BRITISH PENSIONS ARE CUT IN HALF
Tuesday 3 August 2010
Over 5 years ago we had the back door keys to the fund managers, insurance and pension providers. What did we find? Take a guess.
Today, the cost of pensions has hit the headlines. Front page news in the Daily Express, British pensions are cut in half. In the Telegraph, Charges and fees cutting 50 per cent from British savers' pension pots and the Daily Mail, Hidden costs halve the value of our pensions.
According to the telegraph “A 25-year-old worker putting £200 a month into the HSBC World Selection Personal Pension for 40 years and receiving typical returns would be charged a total of £248,650, according to industry figures.
The worker would be left with only £248,453, according to the Financial Services Authority, meaning that just over half the pension pot would be absorbed by costs.“
How does that make you feel?
Before making comment, there was another article in Money Marketing headed 'Barclays has made me a poor pensioner'
In this article, around 80 former Barclays investors lobbied MPs for help to recover hundreds of thousands of pounds they invested in the Aviva global balanced income fund. One such investor was....
Campbell, wearing the
“Barclays eat wealth” hat
"Steven Campbell is a retired film director who invested £250,000 in the Aviva fund in 2007 following advice from a Barclays adviser.
Campbell says Barclays contacted him offering advice after he deposited £350,000 from the sale of his London house. He told the bank he wanted an income to look after his daughter, who was nine years old at the time.
He said: “I had no idea about money, I just trusted Barclays to do the right thing but it turns out I would have been better off putting the money under my mattress.”
Campbell has left his money in the Aviva fund and it is now worth just £150,000.
He said: “Barclays’ treatment of its clients is appalling, there has been no customer service at all.”
Such an article has no reference to pensions, but it does illustrate what makes people angry.
Losing money today makes people upset. Quite rightly so. I really can't imagine anyone who would not take action. Yet the future losses in pensions is quite possibly greater... but it does not feel like a loss. There is no change to your life today. So the emotions and desire for action are somewhat less vociferous.
Even so, these headlines will prompt some people to ask their advisers or providers for reassurance. No doubt the products providers and their salesman will use a multitude of defence arguments…"its not about cost but performance"..."Our charges are extremely low compared to the market." Of course one would expect these responses. But are they actually valid or could, David Pitt-Watson, senior executive at Hermes Fund Managers, who is mentioned in these articles, perhaps be right? Who do you believe?
I read with interest another comment made which has clarity from my eyes because of my knowledge and experience, but whether it helps the reader....
" Over on this side are clients, they want a return, some more than others. And here, over on this side we have the markets, that give a return, over time. Some more than others, with an associated risk premium. All good so far.
Trouble is, in the middle, between the two, is this great big wodge of GOO. And if you listen very carefully you can hear this sucking noise. That's the sound of charges being extracted from the system by the investment industry, layer upon layer of charges, funds investing in funds investing in funds, with the end result that the client over here, doesn't get the return from the markets over there."
Sounds as if this chap perhaps knows more than most!
We all need confidence in pension funds because they impact on our future, but confidence comes from understanding whether people like David Pitt-Watson have valid comments that need investigation. I really think this issue needs investors to take action...otherwise your pension fund could be cut in half.
Some of the simplest proverbs are the best.
You can lead a horse to water, but cannot force him to drink.
It's your choice.
posted by Murray Round Wealth Management @ 09:53,
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,
"Don't you smile at a crocodile; Don't be taken in by his welcome grin; He's just thinking how well you'll fit within...."
Sunday 30 May 2010
This headline was a readers response to an article in the Daily Mail entitled “Barclays' hard-sell tactics: You're a 'conquest' not a customer! By James Salmon
James Salmon says "The confidential document shows clearly how staff are incentivised to sell riskier investments, or more expensive, profitable products such as loans and private banking services.
The document shows that persuading a customer to gamble their savings in the stock market is 100 times more lucrative for salesmen than advising them to tuck their money away in a savings account.
A salesman will earn just 18p for each £1,000 saved by customers into a cash Isa, but will pocket £18.20 for each £1,000 invested in the stock market.
Those who manage to persuade a customer to sign up to Barclays Private Banking investment service earn £49.
The whistleblower adds: 'Some of the things we sell - such as structured products - are rubbish. These are one of the most popular investments. It's an easy sell as they offer elements of protection. But we are now being discouraged from selling so much because we want to be seen to be giving proper advice."
There are so many issues and discussion points on how to stop bad practices...but fundementally the problem is asking for advice from someone that is rewarded for selling products. Its always going to be a train wreck waiting to happen.
posted by Murray Round Wealth Management @ 10:37,
Videos that tell us what we think we already know, or do we?
Thursday 27 May 2010
I must admit I am visual. Clients know all too well of my drawings to explain complex financial issues. So below are a series of adverts made in Australia that I for one think really get back to basics. Whilst the statistics are Australian, the principles are world wide. Its a pity that someone can't remake these in the UK with UK statistics. Enjoy
Cash v Shares
Retirement contributions
Property v Shares
Why long term investing works
posted by Murray Round Wealth Management @ 14:13,
Stock market falls and the impact on your wealth.
Friday 21 May 2010
It is Friday 21 May and the FTSE 100 is 4986.
There have been heavy falls in the UK stock market.
What can investors do?
We suggest that investors that have portfolios with private banks or stockbrokers to establish what action their fund managers have taken to avoid the fall in asset values. In truth, if fund managers are actively managing your money, they should be taking action to help avoid or minimise any falls in your portfolio value.
As such, it is important to challenge your fund managers, stockbrokers or advisers regarding performance.
Here are some questions you may want to put to your fund managers:
What action have you taken in recent weeks to minimise the fall in the value of my portfolio?
What action do you propose to take now, if any and why?
Our experience shows that often the answers you receive will be complicated. At similar times in the past, the reasons given, at first sight seem plausible, but on analysis show confusion, sometimes panic, with no real clarity of action and some even saying, ‘steady as you go’ and ‘not to worry’. Whilst ‘steady as you go’ and ‘not to worry’ help calm emotions in volatile periods, such statements hold no substance if your stockbrokers, fund managers or advisers are actively managing funds.
Action is required.
In truth, if ‘steady as you go’ and ‘not to worry’ answers are given, you could well be paying for activity but not receiving it!
Unfortunately it is the investor that loses; so if you are serious about your money, we hope you will start to ask questions as soon as practicable.
We are passionate about delivering the truth about investments and investors need the tools to discover the truth. The tools are questions and answers. We hope you will ask the right questions at the right time to help you make good decisions.
We wish you good luck.
posted by Murray Round Wealth Management @ 14:24,
Ditch the manager and pick up a tracker fund
Thursday 13 May 2010
So said Charlotte Beugge of the Daily Mail.
Millions of investors would be better off ditching expensively managed funds and opting for cheap stock market trackers.
Many of Britain's biggest funds are simply closet trackers, but their high charges mean investors get smaller returns.
Active fund managers are supposed to aim to beat the stock market by clever stock picking. Yet few UK funds outperform the FTSE index, whether it is rising or falling. The story is similar with overseas funds.
'All the evidence shows it is difficult for a manager to outperform an index consistently,' says Nic Round, of independent financial adviser Murray Round. 'Costs make it nigh on impossible, so why should investors bother to speculate on the skills of an active fund manager when a passive, index tracker takes away that risk?'
posted by Murray Round Wealth Management @ 11:06,
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.
Welcome to our Blog
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