A Money Mail investigation has discovered that savers have been lead to stack billions of pounds into Isa investments that were called best buys. In reality, these so called best-buys are being shown to contain nothing more than moderate funds.
These websites are used by thousands of savers every year. What was discovered was that only one in ten funds highlighted three years ago, were among the best performances in its category. More information on these investments can be found here.
This shocking discovery raised questions about how these funds were chosen. Fund manager for SCM Direct, Alan Miller says, “Best-buy lists are, in reality, no more than a marketing gimmick that helps brokers to sell investments. The funds chosen appear no better than average, which is surprising given they are supposed to be an expertly-chosen selection from a cast of thousands.”
In addition to Miller’s comments, a Chelsea Financial Services spokesman says, “It is important not to look at fund recommendation lists once and once only; they are always evolving. You need to make sure you are kept updated with any changes that are made so that you can adapt your portfolio over time if you wish.’
Savers have chosen to participate in online DIY investing platforms. Three years ago, the financial advisers changed the rules by charging upfront fees. Customers now pay close to £1,500 for an adviser to help them invest the normal £60,000. DIY investing platforms charge close to £150 a year for something similar, but you must make all your investing decisions yourself.
Most DIY investing platforms offer a recommended list between 35 and 150 funds. It is still unclear on how these brokers make their decisions. They all insist they rely on scientific methods that involved experts who analyze all the returns daily. But, until there is clear proof of where their information comes from, some investors are still left in the dark.
How the best fund lists performed:
Money Mail asked SCM Direct to look into how the funds fell three years ago and how they have performed since. Lists were then submitted by Charles Stanley Direct, Bestinvest, Chelsea Financial Services, and Hargreaves Lansdown. For more information on Hargreaves Lansdown, click here.The funds are grouped together in sectors based on the region or type of asset they invested in. On average, the brokers’ suggested the funds would finish around halfway down the order.
Who got the most funds into the top 10%?
Many were determined to find out how many funds from each list were real performers. Three percent of the funds from Chelsea Financial Services made the list. Charles Stanely and Hargreaves had 15 percent of the top performers with Bestinvest represented by 9 percent. Fund supermarkets say that three years is ‘not long enough to judge a fund’s performance. They believe saves should invest between five and ten years.
Here are five best tips to use when picking a DIY investing platform:
1. Cheapest is not always the way to go.
2. Think before you invest
3. Use the tools given to you
4. Look for total charges
5. Check for Fees.