Integrity is everything in money management
Wednesday 2 June 2010
I was interested in a recent article by Jonathan Davis where he discussed John Templetons 11-point check list of things which his colleagues should do to keep their clients happy. The 11 point list can be obtained but you will need to visit www.independent-investor.com and register.
However, the list mixes plain speaking and common sense with what those who only know Templeton by reputation from his later philanthropic activities may consider a surprising degree of pragmatic worldliness. Davis says “Top of his list is the fairly routine suggestion that his colleagues should have “a long personal talk” with every client at least once every six months about their portfolio, in order to emphasise that every stock in it was “the subject of continuous restudy and follow up” and “the best which could possibly be selected”. The deeper the apparent knowledge of the portfolio the adviser can display, the better.
The investor, Templeton goes on, wants to feel that his affairs are managed by “a group of wise and prudent men. No one of us would want to say this about ourselves. However each of us should seek opportunities to describe to the client the background and wisdom and success of each other man in the organisation. Some counsellors make a specially strong point of the fact that other sources of advice may be biased, whereas investment counsel works in the client’s interest only”.
Further down the check list Templeton comments that “it is human to be subconsciously influenced by appearances. Those banks which in inhabit marble palaces usually attract the most customers…...The feeling of optimism and prosperity is contagious. The counsellor whose manner and words reflect uncertainty or disappointment will quickly give the same feeling to the client; and the counsellor whose manner and words reflect confidence and prosperity will quickly give the feeling of confidence to the client”.
Davis in conclusion went on to say “The irony, it struck me as I read on, is that while himself a pillar of personal probity, with a loyal and satisfied fee-based clientele, in putting down these thoughts more than half a century ago Templeton was foreshadowing both good and bad aspects of the future growth of the private banking/wealth management business. (He himself was to sell his advisory business ten years later in order to concentrate on the more rewarding and less time-intensive business of managing funds).
Many clients of advisory firms will, alas, be familiar with “the marble palaces” and the displays of optimism that Templeton identified. Increasingly however what they struggle to find is a level of personal service and conflict-free fiduciary commitment that were once the hallmark of the best in an era when investment advice was regarded as a profession, not a business.
The feeder funds and intermediaries who channelled money to Bernie Madoff, one might say, learned many of the items on Templeton’s check list all too well. This only goes to underscore the fact that without a moral compass and professional integrity, not to mention suitably aligned incentives, in the wrong hands even the exemplary personal intentions of a John Templeton can all too easily mutate into something worse.”
Hopefully you have kept reading to this point, but I recommend you read the last paragraph again. I find the comments very insightful. In other words, the banks and sellers of products, that includes the likes of people like St James Place, Barclays Wealth etc etc…all of whom have conflicts of interest, know how to sell their products to investors. They know what to say, because they have learned from the likes of Templeton, what makes a client buy their products.
As Davis states, “in the wrong hands even the exemplary personal intentions of a John Templeton can all too easily mutate into something worse”. Mutate easily into something worse...hmmm if its easy, you can bet the product providers will put their interests first not the client!
I must be fair however to these product providers... money needs a home and an investment product is is essential, but when the seller of the product is rewarded by the product provider, there is always going to be a conflict. But my point is that if the investor knows that their choices are limited and they are absolutely comfortable about the conflicts of interest, investors can invest with their eyes wide open. Caveat Emptor!
When we are asked to help new clients, we endeavour to understand the clients understanding of conflicts of interest by providing a range of questions to ask their existing advisers…questions they invariably have never addressed, and the funny thing is that on many occasions investors were not fully aware of how the conflicts impact on them and the costs of these conflicts. Beware of the marble palaces; beware of conflicts of interest.
posted by Murray Round Wealth Management @ 10:52,
Time to put your savings on the fast track.
Tuesday 1 June 2010
High charges and poor performance of many traditional funds are proving a turn-off for investors, with more than two-thirds of active fund managers failing to beat the index over ten years.
James Salmon of the Daily Mail discusses the benefit of index funds.
Even legendary investor Warren Buffet -- whose stockpicking skills have made him one of the richest men in the world -- is a big fan of passive funds.
Nic Round, from fee-based independent financial adviser Murray Round, says: 'Most of our customers are invested predominantly in passive funds. However, most UK investors still don't realise they are getting a raw deal in active funds. This is because fund managers want to sell active funds to make more money and advisers don't get commission by selling passive investments.'
Passive funds can be split into two basic groups -- trackers and Exchange-Traded Funds. ETFs are shares -- they can be bought and sold more easily and track verything from well-known markets to the future pricing of Pork Bellies.
Unlike active funds, passive ones are guaranteed to underperform the index because of charges. The question is by how much.
Mr Round says a medium-risk investor with a £50,000 lump sum should put £15,000 in Vanguard FTSE UK Equity Index; £10,000 in iShares MSCI World Index ; £10,000 in iShares index-linked gilts; and £15,000 in Vanguard Government Bond Index. For those investing [pounds sterling £200 a month, he recommends they put it all in Legal & General UK Equity Index Fund.
posted by Murray Round Wealth Management @ 11:14,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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