Robin Powell`s “Sensible Investing TV” – A Documentary Worth Viewing

Published on: September 3, 2014
CategoriesDIY Investment, Financial Advice

The new documentary from Sensible Investing TV sets out to de-bunk the notion that, when it comes to investing, you get what you pay for.

Robin Powell`s new documentary – to be shown in ten short weekly instalments, is a must-view for anyone who takes long term investing seriously.

The  link to the first video follows:

http://www.sensibleinvesting.tv/how-to-win-the-losers-game-part-1

… while those who might also appreciate additional background may be interested in the company`s News Release below:

How to Win the Loser’s Game


Part 1 of a new landmark documentary series from
Sensible Investing.tv is now online MEDIA RELEASE 3 September 2014

For immediate release

Most of what we see and hear about how to invest comes from
either the fund industry or the financial media – both of which
have their own agendas. This landmark documentary is an
attempt to redress the balance.

Nine months in the making, How to Win the Loser’s Game aims to
provide ordinary investors with the information they need to
achieve their investment goals. It explores the relative merits
of active and passive investing, as well as so-called “smart” beta
- a “middle way” approach that is gaining in popularity.

Among the contributors are some of the biggest names and
brightest minds in the investing world, from Vanguard founder
John Bogle to MoneyWeek editor Merryn Somerset Webb,

authors Charles Ellis and Larry Swedroe and Nobel Prize-

winning economists Eugene Fama and William Sharpe.

 

How to Win the Loser’s Game is being released in ten weekly,
stand-alone parts, on SensibleInvesting.tv, followed – on
November 5th 2014 – by the full-length, 80-minute film.

Notes to editors: Sensible Investing does not sell or endorse any
particular investment products. Its aim is to promote the benefits of a
long-term, low-cost, low-maintenance and highly diversified
investment strategy. Based in Birmingham, England, it serves a
worldwide audience of investors, journalists, bloggers, academics and
investment professionals.

 

“The fund management industry as it stands is failing the
consumer. There are too many managers delivering consistently

poor returns while taking huge amounts out of people`s long-

term savings in charges. Investors need to wise up.
“We do recommend that investors use an adviser. But this
documentary will help them get started on the road to a
successful investment experience.”
Richard Wood, founder, Sensible Investing.tv

“We keep hearing from active fund managers that they can
beat the market. But only about 1% of them do so consistently,
and they’re almost impossible to identify in advance.
“How to Win the Loser’s Game presents hard evidence – tried,
tested and peer-reviewed – that there are better and far cheaper
ways to invest.”
Igors Alferovs, Barnett Ravenscroft Wealth Management

“As well as investors, this documentary is compulsory viewing
for journalists and politicians.
“It’s well known that we face a pensions crisis. The emphasis so
far has been on the need to put more more money into our
pensions. It’s true that most of us have to. But we also need to
wake up to how much the industry is taking out of our savings -
and how little value it’s adding in return.
“Investors – and the wider economy – would be better served by
a fund management industry 20% its current size.”
Robin Powell, producer, How to Win the Loser’s Game

Contact
More information is available from:
Robin Powell +44 (0)121 771 3382,
robin@sensibleinvesting.tv

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A Response To “10 Reasons To Invest In Face-to-Face Advice Over Online” (Bryce Sanders – “Financial Adviser”)

Published on: February 6, 2014
CategoriesDIY Investment, Financial Advice

“Financial Adviser” today carried a piece by the President of Perceptive Business Solutions (below), to which Money Guidance felt compelled to respond.

In times when investment returns are low, reducing expenses can sometimes make the difference between profit and loss. A popular strategy to reduce costs is to eliminate the middleman, which is what makes online investing so appealing. But this approach will not eliminate the need for financial advisers, because investing big money involves face-to-face relationships.

Trading, investing and banking online offers convenience – people can access their account 24 hours a day. If a client has a question that requires a response from a live person, that is no problem – tiered service can reduce waiting times for an advisory firm’s best clients. Virtual investing might require upfront investment in technology, but it saves the expense of high street offices along with salaries and commissions for advisers based there.

