Weekend reading: My fee is considerably smaller than yours

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• 1 Gaz January 20, 2018, 11:24 am

  Regarding the 312 trading day run, has the saying ‘the bigger they are, the harder they fall’ been true in historic stock markets?
  Although I’ve got a very long investing time frame in front of me, I’m starting to worry that I’ve only ever experienced this super bull market and I wonder how I’ll react in a major crash.
• 2 Survivor January 20, 2018, 11:36 am

  Hi TI, Agreed, I think you’ve hit a big & very common nail on the head there. If you are a bit passionate about things that aren’t widely socially acceptably sanctioned as ‘fun’, then you can come across as an obsessive, which puts people off whatever you actually say. [to the point where they’ll ignore something that could really benefit them – it’s like the ‘too cool to be at school’ attitude whereby smart kids are mocked]

  I posted this comment on the TEA’s site recently which illustrates that very point with respect to FI/RE:

  ‘There’s a serious psychological block in the UK with switching service providers, for a significant % of the population – I just checked out ‘bulb’ energy & will switch [I do so annually] as soon as free of my current penalty period.

  But when I tried to persuade a close family member just today, they balked, even though I raised an accurate quote on the spot, showed a decent saving existed & offered to do the admin work. On pressing for the reasons why they refused, I just got rambling cognitive dissonance in the form of non-answer answers …..that make no sense at all.

  I went as far as offering to cover them if they had any losses, to see if the reluctance was related to a fear of being ripped off …..& still no movement. So I ruled out apathy, fear of loss & worry that it could be a mistake – leaving me with no clue why some people just wont switch. Does anyone else know what’s going on with this – my interest is not just OCD on this minor point, but because I think it may be a cognitive bias that goes to the heart of why people flunk with their finances?’
• 3 The Rhino January 20, 2018, 11:38 am

  @TI – Its a sad day when you have to cross-reference comedy quotes for younger readers – when did we get so old?

  @Gaz – I’m fully expecting to get slaughtered somewhere down the line – no idea how I’ll react!
• 4 Toby January 20, 2018, 12:13 pm

  Does the interactive tool include all the brokers in your broker comparison table? I switched to Lloyds prompted by the table, but doesn’t seem to show up at all in the comparison tool.
• 5 Living Cheap In London January 20, 2018, 12:47 pm

  Interesting chart. I’m in the process of transferring an old Cash ISA into my newer Vanguard ISA. Aware of the potential for market correction I’m hopefully hedging my risk a little spreading the money out across a few different Vanguard funds: Global Emerging Markets, Pacific Ex-Japan, Japan (a small amount), FTSE All Share Unit Trust, and a bit into a Target Retirement Fund, but it still makes me feel i could be buying a near the top.

  The (Viorgin) cash ISA had only been earning 2.3%, & that “2 yr offer” ended so looking around at current cash ISAs sitting in cash any longer still felt worse.

  This is also getting me dipping into the world of ETFs for the first time away from my core Lifestrategy holdings, & I have this website along with TEA to thank for this curiosity.
• 6 Gaz January 20, 2018, 1:37 pm

  Yes, the word slaughtered does spring to mind but I’m trying to tell myself it always recovers eventually!
• 7 Vanguardfan January 20, 2018, 2:12 pm

  @survivor – I suspect what stops many people taking steps to improve their money management is fear, fuelled by unhelpful beliefs. For a lot of people I think the underlying fear is may be as simple as a fear of numbers/belief they are not good with numbers (see SHMD this week for eg!).

  For myself, in the specific case of switching, it’s something else. I am numerate and pretty confident with my finances, but I don’t switch providers regularly. Mainly because my fear is that it will go wrong and end up being an enormous hassle. A fear not completely without rational basis, I would suggest! In fact I wonder what proportion of people have experienced an unpleasant and difficult hassle over bills/utility or other service provision? Pretty high I’d think. I also really resent having to do this unpleasant work on my time just to get a decent deal. So lots of negative emotions going on which make me avoid the task.

  I have actually got as far as looking up the best tariff, and to be honest, because I don’t want to go the regular monthly DD route (fear of loss of control in play there!) the savings available are simply not worth the effort, to me. So I pay a premium to make my life simpler and less stresssful – a good use of money, in my book. And there’s my rationalisation for inertia!
• 8 Survivor January 20, 2018, 2:40 pm

  @Vanguardfan – I think you are right – that is at least one very good reason …..the resentment of even just the stress of having to sort it all out being infuriatingly unjust. I too am only human & hence guilty – for example. I hate my broadband provider with an irrationality that’s comical, for their poor service & an immorality that’s impressive even for the UK’s subterranean standards, yet am still now procrastinating about changing.

