TRAP: The Real Adviser Podcast
Four business-owning entrepreneurial knuckleheads chew the fat on the sometimes murky, always quirky, world of UK and Irish personal finance.
TRAP: The Real Adviser Podcast
107 - ETF ABCs
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In this latest pile of TRAP, the Trap Pack discuss
- Topical Titbits
- Meat and Potatoes: WTF with ETFs?
- TRAPist question from beloved TRAPist Joe Finn: http://LinkedIn.com/joefinn
- Culture Corner
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Absolute shaft.
Unknown:Welcome to the Real Advisor podcast. T R A P Trap. Like and subscribe to our YouTube channel, and leave a six out of five star review on iTunes. Now let's head over to the studio for the latest pile of trap.
Nick Lincoln:Yes, indeed, dear Trappists. Welcome back to what many people are calling episode 107, The Ento Isietti, of the Real Advisor Podcast. T R A P Trap. My name is officially Lick Lincoln, and joining me as ever in the digital studio of Doom are the three other horsemen of the apocalypse: Alan the Storyteller Smith, Andy Ultra Heart and Carl the Voice de la Bocci Widgeon. Now, gentlemen, we have a show packed full of absolutely nothing. So let's start unpacking it straight away with another high energy review read read out by my very good friend, the Right Honorable mr. Andrew Ursane Hart.
Andy Hart:Thank you very much, Nicholas. It's definitely one review today. We're running very thin, so please do leave your reviews. This one is entitled"Laugh and Learn, five stars, left by Adrian double zero double one double zero. The review is Listen. The intro is a bit weird, but content is fantastic. The guys are down to earth, honest, and hilarious at times. I laugh a lot and learn a lot from the show, and I've become a true fan who appreciates this podcast massively. Back to you, Nicholas.
Nick Lincoln:Nice, nice. Thank you, Adrian. Intro is a bit weird. Good grief, surely not. Okay, let's kick off topical tip puts. Put a timestamp on episode 107, and on LinkedIn, a young advisor called Chris Young made contact with it. I'm going to read out his message, and his contact details are on in the so-called show notes. So if you want to follow up on the back of what he's about to tell the Trappists, click on that link and speak to Chris directly. Hi, Nick. I'm a big fan of Trap, advocate of full-fat financial planning, and a newish advisor. A couple of years in, I'm wondering if you are aware of whether there's now Ideas Exchange Group for the northwest of England at all, and if so, by any chance, do you know who I can contact about it? If not, I'd be interested in trying to get something up and running as I'm based on the Cheshire, Merseyside, North Wales border. Any help on this appreciated. Thanks for all of your work. So, Trappist, if you are part of an Ideas Exchange peer group, mastermind group in the northwest area of England, do do get in contact with Chris Young, but even if you're not and you would like to be part of one, get in contact with him, and maybe you and Chris and whoever else can get one set up and going. They're really good. If you're especially if you're new to this thing of ours, really good ways just to learn from your peers in a face to face environment. So that's all good stuff. But away from face to face, we have this thing called artificial intelligence, mr. Magpie. I understand you got another report. Tell us about artificial intelligence.
Alan Smith:Do you not see this? Our friends at Saturn, Saturn AI, who are very popular amongst financial planners in the UK, I think they're up to about 700 advisors now signed up for their services, and I think maybe maybe as a response to what was it, the ChatGPT financial personal financial planning application, and then Claude came out with something a couple of weeks ago. So they had one of their para planners, who works, you know, on the team at Saturn, just go through a whole series of questions and asking all the top large language models, from Grok to ChatGPT to Claude to Meta, I think, all the main ones, and then we're just sort of testing against the questions they asked and the answers that they gave. And the response, as you might expect, was that AI got the questions wrong quite a lot of times, actually, quite quite a few times. I mean, I've read the report. I put posted a link to in the show notes. It's worth a quick browse through just to get a sense of of where we're at right now. Being really honest, some of them were a bit unfair in terms of just saying no. That's wrong because there was a couple that you'd have probably asked more questions. It asked about, for example, an inheritance tax situation, and it assumed that the person was married, and so therefore that was marked as wrong. Well, if the person was married, it would have been the right answer. If it was if they were single, it was obviously the wrong answer because tax rates would have changed, of course. So it's obviously it's a piece of content which is out there now in very much in support of you know hiring hiring a financial planner, and even better hiring a financial planner that is powered by some decent AI, but do not rely on artificial intelligence to give you the answers to sometimes complex financial questions. Worth a browse anyway of the of the report.
Andy Hart:A couple of extra. A resounding outcome from the report was paid AI services are miles more accurate than the free options. There's nothing new there. It was also featured on Moneybox, which is part of the BBC. So they got a lot of exposure from it. And I think is his name Mark, the guy that runs the Lancat or another? Yeah, yeah. I
Alan Smith:listened to that. Yeah.
Andy Hart:What was his name? Nick.
Nick Lincoln:Mark. Mark Paulsen.
Andy Hart:Mark. Sorry. Mark Paulsen was on Moneybox discussing it with Paul Lewis. Yeah. I mean, these systems are only going to get better and better and better. I mean, we. I'm assuming all use AI personally every single day and professionally every single day, I mean, we're experts in this field, so we can decipher when it's getting things slightly wrong. And again, it's a bit-it's assuming people are going to go into AI, ask a question, get the answer, run off and do it. I mean, that's just insulting. It's just a reference point. People are going to go into AI like we do. We ask about medicine. We ask about law. We ask about accounting. We don't just run off and follow whatever it tells us. We then interpret that information and work out to make you know a decision. So, yeah, it's an interesting report worth a scroll, but nothing. There was
Alan Smith:there was something else though in the the report was also referenced in the FT, there was an article in the Financial Times, and if you'd scroll down and look at the comments from the readers of the FT, there was quite a lot of them that said, "Why the hell would you pay for a financial advisor? You know, the answer to everything is buy the S and p5 100 and let it ride for 30 years. It seemed to be the case for some of these readers because I didn't bother to
Andy Hart:understand what decent financial advisors and financial planners do until. Well, I think
Alan Smith:I think that is the chance
Andy Hart:of one of ours.
Alan Smith:I think that's the challenge. I think some part of the advice profession does just buy investment funds and chops and changes and moves them around. Yeah, true. It doesn't add much value. They extract value.
Andy Hart:Yeah, you're saying add value, they extract value. They put them in bad asset misallocation, provide no financial planning. So, yeah, I'm also strongly against yeah individuals.
Alan Smith:But I'm I'm going to assume I have to assume that everyone who's written that on the comment section and the FT has never actually engaged in real life with a full fat financial planner because they just simply wouldn't say that. They wouldn't. It'd be an entirely different experience. We'd hope. I mean, it's interesting
Andy Hart:that it's the FT. You're assuming they're people that would likely see seek advice. You know, they by default will have more money, be older, but nothing's changed, mate. It's been going on since you and me have all entered this industry. You know, why pay for that additional cost? They don't see it as a value; they see it as cost, and we just focus on the people that want help.
Nick Lincoln:Yeah, I wouldn't surprise me if the FT was had a lot of its readership knew the price of everything and the value of nothing. Okay, we give them that good thrashing. Christ, Ultra, make this interesting. I'm going to mute you.
Andy Hart:I can't make this interesting. I'm working with a potential client at the moment that has had a very large payout, and this is an area of financial advice that I don't really focus on. You know, negligence and things like that. It's very specialist, but I've been doing a little bit of digging because there's an outside chance I might help this individual. Anyway, I came across the Court Funds Office, which is a government department that basically administers quite a lot of these payouts. So I was having a little bit of a you know things like compensation awarded to a young child that's not able to look after the money, someone with mental lacks mental capacity, things of litigation. Anyway, a load of money ends up at the court funds office, and they've got two options. Quite interesting. It's quite interesting for a government department to come out with something quite simplistic. You're going to cover something like this later on, I think, Nick, in the show. Anyway, you can put leave the money in cash, which makes sense, and they aggregate this money across various different banks and get you an okay interest rate. And then the other option they have-they've
got two options:cash or an equity index tracker fund. And I thought, brilliant. Okay, so if it's long-term money, medium to long-term, then put it in this equity index tracker fund. Two
options:cash or you know equity and index tracker fund. Anyway, diving into the details. Yeah, thank you, government department, to to do something so simplistic, it's like, well, we need I don't know we need five years worth of expenses in the cash funds. We'll put I don't know 500 grand in there, and the other few million quid we'll put that into the you know index tracker fund. Reading in the detail, LNG is the manager that looks after it. They're probably charging reasonable fees, which is great. 55% of it is held in the UK, 35% overseas, 10% held in emerging markets. It's quite interesting. It's got quite a heavy-ish slant to emerging markets being 10% and 55% in the UK. It will still do likely a lot better than the cash alternative, but it is quite interesting that they've taken a heavy home bias. But. I thought it was quite interesting that government department has streamlined the two investment options for, you know, sort of trustees, deputies, people that have got a lot on their mind anyway. Yeah, so I've just come across it, so it might be useful for any other advisors out there. Carl, do you have a point on this? Surely not.
