Passive Investing is Not a Race to The Bottom Line

By Mark Radford 27th October 2016

This article was originally published on Quadrant Group’s website. Quadrant Group was acquired by Progeny in March 2017.

Much has been said lately about the lack of transparency within the financial services industry. The hidden transaction costs and management fees that are typically charged by active fund managers are shocking and unfair. The recent outcry against the latest Investment Association report ‘Investment Cost and Performance’ is deserving. As an advocate of the True and Fair Campaign, it is gravely concerning to me that the IA continue to deny the widespread problems of cost opacity and cost control within the industry. Many firms, however, have responded positively, and alongside the growth of index tracking and passively managed funds, more is being done to lower portfolio charges.

This is a very good result for investors. There are certainly more choices available. Wealth advisers like Quadrant Group offer transparent, low fees and continue to make business efficiencies that have lowered charges well below the average figure of 2.4% per annum.

In the long-term, it’s the added value of advisory services that may be more significant to investor outcomes than the percentage of fees alone.

But with more providers reducing their costs, investors should consider other factors beyond purely focusing on price. In the long-term, it’s the added value of advisory services that may be more significant to investor outcomes than the percentage of fees alone. Investors should be looking for the balance of service value and fees that make sense.

Perhaps it is easiest to relate great financial planning in terms of the questions that advisers can help investors to answer, such as:

  • When can I afford to retire, and could I consider partial retirement?
  • Do I have to downsize my home if I don’t want to?
  • What are the implications if I die or get seriously ill? What will be the financial outlook for my family?
  • What level of financial risk should I be taking?
  • Can I live comfortably and still financially support my loved ones?
  • Are there ways of reducing my inheritance tax liability?
  • What happens if the market delivers really poor returns?
  • How much is enough?

A great planner will help you to find answers to these kinds of questions. They’ll help you to feel confident that whatever life brings, you have financial flexibility. Markets are as unpredictable as life and the value a trusted financial planner will provide gives reassurance and will help you to make informed decisions. Having someone on hand that understands your goals and family circumstances and who will monitor your finances as well as lifestyle goals, with your best interests at heart, is part of the value of financial planning.

Our Wealth Partnership is broken down into four key stages:

Wealth Analysis

Most new clients have a variety of financial bits and pieces accumulated over the years, such as a number of pension plans, with-profit bonds, endowments, life policies and managed funds. Some do not have a clear understanding of their personal goals, whilst others lack confidence that they have what it will take to achieve them. A full audit of your present position, which includes an understanding of your family and financial affairs and your emotional tolerance to risk, will provide a vision for the future, both in terms of your lifestyle and your assets.

Lifetime Cashflow Modelling is incredibly useful in illustrating your financial picture now and into the future. We’ll use these tools to help relate your financial circumstances to your future vision and to understand how the decisions you make today affect your future wealth. This results in a financial plan that is holistic and ongoing.

Wealth Structure

Once the overall picture is agreed, we define a strategy with recommendations to reposition your affairs, potentially across a broad range of areas including asset location, investments, tax, wills and contingency planning. This can be a very complex and time-consuming process with a lot of paperwork, but it will be completely taken care of for you. Such is the value of great financial planning.

Wealth Action

Markets are as unpredictable as life and the value a trusted financial planner will provide gives reassurance and will help you to make informed decisions.

The rationale behind your adviser’s recommendations, together with the tasks and timescales required to complete them, will then be followed through. A timetable that allocates accountability for all the practicalities involved in the transition of assets and the administrative framework necessary to implement your financial plan will be provided. A great financial adviser will enable a smooth and simple administration and implementation process.

Wealth Stewardship

Financial planning is not a ‘set-and-forget’ event – far from it. It is a long-term dynamic process that requires regular communication and reporting in order to provide insight into how things are going relative to your plan and adjust accordingly when required. There may be changes to your circumstances or new life goals that develop. There will also be things like new investment products, refinements to your long-term portfolio strategy and of course, changes in pension and tax law. Some periods may be uneventful while others may be challenging, but a great financial planner will be there to help you to remain on track.

Quadrant Group offers very competitive, fair and transparent fees. However, when selecting a wealth adviser, it pays to consider more than a simple price comparison. Meeting your goals, feeling confident in your future, and having the time to enjoy your life is what really matters.

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This article does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.