Tempting as it might be to write about New Year’s resolutions and why they rarely work, we’d rather briefly reflect on the last decade and ponder what may lie in store for investors and clients in the next decade.
Our deep beliefs and consistent messages state that we do not believe in market forecasting or speculating what may happen next in the investment world and investing accordingly.
The last decade
The last decade has shown, with the spectacular advance of evidenced based low-cost index investing around the world, that the overwhelming evidence is against the traditional “active/speculative” investment style. This shift will most likely continue over the next decade, to the benefit of those investors employing a more diversified and lower cost style of investing. Think about the transition and progression of black and white TV’s through to stunning 4K images, we must accept and embrace that change can be a positive and not to be fearful.
The more important lesson for investors is to ensure you do have an investment strategy and you’re not a typical “spray and pray” (random diversification with fingers firmly crossed) investor.
To view the Swindells Investment Philosophy, click on the image below.
The next decade
The balance of probabilities suggests that the next decade is likely to produce far lower investment returns than the previous decade, therefore fees and expenses will come into much sharper focus for everyone. We have already started to see fee reductions from investment management companies, but we’re expecting to see similar reductions in administration and potentially Financial Adviser fees over the next decade. It will simply not be sustainable, and acceptable to investors, for total fees to represent nearly 50% of any investment return received each year, which could easily happen with current fee scales and lower future returns.
Potentially, Financial Adviser fees will shift again from the current predominantly percentage-based fees to reviewable annual fixed fees which more closely reflect the depth and scope of Advice being provided. Percentage based fees can lead to advice that may not be in the best interests of clients and can also result in clients with larger investment portfolios paying significantly higher fees for a very similar service to those with smaller portfolios.
The advance of Artificial Intelligence (AI) into more areas of our lives feels inevitable and this can be a real positive. It is likely that simpler tasks and functions could be commoditised and simplified leaving more complex and nuanced challenges to be resolved by humans. Financial Adviser value will be easiest to measure and quantify within these complex areas and the traditional role of a “simple” investment Adviser will become largely obsolete.
All the above is mere conjecture, what is of the greatest importance is for individuals to be clear about their values and aspirations and the role that money plays in helping them fulfil these lifestyle goals.
Please get in touch if you would like any advice on your financial planning.