Carl Widger:Why wouldn't they? Okay, good. We do a lot of intrigued.
Andy Hart:We do a lot. We do
Carl Widger:a lot of this kind of work. So it's called Ward of Court here. There was a couple of rule changes. As in any kind of niche, there's probably bunches of solicitor firms that are kind of advising these kind of die in die
Andy Hart:out. Yeah,
Carl Widger:and their experience, as far as they can, they have told us was that you know when the million or 2 million or 3 million is awarded, that the advisor comes in and says, "Here's the best fund, and you pick this, and blah blah. Right, the old school way of doing it, because we come in, and clearly, if you've got a a very sick child who's been awarded a lot of money, and the the money is awarded to care for that child over a very long period of time, well, financial planning is kind of important, isn't it? Cash flow
Andy Hart:planning is number one. Cash flow
Carl Widger:planning, right? So we came in and did the cash flow plan number one, and then we broke it up to short, medium, and long term investments, and it was like a game changer for us for for the the firms advising their clients that they now introduced a cash flow modeling investment advisory firm. So yeah, we've been it's been very lucrative for us. And you know what? And this is going to sound perhaps a little bit fluffy, but you do in these cases feel like you're doing really important work. Yeah, because you are mapping something out to help somebody who's in dire dire straits, and it also kind of connects with the work that we do with Cleanest Foundation, which is to help families of of sick kids. So yeah, just another just another another reason why I really believe we're doing so so important work.
Andy Hart:Just a boring logistics question about the Irish market, Carl. Does the money get paid out directly to the client, or does it stay within some government institution that you get a mandate on, or how does it work? So
Carl Widger:I actually don't know the answer to that question, but I do know that they they changed the rule in it recently, and that's kind of where we were brought in. So I think it used to be the court, and now it's being paid directly out to the families, something like that. But hey, please don't shoot me. Yeah,
Andy Hart:yeah, the case might be different. Yeah,
Carl Widger:Susan Walsh and Patty O'Halloran here are the experts, and they deal with those cases. And yeah, it's really, really brilliant stuff that they're doing there.
Nick Lincoln:Interesting, interesting, and yeah, good stuff, Carl. Yeah, I just want. I mean, so they basically need twentyfold overweight the UK, aren't they, Andy? I'm just one because otherwise the solution is excellent. You know, they've well done. They've got rid of manager risk. They just said we're going to buy the we're going to buy the markets, but they've gone heavily you massively, massively overweight the UK. And I wonder if that's just the the litigious background of this, and they just think most people who don't know anything about money would just want a portfolio that is represents their home country. Just give an old style,
Andy Hart:yeah, yeah. They're maybe trying to. It's like a cover your ass allocation. Yeah,
Nick Lincoln:yeah. We didn't want 70% in in the US. You know, we're we're we're British, and you know, I don't know. I'm just extemporaneous, but I'm sure. I've paying
Andy Hart:quite a low fee for it. They're probably paying, you know, 10 basis points, point one for LNG to put this together. They'll probably get institutional rates. It's basically free, but I suppose there there is never a perfect portfolio. But this one is very heavily skewed to the UK. If they rebalance it out, it could be then argued the perfect solution for medium to long-term money. So yeah, quite interesting. Lisa haven't got sorry. Lisa haven't got 65 funds and all different weird names. And yeah, well, she's like, look, I've got enough going on at the moment. Let you know, look, my my young kid, my old adult, yeah. Just just to keep it simple for me. Oh no, but go through the 14 pages and let us know what what 18 different funds you want. We will come up to that, Nick. Yeah,
Nick Lincoln:a criminal example of that. So, an area where people probably aren't paying 10 bits on their investments is in the world of commission-based investments, Wadja.
Carl Widger:Yeah, I'm next. I'm late. Okay. So this was a kind of a commission expose done in the Business Post over the weekend, and I'm all for this because I think the clients need to know about this. But I just think this article got it wrong, and I'll tell you why. It conflates the commission being paid on life insurance products with the commission being paid on pensions and investments, so because obviously you need articles to sell digital or real newspapers. The the first part of it is if you did a 10,000 euro life assurance premium. Then the commission, the maximum commission that can be paid to your advisor is 22,250 or something like that, right? Which is 225% commission, and it's like, yeah, but that you whilst you can get that, that is real. There are other models there, and we all know that the commission payments on risk policies don't have as much an impact as you might imagine, and this article then goes on to say, and you know you can have 25% commission on regular premium pension policies, and it alludes to you know trail of up to 1% It alludes to clawback. It alludes to exit penalties, but it's not. It's a little bit for me. It was a little bit all over the place, and I would prefer one expose or report done on the impact of upfront and ongoing commissions on investment products, whether they're straight investments or whether they're pensions, because I think that is something that needs to be exposed, for want of a better phrase. And I don't think people understand it. And like we're still in Ireland talking about that there are some providers still talking about allocation rates, and increasing allocation rates. And yeah, like look, you you you might laugh, but but they but they certainly absolutely are. No, without then you know the well then you're you have exit penalties, and then you have you know much higher annual management charges, and
Nick Lincoln:yeah,
Carl Widger:they're talking about clawback and going, you know, there's no impact for the client in this report. It says there's there's no impact for the client on clawback of commission. Yeah, but there is because if you claw back of commission, you have exit penalties in there. And how how often have we seen clients being either stuck in a policy when there's, for example, budgetary change, and we might have-I'll talk a little bit about that in a minute-that that you need to instantly move out of the contract that you're in because it's no longer fit for purpose, or for various tax reasons or other reasons you need to get out. And so, saying that you know, oh well, let's all claw back on the on the advisor. That's not actually all of the story, and yeah, I just thought it was a pity to conflate the two because, in my in my opinion, and I accept, but different people might have totally different views. Maybe the clients would have totally different views that I didn't know. You could take 225% of the life insurance policy. I just don't know how many life insurance policies for 10 grand are being are being taken out, and therefore I think that that particular example was probably not that relevant, really. And I think that the impact of the commissions on pensions and investments are have they're much more detrimental to the clients if you know you've got very high commissions, very high trail. You've got exit penalties. You get stuck, and then you know lo and behold, when a lot of there are a lot of examples where once exit penalties are out, people will roll it over again, and maybe they'll be getting their commission from another from another source. So look, I just thought whilst it's great to have this stuff in the news and brought to the attention of the consumer, probably not the best job in my opinion.
Nick Lincoln:Yeah, well, if it bleeds, it leads. I don't know who went first with the hands.
Andy Hart:I think it was Alan and I. I was I was just
Alan Smith:going to ask you, Carl. You mentioned allocation rates. Do do you still have like?
Andy Hart:Did you get excited then? Did it remind you of the backup good old days? It did. Yeah. Well, it reminded me what I was up against, selling again. Yes, I
Nick Lincoln:was Scott X selling GPPs with 120% allocation rates, regular premiums and stuff. Yeah. Yeah. We, you know,
Andy Hart:I was in standard life, and we just we just had
Alan Smith:100% allocations, and then these things came out, and of course it's just manufacturing money out of nowhere. And I used to say to the IFAs and brokers, "Well, this doesn't make any sense. You put 100 grand into this. I mean, young advisors can't get their heads around this. If you're listening into this,
Nick Lincoln:Alperturn. Alpertung, I can't see my wheelbarrow filling with props signed by the weak and willing. I was 21 and arrested. I owned Alperton.
Alan Smith:Well, I can tell you, it was harder than usual to fill my wheelbarrow in those days when Scott Eck came out with, and a bunch of others. Remember, I mean, all these companies don't exist anymore, but Scottish Mutual, Scott Eck, they're all buying. Someone come up with 105% allocation, so. Someone else comes up with 107% and so on. And you're right. I think that's what it peaked at, Nick. It was about 120% So, client puts.
Carl Widger:I never heard of 120 20% I did. Put 100 grand in a pension policy,
Alan Smith:and tomorrow it's worth 120, and it's a massive
Nick Lincoln:back end exit penalty. Yeah, but and if you ever want to
Alan Smith:touch it or take money out or do anything with it ever again in the future, yeah, yeah, you screw it. Yeah, yeah, and you had to take
Nick Lincoln:out the retirement age. You said even if it was like 40 years prior when you were 20, you took it out. If you didn't take it at 60, you were going to get. Well, no, that that was
Alan Smith:another one where you would put retirement age 75 because it was based on term to retirement.
