'Monkeys To Replace IFA's?'


'Monkeys To Replace IFA's?'

The Oracle WB thinks so.

May 4, 2022

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This week's midweek commentary is titled:

'Warren Buffett says ‘monkeys’ could do as good a job investing as financial advisors.'

Legendary investor Warren Buffett calls investing a “simple game” that financial advisors have convinced the public is harder than it really is.

In 2021, St James’s Place profits climbed 50 per cent to £401million. The reason for this? People seem to keep giving them money regardless of how badly they perform or how much they charge.

This can only lead us to believe that the public grossly misunderstand how the Wealth Management model works. If you read in the paper that business at St James’ Place is booming, THIS DOES NOT MEAN they are performing or that your portfolio is booming.

The performance of your portfolio makes no difference whatsoever to the amount they get paid. If you give your financial advisor or wealth manager money, they take a piece of it on entry, an annual management fee, and more often than not, a piece on the way out if you aren’t happy. That is how they get paid, and over charging is why business is booming not the quality of service of performance.

Speaking at Saturday’s Berkshire Hathaway annual meeting, Buffett slammed financial advisors for “catching the crumbs that fall off the table of capitalism” and said that in most cases, “monkeys” could provide better investment returns simply by throwing darts at a list of American companies.

“You can have monkeys throwing darts at the page, and, you know, take away the management fees and everything, I’ll bet on the monkeys [over the advisors],”.

Buffett pointed out how the Dow Jones Industrial Average, during his lifetime, has increased from $100 to more than $30,000, and said that most people need only put their money into “an American business” and let it grow.

“It’s amazing how hard people make what is a simple game,” Buffett said of advisors. “But of course, if they told everybody what a simple game it was, 90% of the income of the people that were speaking would disappear.”

Charlie Munger added about financial advisors: ‘It’s a peculiar business. People are charging for skill, and delivering closet indexisation. In other words, nobody can stand being that different from the crowd, because they’re afraid they’ll lose their fees, so everybody does the same thing. It’s mildly ridiculous.’

As we’ve written many times, wealth managers don’t want to stand out from the crowd; they want to be invisible in it, and that way nobody will ask too many questions and the fees will keep on coming.

This is where we differ; at The Portfolio Platform, our only goal is to make you money. If we don’t, you won’t subscribe which is how it should be. We don’t have entrance fees or exit fees. Our portfolios are both transparent and 100% liquid. Reward performance and hard work, not salesmanship.

Headlines stating what a great year SJP are having is being read that they are doing well for clients, whereas the truth is, they are doing well for themselves.

Buffett has long recommended that investors put their money in low-cost index funds, which hold every stock in an index, making them automatically diversified.

Buffett previously told CNBC that for people looking to build their retirement savings, diversified index funds make “the most sense practically all of the time.”

“Consistently buy an S&P low-cost index fund,” Buffett said in 2017. “Keep buying it through thick and thin, and especially through thin.”

And that is probably where we are now during this conflict, ‘thin’.

The S&P is down over 10% on the year. It’s happened before, many times, and it will happen again.

Stocks will come back as corporate America always grows if you give it enough time.

The S&P 500

The US is the largest economy in the world and the S&P500 is probably the most followed index within it.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index ranking the performance of 500 large companies listed on stock exchangesin the United States. It is one of the most commonly followed equity indices and has a total market cap of US$42.4 trillion(£34 trillion)

To put this into perspective, the FTSE 100 has a market cap of about £2 trillion.

After having one of the worst months in its history, we thought it would be interesting to see where Wall Street analysts expect it to finish the year. The chief equity strategist from Goldman Sachs said on Bloomberg today that he would expect some indices to make ‘double digit’ returns over the next 52 weeks.

He was very careful not to specify which index, but at The Portfolio Platform, we offer exactly what they recommend. A low-cost tracker that grows as the economy grows. For as little as £55 a month, you can link as much capital to it as you’d like. What is the point in paying an advisor 2% to do the same thing?


Barclays is the latest major firm to warn of “limited upside” for stocks lowering its S&P 500 price target to 4,500 from 4,800 (that is still nearly 10% higher than where we are now).

Goldman Sachs cited tightening monetary policy and geopolitical tensions after having downgraded its S&P 500 price target twice since early February, most recently to 4,700.

JPMorgan’s Marko Kolanovic also recently lowered his S&P 500 price target to 4,900 (which still implies an 18% gain) as he acknowledged that a more hawkish Fed “remains the strongest headwind,” but also added that “the market still has upside,” especially as he predicts geopolitical risks to subside in the coming weeks.

Morgan Stanley’s Mike Wilson, meanwhile, worries about tightening monetary policy and its effect on GDP and earnings growth, predicting that it will likely continue to drag markets lower: He forecasts the S&P 500 to end 2022 at 4,400. This is the lowest of all the predictions on Wall Street.

The forecasts are gloomy, but still positive from current levels.

Let’s see where the rest of the biggest players are sat with the S&P500 currently trading just below 4200 (down a massive 12.87% in 2022). Is it a bargain? Here is what the professionals think:

Bank of America: 4500
Barclays: 4500
CITI Bank: 4700
Deutsche Bank: 5250
Goldman Sachs: 4700
JP Morgan: 4900
Morgan Stanley: 4400
UBS: 4850

Average: 4725

We have always said that our portfolios need to be built from the ground up. By this, we mean with a steady block at the bottom, in this case, an equity tracker or two.

If Warren Buffett believes that the best passive investment, is buying the index, then why not do it at 2 or 3 times the leverage like we do at TPP? Choose both the S&P500 and the FTSE for a diversified start, then add our specialised active strategies on top.

We offer both passive and active strategies to give you the best of both worlds. If the top analysts for the top banks think the S&P will finish the year at 4725, over 10% higher than where it is now, then simply link to it and reap the reward.

Of course, they might be over optimistic, and it might take longer than 12 months to get there, but that’s why we add active strategies to the portfolio like Cambridge Futures. This team are up 3.3% so far this year already, having made 65.3% in 2021, and 43.3% the year before.

A mixture of active and passive. It doesn’t have to be one or the other and you can see them work together, live on your own personalised dashboard.

If you would like to build a TPP portfolio, or if you would just like more information, please get in touch with our team here.

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“TPP might just be about to revolutionise investment for the retail market.”

- London Stock Exchange 2020