“Human capital should be treated like any other asset class; it has its own risk and return properties and its own correlation with other financial asset classes.”
Ibbotson, Milevsky, Chen and Zhu (2007)
When it comes to considering the role of venture capital trusts (VCTs) and Enterprise Investment Schemes (EIS) that is the question that needs to be asked and answered. Tax breaks need to be very carefully weighed against the material risks of owning minority stakes in small, unquoted company investments. Are they ever appropriate for investors? In summary, they are unlikely to form any standard part of an investor’s portfolio, particularly if other regular tax allowances have not be fully maximised. They may make sense in some very client specific circumstances, but investors need to be fully cognisant of the material risks that exist.
The Institute of Chartered Financial Analysts (CFA) has published what they believe to the be 10 key rights that investors must be entitled to when purchasing financial services products.
Millen Capital are a staunch advocate of these 10 investor rights. We would suggest that investors pay particular attention to the 8th right: ‘An explanation of all fees and costs charged to me, and information showing these expenses to be fair and reasonable’.
It is always tempting to judge the value of your adviser on the recent performance of your investment portfolio. That is unfair as it fails to understand both the true value that a good adviser delivers with respect to investments and the fact that no manager can control the returns that the market delivers. A good adviser can earn their ongoing annual fee several times over, simply by helping clients to have patience, fortitude and discipline in their investing.
As the founder of Vanguard and legendary US investor, John Bogle points out:
“If I have learned anything from my 52 years in this marvellous field, it is that, for a given individual or institution, the emotions of investing have destroyed far more potential investment returns than the economics of investing have ever dreamed of destroying.”