Nick Lincoln:Yeah, yeah. So the
Alan Smith:guy, you know, the client says, get client gets to 65 and says, ah, I think I'll retire now? Oh no, no,
Andy Hart:no, no, no, no! Your
Alan Smith:advisor 20 years ago, and it is because some of these are coming up for like maturity now, retirement. Yeah, well,
Carl Widger:it's it's funny. We were we were doing the work on our preferred providers at at NFP with the the integration of the two businesses and all that kind of stuff, and so we're going out there, and and and one of the providers asked me, "Do you guys only want clean pricing? And I was like, so we're so long gone out of the magic money, the extra allocation, right? I was like, what's clean pricing? Just like straight 100% allocation. I went, yeah, the normal way, like the only way to do it, the new normal, not the magic money
Alan Smith:tree way.
Carl Widger:So yeah, so I don't know what offers are available out there now, but I just know that our clients won't be getting any of that put in front of them.
Andy Hart:But sometimes the systems are so archaic, there isn't a saving going by the clean route. Does that make sense? It's like the the the the murky, dirty route, the clean route. The net result is the same to the client, but then the advisor doesn't get a huge clip. It's a bit odd. A couple of questions for you, Carl. So typically now, if you have 100,000 euros and you went to a let's call them shady-ish advisor in Ireland,
Carl Widger:I'm not answering that question. But
Andy Hart:okay, let me just let me just say the question, and I say old school, old school, old school. Here's 100,000 euros, and I would invest in it. Could I get an allocation rate of like 105, and then the advisor still gets a five 8% commission or something? Like, what are the contracts roughly?
Carl Widger:I don't know. I genuinely don't know what the allocation rates are, but my gut is telling me for 100 grand, you're probably going to get the maximum you get as 103% or something like that. But I do get
Andy Hart:556, 7% commission.
Carl Widger:No, you'd get 3% then. So they'll only roll it back, as far as I'm aware. Yeah, I shouldn't actually even attempt to answer this because people like flooding in. But it is still a thing, yeah, for sure.
Andy Hart: My next question is:You've obviously read this report that's quite a current report about the commission landscape in Ireland, and you've totally found all the holes, ripped it apart because you're an insider. Why don't you write a report on this for your new company and explain how these things work and some examples? And I'm not sure you've been listening to what I've been saying
Carl Widger:over the last slide, but I'm a little bit fucking busy, right? So why would I arrive and report on the commission system in Ireland? Yeah, could you do that, Carl? It's afternoon.
Nick Lincoln:Halfway there. I think you're halfway there. Okay. Carl, can we can we convene a meeting to talk about it?
Unknown:Yeah. And then have a vote. I
Andy Hart:think you're halfway there. Put it on the. We we had a meeting recently,
Alan Smith:Nick, and we did. Okay, said of that, the better.
Nick Lincoln:Okay, good point. Good point. Interesting. Interesting. How how what still goes on? Hey, and and a trip down memory lane for for some of us in the transact pack. So I had this not untypical situation where a client she's invested with me as is her husband and her children through ISAs and and pension wrappers, and they're all in the same fun. Everything's going really well, and they really like it. However, she has an outside pension because she works at a private school, and they've they've got an AVC scheme, and the teachers have all been chatting. God, they're going to get rid of this national insurance break. We've got to get you know, which has been there forever. But now because it's going, they want to suddenly put money into their AVC scheme. It's like two and a half years. Anyway, crack on. And she says to me, "Yeah, but Nick, I don't know where to invest the money. They've, you know, they sent us this bro show, and I don't know which fund to pick. And I said, "Well, you're really happy because then you then you go in this dance, this little tête-à-tête, where you dance around each other with, with you know, pension stuff that you're not the advisor to. And I said, "Well, you're really happy, aren't you, with the fund you're in in the in the ISO and pension wrappers that I look after on your behalf, aren't you? And she said, "Yeah, really happy. I said, "Well, I suggest. And then you sort of answered, "Yes, Minister, double speak, don't you? She said, "Well, I would suggest that the least deleterious route for you would be find a similar fund, maybe with the world, not a recommendation, of course. I don't talk about your workplace pension, but maybe the world's track a world equity global in it, and put your money in there. That's what I would do if I was you. And she went, "Okay, I'll do that. And then she came back to me and said, "Nick, I've got this. She has been sent by her HR team. It's a 40 over 40 page,
Andy Hart:46, yeah,
Nick Lincoln:46 page PDF of all the funds that she can put her money, and this is aimed at Joe Public. This PDF it comes via people's HR functions, and ends up in front of these Joe Public people who know nothing about pensions, and these." Teachers, brilliant at what they do. Know nothing about pensions. This ABC brochure it opens up with this. Imagine if you're if you're if you're Joe Public and the first page you see it says this. This guy contains information on the investment options available to investors in the following products: GPP One, GPP Flex, GFRP, GPPP, repriced single charge C I M P single charge G A B C single charge R A P reprice C I M P reprice G A V C repriced R A P trusty buyout plan Joe Public is not getting past that first page. I'm sure they have to put that out there. Can you put it in a footnote at the back of the document? Anyway, that's just the start of the hell of this this fund choice document. It's the company Standard Life offering this. Of course, there's various wrappers into this Teachers ABT scheme. It has 46 pages to it, as as ultra said. 59 lifestyle funds, 59 bond funds, 18 Far East equity funds, and the thing I was trying to steer her to with a little nudge, Global Equity Index Tracker, 65 global equity funds. Yeah, obviously this is just overcomplication for the sake of it. It's absolutely baffling. It's baffling to me. I had to wade my way through it till I found the kind of fund that I thought would approximate what she's got through me and as her advisor, and and she's going into that. But it wasn't just that. And and Smithy, you picked up this when we shared the document on the on the group chat. The cheapest the cheapest fund comes in at 98 bips in this in this range of funds that spans four to six pages. 98 bips. The most expensive comes in at 273 bips. And yeah, it's just now I don't we don't know whether if you once you go into these funds via any of those various wrappers where there are like rebates applied to bring those charges down, but pay perfectly 1% for a global equity index tracker fund in a pension environment in schemes that have purchasing power. Remember, there's not individual plans; these are ABCs, right? The trustees have purchasing power. Show me the customers' yachts, right? There's some unless I'm misreading this massively. Something stinks there, so that's all I've got to say.
Andy Hart:There's a few points here. Back to your point of the lowest charging fund. Keep it simple, just under 1% They'll be getting institutional rates on that. Their margin on that annual management charge will be close to 90% This is not treating customers fairly, which is still a regime that we adhere to. This is not a dear to consumer duty. I've I've been down the same rabbit hole, Nick. I think I helped out a client a client's son, and I said, just you know, have a look online. You're a smart boy. You know, just choose a global equity fund. You know, no good deed goes unpunished. Next minute, he sends me the standard live document of about 60 pages. I waded through it like yourself and called him up and tried to steer him. Yeah, very very expensive, very very complex. I mean, they could shrink this down to probably about three or four funds, in my opinion. But maybe sometimes people do want choice. Well, and it seems they don't. Nobody
Carl Widger:wants that much choice. Nobody wants that.
Andy Hart:It's called the paradox of choice.
Nick Lincoln:It's the other side of the beautiful point you made earlier with the trustees of these people who haven't got this money in there. Just give me two funds, cash, and give me a global. And this is the antithesis of this, the other extreme where you've probably got pension consultants being paid a tiny fortune, and if they come in with a report of like three funds, trustees are going to go, "We've paid you X amount for this. No, shit, you're right. 46 pages, 800 funds,
Andy Hart:yeah,
Alan Smith:18 Far Eastern funds. I mean, for the love of Christ, life's too short. And these are people who don't aren't in this thing of ours. How on earth are they supposed to know? It's funny, Nick. Well, because I, I probably sold that. Because all those, because what do you say? The the kimp contracted in money purchase scheme. No one would know that what that stands for. The GPP, the what was the other one? The the trusty investment account, and these were all just a range of legacy products. And of course, if you worked as a teacher for many years, you could have been in any one of these schemes, depending on when you joined, when you signed up for that scheme. And God, it's so. And and we we had this thing. When was this thing called pension simplification brought in? You know,
Andy Hart:2009,
Alan Smith:2009, and he hasn't exactly simplified the pension landscape. And you're right, if you are, and most of these people will be non-advised, and this is the sort of thing that you talk about, Andrew. Is like what do you call it? Your six-figure tick boxes.
Andy Hart:Six-figure tick boxes. So I don't know what to do.
Alan Smith:And interestingly, there'll be some behavioral sort of stuff in this. Do people just take the first one? The first 50 odd are lifestyle funds, which is going to automate them into. Oh, you
Andy Hart:mean all all the good funds might be on page 43, but nobody gets there. No one, no one, no one's getting past the front page. Funds probably decline as you go through the PDF. They start off with the expensive. They lose the will to live. They've got reading all the 18 bloody Far East funds.
