My friend Robin Powell has produced a series of disruptive info graphics around comments he’s garnered following Fidelity’s announcement of “free funds”. He’s also written a good blog on the subject.
Of course “free funds” is a disruptive idea and should be viewed with suspicion
Hedge fund manager turned indexing advocate @LarsKroijer says Fidelity’s may come to regret its decision to offer “free” funds @Monevator @CarolynGowen @henryhtapper @ElCurwen @TransparencyTF https://t.co/ixMDAmSHpn pic.twitter.com/YVusCjN0vh
— Robin Powell (@RobinJPowell) August 9, 2018
I thought to include some of the reasons why Fidelity might regret their decision here – thanks to all those listed below who get paid for marketing funds at exorbitant prices – thanks too to those who – like me – see “low-cost” as “welcome-cost”.
But it seems that there’s a cost conspiracy against us – and our bosses are in on it.
I am very glad that I wasn’t at this event as I might not have survived it. Here’s a sample of more tough talking going on…
Aviva investment proposition, workplace benefits Jason Bullmore explained what this focus on cost meant for providers. He said: “From a provider perspective we see an absolute focus on cost and this has got to change”
Jason is keen to point the fingers that the villains who are forcing fund management prices down. Apparantly it’s not just employers but consultants (like me)
“In our master trust we have to have a very low cost basic default. This pressure comes from both the employers and consultants.”
But there seems to have been a noble faction of consultants at this meeting
Mercer solutions leader, DC & individual wealth Philip Parkinson said: “Does the consultant community not have a responsibility here? All the sponsors come to us for advice about which master trust to choose. So do we have the responsibility to raise as a priority investment, and challenge the focus on cost.”
The harm we can do ourselves in seeking a bargain is spelt out in the Times, much to the approval of Martin Gilbert, head honcho at active fund manager Standard Aberdeen.
It’s good to see the relationship between journalists and fund managers remains at arms length
Thanks for inviting me on Ian https://t.co/4ZbEE6cqzi
— Martin Gilbert (@MartinGilbert83) August 7, 2018
I’ve bust the Times pay-wall to grab the gist of Ian King’s “fund terrorism” warning. Ian focusses on the battering investors got from investing into the dotcom bubble through companies like Baltimore technologies.
Despite this happening 18 years ago, it is still being trotted out as if all the active managers in the world knew!
Of course one of the reasons tech-stocks went through the roof in 1999 was because of the active fund managers who ran tech funds but I suspect that Martin Gilbert didn’t, or if he did – he can’t remember which of the various companies that comprise Standard Aberdeen did or didn’t!
But back to the main event. It seems that we have a thing or two to learn from hedge fund managers.
Wow – if any one person can earn that much in a day, shouldn’t I be putting my money with him? Oh- wait – that’s what he earned from my money!
The other side of the coin
We all know that Warren Buffet advises everyone who can’t keep up with him (like me) to invest in simple indices (like the S&P 500).
Robin Powell has been interviewing clever people who explain why
and he explains why it’s the “buy and hold” passive funds which are best placed to exert pressure on the environmental, social and governance policies of the companies they invest in.
The received wisdom is that passive investing is bad for corporate governance. But, in both the UK and the US, it’s passive managers who are engaging more with company boards than active ones @RobinJPowell #TEBI #ESG https://t.co/Id1eRIpwf2 pic.twitter.com/smgSIPHyr4
— Regis Media (@RegisMedia) July 27, 2018
Before I get carried away..
- Yes I invest heavily in private equity. I’ve invested hundreds of thousands of my own money in Pension PlayPen and now AgeWage.
- Yes I do pay a fortune to invest in funds like Fundsmith and L&G’s Future World.
- And no I am not invested in zero cost funds (yet).
I do believe that entrepreneurs , backed by private equity , can achieve more quicker – which is why I will be seeking private equity to grow my businesses.
I do believe that there are good men like Terry Smith out there, who can manage selective stocks on a buy and hold basis, better than the allocations within an index.
I fervently hope that the money I have in expensive index funds, can move to zero price funds – where all I am paying is the opportunity costs of not getting the revenues from stock lending. But for now – I am happy to line the coffers of passive fund managers – because I prefer paying a little over the odds to them for what I know, than an indeterminate amount to active managers, whose charges could be anything… As Robin has me saying!
And finally for advisers…
In a recent blog, I explained why I see value in financial planners and little value in wealth management. Had I had the savvy to read Robin’s timeline, I’d have had the blog in a picture.