"Ripping off customers is nothing new for asset managers... "

Check the FT article here 30 June 2017

The FCA’s report is a travesty that is bereft of remedies, writes Gina Miller

In 2002, the Sandler Report on the UK retail investment market found “the reporting of product charges is typically neither clear nor consistent”. More than 15 years on and the UK regulator is still allowing the industry to rip off customers by charging excessive fees, which has a huge detrimental impact on the returns investors are getting on their hard-earned money.

Granting people the basic consumer right of knowing how much they are paying appears to be too difficult for an industry that works with complex data, facts and figures. In terms of price competition, there simply cannot be any genuine price competition if the consumer does not know the price.

This is why, as the most recent FCA report reveals, the asset management industry has profit margins of 36 per cent. This is more than double the operating margin of the FTSE pharmaceutical and biotechnology sector (14 per cent), which is based on intellectual capital and extending lives.

When the FCA’s interim report came out in November 2016, it was hard hitting and exposed the numerous dubious practices SCM Direct has been highlighting for years through our True and Fair campaign: closet index tracking, hidden fees, consultants’ conflicts of interest and false reporting of performance.....

check out full report here and get angry if you have any pension or investment plans. You are being ripped off. When you exclude their bonuses the profit of fund managers is not 36% but 48%. 

Marks & Spencer close their staff pension scheme and lose £131 million

M&S pension surplus falls £131.3m due to DB future accrual closure

Written by Talya Misiri

24/05/17

Marks and Spencer has revealed that its pension surplus fell by £131.3m in the year to April 2017 due to the closure of its defined benefit scheme to future accrual.

In its full year results, published today 24 May 2017, the UK retailer stated that at 1 April 2017 the IAS 19 net retirement benefit surplus was £692.8m from £824.1m the previous year.

M&S explained that its reduced surplus was largely a result of the closure of the UK DB scheme to future accrual, which lead to a one-off curtailment charge of £127m. The scheme closed to new members on April 2017.

The report noted that as all remaining active members of the scheme transition to a deferred status, all future pensionable increases are to be in line with inflation, CPI, rather than to the lower one per cent salary cap applied to the active members.

Additional costs of £5.4m that is directly associated with the closure, primarily in relation to third party advisory costs have been incurred.

Pension funding rose year on year from £118.4m in April 2016 to £135.3m in April 2017. Pension costs charged against operating profit fell slightly to £100.3m this year, from £102m in 2016.

Partnership liability to the Marks & Spencer UK Pension Scheme remained at £71.9m year-on-year.

“The first limited partnership interest (held by the Marks and Spencer UK Pension Scheme), entitles the Pension Scheme to receive an annual distribution of £71.9m until 2022 from the Partnership. The second partnership interest (also held by the Marks and Spencer UK Pension Scheme), entitles the Pension Scheme to receive a further £36.4m annually from 2017 until 2031,” the report outlined".

WTF? Why are Marks and Spencer robbing their staff of a decent pension scheme when their fund is in surplus and it costs them £131 million to do so?

No wonder so many people voted for Brexit and why we need a Labour Government to tackle corporate greed and stupidity.

Hat tip "Pension Age". 

Emergency Questions to Newham Council about LOBO toxic loans & Parliamentary Select Committee for Local Government

These questions below by Cllr Rokhsana Fiaz OBE were also ruled out of order by the Chair of Council at last nights Newham Council meeting on the same grounds as mine (see post below)

"Please note that in advance of this evening's Full Council, I wish to submit the following questions under Council Procedure Rule 23 (specifically 23.3) pertaining to Agenda Item 14:

1. Notwithstanding the complaint that the Mayor has said the council will make to Channel 4 about last Monday's Dispatches programme, which claimed that Newham residents are being ripped off by banks who have sold toxic loans to Newham Council and are charging excessive interest rates against Newham's LOBO liabilities, will he assure members that these allegations are being taken seriously and will be taking independent expert advice?

2. Will the Mayor and Cabinet Member for Finance support Newham Council's participation in any enquiry by the Parliamentary Select Committee for Local Government, if it decides to investigate the behaviour of the Banks, and advisors, concerning Local Authority LOBOs and possible bank rigging and fraud?

