Most people’s financial affairs are not complicated. If they are, they probably shouldn’t be. One savings account, one mortgage, one individual savings account (Isa), one self-invested personal pension (Sipp) and most of us are pretty much done. Only the very well off go beyond these basics.
That’s not a bad thing: with complication comes expense, risk and usually not much gain. If you find yourself with a mix of offshore bonds held in trusts for some reason, it is more likely something has gone wrong than right.
Given this, it has always struck us as odd that regulators mostly think all financial advice should be bespoke. If we all need much the same advice (with minor variations based on age and capital gains allowances) surely cheap generic advice will mostly do? Good news then that Vanguard, best known for cheap passive funds, is thinking along the same lines. In this week's magazine John Stepek looks at its new low-cost, low-admin financial planning product. He likes it. So do I. That said, it comes with a possible problem: it might mean Vanguard gets even more popular than it already is.
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
A good business with a good product getting more business thanks to said good product is surely a good thing. Capitalism in action. Well, yes. And no. Here’s the thing: Vanguard is already very big. Between them, the big three US asset managers, Blackrock, State Street and Vanguard, control over $20trn of assets. Overall they are the largest owners of 88% of stocks in the S&P 500. That’s enough to ensure most firms must do anything the big three fancy (and they increasingly fancy quite a lot).
That might be OK. After all, as the CEO of State Street likes to say, passive managers can’t sell firms they don’t approve of, but they do have an interest in long-term good performance. So they can be excellent very long-term stewards. However, it also means that there is a huge dislocation between the end owner of the shares (us) and those who use the votes on the shares (them). You may hold equities via Vanguard. But you don’t have the rights of ownership that should go with them – Vanguard does.
That’s a problem. This week, we briefly look at executive pay during the pandemic. Even while releasing identikit ads about how we are all in this together (go to YouTube and watch “Every Covid-19 Commercial is Exactly the Same”) and making great play of having a social element of some sort in their pay plans, the world’s big companies also made it clear that we are not in it together. Instead median executive pay rose – as did the incidence of overpaid CEOs taking corporate jets on holiday.
This can be stopped by those who vote on remuneration at AGMs. But, with all the votes in the hands of big fund managers, it’s not happening. How much better then, if we could start acting as the owners that we are? More good news. New-ish company, Tumelo, has an idea. It has started a trial with Legal & General which uses its software to allow anyone with L&G funds to set up an account, see what shares are in their funds, and what votes lie ahead. They then indicate how they would vote if they had access to their own votes. It isn’t binding and L&G don’t split the votes to reflect their clients’ wishes. But it’s a start – it allows investors to engage and it represents (I hope) a dawning recognition that fund managers are not the underlying company owners. We are. If you plan to invest with Vanguard, drop them a line to remind them of this. We like seeing capitalism in action. But we much prefer to see shareholder capitalism in action.
-
The war dividend – how to invest in defence stocks as the world arms upWestern governments are back on a war footing. Investors should be prepared, too, says Jamie Ward
-
Literacy Capital: A trust where great returns fund a good causeThere’s plenty to like about specialist private-equity trust Literacy Capital, says Max King
-
An AI bust could hit private credit – could it cause a financial crisis?Opinion Private credit is playing a key role in funding data centres. It may be the first to take the hit if the AI boom ends, says Cris Sholto Heaton
-
8 of the best ski chalets for sale nowThe best ski chalets on the market – from a traditional Alpine-style chalet in Switzerland to an award-winning Modernist building in Japan’s exclusive ski areas
-
Did COP30 achieve anything to tackle climate change?The COP30 summit was a failure. But the world is going green regardless, says Simon Wilson
-
Who is Christopher Harborne, crypto billionaire and Reform UK’s new mega-donor?Christopher Harborne came into the spotlight when it emerged he had given £9 million to Nigel Farage's Reform UK. How did he make his millions?
-
The best Christmas gifts for your loved onesWe round up the best Christmas gifts with a touch of luxury to delight, surprise and amaze family and friends this festive season
-
Leading European companies offer long-term growth prospectsOpinion Alexander Darwall, lead portfolio manager, European Opportunities Trust, picks three European companies where he'd put his money
