Moving the goalposts; doing the best thing changes over time!

Moving the goalposts; doing the best thing changes over time!

My father has been investing for my son and his other grandchild since they were born using a basic trust structure to keep everything simple. Recently he has become exasperated by the fund manager wanting any purchases or sales signed by all the trustees, but accepting any Internet changes without question, although that will change very shortly. For him, this is a nonsense as it is making it harder for him to operate the accounts in a timely manner.

Although I appreciate his pain, I do not believe there is an easy way around this as the fund manager or other holder of the investment must make sure that they are doing the right thing for the trust, or they could find themselves liable for any errors.

For me, I was more concerned that the investments were being brought directly from the fund managers as things have changed. 15 years ago when the trusts were first established, the cheapest way to buy and administer purchases of retail investment units was directly from the fund manager. Over time, the rise of investment platforms, competitive pressure in the investment space and regulatory changes has changed the investment environment considerably.

Back in the late 1990’s, investing in new investment units would cost you a 5% bid/offer spread, an explicit management charge of 1 to 2% and a less explicit cost of running the fund buried in the fund accounts and performance. Often the fund running costs could vary dramatically, depending on how intensively the investments were bought and sold, at the discretion of the fund manager alone. 

Today, with statutory changes in disclosure, competition pressures and more general transparency, buying a fund from a platform or funds supermarket can cost very little, with no initial fees, a similar or slightly reduced management charge, (1 - 2%), and a declared measure of expenses, collectively called the Total Expense Ratio, (TER).

As my father has always picked his own investments, the lower expenses incurred using platforms was news to him.  He is now looking for a platform to transfer all of the assets to. A major factor as to which platform to choose will be how do they administer to the needs of small trusts and the usability of any reporting.

My father has been a successful investment picker, especially for the boys. He has often complained that his choices for the grandchildren have been better than his choices for himself, but  he understands that the level of acceptable investment risk varies dramatically between his own money and for his grandchildren. 

For any self-investor, asking for a sanity check every so often is a valuable control; the financial environment is not unchanging. Systemic changes in the market are not obviously flagged in the consumer space, which seems to concern itself more with stock or unit picking. Buying an hour of professional time for an investment process review could be a valuable investment.

As I found as an internal auditor, doing things the same way, just because they have always been done that way can often lead to disappointment.

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The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.