[Estimated time to read: 3 minutes]
I am an insider.
After finishing military service I joined the financial industry.
And it has taken me about a decade for the simple truth to permeate…
That as an independent financial adviser, I am not in sales, but the education business.
The misinformation international investors are bombarded with and the wealth creation opportunities that are missed because of this.
A blog I read last night explains it well:
“The nonsense and frustrations we all witness in this industry every day is the red hot ember that drives us, a prime motivator to push back against the endless firehose of bullshit that the industry manufactures. The single biggest and most profitable product that the industry cranks out every day is bullshit, and each version of it is slicker and better and more dangerous than whatever came before.
“Our organisation's purpose is to create a countervailing narrative to this endless flow of money-losing foolishness. We know that not everyone will be saved, but we can at least provide enough information, data and commentary that an intelligent web surfing investor can find ways to save themselves from the industry’s finest foolery.”
A “quite staggering” new study by S&P Dow Jones Indices (and cited in the Financial Times) has found that,
“almost every actively-managed equity fund in Europe investing in global, emerging and US markets has failed to beat its benchmark over the past decade.”
After performance fees were deducted from performance (to reflect your net return):-
- 86% of European active funds failed to beat their benchmark over ten years;
- 98.9% of US-focused equity funds under-performed;
- 97.8% of global equity funds under-performed; and
- 97% of emerging market funds failed to exploit market inefficiencies.
These statistics are damning.
While you can pick holes in the methodology, the core findings are not in doubt.
Over the long run, as David Blake of London’s Cass Business School puts it,
“the average equity fund manager is unable to deliver out-performance from stock selection or market timing”
In other words,
“your average professional is rubbish at picking stocks, and at choosing when to buy or sell”
Indeed, says Blake, “a typical investor would be almost 1.44% better off per annum by switching to a UK equity tracker.”
Managing other people’s money is a vastly lucrative business.
As a consequence, the international financial services industry has an almost bottomless budget to spend on advertising, marketing and public relations.
Like the Army, it effectively has its own support industries, where newspapers, magazines and entire television stations replace weapon manufacturers and hawkish lobbying firms.
They will think their money is safe in structured products, UCIS funds, QROPS, randomly constructed IFA portfolios or sitting in their banks.
They will continue to trust the charismatic salesperson who vends them toxic rubbish which lines his own - not their pockets.
And they will ignore their surrender values and that nagging feeling that they could have enjoyed better results if only they had known how.
Our independence gives us insight and enables us to make a difference.
To base the information we provide on evidence, not self-interest.
We call this ‘Positive Change’ and it is the reason why we exist.