Freeman Blog

David and Goliath

Posted by Mark Freeman
Mark Freeman
Mark Freeman & Associates was established by Mark Freeman to bring together a number of trusted associates who...
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on Thursday, 18 April 2013 in Freeman Blog

Over the last few months there have been a number of changes in the way investment managers deal with NGOs - which may possibly not be the best thing for the NGOs!  Investment managers have set out their stall proposing changes to the services and products they offer, and some are proposing mergers.  Bigger is better.  I think weve heard that before somewhere...auditors, law firms, telecoms, and lets not forget the banks!

Previous get-bigger actions have taught us that services become less focused on the client and more on the bottom line, with less control for the client or the customer, and less  access to the individual people that they wish to deal with.

Take auditors for example.  Unless you are a super NGO the big four are not interested.  Take banking.  The promise was better access to services and products.  What really happened was that they got so big they didnt know what was going on with the levels of risk they were taking on.   So now there are moves afoot to break up the banks, and let's not get started with what needs to happen to telecoms!

So, coming back to the big investment managers, is getting bigger really a wise thing?  What I foresee is that clients will have limited choice unless they have large portfolios, and this arrangement may not meet all needs.  We are already seeing that investment managers want to offer a product rather than a service... interesting to see that the industry is following the American model.

At the same time clients will be offered less advice, and investment managers will be dealing increasingly with costly compliance issues - one reason why fees are not going down when economies of scale dictate that they should.  You could of course suggest  that NGOs will be served better than before as there will be more people doing the same thing ... brings an image of lemmings to mind!

So,  what exactly are the options available to the not-so-big NGO investors, or indeed those who want a better service?  A boutique investment manager dealing with organisations with under £10 billion of assets under management might be one way.

Another is to consider buying funds/products through a dealer such as Hargreaves Lansdown.  Why do this when it might cost more?  The main reason is flexibility, ease of moving to another fund or using multiple funds as part of the strategy for investing.

The bottom line is that whilst big might be viewed as better, we know from history that David beat Goliath with one stone.  My money is on the Davids of the investment world beating the Goliaths on service - and potentially on longer-term returns for clients!  

Article by Mark Freeman


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