The recent Financial Conduct Authority’s (FCA) long awaited final report into the asset management industry reinforced the evidence that we’ve known for some time;
1. Investments funds should compete on price, but clearly, they don’t, as the net profit margin of most asset management firms is still extraordinarily high (36%).
2. Paying a high price for a fund doesn’t guarantee better performance, merely increases the risk of poor (net – after fees and expenses) performance. For more evidence of this, watch this short video from Dr David Blake, Cass Business School, and one of the world’s leading authorities on fund performance.
3. Many fund management firms do not automatically put the interest of their clients first and the FCA concluded “investors may not be achieving value for money”.
So, you might be reading this and thinking when will anything change, having also read our comments on the FCA’s previous interim report?
We’re already seeing a seismic shift away from these traditional and outdated practices, note the extraordinary rise of Vanguard in the UK, one of the very few fund management firms who return the benefits of increasing scale to their investors by dropping their fees as their fund size grows.
But the report still refers to yet more consultation, much like the getting ready to get ready principle we’ve long been aware of.
But there’s a quicker and simpler solution, investors stop leaving your money with companies that look upon you as a mere “cash cow” and move to evidence based lower cost proven providers!
If you have a question, we at Swindells Financial Planning are always pleased to help. You can call us on 01825 76 33 66 or complete a contact form.
