We’ll start with an apology. If you’re looking for inspiring, uplifting material to boost your spirits in this cold January weather, our paper review this week is unlikely to help. We start with the sad news that John C. Bogle, creator of Vanguard and the first index fund, passed away last week at the age of 89. RIP Mr Bogle. Given this landmark, the active v passive debate has extended into the money pages this weekend. Now, we all know that the debate around active and passive investment management approaches has been ongoing in professional adviser circles for many a year. We also know that, as professional advisers and paraplanners, you are very well aware of the differences between the two. This includes the benefits that passive funds will bring, such as lower cost and greater transparency etc. Throughout the good times – in bull market conditions such as we’ve seen in the run up to 2018 – such an approach has tended to prove very valuable indeed. However, when things change and market conditions prove more volatile, many will argue that this is the time when active management can really prove its worth. The Sunday Telegraph Money section tackles this age-old debate, with commentators suggesting that now might be a sensible time for investors to look at experienced fund management teams who have reliable, repeatable investment processes, in order to try and capitalise on the opportunities which such volatility presents. As you’d expect, there are warnings to investors that all active funds are not the same – and that sound research is needed in order to identify the funds which are best positioned to deliver.
Depite her winning a no-confidence vote, last week’s historic parliamentary defeat of Mrs. May’s Brexit Withdrawal Agreement has caused concerns in many circles as the uncertainty looks set to continue as to how, when or even if, the UK will leave the EU. One of the possible consequences is a General Election. The Financial Mail on Sunday has set out a warning to readers – and in very strong terms – that should this happen and a Labour victory mean that ‘Comrade Corbyn’ (Prestridge’s words not ours) and McDonnell become the new tenants in Downing Street, that readers would have plenty to be worried about. As he puts it “readers should brace themselves for a *massive assault on their wealth.” The article goes on to cover more orthodox strategies to defend wealth such as using tax allowances now, reviewing IHT strategies and going for a fixed rate mortgage. In amongst the gloom, advisers will, however, be delighted to read the final line of the article, which is “Financial advice is essential.” Whether or not a General Election materialises in the short term is anyone’s guess. However, it’s the kind of article which is quite likely to provoke client interest – ok, we should probably say concerns – and questions at reviews in the meantime so it’s wise to be prepared.
The Sunday Times Business section is also taking a look at what might happen should ‘Comrade Corbyn’ (yes, they use that term too) win a General Election in the event that this outcome materialises from the Brexit conundrum. They take a different approach to the MoS, as the ST considers the likelihood that the “super-rich” – especially non-doms – will head for new shores in order to protect their wealth rather than be “clobbered for tax by Labour”. High on the lists of countries apparently likely to welcome these people with open arms are Portugal, Italy, Israel, Malta and the UAE. Oh dear, we did warn you that there wasn’t much joy for us to pass on to you in this summary.
Continuing in gloomy mood, the Sunday Times Money section leads with an investigation into what they headline is “fund shops that hide away their fees.” It was just over a year ago that MiFID II regulations came into force in the UK, aiming to make it easier for investors to understand fees and compare charges more accurately. This weekend, Ali Hussein reports that some investment firms will only disclose full costs after customers have signed up and also that because firms have interpreted the rules differently, it’s still difficult to compare charges accurately. In our view, this report is probably of more interest to DIY investors and is unlikely to provoke much debate between clients and professional advisers. We’ll leave it there.
In the latest article of their “Pension Equality” series, The Sunday Times has an excellent article highlighting the fact that workers who need to top up their state pension should act now. The costs of doing so are set to rise from April 6 so the article explains how people can check if they have the requisite 35 years of NI contributions needed to gain the full state pension, or if they have any missing years which could be usefully made up by making lump sum payments now. There is a warning that such a process could take some time to complete, and that those who are considering buying extra years should get their skates on.
Meanwhile, Ian Cowie has sensible words for investors given all the political uncertainty which is driving market sentiment and challenging confidence so dramatically at the moment. He reminds readers that panicking and selling investments when prices are falling is not a sound approach. As he says, “ buying high and selling low is the opposite of the way to make money.” Instead, his words will echo the sentiment of professional advisers, stressing the need to have a long term investment plan and to stick to it, to see out periods of volatility and to focus on the long term strategy. We’d agree with that Ian!