Many of my clients will know that, for a long time, I’ve pointed to the risks Olim face when using a financial adviser based only in the U.K. to provide them with investment solutions for their life in Israel.
The costs of this approach have been laid bare by the returns delivered by many of these advisers in 2023 when compared to what they should have earned.
Global equities returned about 23% last year and international corporate bonds 6%.
So investors who invested in global balanced portfolios (with 50% invested in equities) should have expected returns after fees of between 13% and 15% last year.
I’ve seen valuations for Olim from the U.K. who achieved returns of only 5% to 6% in 2023.
This is a significant difference. And the cost to investors in terms of lost performance is substantial.
Some of this difference is due to currency but the larger part is the result of the key failings of U.K. managers that I have long highlighted:
- Poor currency allocation.
- Poor asset and geographical allocation.
- Excessive fees which can be as high as 2.5% to 2.8% (which are double the fees my clients pay).
For British Olim to have exposure to U.K. assets which is far more than their global weighting is creating significant unnecessary risk.
The fact that it’s been a consistently losing bet exposes the cost of that easily avoidable risk and shows how inappropriate this approach is when compared to the one we take at Pioneer Wealth.
Of course, past performance is not a guide to future returns. But these shortcomings have meant the cost of loyalty in terms of lost performance has been very painful.
When you add in the other risks of using an adviser based overseas – such as the fact that they are not allowed to give advice in Israel and the challenge of bringing funds into the country from an offshore tax haven – it’s evident that investors still entrusting their life savings to overseas advisers should be reviewing their strategy.
Maybe it’s time for you to review your investment strategy.
Email me at andrewa@piowealth.com