I am amazed that I have just been told by one leading scottish life office, (who I rather like by the way) that I am the first adviser in the UK that has asked about yields on their pension funds. As a result, I am moved to raise my pen. They told me “as we are not required to report it, we simply don’t provide it”.
Given that a very successful investment banker recently suggested to me that equity markets would be going nowhere for 10 years, perhaps we are entering a Japanese-style lost decade? If this is the case, then surely yield is key to achieving a positive return, therefore why is it so difficult to find the numbers? I think it is a symptom of an over-emphasis on mechanical asset allocation rather than thinking about what is underneath the bonnet. Let me give you an example:-
An Adviser recommends a fixed-interest fund, be it gilt, corporate bond, etc…and that fund has a mixture of stocks with varying durations. What consideration is given to how that fits with the client’s time horizon? How is a long dated 15-year gilt relevant to somebody with five years to retirement?
Almost by differentiation, Scottish Life specifically have shorts, mediums and longs in their standard pension offering and I have to ask why this is not a standard policy for all providers? I am sure we would all agree that it’s very risky to be out of synch on time horizons when recommending any investment.
So, at a time when most fund managers are reducing their weightings in gilts and looking to generate income in other ways, we should be pushing the providers to release this basic information to assist in our recommendations. Is this too much to ask?