INVESTMENTS! – Active versus Passive or Active and Passive.

Some Advisers have debated long and hard whether Active or Passive Investing is better in the long term.

In more recent years, the passive advocates’ voices have been heard loud and clear but this of course misses the point that there remains a number of hugely talented fund managers who have managed to beat the market, some by a significant margin, over time. The key, of course, is being able to find them.

I am fairly agnostic in this debate and believe that it is important to give clients the choice of both active and passive solutions while at the same time sticking to my mantra of Diversify, Diversify, Diversify, and matching whatever portfolio is best for the Client in terms of his or her Risk Profile at a reasonable cost.

I try to give my clients a balanced view on both sides of the argument and allow them to make an informed decision on choosing one strategy against the other.

There is of course a third way and that is blending the two strategies to give a good mix and using the investment house’s expertise in choose which funds should be actively managed and which should be passively managed. That choice is not set in tablets of stone and the blend is open to movement between both strategies depending on circumstances.

Of course like all investments, past performance is not indicative of future performance and the value of investments may go down as well as up. Also, the income generated by investments is not guaranteed and may fluctuate. Lastly you should be aware that you may receive back less than the amount that you invested.

If you would like more information, on this subject ( or any other, for that matter ), please feel free to contact us. A no obligation meeting is available should you wish. And I’ll buy the coffee!

 

 

Claire Trott: Public still has it wrong on pensions versus property

Latest statistics show personal pensions, in particular, get a bad rap

The recently published preliminary estimates from the Office for National Statistics’ Wealth and Assets Survey make for interesting reading with regards to how people view pension savings and how safe they are.

This survey has been run numerous times in recent years and it is always clear those questioned see employer pensions and property the safest way to save for retirement. They have actually attracted an even greater share of the votes in the last two rounds of the survey than previously.

The fact employer pensions saw 40 per cent of votes is a good thing but it does not tell the whole story. I wonder how much of this increase is because of automatic enrolment.

What is disappointing is that only 13 per cent thought that personal pensions were the safest way to save. With the move from defined benefit schemes to defined contribution schemes, there will be very little difference in the two. The fact employer schemes should at least have some additional contributions may make them more popular but it does not make them any safer.

It will be interesting to see if this becomes more aligned in future when DB schemes become even rarer.

On the flip side, when looking at which method of saving for retirement will make the most money, employer pensions came in a poor second, with 22 per cent of votes.

The top spot went to property, with 49 per cent. While this is no surprise, it does begs the question as to whether this is the right way for the public to consider it.

I know that the question put to the voters was not about what they had actually invested in but it is clear that those looking for bigger returns consider property to be the best option.

Of course, this is often not the case.

As we know, pensions offer tax relief and tax free growth while invested, whereas property has ongoing costs, costs when finally sold and tax on profits.

And personal pensions? 6 per cent of those surveyed believed they would make the most money. This is the most disappointing finding. We all know they are able to invest in the same, if not a more diversified, range of assets than the employer schemes and even property in some cases.

The need for education about retirement options is still clear. Retirement is not a single investment at a single point in time. All the options in terms of saving for the short and the long term need to be considered. All savings can work for retirement; clients do not need to put all their eggs in one basket.

As always, advice is key as they progress through life.

 

Claire Trott is head of pensions strategy at Technical Connection

Pension cold-calling ban to be in place ‘by June’

A ban on pension cold-calling will be put into law by June this year after the government introduced amendments to the Financial Guidance and Claims Bill.

The Bill, due to reach the House of Commons report stage on Monday 12 March, now includes a cold-calling ban and pension guidance provision.

The Work and Pensions Committeesaid the amendments brought the Bill into line with its recommendations designed to protect pensioners against scams and boost the take-up of free independent pensions guidance

Committee chair Frank Field said: “The government is now almost there, within spitting distance of what the committee proposed. I am delighted that they will be bringing forward a ban on pensions cold calling by June, as we called for.

“This represents a major leap forward in the urgent fight to protect pensioners’ savings against scams and sharp practice.”

He added: “On pension guidance, the government has moved much closer to the committee’s aspiration that the taking of independent expert guidance should be the default course of action when accessing a pension pot.

“The government can now give even greater reassurance by explicitly specifying on the face of the Bill, rather than in an explanatory memo, that the public guidance body will be the sole source of the ‘appropriate pensions guidance’.

“Guidance must come from independent and impartial experts, rather than from self-interested pension providers, if individuals are to make the best use of their savings.”

Expert guidance

Under the amendments, pension schemes will be required to ensure people seeking to access their pension are “referred to appropriate pensions guidance” and “has either received appropriate pensions guidance or has opted out of receiving such guidance”.

No reference to independent financial advice is included in the amendments, however.

The Work and Pensions Committee said it was “to ensure that clients are to be directed towards the independent guidance service”.

It added: “The explanatory statement to these amendments indicates the government’s intention that this guidance will be provided by the new Single Financial Guidance Body.”

An additional amendment makes it clear that the FCA’s rules should make provision about how individuals are to indicate that they have received guidance or expressly opted out.

 

The above is a copy of an Article from “Professional Adviser” dated 6th March 2018

 

Talking to clients about Ethical and Sustainable investing