‘Passive’ funds are full of investments which track stock market indices of various kinds. Some of them are ‘managed’, in that someone decides how much should be held in various different countries’ indices at any given time, but no-one is deciding which shares or sectors may do better than others. So they’re cheap, which has been their main attraction, and in the good times, pretty cheerful too. However, in difficult, bad or downright bearish times, they go down and there’s no hiding place and no-one there to stop them. Many if not most of the DIY investment websites use them, a part of the explanation of the big outflows as the unadvised panic and pull their money out. Hang on in there, of course, and you’ll do OK, and we and other advisers use and recommend passive funds on a regular basis. But remember, very often cheap is cheap, you get what you pay for, and advice is often worth paying for. I’d say.
How we as advisers charge for our services has been the subject of navel-gazing debate in our profession for some time. Should we work on accountant- and solicitor-style hourly rates, charge a fixed subscription or have a menu of tasks and bill you accordingly.