Interacting online also has its drawbacks. Online dating is a good example where things are not what they seem, and few people would go online to get medical, legal or accounting advice. Online investing makes sense for people who know and understand what they are doing. It is an excellent vehicle for investors who want someone to follow instructions and execute trades.

But the role of the financial adviser is far from dead. When people part with large sums of money or make important decisions, they prefer to do so face-to-face – it is easier when the advice comes from someone who knows and cares about you. Consider the following 10 reasons why a face-to-face advisory relationship is superior to online investing:

1. People make judgments. Before accepting advice most investors want to size up the other party. In politics, countries’ leaders meet at summits and look one other in the eye. Former UK prime minister Margaret Thatcher famously said of her Soviet counterpart, Mikhail Gorbachev: “This is a person I can do business with.”

Why it is important: many people need to determine informally whether the adviser is knowledgeable and has their best interests at heart. You will need to meet them.

2. Bricks and mortar. Buildings imply stability and a commitment to the community. Investors like to see hard assets such as property. It makes them feel their assets are “secured”.

Why it is important: investors want to see a parent firm with deep pockets before they entrust their money to an adviser.

3. Longevity. Established firms in familiar surroundings communicate stability. Knowing that the adviser across the table has a long-term career with the firm puts clients at ease.

Why it is important: the adviser is the face of the firm in the community. They assume a long, successful career is built on doing the right thing for their clients year after year.

4. Referrals. People often refer their friends to a firm because they have had a good experience or got a good deal. Something might be on sale, but it is more likely people are referred to individuals who made a process go smoothly.

Why it is important: in property transactions, once a contract is signed the estate agent’s job is to keep the sale on track until it is completed. This is a people skill – estate agents often build their business on personal referrals.

5. Accountability. It is human nature to apportion blame when things go wrong. If someone has made a mistake, few investors want to say: “It’s my fault I lost money. I wasn’t paying attention.” In politics, world events and sport, we hold individuals accountable, rather than organisations.

Why it is important: clients are accepting advice from a person they expect to hold accountable for the results, based on the advice given.

6. Confidentiality.Many people feel data they enter on their computer might as well be displayed in lights in Piccadilly Circus for all to see. Regardless of a firm’s best efforts, systems get hacked and data gets stolen.

Why it is important: like the confessional, people assume details they tell their adviser in confidence stay that way. Although advisers maintain client contact records, they use some discretion in which details to include.

7. Avoiding misunderstandings. Meeting face-to-face allows investors to ask questions they might find difficult to word or are too embarrassed to ask online. The adviser can look for visual clues – is the client following what the adviser is saying? Advisers can read back an order so that a client understands what they are agreeing to.

Why it is important: each party can read the other’s facial expressions and probe with questions. Many marriages fail because of breakdowns in communication.

8. Relationships. Trust means a client being confident an adviser is working in the client’s best interests. Trust is the foundation of many personal relationships. Many clients befriend their advisers because of traits displayed during the investing relationship.

Why it is important: social people surround themselves with people they trust, often with skills that make their lives easier.

9. Consider the alternative. Investing online might save money in the short run, but what if the investor makes a mistake? The financial consequences of choosing bad investments or holding others for too long outweigh the savings from lower fees.

Why it is important: as people age, their number of peak earning years declines. The older the investor the less time they have to earn back losses from a poorly chosen investment. That is why they need advice.

10. Negotiation. Online investing is cheaper in the prospective investor’s eyes. Everyone still makes money, so it is important be aware of what you get and what you pay for each approach. The adviser’s fee structure is not fixed like train fares.

Why it is important: neither the online nor the face-to-face approach is a perfect fit for everyone. Working with an adviser has advantages. Discuss the cost in terms of the difference between the two alternatives – advisers are often open to compromise.

