Some good reads from around the web.
You can’t keep a bad idea down in the financial services industry – like Hindu vetala [1], the same ruses, obfuscations, and scams keep resurrecting in new forms to haunt us.
Well, that’s if the service providers in question have any sense of irony. Clearly that’s lacking at The Royal Bank of Scotland, who’ve decided to resurrect a controversial idea in the form of… the same controversial idea.
Barely a fortnight ago, Barclays was fined £7 million for investment advice failings [2], which basically amounted to calling funds ‘cautious’ and ‘balanced’, which the average consumer hears as ‘safe’ and ‘secure’.
So I was pretty surprised to get a press release from RBS that kicked off:
Today, the Royal Bank of Scotland will launch a major push into the retail fund management sector with the launch of two new funds (Cautious Managed and Balanced Managed) that have competitive charges, and aim to manage volatility to below market averages.
*Splutter!* What gives? Had RBS already spent so much on paperwork and logos for the new funds that it decided a fine of £7 million was a small risk to take?
Then we get to the money shot:
The Cautious and Balanced Managed sectors are among the most popular with IFAs and retail investors.
Ah, now I get it!
Moving on, RBS explains its strategy with the new products as follows:
The bank will be using a unique combination of strategies around diversification, trend analysis and volatility control to deliver its new propositions.
Here the news is a little better. Regular readers may recall me moaning about structured products [3] in the past. I was happy (and not a bit surprised) to see that these funds simply offer regularly rebalanced exposure to the standard asset classes, with no derivatives linked to the value of the FTSE in 2015 or what have you.
But as the FT points out [4], the cautious fund could hold up to 51% of its money in equities, while the balanced fund could hold up to 81%. These may fit the current guidelines for those labels, but they don’t seem wise after the Barclay’s ruling.
Finally, the 1% annual charge isn’t the worst offender in the world, but all that rebalancing could result in a higher and somewhat hidden Total Expense Ratio [5].
You can slash costs by simply saving into cash and a cheap tracker [6]. Or if you’re really risk averse, consider rolling your own DIY guaranteed bond [7].
Money and investing blogs
- Performance beauty in the eye of the beholder – Investing Caffeine [8]
- Inflation hedging for long-term investors – Bond Vigilantes [9]
- Is your bond fund’s rating a lie? – Swedroe/MoneyWatch [10]
- How to protect your private files – Oblivious Investor [11]
- $5 billion man John Paulson’s 2010 letter – Zero Hedge [12]
- I fell for a pump-and-dump scammer – The Digerati Life [13]
- Obama’s State of the Union address – Simple in Suffolk [14]
- Moral hazard, but thanks for all the fish – The Psy-Fi blog [15]
- Does value screening still work? – UK Value Investor [16]
- Do you lie about money to your spouse? – Consumerism Commentary [17]
- Most people make a lot more money than you think – Financial Samurai [18]
From the mainstream money sites
- A retirement program for the risk averse (US) –New York Times [19]
- German business: A machine running smoothly – The Economist [20]
- The Boardwalk Empire way of doing business – The Motley Fool [21]
- $7 billion pulled from emerging markets on Egypt – FT [22]
- How inflation has previously boosted equities – FT [23]
- JP Morgan’s new 0.25% active fund: The future? – FT [24] & Merryn [25]
- John Lee on why he invests in family-run companies – FT [26]
- Two new funds target cash-strapped first-time buyers – FT [27]
- Current best building society savings rates – Telegraph [28]
- China’s ‘bomb shelter’ hoteliers – Telegraph [29]
- Make £100s shopping via cashback sites – Telegraph [30]
- How to make a career leap – The Independent [31]
- Halifax: Houses prices fell 2.4% in 2010 – The Guardian [32]
- Spot the theme: Central bankers Bernanke [33], Trichet [34] and King [35] look through high inflation in commodities and emerging markets
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