When it comes to investing money, investors have a choice between active fund management or a more passive approach, using index tracker funds.
Some advisers have become almost evangelical about the merits of passive investing.
There is some good evidence to suggest that a passive approach is more beneficial for investors over the long-term than actively managed funds – although often this evidence is flawed and not based on a fair comparison between the two.
Since 31st December 2012, all financial advisers who wish to hold themselves out as being ‘independent’ must (to quote the Financial Services Authority) provide advice “which is unbiased and unrestricted, and based on a comprehensive and fair analysis of the relevant market.
“This is designed to reflect the idea of genuinely independent advice being free from any restrictions that could affect their ability to recommend whatever is best for the customer”.
Advisers who do not meet this standard are offering restricted advice.
With independent financial advice representing the gold standard of advice, it is important that advisers start with every option in mind.
Closed-thinking about the use of actively managed investment funds is unlikely to be in the best interests of every investor, regardless of how passionate an adviser is about the relative merits of the two approaches.
Here at Informed Choice, we can see a role for both active and passive funds within portfolios.
As a firm of Chartered Financial Planners providing independent financial advice, we believe it is essential to start with all of the options, before determining what is suitable for each individual client.
Our investment philosophy describes the importance of a robust process, consistently applied. This does not and should not impinge of our independence or ability to recommend what is best for our clients.
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