Alan Smith:They go, oh god, I don't know. Anyway,
Nick Lincoln:just just just just another example of what what is out there, okay? And and as you say, no good deal. I said to just find this, just look at the global, and then suddenly get this PDF and thinking, oh my god, my head's throbbing. God knows what yours is like. But anyways, but I
Alan Smith:think this is this the point. As Andy said, we've got all these rafts of legislation-the stuff that we're all having to fill in and submit on a quarterly, monthly, regular basis-and this, to me, is unless we've got it wrong. I don't think you have, Nick, but this is just institutional. Unless we've got it wrong, unless we have, if we take elective responsibility on this bloody show, I can't believe the fees. But to chop, what was it? 2.73% One of the funds. Yeah,
Nick Lincoln:the Jupiter Merlin going since 1992. How much is that? I bet Jupiter have some nice boats moored in Benner Harafi. Cataran's that easy to find. Anyway, let's let's draw a line on this because Tempus is future ting, and we are on to recurring things. We have talked about these cash ice tax changes. They are definitely more slippery than they look, aren't they, Ultra?
Andy Hart:Yeah, you just alluded to then, Nick. It would be remiss of us not to talk about our recent trip. Every year we have a little recent trip. This year we went to Malaga. Lovely couple of days. Obviously discussing all the things that are happening inside Trap. It's good to get together with your fellow business partners every year, and it was a great trip. Stayed in a lovely hotel and discussed lots of things. Excited was in Kraken
Carl Widger:Hotel. What was the name of the hotel? Hotel Miramar, wasn't it? Kraken Hotel
Nick Lincoln:Mirimar.
Andy Hart:Very nice. Yeah, big a big block of marble right in the center of Malaga with cross the road from the beach,
Carl Widger:yeah. Cross road from the beach,
Andy Hart:yeah. It was good, yeah. We spoke about a lot of things, a lot of things bubbling. Obviously, there's a few things that people are aware of. The podcast is the main thing. We also have Trap Live, Trap Forum. We're trying to focus a lot more on that, and I think that's probably the key thing we need to focus and build out. We're also speaking about Trap Retreat and a couple of other things happening, but yeah, it was a good couple of days. Good to get away. Nice. So that rule when one
Nick Lincoln:of us says no, it doesn't apply when one of us wants to talk about it. Okay. All right. Talk about cash. It was a very friendly trip.
Alan Smith:We all got on really well, and there was never a word of argument. Never.
Nick Lincoln:We're not all hanging like dogs now with the with the sweats and the fears or anything. Yeah,
Carl Widger:but look, to be fair, it was it was great fun. But we may as well just say it out that it's like we can't agree on basically anything. So this is the fact that we show up and do this every two weeks is a miracle, a miracle. But more
Alan Smith:opinionated people you could not find, but maybe that's why.
Carl Widger:Maybe that's why this works. I don't know, but it's like it's. I'd say to be a fly in the wall watching the discussions is like the WhatsApp
Nick Lincoln:groups will be like Alan Clark's diaries. They'll just be the biggest thing ever when they were in the camera. Right, ultra cash interest. This is
Andy Hart:a change coming in. You know the big year, the Olympic year for financial planners in the UK, 2027. All the pension changes, but I'm just wondering about the logistics of them charging cash interest on cash inside investment ISAs. Now I'm sure you, Nick, have lots of clients that at some points have large cash balances in their investment ISAs, and I'm just trying to think of the logistics with Transact. So at the moment, Transact charge 3.76 on cash. They take their fee from that. Do they then take the interest charge of the net amount or the gross amount? Yeah, of course. The devil's going to be in the details. They take
Nick Lincoln:the charge on the interest.
Andy Hart:So that's the gross amount, Nick.
Nick Lincoln:It's the gross. No, no, no, no. 3.76 minus transact charge is the gross interest of which the HMRC will then take its tax
Andy Hart:off that, not the gross. Okay, but yeah, I'm just wondering about the logistics of this and how this is going to play out. Do you have a lot of clients with a lot of large cash balances in investment ISS, Nick? No, no, I don't. So if I'm
Nick Lincoln:doing my bucketing, it's a global short dated bond fund that I use.
Andy Hart:Oh, over the cash fund. Okay, all right. Yeah. So I'm just wondering again. Platforms. Spoke about platforms a lot. There's also the silly, this
Nick Lincoln:silly workaround, isn't it? Where you could put like 1% in cash and 99% in in a money market fund, or a you know, and and suddenly it's all it's all a load of old it's a real dog. I'm
Andy Hart:more concerned about the direct cash held inside investment ISAs. I have various clients that do it usually when they've got a known expense coming up, or they want to pay down their mortgage, or they want to do something. So I do have a large percentage of some clients' ISAs in that situation in cash, cash. Yeah, I have about the logistics of it, how they are actually going to do it, because it's the first time they've ever charged interest inside the ISA wrapper. All right, no worries. Moving on. Anyway, 2026 is going to be a cracking year for us financial planners.
Nick Lincoln:Yeah, well, we're only 10 months into it, Andrew, so wake up. Sorry, sorry, Pat.
Alan Smith:I was nodding along. Yeah. What year is it, please?
Nick Lincoln:Slightly political, political. This next one, but politicians and financial services often overlap. It's just the way it is because the politicians set the rules that we. Have to play by in terms of taxes and rules around pensions and ISAs and everything else, and we've had this thing in the UK called the triple lock, where since 2011, 2010, the state pension's gone up by the greater two and a half percent a year CPI inflation or average wage growth, and what it means is, of course, that the state pension has been on a real tear over the last 15 years. It's gone from being a pretty meager amounts, it's something quite significant now. But long term, it's unaffordable, and no political party has had the balls yet to say, "Oh, we need to get rid of this triple lock. And our Prime Minister Burnham did so at the Labor Party conference and said, "If they get into power from April 2030, they're going to go back to the double lock. So the state pension going up in line with CPI or two and a half percent, whichever the greater. So actually, so it's still a good deal because if inflation is 1% then the pensioners will get a pay rise of two, not pay rise, a pension rise of two and a half percent. I just thought it was really interesting. The Burnham's done it. Now he's saying he wants to do it, and the money they'll save from this is going to put into some god awful national care service, which will be a catastrophic way where the state administers care homes. But that's fine because the future government can unwind that. The important thing is that all that we get this triple lock unwound. And I just love to see all the political parties in the UK being grown up and putting aside all the partisanship and just saying, you know, Burnham's put his head above the power prep. Brave thing to do. We all agree and we do. But you know, reformer said no. You're stealing from pensions and all this. You're not stealing from anybody. It's it's all you're doing is reducing one of the ways the pension can go up in future. But the way the whole thing is couched is very emotional. I just hope we have a grown up discussion around this because I'm fell off the back tooth with how partisan our politics is, and for this our prime minister to you know go out there and say we need to do this, and we will do it. April 2030 is is very very good, and we should all be supporting him in it. I won't hold my breath. Ultra,
Andy Hart:I mean, it has to happen. It's totally unsustainable, isn't it? I'm going to give you the the last
five years increase:2022 3.1% 2023 10.1% 2024 8.5% 25 4.1% 2026 4.8% The last five years, it's gone up by 34.4% It's insane. You know, even my dear mother is a huge benefactor from the triple lock. She says, "Yep, I'm more than happy for it to stop. I think a lot of wealth, wealthy-ish pensioners have the same thoughts, Alan. What's your thoughts on the triple lock stopping stopping you? You'll be you'll be next up to receive this.
Alan Smith:I just I I agree with what you say, but we know sensible sensible sensible sort of fiscal decisions are often mixed up with political party decisions. Now we just note the
demographics:more retired people vote than young people, and I thought it was surprisingly, you know, good, positive, and brave move from Andy Burnham, relatively new into his premiership, because I think they'll they'll lose quite a few votes as a result of it, but obviously it's the right thing to do. It's unsustainable. It's nuts, and not not just the the compounding effect. The whole demographics about we've got a you know our birth rates are through the floor. There's not enough young people funding the state pension, and people are living longer and longer. So it's it's a complete road to financial disaster.
Andy Hart:So the the logistics of the the double lock, Nick, they're just going to take the middle number, top. No, no,
Nick Lincoln:every year it'll be better than that, is it? The high the higher of CPI, and or two and a half percent, whichever is greater. There's also some pledge in the background that there will never be less than 30% of the increase of the average wage. That's why I lost the will to live bit. But basically, it's going from three. You're not following the highest of three because the trouble is every year if you bake in the highest of three, you're now one year wager growth is massive. That pensions get that next year inflation is minus 4% They still get two and a half percent go, and it compounds on compounds on the highest integral every year. So it just goes parabolic explosion up the older up the old graph. So yeah, right now. So that's what might happen in a future budget in the United Kingdom. Carlos, you have a big day coming up in your neck of the woods.
