I am bemused by all the reports appearing of late about the FSA wanting to
take past performance out of the equation when an adviser is trying to
formulate a recommendation to an investment product.
The question yet to be answered by anybody, as far as I am aware, is just
what does the omniscient FSA suggest we use in place of past performance as
an indicator for the future?
Perhaps that the fund management team is a nice bunch of guys and they
have all got university degrees? Or that the team has a good gameplan? Or
that they have all been in the industry for a good few years?
Will the fact that they may not have yet actually delivered anything in
the way of out-performance be allowed to have any bearing on the matter?
Will it be permissible for the adviser to ignore the fact that the
performance of all the funds they have managed so far may have been
consistently and resoundingly crap? Or are we expected now to become
analysts of fund management teams?
Past performance may be no guarantor for the future but from where does
the FSA get the idea it is of no relevance whatsoever? I believe misleading
is the word they like to use. Does pedigree count for nothing?
If I am going to bet on a horse, I want one that has won a few races
already, even though this can be no guarantee it will win on the day. When
I am looking at buying a car, my inclinations are towards one with a proven
reputation for superior performance and reliability.
When I buy a hi-fi, I tend to prefer an established (not necessarily
mainstream) brand recommended by experts who have used it. I could go on
but you get my drift.
Maybe the industry has been overdue for a shake-up but don't you think
that turning it on its head and throwing logic out of the window is taking
things just a bit far?
WDS Independent Financial Advisers,