Cllr Rokhsana Fiaz OBE

How to Win the Loser's Game

"Part 1 of a new documentary about investing.

The City of London… The centre of the financial world.

It’s here that some of the finest minds in global finance ply their trade.

The pressures are huge - with salaries and bonuses to match.

London’s financial sector encompasses a whole range of commercial activity - from banking and merchant banking to insurance and accountancy. But central to it is the fund management industry.

It’s fund managers whom the vast majority of us entrust with our long-term investments.

They choose which stocks and other assets to invest in on our behalf - and decide when the time is right to buy and sell.

And yes, they’re very well remunerated.

In fact pay has risen sharply in the last few years.

One manager, Richard Woolnough at M&G Investments, was paid £17.5 million in 2013 - 600 times the average UK salary.

Research by the FT shows that, in the same year, pay per employee in the sector outstripped even investment banking.

At one fund management company the average annual salary was £436,000.

The standard line from the industry is that it needs to offer such large financial rewards to attract the brightest talent.

But, time and again, research has shown that we over-estimate quite how talented fund managers are and how much value they add.

For all the talk of “star” performers, the empirical evidence shows that only a tiny fraction of them outperform the market with any meaningful degree of consistency.

Typical of the reports produced on this subject is this one by the Pensions Institute, based at Cass Business School in London.

Researchers examined 516 UK equity funds between 1998 and 2008, and found that just 1% of managers were able to produce sufficient returns to cover their trading and operating costs.

But even those managers pocketed for themselves any value they added in fees, leaving nothing for the investor.

The remaining 99% of managers failed to deliver any outperformance - either from stock selection or from market timing.

In case you’re wondering whether those managers were simply unlucky, the researchers found the vast majority weren’t; they were “genuinely unskilled”.

While a tiny number of “star” managers do exist, they are, to quote the report, “incredibly hard to identify”. Furthermore, it takes 22 years of performance data to be 90% sure that a particular manager’s outperformance is genuinely down to skill.

For most investors, the report concludes, “it is simply not worth paying the vast majority of fund managers to actively manage their assets”.

If you’re shocked and appalled by those findings, so you should be.

The Pensions Institute report is a damning indictment of the fund management industry which is completely at variance with the image that most of us have of the City as a centre of investment expertise.

Since this is only the latest in a long line of reports that have said more or less the same thing, it also begs the question, why are so many ordinary investors completely unaware of this scandalous situation?

In fact there are many reasons.

This a hugely powerful and largely self-regulated industry, which lobbies hard to protect its interests.

It also spends a fortune on advertising.

And the financial media, which is largely funded by those adverts, has an insatiable demand for stories, which the fund management companies are only too happy to provide.

But ultimately, actively managed funds still hold sway over cheaper, passive investments such as index funds, because investors continue to buy them.

We think we’re paying for better performance; that greater skill will produce superior results.

But investing almost always works the opposite way round. The less you pay, the more you get back.

Yes, it’s counter-intuitive, but it’s true.

In the course of this programme, we’re going to be looking at just how much investing costs us; and at the performance that fund managers deliver.

We’ll be exploring more than 100 years of academic research into asset pricing and how markets operate.

And we’ll be examining long-term investment strategies that have been shown to work.

Investing has famously been called the loser’s game, and for most people, it is. We’re going to who you how to win it.

Next time..

Nobel Prize-winning economist Eugene Fama says: "If you're paying big management fees, the cumulative effect of that, given the way compounding works, is enormous."

Merryn Somerset Webb from MoneyWeek says: "Almost all fund management is a complete rip-off. We know that. We only have to look at prices relative to the performance."

Gina Miller from the True and Fair Campaign says:"The very people who are being prudent and saving and investing are not the ones who are retiring with a comfortable pot. It's the fund managers who are becoming millionaires and billionaires because of those profit margins."

http://www.sensibleinvesting.tv/

hat tip Michael Johnson

The Public Cost of Poverty Wages

This cost is to the USA taxpayer but I suspect very much  that the problem is still the same over here across the pond. Lots of companies are "successful" but depend upon the tax payer to subsidise their poverty wages. They also don't pay tax on their profits but that is another (but very important) issue.

