Investing: ETF Statistics from LSE

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ETF statistics from the LSE

Further to my recent post “What are ETFs” it is perhaps worth outlining the size and growing popularity of ETFs. The LSE (London Stock Exchange) publishes monthly data about various investments that it provides a trading function for.

The latest data (in the July 2015 LSE report) to the end of May 2015 shows that the UK is now the largest market for ETFs in Europe, with 32.7% market share. This beats the Germany (25.5%), France (13.4%), Italy (11.4%), Switzerland (8.5%) and Holland at 4.9% with the other European markets making up the rest. £22billion of trades were placed in June, representing around 302,000 individual trades (buy/sell). These sums are not insignificant and increasing each year, increasing 61% over the last 12 months.

We can explain the pro’s and con’s of ETFs for your portfolio and arrange your investments to suit your requirements and ability to cope with investment risk

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Investing: ETF Statistics from LSEDominic2025-01-21T15:54:47+00:00

Investing: What are ETFs?

An ETF (Exchange Traded Fund) is one of a number of financial products or “instruments” which are better described as ETPs – Exchange Traded Products. In very simple terms, it is an investment that can be traded in pretty much the same way on any world stock market. They are relatively new (beginning life in 1993) but are growing in popularity.

Low cost and transparent

The main advantage of an ETP is that they are often very low-cost and transparent, particularly as the total cost of ownership is very clear. As we know, there are very few things that we can control in the investment world – but cost is one that we can exercise some degree of control over. We cannot control markets (at least not legally!) and whilst use strategies to take account of what is going on in the world, I believe that attempting to time investments to produce superior returns is pretty much beyond everyone. Admittedly it looks very easy in hindsight, but the truth is rather different and knowing when to get out is easier than knowing when to get back in…. and both decisions need to be made. Low cost is not the same as “cheap and nasty” and more than high cost is the same as quality. Cost of ownership is one of many aspects that we consider for our clients.

Focus which enables diversity

So an ETP offers a low-cost approach to accessing markets. In addition they can also provide tremendous focus. If you really want to invest in something specific an ETP will invariably have a solution. Arguably an ETP “democratizes” investing, making is just as cost-effective to invest £100 as £1m. However there are some snags.

Evolving market – teething troubles

Firstly, an ETP doesn’t have the advantage of the FSCS (compensation scheme) behind it. Frankly that may not bother you as one can make the argument that the such protection is paper-thin in the event of a serious global meltdown. Secondly as a “security” an ETP is traded, often via a stockbroker, which means dealing costs. If the amount is large enough, then this can be an insignificant sum, but clearly it’s not for those that invest modest amounts each month or trade frequently with small sums. Many ETPs are priced in non-sterling currencies, such as the dollar, thus exposing you to increased currency risk. Finally accessibility is still limited, of course I can find the best way for you to access ETFs and resolve these snags, but the choice of providers that genuinely offer trading facilities and best execution practice is fairly small – this is an evolving market. Once these costs are included, often an ETP can be more expensive than a good low-cost Unit Trust or OEIC – which have more “protection”. So I would argue that for all but a few, the main appeal at present remains the ability to use highly specific investment strategies to add value to your portfolio. Essentially this comes down to your investment experience and requirements – which ought to serve your goals, not simply a different investment experience.

However, I want to make it very clear that ETPs can make a lot of sense for the right investor and something that we are able and willing to use appropriately, after all this is part of being independent and being able to access the entire market for solutions.

Dominic Thomas
Solomons IFA

Investing: What are ETFs?Dominic2025-01-21T15:54:47+00:00

What’s the row over pension charges now?

You may have been listening to Radio 4 or perhaps seen the TV news, Steve Webb the pensions Minister is doing the media rounds having announced that charges on pensions should be capped at 0.75% which he announced yesterday and has been plugging his cause since. There is no doubt that there are many very expensive pensions and I would go as far to say that there have been lots of “rip off” pensions. There are too many vested interests, this has broken out in a row over pension charges.

Is there any such thing as a free lunch?

We now have various think tanks and Providers all taking the opportunity to price to the bottom and distance themselves from “rip off pensions” as quickly as possible. An assortment of spurious views about the impact on the final value of a pension fund is now doing the rounds. The vast majority of this is utter drivel. We are all to blame for this (advisers, providers, investors, regulators and Governments) why? Well because over the years we have colluded in the deceit that anything to do with financial services is free. It isn’t. I had hoped that this delusion would have been put to bed by the introduction of RDR, yet AE (auto enrolment) exposes the deep resistance to a shift in mindset.

Can a pension have low charges?

It is perfectly possible to use a pension that has low investment charges and by low I mean less than 0.30%. However this is merely one element of the piece. The administration costs are high due to well intentioned regulation. The “sales costs” are high due to well intended regulation. The regulation is designed to protect the investor and the wider market.

Why does AE have unique charging problems?

The unique problem that AE brings is that there are some very tiny premiums. Suppose you earn £10,000 a year and in several years time you will have contributions of 8% a year (£800) a cap of 0.75% on this would be £6… ok its based on the value of your fund, but given that most will not be more than £4,000 that’s £30 to cover the investment and administration for the year (and by the way you can opt in and out, switch funds, vary the payments creating more administration). It’s a nightmare for pension providers. Some have come up with some low cost solutions (hardly any investment choice) and some have a fixed monthly fee. Well even at £1.50 a month (£18 a year) that’s a higher proportional charge on a small fund of £1,000 (1.80% to be precise). The Government backed (taxpayer funded) NEST is loss making and will be for many years. This is typical of Whitehall delusion that they then expect commercial enterprise to replicate. We all know Governments are not good at maths… don’t we?

The solution is right under their noses

Stakeholder pensions (with low charges) failed because there were other better alternatives at a lesser or more competitive price. The Government (this one and the previous one) believe compulsory membership isn’t quite ok, so we have a “difficult not to join” approach. However, I would argue that today employers and employees already have a proper pension system. It’s called National Insurance and the State pension. We know it’s not good enough, so why not simply make it better for everyone? It has no investment risk and is already set up. For those that want (and need) more than the State pension (most of us) then there are plenty of very good pensions around, any decent adviser can structure a sensible plan – but it is not free… neither should it be. If we want to create a society of that is independent of the State, we all need to face some adult truths.

Dominic Thomas: Solomons IFA

What’s the row over pension charges now?Dominic2023-12-01T12:38:33+00:00