When stock markets are soaring, some investors might think anyone can do an adviser’s job. When markets plunge, people might assume advisers sit on the sidelines while clients’ assets evaporate. These investors do not understand how advisers add value or bring other benefits to the table. The following four key areas are where advisers can prove their worth.

Asset allocation

Studies show that most of an investor’s return over time comes from proper asset allocation. Graphically speaking, if a client is standing in the road and a speeding lorry is heading towards him, the adviser is the person who picks him up just in time and puts him back on the kerb – that has value. This is important because the index fund investor is standing in the road because they are fully invested 100 per cent of the time.

Investment expertise

In terms of sectors and industries, an index fund’s return should match approximately the performance of the index it tracks. Indices usually comprise sectors. Some will outperform, others will underperform. The broad index investor holds them all, while the adviser adds value by suggesting sectors to over- or underweight.

Emotional control

A stock market rises like an escalator and goes down like a lift. Few investors can be detached when the news predicts the end of the world. The return for mutual fund investors over time is often far lower than the return of mutual funds as a class – investors often buy at tops and sell at bottoms. Advisers help get clients “off the window ledge” when news is bad and encourage them into the market before all the good news is apparent.

Forward thinking

Finally, there is the question of yesterday’s winners. An adviser based in Pennsylvania in the US remarked that an investor might enjoy good investment results because they owned a portfolio superbly designed for the previous market cycle. Advisers help with forward thinking to position clients for anticipated changes in the economy.

So, while it is tempting to cut out the middleman by investing online rather than working with a financial adviser, choosing the former route means considering a portfolio or retirement savings as a do-it-yourself project. Some investors are skilled, others less so. That is where a face-to-face relationship with an adviser truly adds value.

Bryce Sanders is president of US financial services consultancy Perceptive Business Solutions

 

 THE MONEY GUIDANCE RESPONSE

Another way of looking at things may be:-

People make judgments: some prefer to do so dispassionately by evaluating hard data, without “noise” from whoever may be presenting it.

Bricks and mortar: some may see fountains in the foyer as an unnecessary cost which is reflected in their investment returns.

Longevity: Being around a long time may not be tantamount to proficiency. Some consumers may well think that the adviser has been “…doing the right thing (isn`t that what Gordon Brown used to say?) year after year”. Others may think the fact that this young person has recently achieved Chartered/Certified status may mean they have topical knowledge.

Referrals: I believe that Hargreaves, Bestinvest, et al, may have had a few of these as well.

Accountability: A good FCA-authorised online adviser has to be equally accountable.

Avoid misunderstandings: It might be argued that misunderstandings are less likely if systematically documented as part of an online process. Human intervention can sometimes skew outcomes (e.g. risk-profiling scores are often higher when a male is being asked the questions by a female adviser).  Marriages can also fail because people have spent too much time face-to-face!

Relationships: Friendship with clients often comes a poor second when money has been lost. Trust is important, but don`t let`s get too sentimental, as clients tend not to be – a recent CFA survey found that only 7% of investors felt that financial firms “do the right thing.”

Negotiation: Train fares aren`t fixed when you go online.

Emotional  arguments: Those who get their overweight and underweight arguments right are rare. Humans (if Freud is to be believed) have an instinct to preserve – often translating into over-caution and missing out on market rises due to a herd mentality.

Incidentally, the IOD`s legal helpline is excellent and widely-used by its members.  And, I think the FCA may subject firms and their advisers to more stringent tests than E-Harmony does with its  potential dating suitors.

Clients really are too diverse to generalise about this much.

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Another Informative and Entertaining Short Video From Sensible Investing.tv

Published on: September 13, 2013
CategoriesDIY Investment, Financial Advice

Some good investing facts, well presented, to be seen at:

http://www.sensibleinvesting.tv/ViewAll.aspx?id=5807ADEB-E890-4FC2-A614-EE118BDE401A

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Milking The Herd

Published on: September 10, 2013
CategoriesDIY Investment, Financial Advice

Driving to my first appointment yesterday, I tuned in to Radio 4 and heard Chris Huhne berating the press for corroding public trust, whilst acknowledging that he had played his “own part in giving MPs a bad name”. This got me thinking.

