In her regular column addressing the latest regulatory issues affecting multi-asset investors, Rebecca Murphy, director at North Investment Partners, discusses how the definition of value has shifted over time.
If you happen to take a quick visit to the VirginMoney.com website you will learn the company refers to having “pioneered” index-tracking in the UK in 1995. At the same time, it also claims to have been responsible for launching the “best value Pep in the market”.
While not wanting to start a squabble, these assertions are questionable on two counts: first, the somewhat liberal use of the word ‘pioneered’ and second, the clear aim to ally index-tracking with best value.
The FSA has been revising its rules of late, with the worthy intention of ensuring the public always be the recipients of appropriate and cost- effective investment solutions.
Any professional offering advisory services to the public must be certain their investment processes are sufficiently robust to weather the regulator’s thorough scrutiny.
Price is an issue, but it is not the only one to consider. Risk is another important factor, so too changing personal circumstances. The list goes on. Perhaps value is the primary goal of advisers and investment managers, both of whom should be looking to provide not the cheapest, but the most fitting solutions.
Indeed, there are a growing number of cost-controlling strategies available – foremost among them perhaps, actively managed investment portfolios that include keenly-priced passive funds.
Back in the 1990s, the fund managers Richard Branson purported to lambast were those who charged high fees for mediocre, if not downright poor, investment performance.
These have always been easy targets, yet Branson’s high profile in the media, combined with his sweeping accusations, were often as much an initiative to undermine active management per se as they were to benefit the marketing of his own relatively highly priced index- tracking fund.
Nonetheless, historically, some active managers have been able to promote their outperformance in a way that enables them to keep their expensive price tags. Yet, the emphasis is changing. The focus now is on delivering returns commensurate to the level of risk deemed acceptable.
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