Are there any honest companies in Finance?

[Palfrem]

Pensioners are being robbed of their savings by insurance companies - Telegraph


Lloyds fined £28m for 'sell or be demoted' incentive plan - Telegraph

Another week and yet more evidence of the "Financial Sector" having more crooks in it than Wormwood Scrubs.

I understand no senior managers have been dragged over the coals and stripped of Knighthoods (again)

 

[Satch]

Yes there are.

But they do not operate in the retail or mass affluent market, which has tended to be the preserve of those dedicated to generating volume at any price.

 

[Palfrem]

So it's just the retail side that views the public as something to be exploited and milked?

Why is that? - Just because they can?

 

[Piff]

It is very difficult for the "small" investor
I have several small pension funds/endowment policies on which I have had indifferent/bad advice in the past.
What do I do now - take further advice where I will get further stitched up or leave them to wallow in their current indifference?
I have no confidence to pay an adviser - convince me I'm wrong....................

 

[Palfrem]

I'm looking to retire in about 18 - 24 months so I'm taking an interest in all this stuff.

But the more I read and research, the more I just want to keep my cash in a tin in the garden.

 

[Charles Morgan]

There are plenty of decent firms, but rules:

No 1 is never buy anything from a retail bank, be it insurance, savings or investment products unless your research indicates it is the best deal (I see flying pigs);

No 2 think fees. Investment returns are low, most investment managers find it difficult to beat the market (research indicates monkeys with pins have similar results to stock pickers on average) so buy cheap - the lower the fees the better.

No 3 Always research and shop around, regularly.

No 4 Always assume you are being ripped off, check all the small print, fees, commissions, redemption terms, the lot. Ask if you don't understand something.

No 5 There is no such thing as a long term investment, anything that takes a large lump upfront under the guise of it being long term is just gouging.

No. 6. If you don't understand something, don't invest.

No 7. If a fund you are looking at buys and sells a lot they are churning - walk away, it eats long term returns.

No 8. Look at your adviser and assume they know less than you think they do. What does a local IFA know about China for example other than what the menu is at the local takeaway?

No 9. Understand risk and reward. If you are being paid a lot of interest for something simple, be careful.

No.10 There are plenty of simple guides to products available. Become informed, it's not expensive.

No 11 Don't listen to people on the internet.

 

[markjay]

....I have no confidence to pay an adviser - convince me I'm wrong....................

Go by recommendation.

I have been working with the same IFA for the past 13 years and can't fault him.

There is a price to pay for good advice of course.....

 

[tali]

IFA's puzzle me - as the best ones should be loaded.After all if they can't earn a fortune for themselves what chance for you?
On the other hand a loaded IFA could be milking clients big time?

 

[markjay]

IFA's puzzle me - as the best ones should be loaded.After all if they can't earn a fortune for themselves what chance for you?
On the other hand a loaded IFA could be milking clients big time?

I think you are confusing IFA with Asset Management...

But either way, these are people who advise you how best to invest your money, buy they themselves may only have a limited amount of their own money to invest.

After 35 years in my line of business, I often find myself giving advice to potential investors about a business they are looking at buying, and add that if I had the money I would buy it myself.

But the fact that I don't have the cash does not mean my advice is not sound...

 

[Druk]

There is no such thing as a long term investment, anything that takes a large lump upfront under the guise of it being long term is just gouging.

If a fund you are looking at buys and sells a lot they are churning - walk away, it eats long term returns.
.

Don't listen to people on the internet.

Thanks for taking the time Charles. Explain 'gouging' and 'churning' please.



.

 

[Charles Morgan]

Gouging - taking too much out (in this case paying all the commissions due over the life of the product up-front to the intermediary).

Churning - milking a portfolio for commission by buying and selling inordinately - so lots of broking fees that they take a cut of, as well as eating your capital by way you losing the bid offer spread on each investment (you sell lower and buy higher).

 

[Palfrem]

I don't mind paying for advice from a good source.