Trust, or the lack of it, permeates most of our judgement and decisions.  As the CFA`s recent report, “Investor Trust” revealed, only one third of British investors had faith in the financial services industry and, more worryingly, just 7% believed investment firms, “do the right thing”. Against this backdrop. can the sector really be surprised about this year`s reported rises in DIY investing?

It would be easy to blame this growing trend of unhealthy public skepticism on the heinous 24 hour news media, but that would be a simplistic dismissal.  While the media may report and amplify actions, it is the participants themselves who provide the material.

Politicians, financial advisers, journalists and others may resent the way they are perceived, but little will change by merely protesting too much.  It is one thing spending hours doing an Ethics Test (as I did recently), but it is quite another to translate this into actions which form the centrepiece of  an enduring business proposition.

There is no doubt that the financial landscape is changing. I always used to find it slightly amusing when attending Institute of Financial Planners` meetings to hear that appropriate fee levels should be arrived at by first projecting how much you wanted to earn and then calculating how many hours a week you wished to work – before dividing one by the other and politely informing clients how much they had to pay.  Mr Market may not have been too much in evidence then, but he is certainly here with a vengeance now.

Anyone still doubting the ephemerality of their chosen roles might have missed “Peston Goes Shopping” on BBC 2 yesterday evening. The 750,000 employed in British manufacturing in 1978  fell to less than 90,000 within thirty years.  With corresponding falls already experienced in the financial services sector, further outflows can only be stemmed by changes to outlook and proposition. In other words, giving customers what they want, while engendering trust.

Incidentally, in the same programme, Peston also examined the success of Tesco.  Beginning with Jack Cohen, with the mantle then being taken by MacLaurin and Leahy, the company`s competitive advantage was built almost entirely on responsiveness to customer needs.  Interesting to note, though, was the “Marmite factor” of Tesco: most customers may have been happy, but this level of satisfaction was not shared by dairy farmers, anti-Sunday traders and those against out of town developments.

All of which brings me back to the title of this piece.  As this particular supermarket was upsetting its suppliers in a “race to the bottom”, investment management companies will probably not appreciate being leant on by certain fund supermarkets at the moment.  Of course, the difference here is that Tesco really had just the one club in the bag – i.e. price – whereas consumers should ideally be taking more into consideration when planning their finances.  Whether the resulting “preferred funds” are regarded as the equivalent of Tesco Value or a Swindler`s List will be a matter for individual opinion, but these views are likely to change again once full pricing transparency is introduced early next year.

Only when the herd becomes more trusting and engaged in a financial planning process will some of the cynicism be left behind.  Although statements like, “buy the market, keep your costs down, and don`t get too fancy” (Bernstein) will not sell many newspapers, it will serve the audience far better than a perpetuation of the myth that market-timers can beat the indices in the long term.  And why keep studies about stock tips under wraps? – the fact that Schadler and Eakins found in 2001 that Merrill Lynch`s “focus” picks produced abnormal same-day returns, plus abnormal returns in the two days in advance of the announcement, doesn`t contribute a lot to the cause of consumer trust.

Only this morning, the old hobbyhorse about teaser investor rates from banks and building societies came up again – reinforcing the stereotype that investors are again being “ripped off”.  The sooner certain industry elements shift away from seeing financial consumers as geese from whom feathers can be plucked with as little hissing as possible, the sooner the serious business of building trust can start.

Kevin O`Donnell recently stated in the Financial Adviser that, “abbreviated, simpler, low-cost advice is far better than no advice at all”.  I agree.  Service propositions have to be adapted, through technology, to educate consumers and encourage their greater participation.  Perhaps conventional profit-making organisations are not the answer for those who have irretrievably lost trust, and social enterprises should be at the forefront of any new initiative?   Watch this space.

