The brokers would get their 5% plus ongoing from a product, regardless of what fund it was in.
Standard Life GARS Fund
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LDFerguson
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I've no quibble with lambasting brokers who mis-sold GARS or any other fund or product to clients.
I just think that your point here - highlighting is mine - is irrelevant in this discussion.
Every product available from Aviva, Irish Life, New Ireland, Standard Life, Zurich Life - the lot - has the option for a broker to charge 5% commission & ongoing trail if they choose to. And has done since long before GARS was ever launched.
So this fact is irrelevant in a discussion about a single fund from a single provider. The exact same commission terms were available on every product and every fund from every provider.
Gordon Gekko
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You’re missing the point entirely.
It didn’t matter what GARS was or what it did because it paid 5%. That’s all that mattered to a certain type of broker.
It’s ridiculous to dismiss the 5% aspect because it’s a charge at product level or because other ‘things’ could also generate the 5%.
GARS was the perfect ‘thing’ for dodgy brokers to flog. Smoke and mirrors. A silver bullet, seemingly, in the context of returns. And an ability for the broker to get paid up to 5%. It’s irrelevant that he or she could get paid the same on other things such as equity or multi-asset funds. GARS had a USP.
I find it bizarre to see good brokers arguing that the 5% upfront commission has nothing to do with a discussion regarding the volume of GARS missold in this country.
It was the perfect angle for the dodgy broker…“Let me tell you about this one, Jack. It’s one of them hedge funds. And it’ll give you cash plus 5% a year no matter what markets do. I would recommend putting the whole million into it.”
You think the 5% commission available on a sale of this ‘solution’ isn’t relevant to the discussion? If there was no 5% commission, hardly anybody would have ended up in GARS, so the problem wouldn’t exist! It’s a problem created by bad brokers!
It didn’t matter what GARS was or what it did because it paid 5%. That’s all that mattered to a certain type of broker.
It’s ridiculous to dismiss the 5% aspect because it’s a charge at product level or because other ‘things’ could also generate the 5%.
GARS was the perfect ‘thing’ for dodgy brokers to flog. Smoke and mirrors. A silver bullet, seemingly, in the context of returns. And an ability for the broker to get paid up to 5%. It’s irrelevant that he or she could get paid the same on other things such as equity or multi-asset funds. GARS had a USP.
I find it bizarre to see good brokers arguing that the 5% upfront commission has nothing to do with a discussion regarding the volume of GARS missold in this country.
It was the perfect angle for the dodgy broker…“Let me tell you about this one, Jack. It’s one of them hedge funds. And it’ll give you cash plus 5% a year no matter what markets do. I would recommend putting the whole million into it.”
You think the 5% commission available on a sale of this ‘solution’ isn’t relevant to the discussion? If there was no 5% commission, hardly anybody would have ended up in GARS, so the problem wouldn’t exist! It’s a problem created by bad brokers!
Duke of Marmalade
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Whilst I agree with you @Gordon Gekko the real fault is with the provider. They all promise alpha, that they can beat the market or the opposition. The Central Bank should issue a clear warning that there is no such thing as a magic formula, in fact there is no such thing as any major provider having ex ante superior investment skills compared to its peers.
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http://library.standardlife.ie/Press/2013/2013_05_07_GARS_over_%E2%82%AC1bn.pdf (Press Release 2013)
Not one of the 700 that 'sold' the fund but someone did seek it out on an execution only basis. Probably on the back of it's performance at that particular time.
Two years later
Three years after that
Not one of the 700 that 'sold' the fund but someone did seek it out on an execution only basis. Probably on the back of it's performance at that particular time.
Two years later
Three years after that
LDFerguson
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Perhaps I am missing the point. In the main I agree with you. Over the years I've heard variations of the following claims as to why XYZ fund is the next big thing...
- Our fund manager is one of the most skilled asset-pickers in the business. (So why is s/he still working for a wage and not in the billionaire category?)
- We have developed an algorithm that can successfully identify market trends etc. etc. (Really? So you've managed to do what some of the greatest minds on the planet have failed to do over a century: develop a successful mechanical investment timing system?)
- Our highly complicated fund has a secret sauce that you wouldn't be able to understand but it enables us to offer higher returns with lower risk. (Expletive.)
I'm still unclear as to why you zoomed in on 5% commission availability as a negative in a discussion on GARS. There's an entirely separate debate to be had about whether or not commission in general is a bad idea. There's no doubt that if you wave big euro signs in front of a bad broker, the temptation will be to sell at all costs. GARS or any other fund out there.
