Most of our award categories are determined by a reader survey – and, we gratefully observe, you vote in your thousands to share your experiences of stockbrokers and platforms with us. Mostly, you're pretty happy it seems. But trying to work out which funds deserve to be recognised is a bit more tricky - a strong performance in any one year isn't necessarily reflective of a good fund; for example, the sea of China funds that ranked highly on one year total return was huge, reflecting the fact that despite its recent wobbles the Chinese market nevertheless remains well up over 12 months, lifting all boats sailing on it.
Short-term performance is nevertheless important when we’re making annual awards, so we do consider it as part of the system - alongside the qualitative insights from our funds team - we use for picking winners. But we also pay close attention to long-term performance in the scoring system we use, along with charges – because we all know the damage compounded costs can inflict upon our portfolios over the years. It’s amazing how many funds still impose high charges for regularly mediocre performance – and all the more amazing that people buy them, perhaps a consequence of the bewildering choice on offer and an industry structure that, in the past at least, has provided middlemen every incentive to promote them.
On that note, I was interested to note that the government is planning a review of the advice market, partly on the basis that more and more of us are buying financial products without it. That could be a sign of increasing consumer confidence – the welcome removal of the so-called demand barriers that we discuss in this week’s cover feature. This, in turn, may be because new technology has made it easier to ‘learn’ investment and compare and contrast providers (although not that easy, as our funds analysis highlights). But there is nevertheless no reason to believe that retail consumers cannot be just as good stock and fund pickers as professionals, or build cheap and effective asset-allocation driven portfolios like the one we feature on page 38.
I hope, then, that the FCA does not conclude that it is too dangerous for private investors to go it alone. And although I believe that the ‘robo advice’ the FCA seems keen on can help democratise investing further, I think the powers that be need to be careful not to view it as a panacea. One reason financial services is a relatively late adopter of technology is because it is often a very individual business with few one-size-fits-all answers.
