Providers

'Providers' is our word for those in the industry who provide investment products or services

Investment product design is like car design. The products are designed to fill a market need and priced so that everyone in the food chain can make a living. Like cars, style and brand matter as much as, maybe more than, performance. Style and brands are expensive.

Fund Management Groups

Fund management groups (FMGs) create, sell, market and manage the investment products that the private investor buys. A fund is just a product - a collection of investments assembled according to certain rules and packaged and sold accordingly. A precipice bond is also a product.

FMGs also sell wrappers - ISAs or pensions. These are like your Tesco shopping bag - they are not actually products but wrappers (or ring-fences) in which to put the product.

FMGs have names you have heard of - Barclays or Invesco for example. They are the brand.

Insurance companies

Insurance companies also design products - with-profits policies, single-policy bonds, their own fund products. Although never described as such, the collection of these products under one roof can be thought of as an FMG. Confusingly, insurance companies often have their own FMGs.

Fund managers

Fund managers are the people who actually make the investment decisions behind the investment products you have bought. Fund managers usually work for fund management companies (FMCs).

An FMG may use an in-house FMC or they may subcontract to a third-party FMC. Either way the FMC makes its money by charging a percentage of the funds under management. It may also charge a performance fee.

When individual fund managers establish a reputation they demand higher salaries and get poached by other FMCs. FMCs raise their charges to pay for their expensive managers.

Now, when you buy a fund, are you choosing the brand, the management skills of the FMG, the investment skills of the FMC or the skill of an individual manager? And what happens when the FMG changes its FMC or the FMC loses its star manager?

According to the regulator past performance of funds is no guide to the future.

Wealth managers

......do what the name implies: they look after your money for you. Impossible to generalise on the services they provide. Nearly always include a strong element of 'advice' since they can't operate without understanding your personal objectives. Understand what you are getting and what you are paying. Review the Simple Investing module so that you can question what they are doing for you.

Markets

......are providers but deserve their own pages: Stock Markets, Futures Markets