Part of the problem, Jurgens explains is the level of fees incurred.
“Once a client has taken the money offshore, paid the platform fee, the adviser fee and the unit trust fee, he or she is looking at a minimum of 2%. The MSCI world index returns have been about 5% in dollar terms in the past few years, that means as much as 40% of the return is going to fees,” he said.
On top of this, the returns generated from many of the unit trusts has been mediocre at best.
Direct purchase
One of the ways he is trying to mitigate this for some of his more sophisticated clients is by buying a few shares directly.
While quick to highlight the firm has no plan to become a stock broker, for a certain subset of clients it is a move that has so far proved popular.
“We have had quite a lot of success in selecting a dozen or so blue chip companies that we believe will be companies you want to be invested in for long periods of time.
“I have been around for quite a while and I have heard lots of portfolio managers say I will not sell that share or it is a stock I will keep forever. Those are the types of stocks we have been looking at, firms like Johnson and Johnson, Unilever and Microsoft,” Jurgens said.
Dividends key
While he admits that the past three years have been a particularly good period for these sorts of consumer stocks, he says that these are firms that are still paying reasonable dividends and the intention is to hold them for the long term.
Importantly, he adds, it is not something he would look to do for all clients. The ones that have been invested are not only sophisticated, they are prepared to take a higher level of risk and have a very long term time horizon, at least 10 years.
They are also, he says, engaged in the process and often come with their own specific stock suggestions.
“The directors of the companies we are looking at have the bulk of their wealth in those companies, I am happy to put 1 or 2% of my wealth into that company and leave it there for 20 years. Even if you miss out on some of the racier shares and the things that happen, your fees are lower and in 10 years you might be better off.”
