The brokers would get their 5% plus ongoing from a product, regardless of what fund it was in.
The brokers would get their 5% plus ongoing from a product, regardless of what fund it was in.GARS was a dream come through for the many bad eggs who reside in the broker world. It paid 5% upfront and ongoing income. It was complex, which meant smoke and mirrors to blind the client. And it did well initially. But the poor clients were like lambs to the slaughter.
That nuance isn’t really relevant though, because GARS gave the bad brokers smoke and mirrors and was not understood by those same bad brokers. The same can’t be said for an equity fund.
The issue is not with Standard Life per se. It’s with the brokers who missold GARS as a land of milk and honey to unsuspecting clients. Most if not all of those brokers had little or no idea what exactly GARS was or how a hedge fund works. But it paid up to 5% upfront commission and ongoing fee income for the brokers, so it ticked the box for them.
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!
I think we’re essentially in agreement and debating nuance and my interpretation of something versus yours.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...
A bad broker (or fund manager) using any or all of the above to sell any fund to an unwary punter is selling snake oil.
- 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.
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,
@LDFerguson Some structured products were fraud
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.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.
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 ??
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 ??
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......with hindsight.
Show me the the commentators/advisors who went on record at launch in 2008 rubbishing the fund?
Gerard
www.bond.ie
Show me the the commentators/advisors who went on record at launch in 2008 rubbishing the fund?
The real point is the Hedge funds and Absolute return funds are not an “asset class” they are a compensation structure.
Nearly forty years of academic research has shown that traditional managers are unable to outperform the markets by anything more than that which we expect by chance.
"The idea that any single individual without extra information or extra market power can beat the market is extraordinarily unlikely. Yet the market is full of people who think they can do it and full of other people who believe them.....Why do people believe they can do the impossible
And why do other people believe them?"
Hi G
Would Marc's comments in this thread from 2009 help?
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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