As a secondary point, if you read your 5% post again, one could be forgiven for reading in it a suggestion that GARS was mis-sold because it paid more commission than other funds. I don't think you intended it to appear that way.
Again - I'm not defending GARS. It was a very complex hedge fund and it performed very badly. It promised returns and it didn't deliver on those promises.
Gordon Gekko
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I think we’re essentially in agreement and debating nuance and my interpretation of something versus yours.
Duke of Marmalade
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An interesting philosophical debate as to whether GARS was missold.
I really don't think you can blame the seller if they simply repeat the message given by the provider. Are advisors/sellers meant to verify the claims of highly respected, highly regulated and bursting with expertise providers?
So there is no misselling here - the sellers were acting in good faith.
So are the providers guilty of knowingly packaging snake-oil? That would be product recall territory and maybe even fraud but not misselling. But we should probably give them the benefit of the doubt, they maybe believed their own hubris,
I really don't think you can blame the seller if they simply repeat the message given by the provider. Are advisors/sellers meant to verify the claims of highly respected, highly regulated and bursting with expertise providers?
So there is no misselling here - the sellers were acting in good faith.
So are the providers guilty of knowingly packaging snake-oil? That would be product recall territory and maybe even fraud but not misselling. But we should probably give them the benefit of the doubt, they maybe believed their own hubris,
LDFerguson
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It is indeed an interesting debate. I don't think it's quite as simple as letting all sellers off the hook for simply repeating a fund provider's message. Every fund provider going has a highly-skilled marketing team with the job of making their offerings look as attractive as possible. We can't just accept all the marketing. At an extreme, think about our dear friends the structured deposits or tracker bonds. The providers of those are also highly regulated and staffed with folk of great expertise. Yet a broker worth her salt would be able to evaluate them and conclude that the odds of the investor actually getting back more than the minimum guarantee are usually poor.
On the other hand, some funds are so complex and opaque that it would be difficult for most sellers to really understand what an investor's prospects are. I'm reminded of the Peter Lynch quote "Never invest in any idea you can’t illustrate with a crayon." Are complex funds always to be avoided by the retail investor?
Duke of Marmalade
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@LDFerguson Some structured products were fraud
LDFerguson
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Undoubtedly. But do you see my rambling point? Where does one draw the line between accepting a fund provider's enthusiastic marketing claims and doing one's own evaluation? The latter can sometimes require resources that are only available to a minority.
Duke of Marmalade
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I do see your point. The advisor has responsibilities but in the particular case of GARS it is really a bit much to expect a detailed analysis, they have to trust the provider to some extent. But fair play to @Marc and others for seeing that it was too good to be true.
The 2015 article values GARS at £44bn. The 2018 article values it at £20bn, with effectively zero growth over the previous few years, suggesting a very large outflow. Driven by widespread concern 5 years ago ??
......with hindsight.
Show me the the commentators/advisors who went on record at launch in 2008 rubbishing the fund?
Gerard
www.bond.ie
Not too sure about the timing of the outflows. Another article here on outflows from all absolute return funds (in UK)
I just hope that any outflows in Ireland were to other funds within the same product and not to funds in other providers products.
Currently €267m in Irish GARS Fund. There's also €17m in the SLAC Absolute Returns Global Bond Strategies Fund (launched in April 2015).
Gerard
www.bond.ie
I’ve been going back through my emails to see exactly when I first highlighted my concerns with Gars. I can’t pinpoint the exact date but I did find an Email to Jill Kerby
“GARS really was a train wreck waiting to happen. I called it out as the Emperor's New Clothes almost as soon as it launched.
Indeed you did. J”
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Brendan Burgess
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Hi G
Would Marc's comments in this thread from 2009 help?
Newgrange Fund - BoI.Anyone invested/query?
Has anybody invested in this fund run by Bank of Ireland and if so are there any queries regarding the pathetic performance or other questions ???
www.askaboutmoney.com
And this is what he said in Sept 2008 in the same thread, although it was not about GARS specifically
Newgrange Fund - BoI.Anyone invested/query?
Has anybody invested in this fund run by Bank of Ireland and if so are there any queries regarding the pathetic performance or other questions ???
www.askaboutmoney.com
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Gordon Gekko
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Rory Gillen was also a critic.
Kind of.
A lot of the 'damage' was done at that stage though.
Between launch date in 2008 and 20th August 2009 the SLAC GARS Fund was up 10% and SLAC Global Equities Fund was down 17%
It somehow did what it said on the tin for about 5 years.