Are my pension funds too risky?

jamesd

While being negative about this IFA's honesty or view of whether he can lie to you without you noticing, I should perhaps note that many IFAs won't be as capable as he is. He does at least appear to be paying attention to managing the investments instead of just selling the product and forgetting about it and you. Depending on the choices in your particular area, you might not be able to find another that fits you better and is as capable nearby.

It might be interesting to see how he reacts to reading my last reply. If you think he might treat you more sensibly in the future there is some prospect of the relationship working.

As for reading material, you could start by getting the Saturday edition of the Financial Times to get some regular information about what's happening and the economic side of things. The book Fundology is interesting, though do note that it's written by a prominent active fund of funds manager. His focus on macroeconomic choices and sector allocation is of value.

dunstonh

It might be interesting to see how he reacts to reading my last reply. If you think he might treat you more sensibly in the future there is some prospect of the relationship working.

With regards to that comment, if I was in his shoes I would throw MIFID requirements back at you which state that the recommendation should be in line with the ability to understand the recommendation. Not necessarily the specifics behind the scenes but the core concept. The OP appears to have understood the concept.

Suddenly chucking in fashion investing funds like Blackrock UK Absolute Alpha is not an answer. Indeed, there is a lot of negativity towards this type of fund.

IFAs are not stock pickers. We are not investment managers. We pick the funds based on research with a long term view. Periodically we tweak and rebalance but we are not active fund managers. If you want that service you need a discretionary fund manager.

Indeed, I am just putting a pension pack together for someone and I am recommending a bog standard balanced managed lifestyle profile. I personally wouldnt want my money invested there but it is the best advice for him. What we would do personally doesnt always (or even very often) match what we recommend.

If you go back to the IFA now and suddenly make out you have really good investment knowledge, then his recommendation is going to be different than it is to someone with low knowledge.

jamesd

dunstonh, I agree that many wouldn't like that Blackrock fund but that still leaves cash, gilts and corporate bonds and developed markets as alternatives.

Are you really suggesting that the adviser could believe that _pete_ could not understand that cash was of lower risk than equity funds, or that that could reasonably explain a claim that "(a) there was nowhere to move the funds to as everything 'crashed'"?

This IFA does appear to have more of the view of a discretionary fund manager. If I thought he could be trusted to tell _pete_ more accurate things I'd be considerably more favourable than I am, in part because I think there's a chance that _pete_ may want to learn more and may become more comfortable with this adviser's approach and giving the adviser rules that make his approach more suitable for _pete_'s desires.

That possibility is why I've twice edited posts that originally said that I thought that _pete_ should find another adviser.

dunstonh

James, you know from my many posts on this subject that I am a firm believer in sector allocation and that means using funds above and below your risk profile but averaging them out to match your risk profile.

I dont agree with the fund choice here and I do think hes taking a risk with two of the funds being above risk and not below. Thats fine on a regular payment but not a single.

I also think that if he has presented himself as an active investment adviser then the fund choice would have been different to that. The lack of downside protection is strange given the risk profile and the lack of diversification doesnt seem right. However, I dont want to start calling it a mis-sale or bad advice when we dont really know the background. It is sensible as you say to ask the questions though and understand the recommendation. And questions should be asked.

jamesd

Yes, I agree about mis-sale. I've deliberately avoided going down that route.

_pete_

jamesd wrote: »

Yes, I agree about mis-sale. I've deliberately avoided going down that route.

How do I establish if I have been miss-sold, and if I have been, what can I do about it?

I have consulted another IFA who says he would go down the road of a wider portfolio of investments within my Pension wrapper, and more in line with my risk profile. When considering whether to switch IFAs, what questions should I be asking, and what are the answers I would be getting from a good IFA?

Thanks

dunstonh

How do I establish if I have been miss-sold, and if I have been, what can I do about it?

You probably havent been. a mis-sale means wrong product and bad advice. You are not in the wrong product but you are a little above your risk profile as you tell us it here. There is nothing to gain from a complaint and its probable that the adviser would get away with it on the basis that for long term retirement planning, the risk with those funds is lower than say had they been used in a medium term ISA.

