - its rosy glow blinds you to other realities, it does not give you the altitude or perspective you need to be rational. Trying to time the market is a mug's game. Have a plan, review the plan, remain objective, don't get excited, don't get scared, don't become euphoric, don't get despondent. It's not rocket science.
Focusing on 'XYZ fund' or 'ABC Index' because it's currently doing well is akin to having fire fixation in a survival situation - its rosy glow blinds you to other realities, it does not give you the altitude or perspective you need to be rational. Trying to time the market is a mug's game. Have a plan, review the plan, remain objective, don't get excited, don't get scared, don't become euphoric, don't get despondent. It's not rocket science.
avinalarf said:
To me it's seems that the financial sector is unable to bear the responsibility of a loss but only want to come out on top whatever the result,hence heads I win ,tails I win.
Correct. They assess your risk vs return profile for but always ensure they get a return at no risk. Nice work if you can get it.The monevator site has good advice on low-charge portfolios. Now, I only use the company advisor to get the company contributions and then regularly transfer (free) into my own SIPP where charges are less than 0.1% as I avoid the unit trust parasites.
sidicks said:
It's the same lack of understanding that always comes up and despite explaining it time and time again, the same nonsense gets repeated every time.
For the record...
1. An IFA's job is to advise you on produce suitability and to understand your risk appetite to suggest a (high level) investment strategy - IFA's cannot and should not be expected to predict the investment future, If the markets fall that's not the IFA's fault!
2. Most investment managers are asked to perform relative to a benchmark - the relevant measure of success is therefore relative performance not absolute performance. If the benchmark goes down by 15% and the fund is down 12%, the manager has done a superb job. Many people fail to understand this.
3. You can of course purchase a fund that aims to produce absolute performance - this tends to give the manager much more flexibility in the areas they can invest, but these are much more expensive given the significant amount of extra expertise that is required.
4. Fund management is expensive - there are significant costs incurred in managing any investment. In the institutional space often there is a trade off between a higher fixed fee (irrespective of performance) and a lower base fee alongside a performance fee (10% of outperformance).
Unless you are willing to give up 50% (say) of outperformance, it makes no sense for a manager to enter into a contract where they don't get paid if they underperform in any particular year.
As usual,your comments are apposite.For the record...
1. An IFA's job is to advise you on produce suitability and to understand your risk appetite to suggest a (high level) investment strategy - IFA's cannot and should not be expected to predict the investment future, If the markets fall that's not the IFA's fault!
2. Most investment managers are asked to perform relative to a benchmark - the relevant measure of success is therefore relative performance not absolute performance. If the benchmark goes down by 15% and the fund is down 12%, the manager has done a superb job. Many people fail to understand this.
3. You can of course purchase a fund that aims to produce absolute performance - this tends to give the manager much more flexibility in the areas they can invest, but these are much more expensive given the significant amount of extra expertise that is required.
4. Fund management is expensive - there are significant costs incurred in managing any investment. In the institutional space often there is a trade off between a higher fixed fee (irrespective of performance) and a lower base fee alongside a performance fee (10% of outperformance).
Unless you are willing to give up 50% (say) of outperformance, it makes no sense for a manager to enter into a contract where they don't get paid if they underperform in any particular year.
rotarymazda said:
Correct. They assess your risk vs return profile for but always ensure they get a return at no risk. Nice work if you can get it.
You pay for their time and expertise - not sure why that is hard to understand?Why you buy a house, the conveyancer gets his fee regardless of whether the house rises or falls in value.
sidicks said:
rotarymazda said:
Correct. They assess your risk vs return profile for but always ensure they get a return at no risk. Nice work if you can get it.
You pay for their time and expertise - not sure why that is hard to understand?Why you buy a house, the conveyancer gets his fee regardless of whether the house rises or falls in value.
DoubleSix said:
avinalarf said:
A bit arrogant,don't you think.
I'm not in the financial sector,I'm a layman, so I presume he does what it says on the tin ,that is he gives financial advise.
I do not expect him to guarantee me year on year profits on my funds investments.
The one I worked with asked me about my risk appetite and various other things and then we chatted about the most suitable funds for me.
I then devided my ISA allowance between the funds I thought most suited to me after the conversation.
Anything wrong with that ?
What I am querying is the financial logic behind the fact that I pay considerable management charges when the fund underperforms and loses my money.
I am more than content to pay a % of any profit ,even if it's more than the usual management charges ,but loath to pay when I've made a loss.
To me it's seems that the financial sector is unable to bear the responsibility of a loss but only want to come out on top whatever the result,hence heads I win ,tails I win.
You may well be a layman but the reason you're getting short shrift is because you clearly haven't grasped the basics of the industry - sorry if that sounds harsh but that's how it comes across.I'm not in the financial sector,I'm a layman, so I presume he does what it says on the tin ,that is he gives financial advise.
I do not expect him to guarantee me year on year profits on my funds investments.
The one I worked with asked me about my risk appetite and various other things and then we chatted about the most suitable funds for me.
I then devided my ISA allowance between the funds I thought most suited to me after the conversation.
Anything wrong with that ?
What I am querying is the financial logic behind the fact that I pay considerable management charges when the fund underperforms and loses my money.
