| Regular readers will know that after extensive | | | | now by largely being able to ignore this type of |
| research and much experience, we favour | | | | company, and always putting you the client first. |
| passive investments. That is to say that our | | | | In a similar vein, we met new clients recently who |
| clients will accept the level of return that fits their | | | | had getting on for a million pounds in various |
| appetite for risk over the long term. In addition, | | | | investments such as ISAs and Pensions. Their |
| we can access institutional funds instead of retail | | | | main remit was to get organised and develop a |
| funds and reduce costs which result in | | | | strategy to be able to work part time from their |
| 'performance drag'. | | | | early 50s. |
| This way of investing is backed by investment | | | | They had used a standard commission based |
| guru Warren Buffett who said: | | | | adviser up until now, but found that he did not |
| "Most investors, both institutional and individual, will | | | | contact them very often unless they wanted to |
| find that the best way to own common stocks is | | | | buy another investment. This is very common, |
| through an index fund that charges minimal fees". | | | | but what shocked them was that they were not |
| Those following this path are sure to beat the net | | | | aware of the considerable amounts of |
| results (after fees and expenses) delivered by | | | | commission the adviser was taking each year |
| the great majority of investment professionals.' | | | | putting aside new investments. |
| In many cases we also find that the new client | | | | This is called trail commission, and is typically 0.5% |
| does NOT NEED to take as much risk as they | | | | of the total investments held. The insurance |
| are doing, and we can reduce the risk whilst still | | | | companies and investment companies (like the |
| allowing them to achieve their goals in life. | | | | one above) pay this automatically to the adviser. |
| However, there are still many investors who are | | | | So what it boiled down to is that this adviser was |
| not aware of this, or who feel that they can | | | | being paid something like £5,000 pa from |
| genuinely beat the market in the long term | | | | their investment pot for...nothing! |
| despite all the evidence to the contrary. | | | | If he was giving a fantastic service with regular |
| Many of these investors will use well known | | | | reviews etc then you could argue that is one |
| investment managers with household names. Well, | | | | thing, but as is only too common, this is not the |
| an article in the press came to our attention | | | | case. We find that what particularly galls new |
| recently which, putting aside the passive/active | | | | clients is that they have no idea that they are |
| debate, we feel is quite shocking. | | | | paying this money out! |
| We will not name this company, but it decided to | | | | By the way, if you have bought products in the |
| float on the London Stock Exchange. It was | | | | past directly from the investment company, you |
| valued at £676 million, despite losing money | | | | may find that this 0.5% that the adviser would |
| last year, and having debts of around £300 | | | | normally receive is simply absorbed by the |
| million. | | | | company. |
| As a result of the flotation, the two key fund | | | | The Financial Tips Bottom Line |
| managers received £15 million & | | | | When you work with an adviser, make sure that |
| £9.5 million! The rest of the employees | | | | they are fee based and will carry out the work |
| then got £14 million in Christmas cash, and | | | | you want done not only now, but on an ongoing |
| also have something like £70 million in | | | | basis. |
| shares. | | | | You then agree with your adviser what fees you |
| So, what about all the investors who have given | | | | will pay to get this service - this should be a |
| their money to this firm in the hope that they will | | | | written agreement. But if ALL THEY TALK |
| perform. What did they get? | | | | ABOUT is investments, and it's a fee not a |
| Well, many of this company's funds have | | | | commission, then get another opinion. |
| languished at the very bottom of the | | | | ACTION POINT |
| performance tables. | | | | Make a list of all your investments and ask your |
| It looks like the familiar story of growing their | | | | adviser or company what costs you are paying |
| own wealth whilst totally ignoring what should be | | | | annually. If you find, like many investors,that you |
| their real remit which is growing YOUR wealth! | | | | are paying out hundreds or even thousands of |
| Of course, this story of greed is not unique, but | | | | pounds a year, what are you getting for this? |
| adds to our determination to operate as we do | | | | |