Carl Widger:Well, yeah, but this episode is coming out Thursday morning, so it will be two days ago when this episode comes out. So I just wanted to flag that we're recording this on Monday afternoon. Just yeah, the. Give us your
Andy Hart:predictions, Carl.
Carl Widger:Yeah, so well, I can give you what I what I what I think should happen, and then my predictions. So, I the the new savings and investment account is being launched. The details around that, how much you can put in, what the tax rates are. They've leaked little bits out, and then they've taken some stuff back, and then put some different stuff out. So that's going to come out. My guess is that you'll be able to put in somewhere between maybe 25 grand a year, and then you'll have a a very low tax rate on the gain on that up to a certain level. That's pretty much a given. They're going to bring this in. The the contracts the policies will probably be available from q2 next year. I I would say to give the providers all time to get their ducks in a row. They have spoken about my absolute another bugbear, which is the exit tax, which is the deemed disposal every eight years? You have to pay it. It's at 38% I think what they're going to do, based on lots of stuff that they've leaked out, is they're going to set up a kind of a program over maybe three, the next three budgets or something like that, that they'll reduce it and then it'll be gone. That that would be probably not enough right now, but that's probably a more sensible approach. Yeah, to to to be fair. So I think that that's probably what they're going to come up with. They are talking about entrepreneur relief and increasing the limits there. They really really do need to do that because we are so we're far too dependent on the corporation tax from a very few massive massive multinationals, and we really need to be looking after our own people now for what's going to happen in 1015, 20 years, so I do think encouraging startups, encouraging Irish businesses to to to start up now and grow and create employment ourselves and look after ourselves, I think that would be really really great if they do that. But I'm not actually sure they're going to do that. Having said that, it's been in the news a little bit over the last kind of 10 days, and it wasn't really in the the budget leaks before that. So maybe there's something coming, and then they are talking about inheritance tax, and maybe that'll be the limits on you know because Ireland has become very wealthy, mostly because of property values. So household wealth has gone up exponentially because because of housing values. So maybe they're going to increase those thresholds, which would be would be very very welcome. The usual stuff they're going to increase the old age pension, which I tuned in and out of double lock and triple lock and all that. But I think what you're saying is that you can't keep continuing to pay because you'll basically run out of money because there's not enough young people. We're the same, so this is like this is a vote getter, and every time you know this is brought up by the actuaries saying we're going to run out of money here, guys are like, oh, we will deal with that, but they do know if they don't sort the pensioners in each budget that they're going to lose votes massively. So fair play to your guy Andy Burnham. Is that his name? Yeah. Yeah. Everton supporter. So I like him already. But yeah. So so yeah. There'll be that. The tax credits will increase a small bit. But this one is the the the article I shared from Declan King was you know here's a budget I can get excited about as an investment professional, and this really is this has this I I love your your term there and the the Olympics for financial advisors right, well this could be the Olympic year next year for the wealth management investment advisory community in Ireland, and if we do it properly, and don't look for massive commissions in these new savings and investment accounts, we can actually help build real wealth in this country for generations to come if we do it properly. So very excited! Very excited.
Andy Hart:Just to rebalance things, Carl, is there any bad news across the Irish Sea? We just have bad news in the UK at the moment.
Carl Widger:No, we're absolutely and utterly loaded. We're awash with money. Things are going great, and come on, Europe! What's your entrepreneur? What's
Andy Hart:your entrepreneur's relief, Carl? There was some weird quirk. When you hit age 65, you can crystallize 650,000, or somebody's there. Some odd rules. That's kind of that's
Carl Widger:the the main one. The entrepreneur relief is it's up to 1.5 million at 10% and that was increased last year in last year's budget. Thank God, and the so they are talking about increasing it, but look, I like really this is the time when we are awash with the corporation tax money to to build proper infrastructure. So that's the big thing we miss. Is you know you arrive into Dublin Airport and you know you have to get a taxi into town, like just brain dead stuff that we can really help ourselves. We can we can complete motorways around the country, so it's much easier to get around. Build public transport, that and encouraging indigenous Irish companies to start up, build, and stay in Ireland. Right, that's they're the two. Things that we should be focusing on now. Well, we can have an update on
Nick Lincoln:this in in the next episode. We can. I think we've done the Irish budget to death. It's not even happened yet. But in the next episode,
Carl Widger:we'll go back to the triple lock. So yeah. Sorry. Sorry about that. I
Nick Lincoln:think we spent more time on the triple lock than we did on the less time on the triple lock in the Irish budget. Okay. The final point of oh, this is a good one actually. This is a good storyteller.
Alan Smith:Yeah, look, I I just want to do a shout out to a fantastic financial planner called Tory Bulgin, Victoria or Tory Bulgin, who I've known for quite a few years, and I was in touch with her a while ago. She said to me recently, sorry, I haven't been in touch. She's a big fan of this podcast. She's attended Trap Live and a real proper, good financial planner building her own practice down in Brighton on the South Coast. Very unfortunately, her child, her two and a half year old little boy, has had a very serious accident, and she was just telling me, you know, why she sort of been out of out of contact with me and hadn't been had been at work for quite a long time, and it's a real yeah, it's a real tragic story. The little boy, he's you know he's alive, but he needs some very specialist treatment and advanced treatment, and she just mentioned said to me, look, she's got a go funding page. If anyone is doing kind of marathons and sporting things, a lot of people in the financial planning community do. You may wish to take a look at that because it's it's a really really difficult time that she and her partner are going through right now, and we just want to send her all our very best and a lot of love to little Freddy as well, and hope he can recover.
Andy Hart:Absolutely,
Alan Smith:and I want to say a couple of other things on this, which is relevant. She she also mentioned to me that she is going to, or plans to kind of retrain and and learn more about. And I'd never heard of this organization. You know, if you have Senda, S E N D A, which is helping financial advisors to protect send children, young and old, special needs planning, all that complex stuff. When you you get some money or you don't qualify for various benefits and what have you, and tax implications kind of links to your first story there, Andrew, about people receiving money. But so send that and it's s e n d a.org.uk. If anyone's remotely in that space, it's worth probably exploring that because again, being a specialist and obviously, you know, maybe one good thing comes out of this recent tragedy with Tory is that if she can, she obviously is living it right now. If she can learn more about all the sort of the various investment tax, all the complex implications that would come. Then she will be able to help other families going through that situation. And the last thing that I throw into this, which I thought was also quite interesting, she's realized because I'm pretty sure she is a sole trader advisor running her own show, and of course she's just not at work right now, doing the right thing, prioritizing her little boy, and she was just saying, first of all, if there are any financial planners in Brighton, South Coast, looking for because it's a it's a proper full fat financial planning business. If anyone's looking for maybe a change of scenery, then she's open to having discussions about them, because she's yeah she made the point. I realized now I'm actually quite exposed. If anything happens to me or a family member, then you know it's very difficult for the business to run in a normal way, which I thought was another interesting angle. Bearing in mind that half the UK market are sole trader advisors. So look, in summary, shout out. We're thinking of her and her family at this moment. And if anyone wants to reach out, get in touch, support her through the Go Funding page, then the link is in our show notes. That's it. Thanks. Well, well
Andy Hart:said, Alan. We'll make a contribution via Trap. We'll speak about it after. A final point: there is another lady that specializes in this emerging area of financial advice, Rhiannon Goff. She spoke at Humans Under Management last year. She's got a good book. It's also in the show notes.
It's called "Planning with Love:A Guide to Wills and Trust for Parents with Children with special needs. Also, another resource if you're looking to focus a little bit more on this space, or have any clients that are going through this. So yeah, well, big
Carl Widger:big shout out to Freddie. Come on, dude.
Andy Hart:Yeah.
Carl Widger:Best of luck.
Andy Hart:Yeah.
Nick Lincoln:Indeed, indeed. Okay. 40, 5050, minutes in, give or take some rounding. Let's move on to the meat and potatoes of episode 107. Meat and potatoes for new trappists is where we take a subject and give it a bit more of an extended thrashing. And on this one, well, we kind of talked about it in in little bits. We've alluded to it in the in the topical tidbits about the cost of portfolios, the cost of portfolio. It's coming down over time. They certainly have come down over the last 20 years, but they seem to be coming down even further to micro levels. So, ultra, tell us about your new thing in this area.