  Looking in the mirror honesty, this is because I fear the possibility of the disruption of no comms when working from home during the changeover – yet fully understand the irony of thus rewarding them with my continued payment for their abuse of their ‘customers’ !

  It’s just so wrong on so many levels……..
• 9 Neverland January 20, 2018, 2:47 pm

  @investor

  While competitions about who pays the lowest fees are annoying if you are leaving money on the table at least they are honest and potentially helpful

  The really insidious fact is the hyper financialisation of the internet which sees every piece of data an individual generates sold and every interaction sucrutinised as a way to make money off others

  The most visible manifestation is the obsession of the FIRE community with having a “side hustle” to make money. This just leads otherwise well meaning people down dark roads to exploiting people who trust them

  Examples I’ve seen:

  – affiliate like links to dodgy financial scams
  – Sponaored posts by off shore investment schemes
  – Coaching services for stuff that anyone can pick in a library book

  The reality is on the www as Lou Reed put it 20 years ago you can believe only half of what you read and none of what you see

  Anyone who disbelieves me should read David Zak articlle on the online mattress review industry (yes. It’s an industry cf. referral link income) from Fast Company 16/10/17

  Compared to what goes on bragging about low fees is positively benign
• 10 Survivor January 20, 2018, 3:14 pm

  @ Neverland, I think the main problem is the average person’s default capacity for apathy. In my past corporate life, I worked in a biotech startup initially with a responsibility for purchasing. This was actually a respected role [unusually] only because we were new & financially fighting for our lives on a daily basis, so waste was obviously literally lethal; thus I was all the more anxious to avoid a mistake as it could be our last.

  Hence my confusion dealing with a Rep of a successful, well-known/respected supplier, when I asked why a health & safety-required item was on sale in their catalog not even cheaply ……when the law required we could demand they provide it free if we bought the product it related to from them. It was so irrational I thought I must not have understood – it was my first real job & I had little confidence.

  He smiled, tapped his nose & told me I was right, but all the same, it was their best seller – & crazily, that wasn’t illegal at all – in the eyes of the law, the buyers were seen as making a ‘choice’ to throw away their money. My colleagues were multi-degree’d, but caught out on various issues such as these, which explains the sabotage of the NHS by a 1000 cuts.
• 11 The Rhino January 20, 2018, 4:13 pm

  @Survivor – “It’s just so wrong on so many levels……..” – I went dogging in a multi-storey car-park last weekend, that was wrong on so many levels too..
• 12 Survivor January 20, 2018, 4:45 pm

  @ TR

  Yes but even so, that’s still attention-seeking with the all-important consent of all parties, so I can’t judge, let alone hound you about it…….
• 13 Learner January 20, 2018, 4:47 pm

  @Gaz I’m more concerned about a slow decline than a sharp crash. Imagine the last 10 years in reverse.
• 14 Haphazard January 20, 2018, 5:40 pm

  The one thing that stops me switching brokers to get lower fees is not wanting to have everything with one broker – too many eggs in one basket. Do other people use a range of brokers for this reason, or is it just me?
  It does gall me a bit when I see from the comparison tables that I could save quite a lot by pooling everything in one place… and as I understand it you can’t even transfer (re-register) part of a holding from broker X to broker Y, they seem to insist you switch the lot. Making it harder to spread things around.
• 15 xeny January 20, 2018, 6:46 pm

  @Haphazard

  I’m accumulating, so I deal with one broker to really minimise costs. On the other side of the hill I intend to split at least in two, so there’s some robustness.

  I’m pretty sure I can run two brokers with acceptably low costs, especially if I only trade one at a time, rather than withdrawing in parallel.
• 16 Tyro January 20, 2018, 8:48 pm

  @Haphazard

  I’m spread over 4 platforms. My platform costs in total are 0.062% (most of which can be offset against trading fees).
• 17 weenie January 20, 2018, 9:00 pm

  Been following but not been drawn in by bitcoin craze so found your Crypto corner links a great read.

  Plus thanks for that Harry Enfield link!
• 18 algernond January 20, 2018, 9:23 pm

  @ Neverland – Last Great American Whale was 28 years ago, and it’s ‘Don’t believe half of what you see and none of what you hear’
• 19 Factor January 20, 2018, 10:15 pm

  @Vanguardfan – “So I pay a premium to make my life simpler and less stressful.”

  Me too – and I sleep soundly for 8+ hours a night.
• 20 dearieme January 20, 2018, 10:21 pm

  John Kay and Terry Smith were in good form.
• 21 The Borderer January 21, 2018, 3:07 am

  @Haphazard

  Like Tyro I too am spread over 4 platforms. I find the biggest problem with this is when I re-balance. As I’m RE I’m in de-accumulation so I seem to end up having to buy/sell sometimes quite small trades – and so incurring disproportionate trading fees.