Next time you have a Big Mac think that you are not only paying good money to buy this burger but your taxes are also going to subsidise this very rich and profitable company and its payment of poverty wages to its staff. Something very wrong here I think?

Payday Loans? Hopefully only the turkey will get stuffed this Christmas

I first saw this excellent poster in the window of the North Wales Credit Union branch in Denbigh. Check out their press release on the Christmas rip off here.

It shows up what thieves Payday loan companies are and how they exploit the poor and vulnerable.

You would pay over 4000% APR interest on a 38 day £400 loan from Wonga or 26.8% APR from a credit union loan over a year.

If you paid the £400 off over a year then you would still pay over £100 less in interest than with Wonga in 38 days.

Good luck to Stella Creasy MP and her #Sharkstoppers campaign.

"Barclay pay AGM vote round-up"

Hat -tip Tom at "Labour & Capital"

"Being the sad man that I am, I've been collecting asset manager voting decisions on Barclays' remuneration report at this year's AGM.

Here are the scores on the doors so far -

FOR - Goldman Sachs, Standard Life
ABSTAIN -
OPPOSE - Aberdeen, AXA, F&C, Investec, JP Morgan, Jupiter, Kames, Legal & General, M&G, Royal London, Scottish Widows

Will update when I get more data. Interesting thing to note is that some hefty UK institutions voted against. So where did all those votes in favour come from?"

(grayee comment: Goldman Sachs Yeah but Wtf is Standard Life doing voting to reward shareholders being ripped off?

Elephant Insurance: Seriously rotten and completely rubbish car insurance

This is I admit a bit of a rant but not that off message.  Every day in our society, we come across the message again and again, about how efficient and well run the private sector is since it is by led by “profit” when compared with the supposedly “inefficient” and producer interest driven public sector. Why is this so?

When everyone I speak to on this subject has at least one horrendous horror story to tell of being ripped off by a private Bank, Insurance company or utility.  

My tail of woe with Elephant started last year when I (stupidly) took out a car insurance policy with them. I had maximum no claims bonus but within a few months my car had been written off after being rear ended while parked and then my new car was bashed into at work by contractors.  

The whole Claim experience was pretty dire and completely rubbish. Be warned!  Firstly the car replacement service that they were suppose to provide while I was waiting for things to be sorted out were just incompetent. Phone calls were never answered and my replacement cars turned up very late and whenever it suited them. They didn’t turn up to collect the car at the end either which meant that the claim for my excess was held up for months while solicitors argued about the car hire fees. No one in Elephant seemed to give a damn about what was happening. 

You felt you were totally by yourself. I made complaints and told several Elephant employees that I do not want anything to do with such an incompetent company in the future. They apologised and assured me that my contract will end. Despite this they then stole £731 from my credit card account for a new policy. I of course complained and they agreed to cancel my policy and refund my £731. Of course they didn’t do what they had promised to do and they ignored all my complaints. I had to get my credit card company to refund my account. End of matter?

No, don’t be silly. Elephant now ignore the emails that they sent accepting they will refund my account and took £355 out of my account for breach of contract??? Needless to say they did not warn me that they will be doing this nor did they send my any receipt for doing so.  

Now, I know that no company or service is perfect and mistakes can happen. But what interests me is what happens when things go wrong? Is there a will to acknowledge what has gone wrong and make amends? Or is this rotten service just deliberate since rubbish companies such as Elephant and parent company Admiral make money out of exploiting customers in such ways? 

Do the the senior executives of this Company make their obscene bonuses not from providing decent services to customers but from the practice of deliberately ripping people off?  I am forced to conclude that they do. So the next time you see some silly tabloid headline about public services, just remember how simply c**p private services can be. They don’t give a damn about their customers they only want to exploit their competitive advantage to fleece you. This is red raw Capitalism folks – don’t you just love it!