I have consulted another IFA who says he would go down the road of a wider portfolio of investments within my Pension wrapper, and more in line with my risk profile.

That does match what we have been saying.

When considering whether to switch IFAs, what questions should I be asking, and what are the answers I would be getting from a good IFA?

I think you have a good start on this new one. Wider portfolio, in line with risk seems like the right approach. Just ask what type of investment strategy is being recommended and why the funds have been recommended. You may not fully understand the answer but you should be able to tell if the response makes sense or not.

aqueoushumour01

It sounds like he has been thorough in taking you through your risk profile and your objectives. I am assuming that your aims included investing for the long-term rather than the short-term, in which case your particular set of investments is consistent with that objective over the longer term assuming a medium-high risk stance (although i would suggest it's more on the higher side given that it's 100% equities but no currency or commodities so not too high IMO.)

With perfect foresight he would have got out of equities and into cash/gilts over the more recent period, but he can't be blamed for not foreseeing what has happened - lots of high profile funds have lost significant value.

Possibly, given that the funds have lost a lot of money maybe you have reevaulated your apetite for risk and realised that you are not comfortable losing the amounts you have - in which case you should ask for the funds to be better diversified to decease risk. Risk is difficult to evaluate but the key is to ask yourself 1. How much would I be willing to lose in an extreme event (such as the current situation.) 2. How long do I want to be invested for?

whiteflag_3

_pete_ wrote: »

When considering whether to switch IFAs, what questions should I be asking, and what are the answers I would be getting from a good IFA?

Thanks

Never mind asking the IFA , you need to be asking yourself questions.

What standard of living do i want when im older?
IS what im doing going to give me what I want when im older?
Do I have enough ready?
Am I and/or my family financially secure in the meantime ?

Unless you know the answers to questions like these, whether your in a risk rating 6.2 when your in a risk rating 4.8(!) (and another IFA will tell you he'll sort you out with a 5.8 thats going to better than your 6.2) is irrelevant. You need to know your destination before you can start decidng on the best way to get there.

Do you know your destination or even do you even know you where you are now?

An IFA wont ask you these questions, a financial planner will, so perhaps it might be better to find a financial planner, rather than a product salesman and/or building funds under mamangement type IFA.

They might be difficult to find, but you will know when you find a Financial Planner because they will take a REAL interest in you . They wont mention products or funds or charges or boring stuff it will all be about YOU.

whiteflag_3

_pete_ wrote: »

Hello

I opened a Norwich Union pension in 2007 on the advice of an IFA. At the time he gave me a questionnaire to assess the level of risk that I was comfortable with - the questionnaire score suggested that I am a 5/10 (medium risk). I agreed with my IFA that because I was 20 years from retirement and would like a higher return on my investment we should proceed as if my risk level were 7/10.

The IFA opened the pension with all the money divided equally between the following 4 funds:

- NU European Equity
- NU Sustainable Future UK Growth
- NU Pacific Equity
- NU Gartmore Emerging Market


When I met with my IFA recently to discuss how these funds were performing I raised the issue of risk again and he assured me that the European Equity and Sustainable Future UK growth funds are low risk, whilst the Pacific Equity and Gartmore Emerging Markets are high risk, and that the overall portfolio is therefore about 7/10 in terms of risk.

Having done some research on the internet, I am concerned that my IFA's assessment of these funds' risk levels is inaccurate, and that my portfolio is too high risk.

Is there any definitive way of deciding how risky these funds are, or are the actual risk levels a matter of debate?

If my IFA has placed my investment in funds that are too high risk (ie, if the portfolio overall is more than a 7/10 risk level) how should I proceed?

Thanks

Pete

Hopefully after my last post you will realise the folly of all this 7/10 , 5/10 nonsense. No one can answer your original post without knowing all about you now and in the future.


ps risk profilers are merely a tool to cover the IFAs backside - nothing more nothing less!