However, trusted advisors sold us Equitable Life and an endowment mortgage.

..must remember CM Rule #11

 

[Charles Morgan]

Equitable Life was a tragedy - numerous good people lost out, numerous good advisers recommended it as it did pay more because it didn't spend much of its return on selling. Having financed one or two insurance companies all I know is you'd have to be an actuary to begin to understand their finances, and mere IFAs wouldn't have an earthly.

 

[Satch]

So it's just the retail side that views the public as something to be exploited and milked?

Why is that? - Just because they can?

Pretty much.

I used to work on the Investment Banking side and whenever we had to deal with Retail banking or Asset Management arm it was a cause for concern.

They viewed everything in terms of sales volume, driving down cost by offshoring, employing staff in regional centres who were well intentioned but did have any real experience and worst of all trying to make everything a thought free low cost process.

So once rubbish product or way of doing things was introduced, they just ploughed on driven by "management" which was just as dumb but held themselves to be the finest and best, and paid accordingly. They set themselves up to receive mucho Wonga if they met new business targets, irrespective of the chaos that resulted long term

Private Wealth Management was very different, the main difference being that without $3m or equivalent of investable assets they would not even talk to you and worked off establishing long term relationships with individuals families, Trustees etc.

The other main difference was if they screwed up or did something stupid, they would find themselves on the wrong end of expensive litigation, not some snotty letter from a useless Regulator

They really used to upset the muppets by putting their clients into assets and products from competitors if the in house offering did not suit or was poor.

I self invest now, and the one thing everybody should have is a Trading ISA, something like this:

Trading ISA & Stocks and Shares ISAs - TD Direct Investing UK

(other providers are available)

 

[Benzowner]

The Lloyds fine was against them for treatment of their staff, not what they sold. Surprisingly the product the staff had to sell did work well for the investors as it was based on the FTSE

 

[baxlin]

Churning - milking a portfolio for commission by buying and selling inordinately - so lots of broking fees that they take a cut of, as well as eating your capital by way you losing the bid offer spread on each investment (you sell lower and buy higher).

Quite true, but by investing in UTs or OEICs on a "Platform", where there is no bid/offer spread, (initial fee/charge will of course be agreed with adviser in advance) usually the only charge to switch between funds and/or fund managers is literally for admin, say 0.2%, so churning for bid/offer should be a thing of the past.

Equitable Life was a tragedy - numerous good people lost out, numerous good advisers recommended it as it did pay more because it didn't spend much of its return on selling.

Didn't they?

TBH, I think that EL had low charges was a bit of a fallacy, particularly as insurance company charges in their day, particularly with profit, were far from transparent. What they made great play on was that they didn't pay intermediaries, what they didn't say was that their own salesmen were paid rather well...............

 

[johnsco]

So once rubbish product or way of doing things was introduced, they just ploughed on driven by "management" which was just as dumb but held themselves to be the finest and best, and paid accordingly. They set themselves up to receive mucho Wonga if they met new business targets, irrespective of the chaos that resulted long term
QUOTE]

There is much talk about the financial sector (and rightly-so).
Sadly - Much of the above could apply to many companies in manufacturing over many years.
Many engineering companies have little direct interface with the public, and so their "crimes" go unseen and receive little comment.
As in all sectors ... There are the good ones and the bandits.

 

[Palfrem]

So once rubbish product or way of doing things was introduced, they just ploughed on driven by "management" which was just as dumb but held themselves to be the finest and best, and paid accordingly. They set themselves up to receive mucho Wonga if they met new business targets, irrespective of the chaos that resulted long term
QUOTE]

There is much talk about the financial sector (and rightly-so).
Sadly - Much of the above could apply to many companies in manufacturing over many years.
Many engineering companies have little direct interface with the public, and so their "crimes" go unseen and receive little comment.
As in all sectors ... There are the good ones and the bandits.

Not sure it's valid comparison.

Dodgy manufacturing company - I have wasted a bit of money on a cr@p product

Dodgy Financial company - My life savings are down the toilet