Last weekend The Sunday Times ran an article written by an ex-St James's Place (SJP) adviser. It made for disturbing reading. That's not because of the way in which SJP charges its clients. We don't like the ad-valorem model in which advisers and managers take a percentage of your assets each year. We'd prefer a flat fee model. However that is, for now at least, the standard system so we can't single out SJP for criticism. We can, however, single it out for the scale of its fees (most comparisons have it coming out at the extremely expensive end) and for what The Sunday Times' James Coney refers to as its apparently "culturally bankrupt" environment.
It turns out that the core of the thing has advisers competing not to be the best of advisers, or to provide the best of services at the best value, but to flog enough product to rack up enough points to get a nice pair of cufflinks or a trip by chartered plane to a luxury-safari destination. Almost all financial miseries start with misaligned incentives of one sort or another (perhaps unsurprisingly, reports City AM, SJP is now "reviewing" its rewards scheme). Something for clients and perhaps investors to bear in mind.
This brings me, as usual, to the great scandal of 2019 Neil Woodford. The correct thing for him to do now would be to wind his Woodford Equity Income Fund down and to return any cash available to investors as fast as possible. But here too the incentives are misaligned. That may work for his investors, but not for him: as long as he keeps the cash locked in, he is still, notes Alex Brummer in The Mail on Sunday, pulling in £100,000 each working day. Works for him (to the extent anything does any more). Doesn't work for Brummer (one of the many stuck in the fund).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
I see little upside for those involved with SJP (charges and incentives aside, over the last ten years, 23 of 38 SJP funds have underperformed their peers, says Coney). But on Woodford, there is something. In this week's magazine, Max King looks at the Downing Strategic Trust, a company that actually knows what it's doing when it comes to micro-caps and which, thanks to the post-Woodford "liquidity witch hunt" you have a chance to buy cheaply today.
Your must-read for the week is William Dalrymple's The Anarchy. We worry endlessly here that one of the threats to democracy and one of the things that makes modern voters feel so powerless is the rise of the all-powerful-looking corporation. Dalrymple's book, which traces the extraordinary history of the East India Company, makes it clear that this is hardly the first time round for this dynamic. It might also not be the last time that overly influential companies suddenly come a cropper (the reversal of globalisation and the great decoupling of China and the US might mean trouble ahead for corporate profits).
How should investors react? See this week's cover story for part of the answer. For a defence of modern tech investing, Matthew Lynn explains why the stocks you love to think of as being overhyped rubbish might actually be the ones that could make you rich. Finally for (another) reminder on why everyone should hold a little gold, see our briefing on the end of the reign of King Dollar. Oh, and don't miss our Wealth Summit on 22 November!
-
Ofgem proposes new energy tariffs with low or no standing changesStanding charges have invited public backlash as households battle high energy bills
-
Google shares bounce on Gemini 2.0 launchGoogle has launched the latest version of its Gemini AI platform, and markets have responded positively. Is it time to buy Google shares?
-
The dangers of derivatives as the “Goldilocks era” endsEditor's letter This is no longer a benign environment for investors, says Andrew Van Sickle. But – as the recent pension-fund derivatives blow-up shows – not everybody seems to have grasped that.
-
What to do as the age of cheap money and overpriced equities endsEditor's letter The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losing money, says Merryn Somerset Webb. What can you do to protect yourself?
-
Investors are bullish – but be very carefulEditor's letter Many investors are buying the dip, convinced the latest upswing is the start of a new bull market. The odds are that it’s not, says Andrew Van Sickle. The bear has unfinished business.
-
The MoneyWeek approach to investingEditor's letter At MoneyWeek, our aim is simple: to give you intelligent and enjoyable commentary on the most important financial stories, and tell you how to profit from them. So how do we do that?
-
Celebrity bitcoin ads echo the subprime mortgage crisisEditor's letter A wave of ads featuring celebrities punting crypto to the masses are reminiscent of how low income Americans were encouraged to take on loans they couldn’t afford, says Merryn Somerset Webb.
-
Will the UK's property slowdown turn into a house-price crash?Editor's letter As the cost-of-living crisis intensifies and interest rate rise, it is hard to see reasons for UK house prices to keep rising, says Merryn Somerset Webb.
-
What sardines can teach investors about today's marketsEditor's letter A California tale of “eating sardines” and “trading sardines” can help us divide investments into speculative and real, says Merryn Somerset Webb. Something that's very useful when looking at today’s markets.
-
The market finally seems to be getting itEditor's letter Reality checks are coming fast to the markets, says Merryn Somerset Webb – with even 2022’s safe havens beginning to reflect recession worries.
