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Tracking the S&P 500: IFAs "could be setting themselves up for some difficult conversations with angry clients"

ended 03. June 2025

Given that the top eight US companies are worth £18 trillion — roughly the same as all of the listed companies in Europe — one wealth manager, Faisal Sheikh, Managing Director at Monmouth Capital, has issued a warning to the industry that ostensibly passive funds may now be high risk: "If the tide turns, IFAs continuing to recommend these funds on the basis of diversification and reduced risk could be setting themselves up for some difficult conversations with angry clients." Views from Faisal and other wealth managers and traders below.


 

5 responses from the Newspage community

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Faisal Sheikh
Managing Director at Monmouth Capital
For years, advisers have done well for their clients by recommending low cost passive funds that track equity indices. Many followed Warren Buffett’s advice to his own family: buy and hold an S&P 500 tracker. For those that wanted more regional diversification, funds tracking the MSCI World Index have been popular. The top eight US companies are now worth £18 trillion — 34% of the US index and even 23% of the world index. That’s about the same as all of the listed companies in Europe. History tells us that when a handful of companies dominate equity markets, something usually breaks. Whether that’s government intervention as in the case of the railroad or telecom monopolies in the US, or technological innovations that disrupted giants such as IBM or General Electric, we don’t know. If the tide turns, IFAs continuing to recommend these funds on the basis of diversification and reduced risk could be setting themselves up for some difficult conversations with angry clients.
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Scott Gallacher
Director at Rowley Turton
Whilst eight stocks may now dominate the S&P 500, it’s important to remember that passive investing doesn’t have to mean simply tracking the S&P. At Rowley Turton, we use passive funds as part of a low-cost but highly diversified strategy that avoids overreliance on any single sector, let alone a single stock. The key is thoughtful portfolio construction, not blind index tracking. Consequently, we see no need to change our approach at this time.
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Wes Wilkes
CEO at IronMarket Wealth
Portfolios are always likely to have some US exposure and the use of an index or an ETF is a low cost way of capturing the exposure. Most advisers will be using model portfolios for their clients these days so the selection or otherwise of the index or ETF won't ussually be with them. With discretionary permissions, we also use them to reflect underweight/overweight positions and, like most I expect, we have used this recent rally back on US stocks as an opportunity to dampen that exposure a little. ETFs are wonderful vehicles in which to reflect this or any other allocation view so they are our preference in an active/tactical allocation.
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David Belle
Founder and Trader at Fink Money
If you’re invested in the S&P500, you’re invested in the 500 largest firms in the most powerful country in the world. To suggest that this is risky is crazy. When the weakest first falls out of the 500, it’s replaced by the next strongest. This creates almost a constant support. Ultimately, though, we must start thinking in terms of opportunity cost rather than high or low risk. And right now the opportunity cost of not being invested in the S&P500 is simply too high.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
We certainly wouldn’t advocate tracking a single market—even one that includes some of the world’s largest and most innovative companies, like the S&P 500. That said, we don’t believe passive investing is inherently flawed; today, it’s relatively easy to build a globally diversified, multi-asset, risk targeted portfolio without paying an expensive active fund manager.