Markets mayhem causes more than a little difficulty for IFAs

Published on Friday 19 September 2008 21:52

THE ten competitors battling it out for the right to call themselves the IFA of the Year could be forgiven for wishing they'd given this year's competition a miss.

Likewise, our case study, Angus MacDonald, will undoubtedly be concerned at the impact of the continuing market volatility on his portfolio, with all our IFAs seeing values fall this month.

But he can also be reassured that he is in safe hands. This is where a good IFA can be invaluable, in protecting their client's investments from the worst ravages of the markets. They are not miracle workers and there is nothing they can do to prevent MacDonald's investments from the adverse affects of the turbulence of financial markets in the short-term, but they can limit the downside and that's what, by and large, they are managing to do. While MacDonald is currently in the red, our IFAs have performed well in the context of the market.

The five IFAs featured this month have refused to panic, with just two fund switches between them, both of which are moves into less volatile terrain.

Interestingly, there remains some fairly prominent exposure to emerging markets, mostly through Asia Pacific and Russia funds. Russia, in particular, has suffered badly from the global shocks this week, while the concept of decoupling – that developing markets are mostly insulated from the troubles of developed economies – has lost a lot of credibility. However, the long-term outlook for most emerging markets remains very strong and most of our competitors have retained some exposure in the knowledge that it'll pay off in the long term.

Holdings in equity income funds are significantly lower than they typically would be, however, as these funds traditionally have large weightings in banks because of the high yields they generate.