  My own fault really as I re-balance quarterly and perhaps should switch to annual, but this is difficult to guage when in de-accumulation, as withdrawings are not necessarily easily forecast, and my cash buffer will not allow me to simply draw on this until the re-balance is a more substantial amount ‘justifying’ the fee.

  Does anyone else find this an issue?
• 22 PennyPincher January 21, 2018, 6:27 am

  Really surprised Monevator feels the need to stoop so low as running a ‘puff’ for Barclays’ Squirrel app – even given the paltry £15 ‘quid pro quo’ on offer. I’ve followed this and other quality blogs ( e.g. TEA, MMM, JLCollins, Simple Living etc etc ) for many years and think most readers of this and other sites will be financially sussed out enough to be disciplined in their spending, investing and resource allocation as not to need this costly (£3.99 pcm) crutch ( it also involves giving Barclays, for free, lucrative personal marketing and sales targeting data). If you really need something like this there are other apps on the Apple/Android markets for free. Personally I find an Excel spreadsheet does an excellent job – I can do an annual forecast of fixed costs plus other known elective spending and still manage to max out my ISA allowance every year by saving upward of 50% of my gross income ( excluding capital gains – mostly in tax exempt wrappers – which can transform overnight into significant losses!).
• 23 xeny January 21, 2018, 8:32 am

  @The Borderer

  That suggests maybe your cash buffer is too small, or are you very cautious about allowing it to run down significantly?

  Balancing and having assets in the “wrong” account issue is part of why I run a single platform at this point, and don’t really intend to go higher than two going forward. I’ve had more due to historical lack of planning and found it very frustrating.
• 24 Vanguardfan January 21, 2018, 9:06 am

  @borderer, I am partially decumulating (still earning but spending in excess of earnings). Two of my financial goals are to simplify, and to be approximately right rather than seek perfection. So I generally trade/rebalance once per year. As part of this I skim off my drawdown allowance for the year, and put that in a cash account linked to my current account. That’s what I can spend in the year. I have three platforms and spouse and I each have one ISA, SIPP and taxable investment account (used to be more, with four platforms, but I simplified). My investments are quite simple, all index funds, I have a written investment statement that includes my asset allocation to make sure I don’t go overboard on fancy factors. My rebalancing is fairly approximate, it just helps to guide what I sell – I once read something which suggested that rebalancing didn’t really add much to overall portfolio growth so I don’t stress too much about precision (I remember being convinced by the argument at the time, no doubt confirmation bias coming into play there!). I do have a mix of assets in all the accounts though (some of them are just self rebalancing lifestrategy funds which is very easy to manage)
• 25 Hospitaller January 21, 2018, 10:44 am

  @ Gaz

  Yes, it an unpleasant feeling with so many equity indices up in the stratosphere. I have lived through equity crashes and have found it helpful to have built cash reserves to go in and buy more when they happen. I do this by selling little bits off the top and squirreling them away. The act of going back in and reinvesting these reserves later when the market is say 20% down helps me to not do the one thing one must not do – which is to sell large chunks when indices are heavily down. Its an emotional thing but there it is.
• 26 Brod January 21, 2018, 12:10 pm

  Well, I’m definitely getting nervous about market highs. I’m hoping to retire in 3 years when I hit 55, so Sequence of Risk is a big issue.

  My SIPP is all in global equities, Lars style, as I’ll have a small Civil Service pension in addition to the state pension and that’ll amount to £15k p.a. index linked when I’m 67 – that’s my core spending taken care of when I reach pensionable age. So I’m not contributing to the SIPP now. With two young children and a wife doing an MSc cos the bottom dropped out of the Oil & Gas market, money’s a little tight.

  The SIPP has been looking a bit “frothy” (2017 finished 20% ahead of my projections, courtesy of portfoliocharts.com, ) so I sliced 9% off and have divided it between UK Short Term Gilts (Lyxor FTSE Actuaries UK Gilts 0-5Y ETF) to protect against interest rate rises, and Gold (Gold?!? Is there nothing else?). Every January, I’ll cream off the excess over 10% of SIPP projections into fixed income. I’m hoping that will hedge me a little against the market retrenching and give me ammunition for buying opportunities if /when prices fall. Obviously, I’m only tinkering with the edges here, but maybe it’ll help.

  On the subject of Brokers, I’m only using one, Interactive Investor, but when I draw down my 25% I’ll put it into ISAs held with another. Then I’ll gradually empty out the SIPP in the most tax efficient manner I can. I think it’s a tail risk, and one that I can bear for the next three years.

