AVC's not performing / selecting a fund risk related with IRISH LIFE


You are 100% right in saying that brokers cannot see IN ADVANCE. None of us unfortunately have a crystal ball.
However what is important to note is that the falls in the market, take 2020 for example did not happen over night. It took nearly 4 weeks to bottom out starting from just before the country received its first positive case of Covid 19 in February until after St Patrick's Day.
Also I think it is fair to say that that even before Ireland had its first confirmed case of Covid 19 that there was a lot of worry and uncertainty.

What I was trying to point out was that just because your AMC is higher, that does not necessarily mean you will not have as much return.
 

All of the things you mention above that happened in 2020 are only known with hindsight.

Market timing is impossible unless you have a crystal ball.

So if you don't have a crystal ball, then why would anyone pay you a higher AMC?
 
Dave Vanian said:
All of the things you mention above that happened in 2020 are only known with hindsight.

Market timing is impossible unless you have a crystal ball.

So if you don't have a crystal ball, then why would anyone pay you a higher AMC?
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Why would someone pay a higher AMC.
Simple answer is for the service they provide and experience that goes with that.
 
Dave K said:
Why would someone pay a higher AMC.
Simple answer is for the service they provide and experience that goes with that.
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I have no problem paying someone extra for extra service. I have no problem paying someone extra for their experience if they can demonstrate how that experience will benefit me.

This is the bit I have a problem with... being advised to switch funds in order to avail of fantastic opportunities.

Dave K said:
Take this year for example, there was a fantastic opportunity for growth but it would only have happened if there was contact between advisor and client and with switching between funds.
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Brokers can certainly provide a useful service in advising on:
- correct type of pension product
- options from different providers
- determining the appropriate, tax effective contribution level
- helping the client to understand the investment risks and potential growth
But I would walk away from an advisor who claims they can tell me in advance as to what markets/funds/investment will perform best. If they had such perfect foresight, they would not be telling the secret to others (even for a fee). Professional advice can be very valuable, but you need to know what advice you are paying for.
 
But I would walk away from an advisor who claims they can tell me in advance as to what markets/funds/investment will perform best.
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Conan 100%... I would not trust a broker who will try tell me what fund will perform best. That is just not going to happen.

But unfortunately the way the industry is there can be a big gap between different advisors and the advice they give.
 
This is the bit I have a problem with... being advised to switch funds in order to avail of fantastic opportunities.
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To take how you have quoted it, I would have a problem advising people to switch funds for fantastic opportunity.
That is different to me saying that this year did provide an opportunity for people to achieve further growth. And some of my clients have achieved that by switching funds. That is a fact.
 
Dave K said:
This is the bit I have a problem with... being advised to switch funds in order to avail of fantastic opportunities.
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To take how you have quoted it, I would have a problem advising people to switch funds for fantastic opportunity.
That is different to me saying that this year did provide an opportunity for people to achieve further growth. And some of my clients have achieved that by switching funds. That is a fact.
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But that’s hindsight. Every year provides opportunities for “further growth”, whether markets are on the up or on the down. That’s a given. What’s not, is knowing in advance what those opportunities will be be.
 
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But that’s hindsight. Every year provides opportunities for “further growth”, whether markets are on the up or on the down. That’s a given. What’s not, is knowing in advance what those opportunities will be be.
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Absolutely,
and to point out I have not once said otherwise. But feel like some of the responses are challenging that.

We have gone way off point here, so apologies to the thread. maybe some cleaning up will be needed.
 
Dave K said:
Absolutely,
and to point out I have not once said otherwise. But feel like some of the responses are challenging that.
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I am certainly challenging the notion that a broker can justify charging a higher AMC with the promise of better fund performance, by using fund switches.

Dave K said:
While the charge may be higher else where, if you are getting solid advice you could and should expect a much better return even taking your risk rating into account and the higher AMC will be worth it.
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It certainly seems to me from what you've said above that you advise your clients to switch funds to avail of opportunities.

In the first quote above you say that a higher AMC will be worth it if the client gets a much better return. But the client is locked into the higher AMC from the start, for the life of the product. How do you know that you're going to get them a much better return?
 
I am certainly challenging the notion that a broker can justify charging a higher AMC with the promise of better fund performance, by using fund switches.

Firstly on this Dave Vanian I do not promise my clients a better fund performance than anything or anyone else. But certainly feel free to jump to any conclusion you wish. At no point have I made that claim that I can provide better fund performance.

It certainly seems to me from what you've said above that you advise your clients to switch funds to avail of opportunities.
To untwist your words again, I did not say switch funds to avail of opportunities. I said that there were opportunities for people to achieve growth, (as Conan agrees this is a given as every year there is opportunities to achieve growth) and that some of my clients have achieved that with changing funds. There is a difference.
I provide advice to my clients on an ongoing basis. At times yes I may recommend a client to switch a fund, maybe de-risk for a period of time etc. I provide advice to my clients and some may take it and others don't. My clients have the choice.


In the first quote above you say that a higher AMC will be worth it if the client gets a much better return. But the client is locked into the higher AMC from the start, for the life of the product. How do you know that you're going to get them a much better return?

Dave finally, as you agreed i said 'a higher AMC will be worth it if the client gets a much better return'...... if you would like for me to expand, i can say 'A higher AMC will not be worth it if the client gets a lower return'..... They are just statements, both equally valid.
At no point I have said that I am going to get them a much better return. I have at no point made that claim.

Sometimes financial advisors focus mainly on the AMC and I am just pointing out that just because the AMC may be lower it doesn't always mean it will be better overall, and also just because the AMC is higher doesn't mean it will be worse off.

Also at no point I have advised what charges I apply to any of my clients.

But i agree with you, if someone was making the comments you taught i was, I too would challenge them.
 
