Did investors do better than a financial adviser?
According to an article in the Times, investors who took advice have had worse performance and paid higher charges this year than those who made their own decisions.
The article riffs off of this article which by one of the largest pension and investment providers in the UK, AJ Bell. They do not present it as an in-depth research piece in any way. AJ Bell has looked at the funds most recommended by advisers over the past year and those most bought by DIY investors.
The most selected fund by DIY investors is the Lindsell Train Global Equity fund and the most recommended by advisers is the Lindsell Trains’ UK Fund. As the Global Fund has outperformed the UK Equity fund the article speculates that advised clients would have lost money. That is the depth of the “research”,
What the article does not consider is that I would venture al lot of the DIY investors invested in the Global Fund later in the year precisely because it was doing well. Those who would have invested over the past few months would not have enjoyed the outperformance most which mostly came earlier in the year. Our minds trick us into following the herd which does not work when investing for the long term. We chase performance which can potentially be ruinous. This article reinforces this.
Rescue your savings from the pension graveyard
Another article in the Times looks at how Britain’s largest long-term savings and retirement business is charging sky-high fees on small pension pots acquired from rivals.
They found about 160,000 savers with pots of £5,000 or less with the Phoenix group of companies were paying up to 3 per cent a year. That is six times more than a modern pension service can cost. Another 200,000 paid up to 1.5 per cent a year, three times more than the cost of a contemporary pension. Customers were charged even more until 2018 when the company introduced measures to cap its fees.
One of the first things we do when looking at a client’s financial situation is looking at whether their pension and investment plans are fit for purpose. There is no sense in paying high charges and getting very little back for it.
Specter of higher inflation threatens historic bond rally
An article in the Financial Times looks at how bond investors are prepared for the risk that 2021 heralds the return of a long-dormant enemy: inflation.
Bonds have done well this year largely due to the actions of worldwide central banks. This should continue but if inflation rises faster than expected it may not.
Even in an article with such a headline the analysts they interview have mixed opinions on whether inflation will pick up significantly. Whilst there can be a case made for a large amount of pent up demand the sheer size of the downturn caused by COVID should offset that to a degree.