SOMETHING FOR THE WEEKEND
We’re probably all familiar now with the sneaky way that banks fail to move customers’ money to accounts with higher rates of interest, or even tell them about better deals that they can offer them.
Well, UK asset managers are doing exactly the same thing to investors — only the amount of money involved is generally far, far higher.
When fund managers were banned under the Retail Distribution Review introduced in 2013 from paying commission to advisers, many of them cut the fees they charged new investors. The Financial Conduct Authority also told them to move existing investors to cheaper versions of their funds, known as an “unbundled share class”.
But, according to data from Fitz Partners, a fund research company which specialises in calculating how much investors pay, more than two-thirds of the assets managed for retail investors remained in the more expensive funds in 2015. As a result, investors paid around £2 billion a year more in fees than they would have done if they had been moved to cheaper funds.
TEBI: How YOU can help
It was almost exactly two years ago that I first had the idea for The Evidence-Based Investor. I was becoming increasingly exasperated at the state of investment journalism in the UK and Europe generally, and particularly the way that product providers and retailers were setting the editorial agenda. I was dismayed, too, at the almost total lack of attention given to the academic evidence on how investing actually works.
In the 20 months since the site went online, I like to think that TEBI, in some small way, has helped to redress the balance.
But as Jason Zweig from the Wall Street Journal says, standing by your principles and telling the truth about investing isn’t always easy — especially when most people are happy to be lied to. It certainly isn’t a road to riches.
Bogle on Brexit, Trump and political division
In case you missed it, CNN ran an extended interview with Jack Bogle on Saturday and, as you’d expect, it was brimming with wit and wisdom.
As well as Wall Street and the financial markets, Bogle had plenty to say about American society under president Trump. He also waded in on Brexit and his dislike of the use of referenda to decide important political issues.
See you in California!
The inaugural Evidence-Based Investing Conference in New York City in November was such a blast that we’re doing it all again — in California!
The good news is that this event is going to be bigger and better. For a start, it’s being held over three days rather than one — the dates are June 25-27 — and the venue is the stunning Monarch Beach Resort in Dana Point.
Speakers include Michael Mauboussin from Credit Suisse, Rob Arnott from Research Affiliates, Eduardo Repetto and David Plecha from Dimensional Fund Advisors, and Barry Ritholtz and Josh Brown from Ritholtz Wealth Management.
Podcast Episode 12: Vanguard sets its sights on Europe
Everyone knows by now how phenomenally successful Vanguard has been in the US in the last few years. But it’s not doing badly elsewhere in the world either.
For the latest TEBI Podcast, I’ve been interviewing Dr Peter Westaway, Chief Economist and Head of Investment Strategy for Vanguard Europe.
How funds use IPOs to inflate performance
As every TEBI reader knows, plain and boring, fuddy-duddy index funds are by far and away the best investment vehicles for long-term investors to use. But whether it’s cars, tech, fashion or investing, most of us prefer products that are shiny and new, and the fund industry knows this only too well.
Larry Swedroe wrote an excellent post for ETF.com the other day in which he explains how fund houses use initial public offerings, or IPOs, to make their latest products look, erm, rather better than they really are.
Also worth a look or listen
Adviser 2.0:
Transparent firms lose fewer clients
Podcast: Whatever happened to the Sketch Guy?
An example of how to answer your client questions
Other:
Another big hedge fund bites the dust (Matt Goldstein)
Ten headlines you’ll never see in the financial media (Dan Solin)
Seven psychological quirks that destroy investment returns (Monevator)
100 is the new 80 — the implications for investors of increasing longevity (Matthew Lumsden)
The volatility of your portfolio isn’t meant to be the most interesting thing in your life (Tim Maurer)
The investing industry has a big problem. The solution is a greater transparency (Preston McSwain)
Active fund managers like to diss passive funds, but just now they can’t get enough of them (Dani Burger)
Survey shows Americans are stressed by retirement preparations — but doing little to prepare (Kevin McCoy)
“Narratives impose a rationality on market action that is random and meaningless” (Barry Ritholtz)
“There is not an investment profit so good that there is not a fee that can make it bad to the client” (Nathan Vardi)
“Headlines are what mislead you, because bad news is a headline, and gradual improvement is not” (Michael Batnick)
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