Andy Hart:Yes, I will lead off with this. Are ETFs too good to ignore? That is the question I'm leading with for this section, so I have not changed my investment portfolios for Maven Advisors since 2017, which I'm pleased about. Shows consistency, you know, and conviction, rather than just changing things all the time and coming up with new ideas for the client. So it's been very a very consistent ride. However, next year, the Olympic year for financial planners, 2027, is 10 years of of my company being around, and I'm very likely to make a tweak to my my investment portfolios. And the front runners now look like ETF funds. In the over the years, I've I've tended to avoid them. I've dabbled in them in the past, and they've been a little bit complex to explain in terms of bid offer spreads, in terms of trading costs, in terms of reporting, but I believe a lot of this stuff has been ironed out of this now. And at the moment, you know, all different, you know, various worlds are colliding. We have this new term called GEO, which is generative engine optimization. This is basically the results that AI throws back to anybody that's using their services, and AI at the moment is throwing back investment portfolios at anybody that asks, and a lot of them have got ETFs involved in them. There's ETFs in in our space at the moment that are in single digits. Quite a lot of them in single single digits, and a big shout out to Vanguard who have launched this fund that has taken social media by storm. All the influencers are talking about it. The Val Fund, V A L L, basically Vanguard have launched Vanguard Global ETF at 0.07. It's very early days, so I'm not going to obviously throw my clients' life savings at this fund tomorrow, but it's very likely that this will be included in the new Maven Invest portfolios that I come up with. The equivalent Vanguard unit trust that I use is 0.23. Fees are important, and again, if we can reduce our clients' fees, which increase their returns long term, then it's something I'm going to seriously look at
so my dilemma is:Do I stick with unit trusts that are simple, clean have worked? Do I move to a portfolio, a basket of ETFs, which should replicate the exact same thing that I'm trying to do? It does get a bit a little bit quirky when you start to unpack this because with regular contributions of low amounts, there's usually trading fees, and it doesn't make sense. I'm going to have to have two different portfolios inside an ISA. So I've got sub account one ISA ETF, Maven Invest 100, that's full of ETFs. Then I've got Maven Invest Regular, that might be one unit trust, and then I might have to switch assets between them. But that's detail. I have a few times said in the past that I think the future of what I do in my business will be to clients saying everything is in for 0.99. So the whole thing, the fund, the the platform on million plus portfolios is about 0.15. The portfolio should be about 0.1, and roughly the advisor's fee will be about point seven 4.75. That pitch is then all in for 0.99. You have a world class investment service. You had a you have an awesome investment platform, and you have a great financial advisor in your court. I think it's a good pitch to you know wealthy clients at some point in the future. So that's my dilemma. Do I switch to ETF predominantly portfolios to reduce the fees from my current portfolios at the moment are ongoing 0.3, and I'm going to bring them down to about 0.08, 0.09 all in. So yeah, that's my dilemma. I've ignored ETFs 10 years ago because they were just too convoluted, weren't fit for purpose for looking after people's life savings. They had a few wrinkles in them that were sort of I concluded too big, and then as the years have rolled on, they've become more and more compelling. So at the moment, I'm very close to making that switch. As I say, 10 out of 10 for consistency with the portfolios, but do I give myself a poor score for not tweaking sooner, but again, that's an internal reflection. Who is up next? DFA have ETFs as well, Nick, and that they do reduce. So your world allocation fund, whatever you're paying for, I think you get it for 0.18 now. So again, it's a genuine business decision that we have to consider when fees are very important for our clients. Who's next?
Alan Smith:Right, I'll I'll throw something in here. Look, you're absolutely right. I mean, this is costs are heading rapidly towards zero. I mean, seven basis points is
Andy Hart:on on the new Vanguard ETO. It's a
Alan Smith:rounding error, isn't it? And by the way, if you think about it, we were talking about this on our on our trip. It's an that's an incredible thing to to be to exist to have access to what five or 10,000 global companies around the world at the click of a few buttons for for practically free. That's in itself is incredible. Here's the thing: I talked about this or in this area at Trap Live, because you're going to have to have Andy. I get it. If you're thinking about switching, other
Andy Hart:things, yeah,
Alan Smith:yeah. If you're thinking about switching, well, one, you've got out the market. You will be, you'll sell down to cash, hold cash, repurchase, and depending on what platforms use and what underlying funds you use, the often that can be up to 10 working days. And again, you look at you look at how market markets move. Hear me, hear me out. Number one, you've certainly got CGT issues on any unwrapped assets. God,
Andy Hart:Alan, I'm not going to do either of them. Let's just imagine I'm a brand new business and I've got a decision to make ETFs or unit trust. Play it from that point of view. Of course, I'm going to consider CGT. Of course, I'm going to factor in out the market. But let's just say I'm a brand new business. Right for a brand new business that can be ETS or unit trusts.
Alan Smith:So what? So again, and there is a trade off here, and I get it. This all makes sense. But sometimes when you're talking about the difference of, I mean, five or six basis points, which isn't very much. I don't know what the cheapest. It's a lot more.
Andy Hart:It's a lot more than that. You'll reduce the fees on average. Keep it simple by about 60% and that compounds every year. So it's a serious saving for clients.
Alan Smith:Okay, that's fine. You will certainly be increasing the level of complexity in your business. You will have new money portfolios. Any new client that comes on, and maybe new money from existing clients, and then but unless you want to manage that CGT issue, that out of the market issue, the frictional cost issue,
Andy Hart:separate issue. CGT is a separate issue,
Alan Smith:right? But therefore, as I say, and it's it is fine, but you end up one thing that we've advocated for a lot that I've learned over the years, having had quite a complex business, is simplification keeping things really, really simple? And you just come to the decision: at what point is it worth creating a lot of ongoing complexity for you and your clients and everyone else for the for the saving? And so, obviously, there's a lot of moving parts. Ongoing
Andy Hart:complexity for the client. That's why I'm putting them first. If it's a slight more of a ball ache, my end, and it can save them 60% of the fees on going compound, I've got to take that. I've got to say yes to that decision.
Alan Smith:But commercially, why why wouldn't their why wouldn't Vanguard now come back out with their mutual fund version, and and reduce that by a fair bit. I don't know.
Andy Hart:Obviously, and then you've done all the fund
Alan Smith:switches.
Andy Hart:Obviously, the logistics of running unit trusts versus ETFs are a lot cheaper on the ETF side. If the pitch from an ETF provider would provide the exact exposure, almost to the point 00 accuracy of the unit trust, but the fees are 60% cheaper. That's what I'm saying. ETFs have become too good to ignore. I'd be very interested in other trappers that have potentially gone down this road. So please do contact me. Okay, one one last successes around this. One last
Alan Smith: question on this:Do you undertake like I mean, look as as I've mentioned before, we work with Albion, and they will-they're going to do a big piece on this. And you've got to analyze things like tracking error, like what do they call it, stock lending policies, and all that sort of other thing. You just got to have that have that signed off. Presumably, you'll just do that. It's more than just moving for a cheaper fund. There's a bunch of other things you probably just need to get internally signed off. This
Andy Hart:is why I'm doing it very slowly, Alan. Nine years and I've not made a change. Trust me, I don't want extra complexity in my business, but I feel ETFs have become too good to ignore. And as I say, AI is throwing ETF suggestions to clients way more than the unit trusts because all it looks at is they need global exposure to the equity markets. Here are the top five. All five are ETFs. Almost no AI system is going to recommend unit. So we've got other other problem to deal with. Oh, Andy, I've just had a quick look, and why don't we look at this fund now? Oh no, we've got this fund that's three times the price. Well, what's the justification for that then in consumer duty land? I'm just throwing it out there. Early days.
Carl Widger:You should you should write a big report on
Andy Hart:it.
Carl Widger:Yeah, very interesting. I think the tax rules are kind of up in the air here. So whether it's ETF are different or other types of structures, but I do like the whole idea, though, of getting everything under 1% Here, our platform charges are higher. The advisor charges for people doing it like we do it is probably lower, a little bit lower. Yeah, yeah, they're they're at probably a half percent, and but there is downward. Pressure here, like Amundi, have made big strides in the Irish market over the last couple of years. So, but I do like that whole going to a wealthy client and saying you're all in for for less than 1% That's I can see that as a very very good marketing strategy. But I would be to Alan's point, right? To be very careful, Andy, about rebalancing and the tax issues that come with it, and it is definitely worth paying a little bit more to avoid those that because tax problems can be an awful lot more than you know 20 basis points. There can be there
Andy Hart:will be no tax impact to clients. That will be clearly thought out for every single specific client family. Back to your point, and Amundi, Carl, they come up all the time on AI now because they are the lowest charging global equity provider in the UK at the moment. They are all in for global equity exposure, and I've had a look at their returns compared to all their peers, 0.05% Amundi, I used to be a bit. It just sounds a bit sketchy, dodgy teaching a mundi to you know someone who's just sold the business for a load of money. But I think they're one of the they're a French asset management company. They're one of the biggest in Europe now. Yeah, they're huge. I think they're number one. But so they're making strides in Ireland, making strides in the UK. But again, am I going to include them in my new portfolios? I'm a lot more comfortable with the likes of Vanguard and other people I've been working with for years. But again, I need to challenge myself. And as I say, it's taken me nine years to make no changes intentionally. So now I I think I need to be on the front foot to make some changes. Yeah, and
Carl Widger:I I I wouldn't be scoring yourself down on that. I think that we've spoken an awful lot before about having an investment philosophy that you stick to, and changing it every year or two because for for point zero 2% is yeah you have to get it yeah that's not worth it but that but the changes you're talking about now that's I can see why you'd be seriously looking at it. I really look forward to your very detailed report on this.
