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Sense of values

The famous phrase in investment compliance, that “the value of investments can fall as well as rise”, is equally acceptable in its reversed format, “the value of investments can rise as well as fall”.

During the past week, we have seen major valuation changes in commercial property funds. In many cases, this has been excused by the level of outflows, although this is not easy to swallow when in one case the fund was 20 per cent in cash already.

These moves from acquisition to realisation valuations do provide an opportunity and, at the same time, a window on the soul of IFAs who see themselves as market timers and fund-pickers.

If we are to be seen as professionals, then many IFAs need to upskill and be quick at that.

Far too many have stalled at the FPC and the retail distribution review makes a valid point in that those with limited skills should not be able to pass themselves off as experts.

After all, these funds are now a buying opportunity so why is everyone selling, or is the real reason for exit not the absence of expertise but a lack of confidence in the providers for their lack of candour?

This is meant to be the time for treating customers fairly. The IFA is a customer too and needs to have the fullest information if it is to make a valued judgement.

The lack of information is pathetic and does Standard and others no credit with their platitudes or, to be more accurate, patronising comments such as “significant outflows” with no breakdown in data. For example, was it one or two major investors or a run of many small investors?

TCF applies to them but I do wonder if the providers have grasped that fact. Perhaps the first fine will concentrate their minds?

TCF is a cultural shift and far too many providers are cultural-free zones.

At the recent retail distribution review conference in London, one provider’s CEO seemed to think that all problems began and stopped with the smaller IFA.

This ignorance of reality simply underlines the lack of a TCF culture on the provider side.

But back to investment, I suggest we need fuller disclosure if the funds issues are not to spiral to the point where the FSA intervenes. We already have far more information on with-profits, somewhat ironic for those among us who have not used withprofits for many years. We need to demand more and get more.

Ron Sandler suggested some time ago that asset allocation was not used to its fullest extent and, in some cases, not used at all. May I suggest that, despite the growth in tools, stochastic and otherwise, this ignorance still abounds.

Timing the market is a mug’s game and simply proves that short-term performance is still seen by too many as more important than investing after considering the investment time horizon.

If this message cannot be digested by the bulk of the IFA market then, in the words of Private Fraser in Dad’s Army, “We’re all doomed.”

One final thought. As I move round the UK, I have found that far too few IFAs have read or are even aware of the publication of the retail distribution review.

As Nick Bamford said last week, we should not delegate the response to others, but if you are not even reading the paper then I despair.

For goodness sake, download it and have it read before the month is out. You know it makes sense.

Robert Reid is managing director of Syndaxi Financial Planning.

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