Just how far can Covid 19 drive down the markets?
Discussion
janesmith1950 said:
I was being a touch facetious to make a point...
I was a CF1 of an independent firm and have worked with hundreds of advice firms of all different flavours, from the b biggest to the smallest.
As pointed out above, there is a world of variance within the advice market (and the needs of the consumer).
The needs of an investor with material and varied assets in accumulation with 25 years to work are vastly different from someone with a £50k pot and little else who just wants to access their fund into retirement. The latter used to more or less buy a non advised annuity and off they popped.
I'm simplifying here, however pension freedoms came along and those annuity buyers have moved away from insurance products and into invested ones, much of which sold and facilitated via Advice by financial advisors.
Unsophisticated buyers of these products don't understand what a financial advisor really is or does; they just want a transactional relationship. Unfortunately drawdown isn't a simple transactional product like an annuity.
I wonder how many people in drawdown are now sitting nervously looking at their reduced pension pots, wondering if trading the low rates of annuities for the flexibility and promise of returns from drawdown?
Of course, the value of a financial advisory business is almost entirely predicated on the ongoing revenue stream from the funds under management. Advisors hate selling annuities because you then don't have any funds under management and so it doesn't really add anything to the bottom line.
Apologies, I'm rambling...
A good financial planner, perhaps chartered, who works with clients holistically over time to carefully build a lifetime of financial security and prosperity, is a world away from someone flogging drawdown plans to all and sundry in a quasi pre-RDR commission by another name fest. Yet they are both labelled the same thing and the average Joe public has little chance to distinguish between the two.
The markets are of course cyclical over time, coronavirus will be looked at in the future as another trough in the graph, however I do fear for those who've reached retirement and taken drawdown or left DBs for invested don't find their retirement ruined through a badly thought out and regulated market place.
Yep, agreed on all of this. I was a CF1 of an independent firm and have worked with hundreds of advice firms of all different flavours, from the b biggest to the smallest.
As pointed out above, there is a world of variance within the advice market (and the needs of the consumer).
The needs of an investor with material and varied assets in accumulation with 25 years to work are vastly different from someone with a £50k pot and little else who just wants to access their fund into retirement. The latter used to more or less buy a non advised annuity and off they popped.
I'm simplifying here, however pension freedoms came along and those annuity buyers have moved away from insurance products and into invested ones, much of which sold and facilitated via Advice by financial advisors.
Unsophisticated buyers of these products don't understand what a financial advisor really is or does; they just want a transactional relationship. Unfortunately drawdown isn't a simple transactional product like an annuity.
I wonder how many people in drawdown are now sitting nervously looking at their reduced pension pots, wondering if trading the low rates of annuities for the flexibility and promise of returns from drawdown?
Of course, the value of a financial advisory business is almost entirely predicated on the ongoing revenue stream from the funds under management. Advisors hate selling annuities because you then don't have any funds under management and so it doesn't really add anything to the bottom line.
Apologies, I'm rambling...
A good financial planner, perhaps chartered, who works with clients holistically over time to carefully build a lifetime of financial security and prosperity, is a world away from someone flogging drawdown plans to all and sundry in a quasi pre-RDR commission by another name fest. Yet they are both labelled the same thing and the average Joe public has little chance to distinguish between the two.
The markets are of course cyclical over time, coronavirus will be looked at in the future as another trough in the graph, however I do fear for those who've reached retirement and taken drawdown or left DBs for invested don't find their retirement ruined through a badly thought out and regulated market place.
"I wonder how many people in drawdown are now sitting nervously looking at their reduced pension pots, wondering if trading the low rates of annuities for the flexibility and promise of returns from drawdown?"
Retirement planning/drawdown is, IMO, pretty specialised and goes back to my point about having a niche - very different requirements to those of a 30 year old starting out on their accumulation journey. "Managing" the money is easy vs managing someone's emotions.
Regarding annuities, I would hope that an advisor would recommend one if it were the best option for the client, even if it were just to cover their minimum income requirement, but accept this might not always be the case.
Condi said:
Derek Chevalier said:
"Beta appeals to the intellect, alpha is emotional. Everybody has the ability to find beta; nearly no one has the ability to find alpha. Beta is a humble approach to markets, a more honest recognition of the limits of your talent and personality type. Alpha ignores the probabilities, assuming they will beat those odds to obtain the holy grail."
Your options theory class was considerably different to mine... 
Derek Chevalier said:
Condi said:
Derek Chevalier said:
"Beta appeals to the intellect, alpha is emotional. Everybody has the ability to find beta; nearly no one has the ability to find alpha. Beta is a humble approach to markets, a more honest recognition of the limits of your talent and personality type. Alpha ignores the probabilities, assuming they will beat those odds to obtain the holy grail."
Your options theory class was considerably different to mine... T'was a joke.
Condi said:
Derek Chevalier said:
Condi said:
Derek Chevalier said:
"Beta appeals to the intellect, alpha is emotional. Everybody has the ability to find beta; nearly no one has the ability to find alpha. Beta is a humble approach to markets, a more honest recognition of the limits of your talent and personality type. Alpha ignores the probabilities, assuming they will beat those odds to obtain the holy grail."
Your options theory class was considerably different to mine... T'was a joke.
But not as much as some of the quant models we used to price our options - do we really need 7 decimal places
Derek Chevalier said:
Yep, agreed on terminology.
We'll agree to disagree on our interpretation of what a financial planning process entails and also the commoditisation of investment management.
I am glad we can agree on something!We'll agree to disagree on our interpretation of what a financial planning process entails and also the commoditisation of investment management.
I don't agree with your second point though, in the slightest.
You didn't answer my question on your "fixed" charges...?
