The crap you get when you buy a retail investment product

To take advantage of a small signup bonus at the Dutch insurance company “Nationale-Nederlanden” I applied for an account that would let them invest a bit of money for me. Based on a couple of questions they assign you to a model portfolio, and for doing this they charge a management fee of 1.0%. They assigned me to the “neutral 2” profile, that is pretty conservative with an allocation of 40% equities and 60% bonds. Since I don’t intent to keep this account strictly longer than necessary for the signup bonus, I don’t really care how they invest the money. Nevertheless, I was sort of surprised how crappy the portfolio is that you get:

NN portfolioAs you can see they put my money in a bunch of random mutual funds that add another layer of expenses. In the case of my profile these funds add 0.66% in expenses, so you pay 1.66% annually (more if you don’t meet certain minima). Of course, they managed to tuck in some of their own funds in this list and then it’s just a crappy mix of overlapping funds. There are for example two global bond funds (and there is a third one with inflation protection) and also three European corporate bond funds. And that’s just the tip of the iceberg… Investing like I do isn’t an option for everybody, but this is without a doubt a terrible deal for anyone. Just buy some cheap ETFs! It’s really sad how the big financial institutions are mainly in the business of selling the biggest crap they can get away with. I can’t really complain, because I’m just in it for a small bonus, but imagine someone who’s putting his life savings in this…


I have invested a whopping 50 euro’s in this crap, and already lost 3.89 euro…

18 thoughts on “The crap you get when you buy a retail investment product

  1. pietje

    Yeah it is really a disgrace. In my example TER is 1.78% annually ..

    NN charges 1% to invest in a portfolio of funds, then they channel my money partially in their own Japan fund: , with a buyers charge of 0.15% and a TER of 0.83%. The fund only has 39m AUM and pretty much closet indexes the MSCI Japan (obviously it underperforms). That fund has basically has no right to exist – apart from defrauding stupid consumers.

    Another part of my money is invested in the Blackrock Asian Tiger Bond Fund with an initialy charge of ‘up to 5%’. WTF?? Or the Invesco Pan European Structured Equity fund with AUM of 52m and a TER of 2.57%.

    I mean, really, if you rip off a pensioner with this shit you should go to jail ..

    1. Alpha Vulture Post author

      I wonder why they put money in those funds. I get it why they put it in their own funds, but according to them they don’t receive a kickback from other funds. So what’s the upside of including that crap?

  2. pietje

    Also, the most depressing thing is that these products are actually quite sensible when compared to the ‘woekerpolissen’ they sold to consumers only a few years ago.

  3. Matt Jones

    In the U.S. It is sometimes worse. Workers have two main places for pretax retirement money – 401k and traditional IRA. People can put their IRA money with about anyone, including low cost providers like vanguard. With 401k money you are requires to put it in your employer’s plan which may charge fees on the order of what you quoted. The trouble is with the contribution limits which are 17.5k for 401k and 5500 for IRAs. So people are effective trapped into paying these fees.

    This industry is full of people who make a living providing no value, or even negative value. And this is huge money, trillions of dollars which is compounding at say a quarter point/yr lower than the rate at which it should be growing. Lawmakers could solve this problem easily by simply changing the contribution limit to say 23k for combined 401k and IRA contributions for each year.

    1. Alpha Vulture Post author

      That sounds less than ideal… Don’t know exactly how things work in The Netherlands, but think here it’s also imperfect. In most cases people are simply forced to join big pension funds. The upside is that most are reasonable managed with a low amount of overhead, but if you want to save in a tax-advantaged way yourself your options are extremely limited.

    2. Gregg

      Matt – Definitely agree that the whole employer based 401k system is messed up (much like employer based health care in my opinion, but that’s for another debate!). It should really be an equal system for everyone allowing each person to choose where to put their money. I’ve had jobs where I had to wait 6 months before I was eligible to contribute. Smaller companies often don’t have the leverage (or just don’t care enough) to get the best plans. The last company I worked for as a contractor offered terrible funds with high expense ratios. I had to send emails requesting they at least offer an S&P 500 Index Fund (they did, but it was still around 0.80%). In addition the company that managed the 401K plan added their own fees which were outrageously high and I had to read through many pages until I found it in the fine print. Compare that to big companies that can offer low cost funds from places like Vanguard or the Federal Government where I work now whose fund choices are limited, but have expense ratios of 0.029% (yes under 3 one hundredth of a percent!) with no hidden fees.

      I don’t know about other countries, but I can’t comprehend why finance and economics aren’t taught in U.S. schools at least in high school, but probably much earlier. Most people I know have very little concept of how to invest which is why financial companies can take advantage of people like this.

  4. PG

    The sadest part is that there are great, low cost options available but that the poeple in need of it the most, like pensioners, are the people who are the least savvy and least likely to be able to switch to these options.

    1. Alpha Vulture Post author

      Yes, exactly… I think (at least here) most unsophisticated investors turn to their local bank if they want to invest some money, and they are exactly the ones selling the most crappy products. They are only interested in squeezing as much money as possible from their valuable “customer relationship”.

  5. Read95

    It’s really sad that they can take advantage of innocent (ignorant) people so out in the open. No shame and nobody working there saying something about it. Nevertheless, I have come to believe that even a bad investment plan is better than no investment plan given that the majority of people don’t invest at all (excluding pension).

    However, for some weird reason I love these ‘arbitrage’ sign-up bonus deals a lot even though its small money. If you have more of them I’d love to hear about them! So thanks for this one ;).

    1. Alpha Vulture Post author

      See the comment of Paul a bit below, that’s another small one that I have also done. Usually there are not a lot, but once in a while I stumble onto something 🙂

  6. wachtwoord

    I have my pension with these people. Since the choices you have are quite limited and the total amount is quite a bit lower than my normal investment portfolio I just chose to put it all in the equity fund with the highest Morningstar rating and low fees. I doubt it will do very well over the long term. There isn’t a single index fund available.

    This is what you get with democracy and lobbying.

  7. Paul

    Just signed up. Offensive profile 6 so wonder how much money they’re able to kill in just 3 months 😉

    The astonishing part is that NN on their website even discusses changes in their fund portfolio. Besides being utterly ridiculous discussing a 2% weight change from Europe to North America, it also means that it’s no accident that these extremely high TER funds are part of the portfolio 😐

    The only theoretically nice aspect is the option to choose for automatic rebalancing towards target date. However that feature is not worth 1% fee.

    BTW: for Dutch people, Robeco has a promotion where you’ll get EUR 25 if you open a plus account, deposit some money and keep it there for 3 months.

    1. Alpha Vulture Post author

      As a fund managed you of course have to appear to do complicated and well thought out things, otherwise you cannot justify charging a 1% management fee… even though of course the best thing would do to just pick one cheap world wide equity fund, and one global bond fund or something like that.

      And yes, I know about that one: have done it already a long time ago 🙂

  8. Deborah

    Worst of all if you are a US taxpayer you now have a PFIC, welcome to $4000 in tax prep fees just to report it all correctly.

    1. Paul

      A US taxpayer won’t suffer from this particular outlet, because there’s no European retail financial institution that wants US customers due to US regulatory risks 😉

      Some people will disagree, but one of the ‘advantages’ of the Dutch system is that tax is really simple: just a fixed tax rate (soon: rates) over the invested capital. Deduct some dividend withholding tax and done 🙂

  9. bunty

    Didn’t know you were based in Netherlands!

    I can’t read the attachment as it’s in dutch.
    How much $ was the bonus?? and terms and conditions….


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