Risky Labels
Confusion is rife within the UK investment industry as to whether the many funds being sold to investors are true to label and actually do what they say on the tin?
Unfortunately the majority of investors don’t know where to even begin in trying to understand the subtle differences between two balanced funds.
Besides, making a choice is usually based on a combination of three things: past performance, price and brand.
Recent research in the UK funds market reveals instances in which some growth funds were found to be more conservative than some balanced funds, depending on how individual managers assess risk.
And the same was true vice versa with some balanced funds carrying notably higher levels of underlying risk than growth funds.
This is a problem for consumers trying to select funds (even through an adviser) to best suit their risk appetite.
Even experienced investors would struggle to identify a true balanced fund from a growth fund in this environment.
The drivers behind the apparent anomaly are volatility and companies also making subjective decisions as to the marketing names of funds.
Interestingly it seems investors take names such as Cautiously Managed as literal translations but not all funds labelled as such may actually do what is says on the packet.
The simplicity when branding funds was reflected this week in high street retailer Marks & Spencer promoting a series of investment funds through a partnership with HSBC.
The funds – Cautious, Balanced and Dynamic – are colour coded and appear at first to be sachets of exotic types of tea.
This makes choosing seemingly easy for investors, and akin to deciding on a choice of cheese or pastry, but consumers need to take a closer look to be sure they’re getting what they bargain for.
Less savvy investors tend to rely more on factors such as brand to make choices, and with Marks & Spencer being one of the UKs most trusted brands these types of funds tend to get noticed.
Meanwhile M&S retail competitor John Lewis is also leveraging its brand sway with a range of financial services, which includes home insurance (as shown in this advert on a London train).
Over the aisle, so to speak, and the supermarkets have also been getting in on the act, with the likes of Sainsbury’s, ASDA and Tesco all aggressively expanding the range of financial services they have on offer.
The one healthy outcome for UK consumers is that instead of being bombarded with a bevy of confectionary goods at the checkout, these days you’re more likely to make an impulse purchase for cat insurance – or life insurance for your vacuum cleaner!
One Comment on “Risky Labels”
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savey investor says:
do you want fries with that !!! this is madness are people realy this daft to think that counter buying financial advice is agood solution to your long term financial security !!!! well the colour looks good attractive packageing rather than a solid stratagy that suites your long term needs this is embarising from both sides of the coin , the consumer and the product provider