Good reads from around the Web.
I like to see the rich being profligate with their money. That’s because I’m pretty worried about a structural shift to increasing inequality [1] in the West, due to everything from technology and network effects to taxation, globalization, and even shifting social mores.
The relentless troops of Trustafarians launching Fintech start-ups in Silicon Roundabout rather than blowing their inheritances in fleshpots and car dealerships dismays me. I want to hear silk slippers coming down the stairs and wooden shoes coming up – not the frugal rich squatting on their gold and shopping for cheap brogues in TK Maxx.
And that’s doubly true of investment fees.
It dismays me when the striving middle-classes pay a financial services firm the equivalent of multiple Porsches through high fees [2] on their relatively life savings – let alone when a blood-sucking IFA [3] tries to siphon as much as 7% from a shop clerk trying to do the right thing with her modest means.
But when the ultra-wealthy spend 2-and-20% a year on their lackluster hedge funds? Mini fist pump! It’s a hedge fund’s most socially useful function.
The notion of the Trumps [4] of this world turning to index funds fills me with dread.
Eat the rich
Of course, a good few of you are pretty wealthy. Heck, I’m getting there myself, in the grand scheme of things.
And like you, I have no intention of volunteering any more of my own resources to supporting the financial services community than I need to.
It’s a classic tragedy of the commons [5], albeit in this instance the commons are rather neatly manicured. We want the wealthy to waste their money. But not if we get wealthy!
The good news is that while awareness about high costs is rising – and there are signs [6] that hedge fund fees are falling – there remains plenty of ways in which the most well-off can still be relieved of their Gini coefficient-skewing burden.
And even if you’re rich and financially sophisticated, you might not know it’s happening.
In his wonderful post this week about the dangers of private banking, FireVLondon [7] admits that:
…with the recent FT article about fund managers making 2.5% per year on typical portfolios, I wondered, ‘Who are the idiots who are paying 2.5% per year?’
And this got me looking more carefully at my own situation.
Lo and behold, my ‘1%’ figure turns out to drastically underestimate the fees I’m paying.
I discovered I myself am one of the idiots.
The true figure I am paying my private bank, for a ‘discretionary portfolio’ they manage for me, is a gob-smacking 2.04%. This probably excludes a few trading fees within some of the funds that I can’t cleanly see.
How do I get from ‘1% of money managed’ to ‘2.04%’?
Only by being an idiot.
Now anyone who has read his blog knows FireVLondon is no numpty. The private banking vampire squid he has uncovered is only suckered onto a tiny part of his portfolio. As he tells it, even then it’s only there for scientific purposes. (He wants it as a benchmark).
But just think how much richer the richer would be if they collectively woke up to the larceny taking place under the auspices of wealth management?
The old aristocracy noticed if a peasant was making off with a goose under his overcoat every second Saturday.
Let’s hope that financial obfuscation continues to hinder the super-wealthy in spotting the modern equivalent.
Have a great weekend!
From the blogs
Making good use of the things that we find…
Passive investing
- Fund expenses don’t matter? Not so fast – Alan Roth [8]
- Sustaining retirement income in a lower-return world – Vanguard [9]
- Understanding momentum [Note: Canadian ETFs] – Canadian Couch Potato [10]
Active investing
- If you’re buying, who’s selling? – The Irrelevant Investor [11]
- Commodities: An investment only a mother could love [PDF] – GMO [12] & AWOCS [13]
- The John Bogle expected return formula – A Wealth of Common Sense [14]
- Investing tribes and the paradox of choice – Abnormal Returns [15]
- A tool to follow hedge fund trades – StockTwits @ Medium [16]
Other articles
- Why you should take up your workplace pension offer – 7 Circles [17]
- A freedom business case study – Liberate Life! [18]
- Jonathan Clements’ prescription for a ‘happy financial life’ – Vanguard [19]
- Where next for pension fee transparency? – Henry Tapper [20]
- The minimum wage experiment – The Escape Artist [21]
- Losing the Jeep for the journey to financial freedom – Mr Money Mustache [22]
- Je ne regrette rien (yet) – SexHealthMoneyDeath [23]
- The smartphone as a tool of oppression in the gig economy – S.L.I.S. [24]
- The sorry state of risk tolerance questionnaires for IFAs [For geeks 🙂 ] – Michael Kitces [25]
Product of the week: A few years ago you could get a five-year fixed-rate savings bond paying 4.1%. Imagine! ThisIsMoney [26] has explored the options for anyone descending from such heady heights into today’s Norfolk-like foothills when their fixed rate savings mature. It seems the best of a bad bunch is the 2% five-year fix from Shawbrook Bank [27].
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [28]
Passive investing
- Swedroe: Ignore forecasts, they’re usually wrong – ETF.com [29]
Active investing
- How to invest like Warren Buffett’s hero Philip Caret – Telegraph [30]
- Terry Smith: The ‘Nifty 50’ and today’s bond proxies [Search result] – FT [31]
- Why housebuilders are still a good bet post-Brexit – ThisIsMoney [32]
- Avoid leveraged and inverse ETFs – Morningstar [33]
A word from a broker
- What stocks are the Best of British fund managers holding? – TD Direct [34]
- Inflation calculator – Hargreaves Lansdown [35]
Other stuff worth reading
- Merryn S-W: Beat negative interest rates, invest in a safe [Search result] – FT [36]
- The more cash people have, the happier they are – Wall Street Journal [37]
- Too rich or too busy? What we now pay to have done for us [Search result] – FT [38]
- What should you choose: Time or money? – New York Times [39]
- Why do the rich still work so hard? – The Atlantic [40]
- Earn £100,000? Beware the complex new pension taper – Telegraph [41]
- Generation Spend: How the other half lives [In Toronto] – Toronto Life [42]
- The life-changing magic of turning employees into shareholders – The Atlantic [43]
- The 24-year old Coca-Cola virgin – Eater [44]
- Why Silicon Valley is wrong about Apple’s AirPods – Chris Messina @ Medium [45]
Gadget of the week: Amazon is finally taking orders ahead of the UK launch of the Amazon Echo [46] – a voice-operated gizmo that sits in your living room all day waiting for you to command it to buy you more loo roll. Okay, and also to order an Uber and play music from Spotify and read you the news, and much, much more. I have a US friend who owns one and swears by it, and also a British friend – a tech entrepreneur – who asks: “A device that listens to every word you say all day, that’s connected to a vast network of global computers. What could go wrong?” The Echo costs £150. More details at Amazon [46].
Like these links? Subscribe [47] to get them every week!
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [51]]