Emma Ann Hughes  

Double digit return targets are as dead as a dodo

Emma Ann Hughes

Emma Ann Hughes

When I first joined Financial Adviser as a reporter back in the early noughties, our news pages were full of stories of fund launches with managers promising a significant return.

These days, if you even mention a double-digit percentage return as an aim the eyebrows of financial advisers are raised.

This was demonstrated this week when FTAdviser reported European wealth management firm Novofina will launch in the UK this year bringing with it what it called “state-of-the-art” algorithms.

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According to Novofina these algorithms can deliver 20 per cent returns.

I would like to note “can” – I did ask the journalist who wrote it – our deputy news editor Damian Fantato - whether it was a “promise” but he reassured me this wasn’t the case. 

Novofina 7plus and Novofina 20plus are the first products to be launched in the UK and the company said that based on past simulations they “aim” to offer average annual net returns of 7 per cent and 20 per cent respectively.

According to Novofina, the two portfolios have achieved what it calls “back-tested” yearly net returns - over an average of 10 years - of 7.34 per cent and 20.07 per cent.

In this day and age, even to suggest you can aim to achieve a 7 per cent return has people scoffing and scorning.

But a 20 per cent aim had many of you up in arms.

I mean – don’t they know past performance is no indication of future returns?

Comments from advisers on Novofina’s claims it will aim to deliver a 20 per cent return included “Dear Mr Fos”, and “I smell you know what”.

OK – this isn’t a promise but does the average man on the street understand that?

While this robo-adviser hasn’t made a promise in this day and age - with such pitiful returns on cash accounts - heck the aim of even a 7 per cent return would have been enough to lift the spirits (and open the wallets) of certain individuals.

Do consumers really understand that an aim isn’t a guarantee?

The average man on the street will believe that as a financial services organisation, this robo-adviser would not have stated an aim that wasn’t easily achievable.

If I said I was aiming to be Britain’s next top model and holiday on the moon this year, you would know my aims were ludicrous as A) as a 36-year-old mother-of-two I am unlikely to be gracing the cover of Vogue anytime soon and B) I have already booked my summer holiday and it is to Greece.

y budget couldn’t stretch to the moon and back this year. I blame Brexit for the increasing cost of space travel and my lack of an astrophysics degree.

If I said my aim was to be one of the most read journalists on FTAdviser this year, you would believe I was setting a goal I knew was achievable as I monitor the traffic different types of content on this site generates.