 

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Surviving Disasters

Published on: July 8, 2013
CategoriesDIY Investment, Financial Advice

There seem to be a couple of inconvenient truths when analysing the UK fund management industry – both of which stand to have a big impact on your potential investment returns.

First, the practice of merging or liquidating actively-managed funds really does skew performance figures and impedes fair assessment by investors.

Second, while sound investing should involve a medium to long term perspective, this principle tends not to be followed by many dilettante fund managers who fail to stick around long enough to witness the outcome of their considered strategic positions.

Harsh statements perhaps – though easily sustained by the facts.  One benefit of the Money Guidance website is that the Media and Research link goes back to 2007 and can be readily called upon to support a trend of events.

In the former case, our archives reveal that, of the 355 funds that were available to UK investors in 1970, only 132 were still in existence by 2006 – an attrition rate of almost two out of every three funds.

Then, in September 2010, Alice Ross did a piece in the Financial Times, drawing upon some research by Lipper.  In this, Ms Ross brought our attention to the fund managers` habit of merging less successful funds with their larger or better-performing peers.  Apparently, more funds (68) had been merged in 2009 than at any time since 2004 and, moreover, with less than three-quarters of 2010 gone, 61 further funds had been liquidated and another 22 had been merged. In fact, between 1999 and 2010, there were 2,507 new fund launches while 2,400 funds were being closed or merged.

More recently (5 May 2013), in The Sunday Times, Ali Hussain remarked that investment firms were: “clamping down on managers producing poor returns amid growing pressure to justify high fees”.  The route taken, unsurprisingly again, was the closure of retail funds – indeed 136 of them in the first four months or so of this year, which followed on from the record 371 shut-downs in 2012 (there are currently only 2,571 retail funds to select from!).

According to Vanguard, 55% of actively-managed funds investing in UK stocks failed to beat the FTSE All-Share over five years. This percentage increases to 72% when funds that have been closed are taken into account. Don`t expect any respite from the USA or Europe either – their corresponding figures reveal 74% and 93%, “beaten by their indexes or shut down”.

Now, what may be posited by active fund managers as a reasonable bit of housekeeping could make a huge difference to their track records and, consequently, to the ability of ordinary investors to gauge performance data with reasonable accuracy.  If we could all dispense with our rogue outlying statistics, averages could look really attractive (as no doubt Nick Compton would attest to the England selectors) . Let`s face it, the bad outcomes are likely to have been really bad, or else these funds would not have been merged or wound up. Every time this happens, some loyal fund investors will have been caught in the crossfire and had their original strategy unilaterally altered.

All this means that investors should approach the performance data of fund managers with caution, as there is more than a fair share of survivorship bias in the statistics presented.  It is therefore of little surprise that the Financial Conduct Authority was recently reported by New Model Adviser to be, “swooping on the London offices of asset management firms as part of an investigation into fund mergers.”   Something to keep a close eye on, we suggest.

In the latter case, Money-Guidance has excavated its archives and found a piece written by Citywire back in October 2007, when the most comprehensive analysis conducted on UK funds, using five years’ worth of data and an examination of 1,741 funds, revealed that, “average active fund manager moves are now so common that the average fund will only retain its fund management team for two and a half years.”

Based on the probability that such moves will take place at times of stock market turmoil, we decided to re-visit these statistics in the (relative) calm of six years later.  The verdict? – a small improvement, but nothing particularly seismic.  According to Jason Hollands of Bestinvest, the average fund manager now stays in his job for four years.  Furthermore, if you are hoping to see the same manager looking after your money in 10 years` time, then you will have only a 10% chance of achieving this.

In summary, you would have to be an incorrigible optimist to believe in your own investment judgment when (a) there`s a fairly good chance that the active funds you select will not be around in their present form in the medium to long term and (b) the fund manager you have taken a liking to has probably moved on.

Remove those critical variables and you come back to appropriate asset allocation using low cost index-tracking funds with phased entry and regular re-balancing. It`s quite straightforward, really.

 

 

 

 

 

 

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