Andy Hart:AI will spit it out in a few minutes, May. Once I've decided what to do, Nicholas, any thoughts on this very, very important subject matter for your clients?
Nick Lincoln:Very, very important. No, so I always get this race to the bottom feelings, which I'm a bit wary about. You know, because this year's 1% all in is nice is next year's point eight. Actually, is the barometer I'm looking for now, so I don't think we want to necessarily be just focusing on cost all the time. It's value, isn't it? I would also say that the Mundy fund is about five bips, is large cap and mid cap, and not small cap, and not emerging markets. So are you comparing are you comparing apples with with with pear? Just to push
Andy Hart:back, Nick. That could be the bulk of your large global equity allocation exposure. If you want to throw in some, if you want to throw in an emerging market ETF and a smaller value company, great. The overall cost will still be insanely cheaper. Would be a bit cheaper.
Nick Lincoln:It would be a bit cheaper. Yeah, and I couldn't see. I think, as far as I can tell, Dimensional have four equity ETFs, not, and they don't have the equivalent of the one I'm in now as a mutual fund. So again, it's you just got to look under the bonnet of these kind of things. I, I, I think the good thing. I mean, in fact, the Vanguard fund that you mentioned, which is a seven bips, that is totally global, large, mid, small cap, and emerging markets at seven bips. That's that. That's very interesting. The good news is, I think, and also the Mundi fund, and you're going to say blah blah blah, is 71% USA, and Nvidia is 6% in that fund. So just okay, I say dimensional. I do
Andy Hart:have, sorry, go on,
Nick Lincoln:go on.
Andy Hart:Dimensional do have an equivalent, I believe, dimensional global core equity ETF. That's
Nick Lincoln:not the fund I'm in.
Andy Hart:Yeah, I know you're in the World Allocation Fund, so okay. But it's it's a strong correlation, but fine.
Nick Lincoln:But I think the good news is, I think you know. So much as we love Vanguard, we like Dimensional. The downward pressure on prices hopefully will cause a ripple across the marketplace because these firms they cannot be seen to be too far relatively from their competitors, so that's that'll apply downward pressure across the board, and I'm I'm all for that. But you know, if we'd have gone back 10 years and thought, crikey, we can get we can buy world capitalism for 30 bits, you'd have gone to wonder. This is a miracle. This is a wonder. Now we're just slicing off slithers and slithers and slithers. It doesn't,
Alan Smith:but it shows it shows how ridiculous that document you showed earlier on. Where you talk about seven bips or five bips, and they're charging 273. It's crazy.
Andy Hart:Exactly. Anyway, go on. And the institutional price of these funds are basically free. It's normally me and Alan. It's me and Nick today. The the institutional prices of these funds are a joke. Think and I. I think I think a mundi fund institutional charges are one or two bips. It's insane. Basically, fund management has been one. It's gone down to zero, but not everybody knows. Back to our standard life link earlier, Nicholas.
Nick Lincoln:Well, just wrapping up on this, I think. Unless anyone's got anything else to add, as Carl said, keep us in the loop, and let us know how you progress because it is, you know, it's a major part. There, you know, there's the there's the advisor, there's the financial plan, and there's the there's the fuel that funds the plan, which is the investments. And we never really talk about it now and again. Every nine years or so, every 10 years, you maybe revisit it. So it's a big thing to do, and just keep keep us in the loop, ultra. I suppose
Andy Hart:you sorry, Nick. Just to add a little bit more for the listeners, you have made a few changes over the years. I think you launched in 2008 when you first launched. When I came to see you at that hellhole wardrobe cupboard office in Watford, I think you had about three or four different fund managers, maybe legal in general, BlackRock, Vanguard, and then you made a change to be more predominantly DFA, I believe, and then you did the change to go one fund, didn't you? So yeah, I mean, a few changes here. Any tips for me? I think it's don't oversell it to the clients, or what's your?
Nick Lincoln:I think it's. I think the tip is ask a question, then shut up, rather than ask multiple questions. That's very good. Noted. Yeah, I start. I had LNG. I had LNG International Index. I had BlackRock Global Property Securities, which then became sustainable. Eat my hemp, lentil, pie securities, and then and dementia. And then every course time, I just shut those funds and went with with one brand, and then I went for my equity exposure with one fund, with one provider, and my bond exposure for cash flow management with another provider. And I really, I just, Alan said it, just trying to simplify, simple, simplify, simplify, simplify. So sorry, yeah,
Andy Hart:go on.
Nick Lincoln:I've never had. I know you think, Andy, that it's just the best portfolio is the one the client will stick with, and sometimes clients will balk at having maybe one fund in their portfolios. That's that's that's that's never happened to me, but but it could happen to others.
Andy Hart:And did you just do it on a meeting by meeting basis? Like as the years have rolled on, I've slightly changed my mind on how I think investment management works. You know, there's not been a huge fundamental change, but we're sticking with global. Like, how did you pitch it? Did you say, do you want to know the long, short, medium? What did what did you say?
Nick Lincoln:Well, the the last switch was the big one because I was perfectly saying we're getting rid of these four equity funds going to one fund. So I typically do it during the annual planning meeting, but even then, I try and automate it as much as I can. So I send the clients a Loom video to watch to explain what we're doing, why, and a link in the Loom video would then take them to their Dropbox folder with with the key facts documents and everything else, and a consent form from the clients, and that would form part of the annual planning meeting. And that's a generic
Andy Hart:meeting, Nick. You filmed it once, you pitched it well, and then hopefully everybody would consume it. Like five minutes long.
Nick Lincoln:Yeah, five minutes. Well, yeah, literally about five minutes long. Yeah,
Andy Hart:yeah, brilliant. Okay, great, thank you. It
Nick Lincoln:worked. That is brilliant.
Carl Widger:I remember you telling us that. Yeah,
Nick Lincoln:thanks, girl. Are we okay? 67 minutes, boys. So we're having a good show here, and we're keeping it quite basically because we're all we're all shagged, aren't we? Let's move on to. I'm not. Let's move. Let's move on.
Alan Smith:Yeah, you went home early.
Nick Lincoln:Let's move on to the Trappist question. I went home. There she goes. It
Andy Hart:was the day before.
Nick Lincoln:There's there's post at the front door, having dragged the bulging sack of Trappist questions up the driveway of Lincoln Lodge. Trappist, if you want to leave a question, do so in the link in the so-called show notes and/or in the link on the pinned link on X on Twitter, whatever you want to call it. We do get to the questions. We still got a handful left, but we like to have them coming in. And don't worry if the question has been asked before and you haven't heard it on an episode because you haven't listened to all of them yet. God help you. Why not? Ask ask anyway, and we will read your question out. This one's quite a good one. Well, it's contentious. I don't think it's been asked before in this in this manner or tone. And this is from. Let's have a look and see. This is from. It's from a guy called a guy. Joe spelled with an e. The guy's next. I'm not doing anything wrong here. Joe Flynn, Finn even who's on LinkedIn. His link will be in the so-called show notes. Joe Finn says, "Genuinely love the
pod for a host of reasons:themes, personalities, banter approach, and the helping spirit and abundance mentality. Also, I like seeing active management getting a well-deserved beating, as it did in the most recent episode. But how can this be reconciled with Alan's barely disguised stanning? I presume it means shilling there, Joe. Shilling of Bitcoin. If you're a fan or not, it's contrary to the whole ethos of the show, Alan. Would you have a member subscribing index? Would you have a member subscribing to index investing with the routinely expressed caveat that clients should have a 5% allocation to commodities, Persian Square or Swiss francs? If they did, would you overlook massive falls in those assets? Does it not deserve ridicule as much as Terry Smith or Posh DFM? So, Joe Finn's gone quite hard on you there, Alan. Alan, you get picking on me.
Unknown:What's this all on you?
Nick Lincoln:I know. Just to clarify
Andy Hart:what stanning means. Stunning means being an extremely devoted, loyal, and enthusiastic fan of a celebrity artist or public figure. That's what the internet tells me. Obviously, Alan. So that doesn't quite work, Joe. But it's very good, very good idea to get a word in the middle of the hurdle. Come on, come on, Joe.
