The Fall of an Empire
The case of Neil Woodford has been a singular, spectacular and remarkable one. It is shocking how quickly this entire empire collapsed; from running more than £10 billion of assets to shuttering the business inside two years. I shan’t re-tread old ground; anyone interested surely knows the history (or can read about it here, here and here).
Was it the Guernsey listings that did it? The controversial share swap between the Equity Income fund and the Patient Capital Trust? Or was this doomed to be the outcome from the moment the manager gave notice at Invesco Perpetual to set up his own shop?
There is much to be sad about in the end of this very short era and much has been lost: a reputation, dozens of jobs, the savings of thousands of loyal investors, and ultimately a great deal of trust in the industry.
But the hauling over coals of the entire industry because of this one high-octane drama seriously concerns me. We’re at a time when it has never been more important to save and invest for the future, and my biggest worry is that this will put cautious savers off forever.
I’ve seen speculation that RDR is to blame for everything because it ramped up the use of "best buy" lists by firms such as Hargreaves Lansdown, well known for its staunch and controversial support of Woodford until (almost) the bitter end.
Really? You think the better option is to go back to the days of 5% upfront fees, 3% annual charges and a hefty trail commission every single year to whoever recommended the fund to you two decades ago because you weren’t allowed to do it yourself?
There are lessons to be learnt from the Woodford debacle; many, many lessons – for investors, fund supermarkets, fund managers and, of course, the regulator.
But let's not forget how much progress there’s been in recent years – fund fees are down; investing has never been quicker, cheaper or easier thanks to the rise of ETFs and fund supermarkets; transparency is improving, and companies are finally taking matters of environmental, social and governance factors seriously.
The industry isn't perfect - far from it - but actually, it's not a bad time to be an investor, and I don't think it's time to write off the entire industry just yet.
The Problem with Pension Planning
This week the UK’s Pensions and Lifetime Savings Association had a stark announcement for us all – we are not planning properly for retirement.
Duh.
One of the main problems in the way most people try to determine how much they need to set aside for retirement is that they are thinking about their lifestyle today rather than in the future, the PLSA says, and we should be focusing more about the lives we want to live when we stop working.
It’s come up with a handy dandy system that tells you how much your annual income will need to be in retirement based on how much you think you’ll spend on things like clothes and eating out, how many taxis or train journeys you’ll take each year and how much the house will cost to run.
While that makes sense on paper, I can’t help but think we’re being set an impossible task. The problem is there are so many variables: I don’t know how long I’ll live, whether I’ll have any health conditions or whether my partner will die before me. Heck, right now I don’t even know when I’ll finish work or if there will even be such a thing as a State Pension when I finally do.
So it’s all very good the PLSA telling me to consider how many holidays I’ll want to take a year in retirement and whether I want to have my hair blow dried and coloured every six weeks, but it’s all the unknowns that make planning for retirement so difficult, and I’m not sure we’re any closer to inventing a crystal ball that can help with that.
Revving Up
Where there is disruption in the world, there is usually an investment opportunity. Our new four-part series looks at the boom of the electric vehicles industry, which is set to account for one in every five cars sold by 2030. That's pretty staggering when you consider that just a few years ago, electric cars were the preserve of the uber rich.
With big industry shake-ups such as these, it usually only takes one bold company to change things. Think Amazon for online shopping, Google for the internet and now Tesla for electric cars. The company may not prove to be the best investment in the end but you can't argue that it has been vital in the charge to make electric cars a reality for everyday drivers. For those interested in benefiting from the boom, keep watching for the rest of the articles in the series.
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