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14. June 2014 16:00
by Allan

It’s not about you, so it's time to put the investor first

14. June 2014 16:00 by Allan | 0 Comments

Sometimes in life it only takes the smallest of serendipitous moments to change one’s view forever, and when two such moments occur within the space of a few days you really know you are onto something. 

This week saw a conference held at The London Stock Exchange sponsored by iShares entitled ‘European ETFs: At the critical tipping point?’ with the keynote speaker from Google, Dan Cobley. Dan’s simple, but powerful message using Google’s trend tool was that over the last couple of years ETF as a search term has been trending down.  So much for the expansive take up of ETFs in Europe! 

As someone who makes a living to offering ETF managed portfolios to the UK and European market I feel that lack of love for all things ETF first hand.  The trending down for ETFs was not fiction, here were the facts.  What is the reason behind this counter cyclical trend?  Well, at the risk of stepping on a few ‘exchange traded toes’, the industry has spent too much time during the last few years focusing on each other and not putting the investor first.  The negative campaign by some industry insiders regarding the pros and cons of synthetic ETFs and securities lending has back fired quite considerably and seems to have set the market back by a couple of years.

One week earlier, the organizers behind Europe’s largest ETF conference, Inside ETFs, did a truly inspiring thing by chartering a plane from the UK to actively promote and encourage a wider level of interest in ETFs across the financial advisors community.  For many financial planners and advisors this would be their first contact with ETFs, and a special series of presentations were put together by the likes of Vanguard, Lyxor and the other leading ETF providers to help explain the product and proposition.

Having had the opportunity to speak to quite a few of the advisors on that plane I was stunned that after a couple of days in Amsterdam, for some, a somewhat different impression had been left with them.  So there they were trying to get to grips with the benefits of ETFs, and in too many instances all they could hear was this constant chatter about what is meant by ‘Smart Beta’, and other less than edifying debates.  With close to 1,000 ETFs now being listed on The London Stock Exchange, the situation calls for more clarity and not less.  Personally, I love the concept behind smart beta ETFs, but let’s not confuse the end user any more than we have already. 

Why bother putting the investor first when you can impress your fellow professionals?  If I were to buy the latest smartphone from either Apple or HTC I would expect the mobile phone industry to sell me on the compelling benefits of their proposition, and not just focus on the printed circuits inside the phone.  Taking up all of ‘my air time’ showing me how the wiring system inside operates is not how to win me over. I just want to know what it does and how I can use it.

With the recent changes by the UK government around pension annuities and the quite substantial increase in ISA investment levels, ETFs should be more and more considered by any financial planner and end-investor for their ease of use, liquidity, transparency and last but not least low cost.

It’s not about you, so it's time to put the investor first.


7. April 2014 11:47
by Irene

Welcome to the world of ‘Shadow regulation’

7. April 2014 11:47 by Irene | 0 Comments

Politicians can’t always get it right. Nor can the FCA. But lately the FCA has had its fair share of blunders, and that is not just with insurance companies.

Think about crowdfunding. Unlike the Prime Minister, the FCA does not think that the public knows what they are doing or could be trusted with their investments. From next month onwards, inexperienced investors in equity schemes will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses. Just thinking about the extra work that is involved might deter many of us. As Barry James, the founder of The Crowdfunding Centre, says, “it takes the crowd out of equity crowdfunding”. The UK could risk getting behind not just the US in entrepreneurial spirit and innovation, but also France. Both countries let their people choose whether and how much they want to invest in any of these schemes, so why shouldn’t the UK.

Now while I guess most people do not particularly like the regulator, probably most of us feel that some regulation is necessary, especially for a quite risky investment like crowdfunding. But how much regulation is enough? Here is an interesting fact: if the jobs in the private sector of the financial services industry and at the FCA increase by the same speed as over the last 30 years, we will have one person at the FCA for any one person working in finance by 2060. Just think about it, a personal assistant from the FCA for each of us doing all the compliance work for you. Now that’s what I call ‘Shadow Regulation’.

3. March 2014 16:46
by Allan

Who will be the first to tilt at the financial windmill?

3. March 2014 16:46 by Allan | 0 Comments

So what is it with the financial services industry, in the real world they get exciting things like 3D printing whereas all we get is the Bitcoin and the prospect of a Bitcoin ETF!  Don’t get me wrong, I love PayPal, also I think the idea of paying for your goods by waving your credit card at the machine is innovative, and yes I do like the idea of a digital currency as well.  However, as the musical prophet Gil Scott Heron once said ‘The revolution will not be televised’.