Nick Lincoln:Yeah, try harder.
Alan Smith:Sharpen up your vocabulary. Come on, get the words. One oh. Yeah, interesting. These things. But by the way, I would always say trap is a broad church. We we agree on many things. We do not agree. Everything and that's clear by the number of arguments we have on a regular basis. I am 100% an advocate for all the things that we boringly, repeatedly tell the audience every other week about the power of capitalism, global equities. I see Bitcoin as something different. I see Bitcoin. It sparked my intellectual curiosity several years ago, and I went down a few a few rabbit holes to learn about it. And the way that things are operating now, the whole the level of debt that countries have around the world, I see. I do see a case for a scarce digital asset being some somewhat part of the of the future's kind of financial economic system. For sure, I do that, but I've spent countless hours learning about it, and I don't think it's reasonable to compare it with, let's say, Terry Smith, who is who is raised there. Terry Smith is doing something different. He's saying that he can and will beat everyone else in the marketplace.
Andy Hart:He's not saying that just to push back and support Terry. There,
Alan Smith:you love you. You love Terry, don't you? But but what he is? Well, what does what does an active manager claim? Made it
Andy Hart:very clear in his owner's manual. I'm not supporting him here, but I'm saying he definitely doesn't say what you just said then. But fine.
Alan Smith:Anyway, is I see it as a different argument. I think you can. You're allowed to be intellectually curious to learn more about other areas, other things, and look somewhat towards the future as opposed to historically. And I think we've often talked in the past as well about you know. By the way, of course, we don't recommend this for for our clients, but I tell you what, we are very well able to handle some of our smart, sophisticated entrepreneurial clients who do invest in Bitcoin, specifically Bitcoin, no other coins, no other digital assets, and so we have grown up conversations with them, and I think that's a fair and reasonable thing to do. And I still stick by the the family fortress for 90% 95% of your wealth, and the investment playpen, whether that's a new startup you're investing in, whether that's Bitcoin, whether it's some VC tech stock fund, whatever, that's reasonable. I think that's a reasonable thing to do. So I'll continue to be. You know, I'll try not to. What's it called? Shill it, spill it, Shanny. And it
Andy Hart:comes from the Eminem song "Stan. Just a little clarity,
Nick Lincoln:but it involves people, not things. Bitcoin's not people, Joe Finn.
Alan Smith:It's definitely not. So look, that's, and I think it would be boring if we agreed on 100% of everything every time, and I think that's highly unlikely any time soon. And I wouldn't compare it to to the other things that he's mentioned, Pershing Square as a hedge fund and others. That's an entirely different thing. I would encourage you, Joe, do a bit more research.
Nick Lincoln:Joe Finn, you must come to you must come to the next trap live May next year. Have a face to face discussion with mr. Gents. Anything to add to that?
Andy Hart:Bitcoin is not people, Nick Lincoln.
Nick Lincoln:Thank you. That'd be my epitaph. No, okay. Silence is golden. In that case, let's move on to again what many people do call indeed culture corner. So Philip Laffer, been around since forever. I didn't realize actually how many U.S. administrations Philip Laffer has worked with. He's the economist of the Laffer curve, but when he was when he was a sprat, he worked with the Kennedy administration. He worked with Nixon. He worked with Reagan. He worked with Clinton. He's working, I think, with Trump. So he's not particularly aligned to any particular party. But of course he but he he came up with a Laffer curve, which is this thing where whereby there's a marginal rate of income tax, where once you exceed that rate of income tax, the actual total tax take in pounds and pence or dollars and cents goes down, and it's been proven to sort of work wherever it's been considered and thought through, and the kind of sweet spot is about 40% for the Laffer curve, give or take. Obviously, the different economies, different, different, different countries, different people, different, different populations have a different way of looking at it. But just around that mark, he was on the Winston Marshall show. He's quite a feisty character, as is Winston Marshall. So they kind of they kind of batter against each other a little bit. But well worth listening to. He must be of an age if he worked with the Kennedy administration. He must be of an age where he won't be here forever. So well worth listening to Philip Laffer. One of the economic theories that, for once, seems to have been borne out over time and over multiple economic cycles. Andrew,
Andy Hart:thank you, Nicholas. I can't believe he's still alive. He's 86. He looks really great. He looks really good for 86. Today's trap is landing. I know it's not part of the show, Nick, but I'm just going to mention it because there's lots of Trappists that we listen to this that'll be at the CISI conference. So today I'll be heading to Windsor to attend the CISI conference. Lots of Trappists going to be there, lots of good speakers there, and one of the speakers there this year is mr. Rory Sutherland, a previous Trap guest and a previous speaker. My conferences, yep, close personal friend who went out for lunch with him at the Devonshire. You're welcome. My link in Culture Corner is Nudgestock 2026, which is Rory Rory's conference that he runs, and I've specifically isolated the Louis Theroux meets Rory Sutherland interview. Two people that I'm a big fan of consumed a lot of Louis through a lot of his documentaries over the years, and watched a lot of Rory Southerton. So for me, it was a great watch. And there's a load of other interesting speakers at Nudge Stock 2026. I've always promised to say I'll go there, but I haven't yet. Nicholas,
Nick Lincoln:I look forward to meeting you today at the CIA conference. Are you coming in in the background? We'll have the Irish budget streaming. I am going. I am going. Right. Wow, it's a it's
Andy Hart:a rare conference for you, Nicholas. So if you're listening to this, driving to Windsor, when you see Nicholas, he loves to see Trappist. So give him a big, big hug. He's got. I do love to see Trappist. A lot of interest in receiving pub hugs of random strangers. So and pubs and
Alan Smith:hugs, hugs in pubs,
Andy Hart:and a lot of that in Malaga. Right, right. Order, order, Smith.
Alan Smith:There's a handful of podcasts that I do keep coming back to and listen to them a lot. One of which is called Invest Like the Best. Patrick O'Shaughnessy, good Irish name. We've mentioned him before. His latest episode, or the one I've just listened to, is with this guy Noah Shin, and Noah is 23 years old, and he's the founder of this AI application called Instinct that I've mentioned to you guys, and which is kind of largely running my life right now. But what a, I mean, 20. The company is now valued at 10 billion. It's been going less than 12 months. It's just raised a billion from all the top Silicon Valley VC companies. But I just thought he came across so well. I mean, I was thinking what I was doing when I was 23. I was driving a wheelbarrow around the streets of North London. Anyway, it's a great conversation. It's great episode. I recommend you check
Andy Hart:it out. I'll definitely take a listen to that, Alan. And if you haven't downloaded Instinct yet on WhatsApp, do do it. It is a wonder AI, so it's it's worthy of its $10 billion valuation. Carlos, are
Alan Smith:you muted?
Nick Lincoln:You muted, Carl. Darren
Carl Widger:Brown's, I think it's boot camp for life. It's the pod a podcast series on Audible, which is there's lots of free podcast series. It's really really good. I really enjoyed it. He's a he's a funny guy. Enjoyed it. It's just
Andy Hart:Carl's. Is it Mentalist? I think they call him Mentalist. It's kind
Carl Widger:of no. Listen to it. It's kind of like a. Each podcast has a theme, and he will have like short snippets of interviews from various people. But it's not. It's it's produced really really well. Yeah, massive fan of him. And he's a he's a he's a cool guy. He's the I've seen I've
Alan Smith:seen him live. It's funny to see some funny shows.
Carl Widger:Yeah, he's he's he's. It's really really good. You don't have to pay for that. And if you if you have an Audible subscription, there's lots of free Audible podcast series. And I just came across one. Actually, listened to it on the flight on the way out to Malaga. Think the seven episodes in it. The fifth 1/4, or fifth one is really really good.
Andy Hart:Great. But they're
Carl Widger:all good. I recommend them all.
Unknown:Very good.
Nick Lincoln:Okay, good stuff. Okay, so there we are. Look at that. 78 minutes in to episode 107 of Trapped, Trappists. As it comes to a close, as it slides down the U-Bend of Father Time, please do consider leaving us a like and subscribe on YouTube. Leave us a review. We're getting low on the reviews. Thank you for your precious time as ever. See you long. I can't even speak to you. I'm absolutely running on fumes. Until the next time, dear Trap Pack, whatever you are, people. Adios, Trappists. It's goodbye. I love you all.
Carl Widger:I Can't wait to see at the CISI, Nick. Nick, the seven behind you is a little bit. It looks a little bit like how I'm feeling. A little bit decrepit, decrepit, and a little bit shaky.
Nick Lincoln:It's a very bad seven. I have trouble with sevens and fours cards. They always have a slightly,
Carl Widger:yeah,
Nick Lincoln:Germany 1930 s looks. The yeah, sorry about that. Should I stop recording? By the way, might be good.
Alan Smith:Yeah, it's got these.
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