Review your investment funds regularly…or else!

Sunday, 18th January 2009 09:28 - by Resident IFA

Many moons ago I worked in bancassurance, ‘tied’ to the products of my employer alone. I saw the light and became an Independent Financial Adviser (IFA), but not before I had trained a number of new Advisers for the bank in question. One such fellow has now chosen the Police as his career, feeling that providing financial advice was never quite his ‘calling’ (although he was a good and diligent Adviser). He recently asked me to ensure that 7 of his more personally-valued, not necessarily financially-valued, Clients in my area (having the bulk of his Clients in a separate County) were given the option to talk to me rather than become ‘orphans’. I saw one such Client on Tuesday. She was not one for the minutiae, it being a struggle to keep her attention through my ‘Client Agreement’ regulatory document which explains my status, data protection, reporting, etc. Fair enough…financial matters can be turgid and complicated at the best of times. This aside, one thing she said alarmed me. Now, this is not a criticism of her, but perhaps she is not alone in thinking this. When I mentioned reviewing the funds she held within her investments to see if they were still appropriate for her and performing well, she countered with “I am sure X (my old colleague) recommended the best funds”. I am quite sure she is 100% correct - the funds were well-known ones with good track records a few years ago when recommended to her. Of course, the problem comes in that a fund which may have been a ‘star’ may now be, if not a ‘dog’, slightly lacking of its former lustre i.e. the excellent fund manager has moved to a different company. A decent analogy, I think, is a football one…yawn! Take a few years ago, Chelsea were winning consecutive Premier League titles, but they scored 2 goals in the last 3 minutes yesterday to avoid slipping to 4th in the current league positions. A lot of clubs would like to be 4th in the Premier League, but it represents a diminishing performance level for a club such as Chelsea. The same can be said for investment funds - a good fund recommended a few years ago is not automatically still ‘Top of the Pops’. Many internal and external events can lead to a fund’s performance falling off the edge of a cliff…sometimes in rapid fashion. The 2 morals of this story are: - Find a good IFA who wants to do their job properly or not at all, ensuring a new Clients investment funds are reviewed and still ‘risk-appropriate’ for them and their current circumstances - The only certain thing in life is change…even in the oh-so-predictable (!) world of collective investment funds Until next time…