I am more than content to pay a % of any profit ,even if it's more than the usual management charges ,but loath to pay when I've made a loss.
To me it's seems that the financial sector is unable to bear the responsibility of a loss but only want to come out on top whatever the result,hence heads I win ,tails I win.
I recently had an unvented cyclinder fitted in my home and as a layman to the plumbing industry I did a load of reading in order to understand the task at hand so I could assess the quality of work and understand what I was paying for...
Have you even read a basic Wiki?
Wiki IFA said: 'This does not mean that a client can recover compensation simply because an investment loses money. With all investments, there is an element of risk. The basis for complaint would be only whether or not that level of risk was unsuitable for a particular client based on the information given to the adviser. This is particularly important, and especially in relation to the sale of with profits endowments intended to be used to repay an interest only mortgage. A great many people saw[citation needed] strongly reduced investment returns from their endowments due to lower interest rates (and hence investment returns) and subsequently claimed that they had been mis-sold. While the poor performance is regrettable, it in no way constitutes mis-selling in the legal sense unless it can be shown that the endowment was unsuitable for the client's needs at the time it was advised. It is not possible to use retrospective judgements to assess decisions made in good faith in the past.'
You must surely appreciate that financial professionals largely exist to facilitate the risk their client wants to take and ensure the client's adopted position is suitable - not to partake directly, as the advisors ATR is unlikely to be the same as the clients.
avinalarf - McCain called, they're interested in buying your chip.
If the professionals really knew what they were doing there would be no peaks and crashes - it's a simple as that - and very evidently there are massive peaks and crashes!
Sell in May and go away? Not this year!!!
Up 15% in four months is staggering growth.
I have long believed the biggest risk of all is to try to hide from risk. During the past decade with interest rates on the floor that has been an even bigger risk. Gilts/Bonds? Can't stand the things. Fortunately every time I consider them I've been able to convince myself they "look too expensive". If you've got an equity portfolio which has doubled in value while cash/fixed interest has pottered along the honest truth is you can afford a 30% fall in markets - so it's not worth reducing the risk and giving yourself the certainty of missing out on further upside.
Sell in May and go away? Not this year!!!
Up 15% in four months is staggering growth.
I have long believed the biggest risk of all is to try to hide from risk. During the past decade with interest rates on the floor that has been an even bigger risk. Gilts/Bonds? Can't stand the things. Fortunately every time I consider them I've been able to convince myself they "look too expensive". If you've got an equity portfolio which has doubled in value while cash/fixed interest has pottered along the honest truth is you can afford a 30% fall in markets - so it's not worth reducing the risk and giving yourself the certainty of missing out on further upside.
Soov535 said:
Get out of here with your measured common sense.
avinalarf - McCain called, they're interested in buying your chip.
No chip on my shoulder.avinalarf - McCain called, they're interested in buying your chip.
Just having a friendly conversation.
As you appear to say......
All is well in the financial world,no need to challenge anything,nothing to see here.
Couldn't agree more.
avinalarf said:
Soov535 said:
Get out of here with your measured common sense.
avinalarf - McCain called, they're interested in buying your chip.
No chip on my shoulder.avinalarf - McCain called, they're interested in buying your chip.
Just having a friendly conversation.
As you appear to say......
All is well in the financial world,no need to challenge anything,nothing to see here.
Couldn't agree more.
Soov535 said:
My CFD account is certainly looking healthy thanks.
I'm very happy for you.I'm doing ok too.
Oops......forgot for a minute about all the other people out there whose pensions have been punished, oap' s not financially savvy that can't get a decent return on their bank savings account,key workers that can't afford to buy and have to rent in a rising market,etc.etc.
The inflationary effect of QE.
But let's not concern ourselves with all that tosh,we're OK.
avinalarf said:
I'm very happy for you.
I'm doing ok too.
Oops......forgot for a minute about all the other people out there whose pensions have been punished, oap' s not financially savvy that can't get a decent return on their bank savings account,key workers that can't afford to buy and have to rent in a rising market,etc.etc.
The inflationary effect of QE.
But let's not concern ourselves with all that tosh,we're OK.
'Whose pensions have been "punished" and how?I'm doing ok too.
Oops......forgot for a minute about all the other people out there whose pensions have been punished, oap' s not financially savvy that can't get a decent return on their bank savings account,key workers that can't afford to buy and have to rent in a rising market,etc.etc.
The inflationary effect of QE.
But let's not concern ourselves with all that tosh,we're OK.
sidicks said:
avinalarf said:
I'm very happy for you.
I'm doing ok too.
Oops......forgot for a minute about all the other people out there whose pensions have been punished, oap' s not financially savvy that can't get a decent return on their bank savings account,key workers that can't afford to buy and have to rent in a rising market,etc.etc.
The inflationary effect of QE.
But let's not concern ourselves with all that tosh,we're OK.
'Whose pensions have been "punished" and how?I'm doing ok too.
Oops......forgot for a minute about all the other people out there whose pensions have been punished, oap' s not financially savvy that can't get a decent return on their bank savings account,key workers that can't afford to buy and have to rent in a rising market,etc.etc.
The inflationary effect of QE.
But let's not concern ourselves with all that tosh,we're OK.
As Pension Funds generally invest in equities they are sky high at present.
There are none so blind as those who refuse to see.
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