The Wokingham Paper

MONEY MATTERS: What not to do with serious money!

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If you have a large investment or pension portfolio, the chances are that your adviser may have “out-sourced” the investment management to a discretionary fund manager.

We often receive requests from clients who have large investment portfolios and are coming to the realisation that although they are paying a lot of fees they are not necessarily getting better performance.

They want a second opinion.

When I get my teeth get stuck into the research, my staff are aware that I do not like to be interrupted.

I want to finish what I start and get frustrated by anything that gets in the way of my getting a result for the client.

I had “one of those days” on Monday.

My problem was that I was recovering from the flu. I could have passed the work onto my para-planner, but I woke up feeling well enough and decided that it just made sense to get it done as best I could.

As it turned out, I ended up taking my work home, that happens very rarely.

Why couldn’t I let it go?

It was an irritation, an annoying irritation of having to carry out a professional assessment on a very poor selection of funds in the portfolio presented to me.

Some of the funds included had quite exotic names, such as Carmignac Gestion and Boussard Gavoudian, but rather down to earth, poor performance.

Good funds normally have four or even five-star ratings, but many of their selections had miserable one-star ratings. There were also failed funds that should not be included in any portfolio.

Finally, I twigged what they were up to, they had a mixed bag of funds – just to prove they were diversifying the portfolio. I was unimpressed; to include the type of funds they did – made no sense in current market conditions – it was diversification for show.

The lack of meaningful inclusion of a reasonable amount of investment trust holdings also spoke volumes about their competence and expertise.

My first phase of research over, I asked the client to pop in for a discussion; he couldn’t make it until late the following day.

He came in to see me at 4pm, not the best time for an appointment but needs must.

I was still recovering from the flu, and after two days of intensive research, I felt that I had nothing left in the tank.

I said, you are impressed by the quality of the reports they send you every six months, but I am unimpressed by their work. When you charge fees for managing investments, you need to carry out a lot of work to ensure the investments are properly looked after.

You are not getting bespoke investment planning, I explained, it’s a one-size-fits-all solution. Your best defence is to create an Investment Policy Statement, as this provides clear guidance to your investment advisers, as to how the portfolio should be organised. It also provides you with an element of control.

Well, he said, thanks very much Ray, you have given me so much food for thought that I want to sleep on it.

After all my work, that comment made me feel like I’d been stabbed in the heart. Mission failure.

That’s how the day ended, I felt exhausted and realised that the best thing for me was to go home and get back to bed.

I had some hot whisky and lemon to look forward to.

The next day, I felt a lot better, particularly as my previous day’s appointment called me to inform me that he was handing my firm the job of looking after his investments.

I think you’ve made a very sensible decision, I said.

If you would like a second opinion on your investments, call Ruth on 0118 934 7920 (not if you have the flu though).

Past performance is not necessarily an indication of future returns, and future performance is not guaranteed.

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