Ok, we’ve established that you are not claiming that you can predict what will be a winning fund. Right?

When you say you may recommend that a client “de-risk for a period of time” are you claiming an ability to time the market?

if not, what exactly is the basis for these recommendations?
 
Dave K said:
While the charge may be higher else where, if you are getting solid advice you could and should expect a much better return even taking your risk rating into account and the higher AMC will be worth it.
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So how exactly does a broker provide the better return a client can expect, even taking the client's risk rating into account, so that the higher AMC will be worth it? Bear in mind that the broker has to recommend the higher AMC product at the start of the transaction and the higher AMC applies for the full duration of the contract. So the broker needs to know from the start that the client will get a better return to justify the higher AMC.

You say that a client "could and should expect a much better return". How does a broker go about providing this much better return for the client?
 
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No I am not claiming the ability to time the market.
What is the basis for these recommedations? It is like any recommendation you may give. You provide advice for a certain product, a certain fund a certain provider or what ever it is. You provide this advice based on your knowledge, your experience, resources available to you to name just a few.
When you or if you provide advice to a client to select a fund or number of funds, a product, a provider etc what is the basis for your recommendations?


Dave, That is up to each individual broker to find out how they can do that.
I am sure you have adopted your own techniques or your own way to perform your role to the best of your ability. How you do that is up to you. What you offer your clients is up to you.
My comments (apart from the one I mentioned that I do advise my clients on an ongoing basis and may recommend a fund switch) have all been made as general comments and I was making the point that just because the AMC is higher does not always make it worse off.

From your comments, I take it you do not agree with that statement. It is something you have a habit of questioning when it comes up on pages. Some brokers get paid a commission, some brokers get paid a fee. Some brokers choose lower AMC than others, some have a higher AM.. Which way is the correct way of doing things would you say.
If a broker wished they could take 0% commission, and get any commission allocated to the clients funds, they could take lowest AMC and the client has the best outcome. Not the best outcome for the broker as he wont be paid for his work.
Again I am not saying this is the way I or anyone else works.
 
Okay so you said this to the original poster earlier in this thread...

Dave K said:
While the charge may be higher else where, if you are getting solid advice you could and should expect a much better return even taking your risk rating into account and the higher AMC will be worth it.
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I disagree with this statement. I asked you to back it up by explaining how a broker can do this.

Your reply is...

Dave K said:
That is up to each individual broker to find out how they can do that.
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So you're telling the original poster that they should expect a much better return but when asked to explain, you're saying that each broker must find out how to do this for themselves? Okay, where does a broker go to find out how to get a better return for their client, taking their risk rating into account, to justify recommending a higher AMC product.
 

Again Dave, you have a habit of selecting certain words and omitting others.
If you are getting solid advice(or good advice) I believe that you should get a better return..... A better return to what I am sure you will ask next. A better return than if you get poor advice. (and I am not saying anyone in particular is giving poor advice before that is thrown at me)...
That was the point of the comment, some people will say go for the lowest AMC but that is not always the best result.


My response Dave was to your question.... How does a broker go about providing this much better return for the client?
And I responded saying well that is up to the individual broker to find out.
If your broker wants to further their education, do courses, learn on the job, deal with their broker support, what ever way they want to gain more knowledge is completely up to them. It is not up to me to tell other brokers what they should do. And so i will kindly decline answering that one.

You ask how to justify recommending a higher AMC product... I will ask a question how can a broker justify taking a commission from a client. Why not allocate the commission that is paid to a broker to the clients fund instead so they benefit from it and charge the lowest AMC available. That way the client will get the most out of transaction and the broker can get paid nothing.
 
Dave K said:
When you or if you provide advice to a client to select a fund or number of funds, a product, a provider etc what is the basis for your recommendations?
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Sound Academic / scientific research applied to their circumstances is what the basis should be.

Generally, The equity funds should be a passive index tracking solution, at the lowest total cost, with tax effects taken into consideration.

Maybe a bit higher cost is acceptable if there are some concerns or risks for a given provide/solutionr, or for convenience.
 
Dave K said:
If you are getting solid advice(or good advice) I believe that you should get a better return..... A better return to what I am sure you will ask next. A better return than if you get poor advice.
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Agreed. The Irish tax system and products are complicated, so good advice on that front is important.

The academic evidence is overwhelming; effectively, nobody over the long term, Regardless of how much they study, can offer market timing or fund switching advice that will beat being invested in broad passive market funds.
 
@Dave K I see you are now declining to answer questions which might clarify your earlier replies.

You were the one who said to the original poster...

Dave K said:
While the charge may be higher else where, if you are getting solid advice you could and should expect a much better return even taking your risk rating into account and the higher AMC will be worth it.
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You mentioned switching funds. You mentioned derisking for a period. Yet when it was pointed out to you that doing these, also known as market timing, is detrimental to long-term investment returns, rather than explain how you think your suggestions would benefit people, you chose instead to suggest that it's up to each individual broker to find out for themselves. Your claims that a person could and should expect a much better return would be a bit more credible if you were offering any backup for them as to how exactly these better returns might be achieved.

I can claim on here that I have an investment that is guaranteed not to drop in value and will give me 15% per year returns every year. Unless I can back up such claims with how I propose to achieve this claim, the claim itself is meaningless and not helpful to anyone on Askaboutmoney.
 
To be fair. I think there are studies showing that advisors can be worth their fees and can bring value.

Getting a client out of 'bad' (e.g. very active, high fees) funds have expected future value.

Keeping a client invested, or getting them to invest more in bad times, has value.

There is good advice and there is bad advice. Sometimes the quality of the advice is correlated with the price. Everyone says there advice is good. Especially if they are selling it or their livelihood depends on you buying what they are advising.
 
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