Why do so many advisers continue to recommend active funds?
As I’m sure most visitors to this site are aware by now, the UK regulator, the Financial Conduct Authority, recently published a hard-hitting report about the asset management industry.
The report raises several important questions about the rôle of financial advisers, but for me, by far the most important question arising from this report is this:
If, as the FCA categorically states, investors who use actively managed funds almost invariably end up with smaller retirement pots than who use passive funds, why do the majority of advisers continue to recommend active?
I strongly believe in the value of having a good financial adviser. So many try to manage without and up making all manner of mistakes. But if we are to make a cogent case for people seeking financial advice, this is a question we need to find the answers to. It’s a debate the profession can’t afford not to have.
Those familiar with my blog, The Evidence-Based Investor, will know that I have fairly strong opinions on the value of active management. I also have my own views as to why active funds remain so popular.
But what I’m interested in is other people’s views, your views — especially if you’re an adviser who recommends active funds yourself. Adviser 2.0 is on Facebook and Google+, and I’m on Twitter, @RobinJPowell. Please let us know what you think.