Monthly Archives

July 2021

Irwin-McAfee joins Pacem

We are pleased to announce that, from May 2021, we have combined our business with Irwin-McAfee. Though we will be operating as one company, our clients can rely on the same personal, trusting relationships that they are used to. Coming together will create more opportunities and enhance the expert advice we offer our clients.


Pictured are Directors Lesley Irwin, Lizzy Crossan and Daniel Glover.


All together now: ‘Costs really matter.’

The late, great Jack Bogle – the founder of Vanguard and the grandfather of index investing – left us all with a simple mantra that he repeated almost every time he wrote an article or gave an interview ‘costs matter’.  He also often used to say, ‘in investing you get what you don’t pay for’. And therein lies the rub.  In day-to-day life, we tend to make a connection – largely correctly – that you get what you pay for.  If you need a good lawyer, it will probably cost you.  If you want the paint to last on your windows, employ a decorator who costs more because they will spend more time prepping the surfaces and uses better quality products.  Buy cheap, buy twice!  Yet when it comes to investing, broadly speaking, the exact opposite applies.  The more you pay in ongoing charges to invest in a fund and on all the costs associated with owning the fund over time, such as those it incurs when buying or selling shares, means, on average, that there is less money left to put in your pocket.  It would be easy to select a good fund if all you had to do was pick the most expensive manager, which might set you back significantly more than 1% a year.  Yet we know, for example, that over 85% of all US equity funds failed to beat the market over 20 years, not least because of the high costs they incur[1].  Trying to pick – in advance – skilled managers who will beat the market in the next 20 years is extremely taxing.

In fact, if you reverse your strategy and pick the cheapest fund, it is likely (although never guaranteed) to be a better option. Taking equity funds available for sale in the UK[2] – both index funds delivering the market return (295 in all), and non-index funds (4,969) seeking to beat the market return, the average costs and the difference between them are set out below.

Figure 1: Equity funds for sale in the UK – Ongoing Charges Figure (OCF)

Source: Morningstar Direct © All rights reserved. Data as at 30th June 2021.

If we assume that both sets of managers (index and non-index) capture the same market returns before costs – a reasonable position to take, in aggregate, as winners and losers have to net out to zero – we can calculate the differential wealth outcomes over time between the less costly index funds and the more costly non-index funds.  The seemingly small difference of 0.85% make a huge difference to what an investor’s retirement might look like.  The chart below shows you how much more money you would have with the lower cost strategy over different time frames[3].

Figure 2: Wealth outcomes differ depending on costs – lower = generally better

Source: Albion Strategic Consulting using Professor William Sharpe’s Terminal Wealth Ratio calculation.

Put another way, at the end of 40 years – not an unreasonable investing horizon – if the high-cost strategy ended up with £1 million, the lower cost strategy would have £410,000 more to spend, all else equal.

Perhaps we should also take heed of another investing titan, Warren Buffet of Berkshire Hatahway, who reflects on the trouble the wealthy sometimes have in buying something cheap, in this case index funds:

‘The financial “elites” – wealthy individuals, pension funds, college endowments and the like – have great trouble meekly signing up for a financial product or service that is available as well to people investing only a few thousand dollars. This reluctance of the rich normally prevails even though the product at issue is – on an expectancy basis – clearly the best choice.’

Warren Buffett (2016) Berkshire Hathaway Shareholder Letter

As investors we should not lose sight of the fact that we put up 100% of the capital and take 100% of the risk of doing so.  Surely, we deserve to pocket the bulk of the returns on offer.  So, all together now, one last time, ‘costs really matter!’

Risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

[1]  US Scorecard 2021.

[2]  As of 30th June 2021.  Open-ended, UK domiciled funds and ETF, or funds with UK reporting status, publishing KIID OCF data.

[3] This uses Nobel Laureate William Sharpe’s Total Wealth Ratio calculation

Pacem Support Belfast Business Idea Award 2021

Pacem was delighted to, once again, support the Belfast Business Idea Award 2021. The Idea Award, supported by Belfast City Council, Danske Bank, Pacem, Enterprise NI and Innovation Factory, differs from other awards in that it is the strength of the idea that is assessed, rather than the achievements of the venture so far. The competition is designed to unearth, recognise and help to fast track the best business ideas in Belfast and means that people who have yet to set up a business have as much chance of winning as those who have already started to trade successfully.

For the first time, the 2021 Belfast Business Idea Award was open for ‘Video Entries’ and applicants sent their submissions electronically to be judged by an independent panel. Each applicant had 120 seconds to explain why their business/idea is great and why they should win the competition.

Speaking at the judging day, Daniel Glover, MD at Pacem spoke of his support of the initiative;

We are delighted to support the Belfast Business Idea Award again this year and we have been extremely impressed and enthused at the quality of submissions received. It has been difficult to shortlist to five winners today, and there was much deliberation and discussion within the judging panel, which is a testament to the calibre of entries received. Belfast has a great entrepreneurial spirit, and we are thrilled to do our bit to help early-stage businesses flourish in Belfast. It is great to be able to share our experience and financial expertise to new entrepreneurs who are setting out.”

The competition seen entries received from a diverse range of applicants across Belfast with the five shortlisted winners announced at the finalist’s night which took place on 22nd June 2021. On the night, the five winners each had to pitch for 120 seconds and explain why they think their business/idea should win the overall prize; a cash injection of £2,500 to help their business grow. The overall winner was decided live on the night via public vote. Each of the five winners also received an impressive support package worth over £3,000 which includes:

  • Six months free accountancy services (including software) from Pacem Accounting and Tax Advisory
  • 1 year Innovation Factory membership (including an open plan co-working desk, access to masterclasses and on-site bespoke business mentoring)
  • 1 year membership of the ENI Plus online resource

The 2021 Belfast Business Idea Award Winners announced at the finalist’s night on 22nd June were:

All finalists present on the night also had the opportunity to hear from, and put questions to, three of NI’s most successful entrepreneurs and founders of, BLK BOX, Bperfect Cosmetics and Suki Tea, gaining some welcome advice from those who started in a spare room in Belfast and have gone on to compete, and win, on a global scale.

Speaking at the finalist’s night, Daniel commended all applicants and expressed his enthusiasm towards working with the winners,

We are looking forward to working alongside the newly crowned winners of the 2021 Belfast Business Idea Award by providing six months free accountancy services. We love helping new businesses develop and grow and to play a part in their journey is a real privilege. We can’t wait to see what is in store for these blossoming businesses and predict great things ahead –  watch this space”.