No names no pack drill, but I have just wasted a few minutes reading the marketing brochure that came with one of the weekly industry publications that landed on my desk, and all I can say is who writes this turgid stuff?  In the main I can live with boring, but what I am not so keen on is the misinformation that so many underperforming investment managers seem to resort to when the going gets tough.  It’s not clear to me what real purpose these types of firms are serving and presumably it’s only a matter of time before the impact of RDR sweeps them into the history books.

In the finance industry if you are looking to tempt investors into your investment management proposition, the 16 to 30 year age group is definitely not one’s target market.  In just about every other industry this age group is giving their elders a run for their money, but I suspect it will take the passage of a whole generation before the financial services industry gets shaken up. 

Let’s be clear, if this younger age group ever had any money to invest they would not put up with many of the poor practices that their parents have learnt to live with and forever bedevils the industry.

At last years’ Personal Finance Society’s annual event in Birmingham, there were a number of excellent presentations, and none more so than the thoughts offered by Jan Willmott who is an acting consultant for Zurich Financial.  So it was good to see one of the behemoths of the industry actually acting like a ‘thought leader’.  I loved the idea that the latest group added to our demographics vernacular is ‘Generation Alpha’, or what others might know as the ‘Google Kids’. 

On that basis, no prizes for guessing which generation follows alpha.  Given the disproportionate role that technology plays in this industry, don’t be surprised if the likes of Facebook or Google become the first tech player to tilt at the financial windmill.

One thing’s for sure, BitCoin might be cool, but the recent incident of a security breach in one of the digital exchanges that make up the virtual currency ecosystem does suggest the future of financial services might purely become a technology play.  

28. January 2014 09:44
by Allan

‘It’s the product, stupid’

28. January 2014 09:44 by Allan | 0 Comments

So Hargreaves Landsdown has cut their fund supermarket platform fees and all hell breaks loose.  Fidelity has followed suit and mutterings abound that talk of unfair competition.  Who said RDR would not have any real effect on the invest management industry in the UK?  If you are one of those columnists go to the back of the classroom.

Anybody attempting to make sense of all of these news stories invariable faces the same problem, how can one exactly make a price comparison between two different providers in the financial services industry?  Before one gets too incensed here it is worth remembering that if the question could be reduced to comparing two singles numbers then it would be a doddle.  The fact is one instead is forced to compare a range of separate fees, at which point one’s eyes tend to glaze over.

What exactly would define a fair price for financial services?   It strikes me as highly appropriate that the word supermarket is used to describe some of these fund platforms; at least I have my own prejudice view of how I expect them to behave towards their suppliers.  You want your product on our shelves then we’ll dictate the terms, but there is only so much you can charge for the same box of cornflakes.

It stands to reason that the ‘box shifters’ should only earn a fee consistent with being a supermarket. Where the story gets much more interesting though is when one starts to put a different value to each of the boxes being shifted through the system.  In fund management, one we move into the advised space, not all fund products should come with the same management fee, and not all financial advisers should expect to be able to charge the same fees. 

In the main, god forbid, investors expect a return on their investments, but as with the comparison of fund supermarket fees, exactly how should one compare the various fees of the services on offer?  Is an adviser displaying skill when they recommend a particular product?  How much more would you be prepared to pay if an absolute return manager always delivered good returns?  However, with many equity index products up 15% to 20% last year, when is a good return, really a good return?

So there we have it, there is clearly more questions than answers.  As a parting shot it is worth pausing to consider the following fact.  In the 28 years for which there is data for the FTSE 100 Index, comprising more than 7,000 trading days, on no less than 56% of the time the overnight market move was more than 0.5%.  Or that in any one typical year that investment might go up or down by 20%, suggests to me that the time has come when the commentators should stop going on about a few basis point fee reduction here, and a few more basis points there, and instead start talking about the elephant in the room. 

As Bill Clinton’s campaign strategist, James Carville, once said ‘It’s the economy, stupid’, and post-RDR this need to be replaced by ‘It’s the product, stupid’.



27. November 2013 11:30
by Allan

Would you like to help Twenty20 Investments push down the walls of investment management?

27. November 2013 11:30 by Allan | 0 Comments

At Twenty20 Investments we are one of the first fund managers to offer a balanced multi-asset fund as a pension fund solution in an eSIPP wrapper constructed entirely using ETFs. Currently we are on the Praemium platform but are now looking to branch out to other platforms, in particular Transact and other similar ETF friendly platforms.

To do this we are looking to work with a small handful of financial advisers and financial planners who are happy to act as a sponsor for our range of model portfolios. Investment management is full of chicken and egg conundrums; such as your names not on the door and you are not coming in!

As a firm with impeccable credentials but still fairly new to this space we welcome the support of those financial advisers and planners that see every reason to take advantage of the low fees and full transparency that ETF portfolios bring to the table. If you would like to work with us and join those advisers who are helping us push down the walls that hold back the industry please drop me a line at my LinkedIn email address.

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