March 9, 2016
|By Consulting Group|
All leave is cancelled for salespeople in the retail finance publishing industry, as brokers, fund managers and wealth managers all ramp up their marketing budgets imploring people to invest in an ISA before the tax year ends on 5th April. Meanwhile marketing directors at the same companies are bemoaning their luck at the high profile crash eroding investors confidence at the most important time of the year.
It’s fair to assume that Warren Buffett would see all of this as madness. The sage of Omaha is eminently quotable, and one of his most famous is ‘Be fearful when others are greedy, and greedy only when others are fearful.’ It’s likely therefore that, were any platform marketeers able to bend his ear, he would suggest they encourage their customers that ISA or no ISA, this is an excellent time to invest.
A more interesting, and certainly more compliant, of his quotes is ‘Do not save what is left after spending, but spend what is left after saving.’ By making the ISA season the focus of their marketing, brokers may be accepting of human nature, but are encouraging their customers to directly contradict Buffett’s advice. Buffett would be more likely to suggest they market a product that many brokers have, but which is rarely used – a regular investing package.
Hargreaves Lansdown has been operating its Regular Savings service for 12 years, and while take-up is increasing only 105,000 (14%) of 727,000 total clients used the service in FY2015.1 Yet the regular savings scheme is better for customers, not just because the fiscal discipline will give them more to save, but because they will tend to get better returns.
There are two reasons for this; money that has been invested for longer has benefitted more from the (generally) rising market over the period and by default you are able to be fearful when others are greedy and greedy when others are fearful. By investing a set amount each time you automatically buy fewer shares when markets are at a peak and more shares when they are in a dip.
Our hope is that April 2016 will not see broker marketing disappearing as it does most years, but a consistent campaign across the year extolling the benefits of regular investing. Unfortunately not all providers offer a regular investing option even though the products that currently exist are not only good for customers, but make very good margin for operators, as the trades can be executed in bulk. More people using a regular investing service will result in more customers with improved savings habits and better returns, and improved margins for brokers – a scenario to impress Warren Buffett himself.
To see how regular investing may impact your trading fees, visit Broker Compare for a market-wide comparison.
For a free consultation on how to successfully implement a regular investing option, please contact us at firstname.lastname@example.org or on Twitter @BlackSwanBSP
1Hargreaves Lansdown Annual Report 2015