  At the end of the day, if it helps you sleep at night that’s the only guaranteed return.
• 27 Simon January 21, 2018, 1:00 pm

  @Brod (Gold?!? Is there nothing else?)

  If you mean is there anything else, apart from gold and top quality government bonds, which might POSITIVELY react to an equities crash, then not that I know of. I have some of both with that in mind. Of course, there is more stuff around which might not fall as much as equities, notably clearly investment grade corporate bonds. And I have some of that, with that different perspective in mind.
• 28 old_eyes January 21, 2018, 4:08 pm

  On “fee shaming”; I haven’t seen too much of that, and what there has been is usually pointless willy-waving. The bigger problem I encounter in conversation is people paying ridiculously high fees to IFA’s who ‘know’ what is going to happen in the market for usually active portfolios.

  My strategy is then to simply say that I admire their courage, explain that I am personally much more risk-averse and so passively invest in the whole market and choose platforms/funds where I can keep the costs down so as to make it more likely that I keep whatever small gains I make. It is non-threatening, not trying to one-up, and surprisingly often leaves them thoughtful and in a questioning mood.

  Some of the smarter ones spot the keyword link between ‘courage’ and Yes Minister.

  I have used IFA’s, but always to check my logic and facts (often around pension rules which I have always found unreasonably complicated). Last time I did my usual statement of where I am, what I want to achieve, and this is my plan, and asked to pay for a couple of hours of his time for a robust debate about it.

  He said the first meeting was on him, so I said fine. Some way into a conversation that proved he had little to contribute, he loftily announced that he would manage my entire portfolio for 2% pa plus some charges. He explained that this was only possible because of his contacts, his expertise, and his ability to get discounts. “You would not be able to do it for less than 3%”, he said.

  In the words of the old Sunday scandal sheets – “I made my excuses and left”
• 29 Neverland January 21, 2018, 4:40 pm

  @Algernond

  Thanks for making me feel old… I said to some hipster the other day he looked like Jim Morrison, when he said “Who?” I got quite depressed
• 30 The Rhino January 21, 2018, 8:25 pm

  That Medium article is so bad it’s actually good.

  If you were to purposefully avoid any of its bullet point objectives I think you may have a shot at getting smarter, happier and richer?

  “If you got just 1% smarter every day you would be 37 times smarter in a year!”

  Nuff said..
• 31 The Borderer January 22, 2018, 9:09 pm

  @xeny – caution on the size of the cash buffer – I find myself almost irrationaly uncomfortable if it drops below 2 years expenditure.
  @Vanguardfan – sage advice – I spent my working life with the mantra that God is in the details, but in reality the difference between being say 10% in emerging markets and 9% will never make any significant difference. Need to learn to apply the Pareto principle a little more, I think.
• 32 hosimpson January 23, 2018, 8:25 am

  @Neverland – I agree about the personal data. As an aside, some of my friends have gone as far as to delete their Facebook accounts, and I know someone who has paid a firm to erase his digital footprint, though I can’t claim I know/ understand all of his reasons for doing so; he also always pays cash in restaurants and such. In theory, not letting your credit card company know where you go and what you do every single day sounds appealing, but I don’t think I could give up the convenience of plastic.
• 33 The Rhino January 24, 2018, 11:36 am

  @HS – I have vaguely heard about this new scheme whereby banks will be freed up to sell on what was previously private personal financial data? Anyone got any links on it? I hope its an opt-in rather than opt-out scheme, the cynic in me expects it to just get implemented with no opt-in/opt-out about it? Sounds very dodgy?

  facebook seems to have effectively deteriorated to just a slew of ads now? I think its wise to lock it right down – also have an almighty prune of your friends.

  keep googling yourself from an anonymous browser, when you’ve finally worked through all your social media settings such that google returns a blank – you have achieved digital lockdown!
• 34 argoal January 24, 2018, 2:51 pm

  @The Rhino

  Mathematically a compounded 1% increase per day for 365 days does make you 37 times smarter after a year.

  1.01^365 = 37.41

  I’m not saying it is not nonsense only that it is not mathematical nonsense.
• 35 The Rhino January 24, 2018, 5:37 pm

  @argoal – I don’t disagree with your calculation, maybe I should attempt to get 1% smarter every day after all?
• 36 hosimpson January 24, 2018, 10:43 pm

  @Rhino – I thought that was just an American (read: Trump) scheme with telecoms and such? If it was banks in the EU and the UK post EU I’d have objections to that as well. Hmm, I suspect right now I probably sound a bit like one of those ‘members of public’ from John Oliver’s episode on government surveillance with Snowden…