Jon39 said:
Yes, over the long-term, total dividends can form a significant portion of overall return.
Eg. For 2019 I had a 21.60% return, but nearly a quarter of that was dividends received.
If anybody does rely exclusively on dividends for their income, it would be 'eggs in one basket' once again.
Investors do like dividends, but it is slightly odd in a way, because that money comes out of a company, which is already owned by those same investors. You are being paid with what is already your own money. Not the most tax efficient way either. Share buy-backs for cancellation, work better for tax purposes.
I've literally bought shares the day before the XD day without realising and watched them drop 2% next day on the XD date and a month later the dividend has dropped in my account.
Perhaps it's different when your investments are your only income but it just doesn't sit right with me.
Derek Chevalier said:
Some of the mathematical derivations around option pricing theory made me cry
But not as much as some of the quant models we used to price our options - do we really need 7 decimal places
Ahh, there are some beautiful mathematical relationships in options pricing. But not as much as some of the quant models we used to price our options - do we really need 7 decimal places
IMO people can analyse stuff to their hearts content but they still won't be able to eliminate all risk.
A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
rockin said:
IMO people can analyse stuff to their hearts content but they still won't be able to eliminate all risk.
A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
I agree with all of that pretty much, the last paragraph particularly. I know a number of business people that have struck gold with a specific business and considered themselves to be Richard Branson’esque only to keep failing (quite spectacularly) at anything else they turn their skills to. Stick to what you know indeed.A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
soofsayer said:
I agree with all of that pretty much, the last paragraph particularly. I know a number of business people that have struck gold with a specific business and considered themselves to be Richard Branson’esque only to keep failing (quite spectacularly) at anything else they turn their skills to. Stick to what you know indeed.
Yes very true. Can vouch for +10rockin said:
IMO people can analyse stuff to their hearts content but they still won't be able to eliminate all risk.
A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
Good post.A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
rockin said:
IMO people can analyse stuff to their hearts content but they still won't be able to eliminate all risk.
A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
Tony Ferrino?A particular investment approach might look as safe as houses but if the game suddenly changes all bets are off. For instance, who predicted 6 months ago that investing in pubs and restaurants was a bad idea because they might have to close?
On the other hand, just because you can't see the future doesn't mean you throw your hands in the air and give up. Everyone has to run with some sort of guesstimate about what's going to happen next. People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
Very often people are good at one thing and then get the idea they have broad talent which might make them good at something else as well. Bad idea. Just because you're a great pianist doesn't mean you'll be good on the violin. As Mr Woodford discovered... Similarly, many successful racing drivers aspire to become successful businessmen but only a few achieve that goal. See also Tony Fernandes, Formula 1 and Caterham cars. Or Les Edgar and TVR. Stick to what you know.
rockin said:
People who are better at guesstimating than others tend to be the ones who earn the best returns - which links with the concept of "the more I practice the luckier I get".
I think you would struggle to find a serious player in the financial markets who would agree. The market just isn't that generous because you have people that are smarter, with more information and can act more quickly upon it that can exploit any inefficiencies before you even realise they exist.If you have the good fortune to speak to one of the very successful quant hedge funds (and bearing in mind these people have almost unlimited resources), they will tell you the edges are tiny.
How on earth can someone's "guesstimate" be better than the thousands of other people trying to do the same thing with the same information?
This is £3.95 on Kindle - its worth a read.
https://www.amazon.co.uk/Incredible-Shrinking-Alph...
JulianPH said:
JulianPH said:
You didn't answer my question on your "fixed" charges...?
You still haven't...https://ritholtz.com/2019/04/3-30-the-new-2-20/
https://www.institutionalinvestor.com/article/b1f1...
Edited by Derek Chevalier on Monday 13th April 21:53
b
hstewie said:
hstewie said: That's cleared that one up then
I actually regret posting that as I feel bickering during these challenging times is helping no one and I apologise. Going forward I am going to refrain from posting on the IM thread, not reply to Julian's questions and ignore those his posts on the Finance thread (but more than happy to discuss pool insulation on non-finance threads ). 
Condi said:
Derek Chevalier said:
Some of the mathematical derivations around option pricing theory made me cry
But not as much as some of the quant models we used to price our options - do we really need 7 decimal places
Ahh, there are some beautiful mathematical relationships in options pricing. But not as much as some of the quant models we used to price our options - do we really need 7 decimal places
This conversation reminded me of when I went through 15 books trying to find an implementation (rather than just a string of formulas) for a particular credit pricing model. I've just gone back through my Amazon history and reckon that was an easy £500 worth of books. I got a friend to attempt to sell then on Ebay a couple of years ago. It's fair to say the world has moved on - I got buttons
Why not just give a straight answer?
If you advertise a fixed fee structure, then it’s incredibly weird not to tell people what it is.
I just paid a quid for some pickled onion Monster Munch (Money very well spent), £146 a week on a rental car (less well-spent) and an hourly rate for some guys to do some work on my loft and a higher hourly rate for a solicitor to make a will.
All prices/pricing structures were advertised. That’s why I used them. I’ll probably use this logic (wanting to know the price) when I next buy a car or house, too. My nieces use it with their sweets.
Why would you be so evasive?
If you advertise a fixed fee structure, then it’s incredibly weird not to tell people what it is.
I just paid a quid for some pickled onion Monster Munch (Money very well spent), £146 a week on a rental car (less well-spent) and an hourly rate for some guys to do some work on my loft and a higher hourly rate for a solicitor to make a will.
All prices/pricing structures were advertised. That’s why I used them. I’ll probably use this logic (wanting to know the price) when I next buy a car or house, too. My nieces use it with their sweets.
Why would you be so evasive?
Edited by Testaburger on Tuesday 14th April 08:38
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