Passive Investing founders book published in Swedish, cite RDR effect
A book co-authored by Geneva-based Alexandre Arnbäck and Trevor Pavitt at Passive Investing, which slates active management and particularly bank-provided investment advice has been translated and published in Swedish.
The book originally published in French as Guérir Vos Investissements – Une histoire que votre banquier ne vous racontera jamais has appeared in Swedish as Historien din bankman inte vill berätta and been covered by Sweden’s Affärsvärlden, including further comment by Arnbäck – who holds dual Swiss-Swedish nationality.
In an interview with the business publication Arnbäck starts from the position that it is impossible to predict the future. Therefore it is equally difficult to identify the correct equities in which to invest, or to get the timing right, or choosing the best fund manager. This means too that investors should not pay for such services, particularly when offered by the investor’s own bank.
“You don’t buy a Volvo from a car adviser, you buy it from a car salesman. In the same way the bank’s staff are salesmen, not advisers,” he is quoted.
Instead, investors would be better off investing passively, aiming to hold exposure to a broad range of assets, including exposure to different geographies and currencies.
Up to 80% of the fees extracted via active management are hidden from the investor, Arnbäck argues. Performance based fees are given short thrift: he says that they fail to align investor and provider interests.
“The manager is encouraged to invest in securities with high risk. If the bet works out then everyone is happy, but if there is no luck then it is the customer who takes the hit,” he writes in the book .
And even if the fees sound low, around 2.5% of the capital, that means that half the wealth has gone to the manager after 20 years. Instead of a bank, investors should have an adviser who charges a fixed fee, and does not take out any other charges as kick-backs. Arnbäck suggests that a more transparent world is on the way, however, pointing to the example of the ban on commission for financial intermediaries that will take effect in the UK market in 2012.
“It won’t happen tomorrow. It will take time, but by making people aware I think we are going in the right direction,” he told Affärsvärlden.
An English version of Arnbäck and Pavitt’s book has appeared titled: Heal Your Investments – a story your banker will never tell you.
Of note is that all profits from the book will go to Amnesty International.