SIPP, Hargreaves Lansdown and Funds

SeniorSam

JEM16
You are correct with the fund and amount and my understanding is that an IFA will want at least 1% of the fund and the funds selected will also have charges to be met, possibly up to 2.5% TER charges also have to be met as well as the IFA trail commission. This is why I have gone on my own route. With HL the initial charges of the funds are discounted. If suggestions to consider other funds are available, as requested, it would be helpful, but I have been reading about the best funds and managers and have selected a cross section to begin with.

I have actually selected initial funds of HL Income & Growth, HL Cautious Managed, Invesco Perpetual Distribution, Skandia Global Best Ideas and PSigma Income fund, all of which are Accumulation.

I am also considering Invesco Perpetual High Income Acc and Jupiter Merlin Income fund Acc.

Are you able to suggest others I should perhaps consider?

Sam

dunstonh

my understanding is that an IFA will want at least 1% of the fund and the funds selected will also have charges to be met, possibly up to 2.5% TER charges also have to be met as well as the IFA trail commission. This is why I have gone on my own route. With HL the initial charges of the funds are discounted.

Your understanding is wrong.

The annual fund charges are the same with HL as they would be with an IFA. Indeed, depending on the funds you use, the IFA could be cheaper. Only the initial cost of set up could be different.

HL keep the trail commission that goes to the IFA. So, whilst an IFA can provide ongoing servicing advice and be paid from that, HL just pocket it for themselves and give you nothing.

Your assumption of a TER of 2.5% is wrong as well. If you pick a 2.5% TER fund on HL then it will be that whether you DIY or use HL. The trail is included in that and not on top of it.

I have actually selected initial funds of HL Income & Growth, HL Cautious Managed, Invesco Perpetual Distribution, Skandia Global Best Ideas and PSigma Income fund, all of which are Accumulation.

Looking at that spread, you are paying charges of around 1% a year more than an IFA. Plus, a couple of naff funds in there.

Are you able to suggest others I should perhaps consider?

I think you need to take a step back and look at what you are trying to achieve and the reasons why.

You are currently picking the most expensive fund types yet say you are doing it to save charges over an IFA. Yet the IFA could be around 1% to 1.5% a year cheaper.

Do you need self balancing portfolio funds? If you do, then why the spread as that can defeat the purpose of using portfolio funds? You may as well self select focused investment funds if you are going to do that and save money.

SeniorSam

Thanks Dunstone,

I am pleased that the TER 'includes' the 0.5% trail that HL will retain each year and I do appreciate that HL will not be giving any advice at all.

As mentioned, I am only looking to achieve about 3-5% per annum and anything above that will be a bonus, at least it may not be going down as long as I keep an eye on it and switch to lower risk if markets get difficult, but I expect the fund managers will be making changes themselves as markets change, so hopefully it will work out.

Regarding the funds I have selected, I have looked at several web sites and their comments on the funds, as well as noting their history of performance. I know that past performance is no indication, but with my past experience of a financial adviser who moved the 5 pensions into a Sipp for me, had a large commission and did nothing at all afterwards, I do not want to same experience again, even though I feel sure that there are good IFA's around somewhere if one keeps looking.

My thoughts were that picking good fund managers and splitting the pot into sections of 4 or more, then the overall amount may be better served if one or two are not so good as the others. I do not have the expertise to pick individual shares or assets to make up a portfolio, but the fund managers should have.

With this size pot, an IFA would be taking over £2,500 just to move the Sipp. There is no more work in moving this or moving a £50k pot as there are no protected rights and only 4 life funds in a Bond, which will be changed to cash to move.

You say that two of the funds I have selected are 'naff', would you please say which these are in your opinion and why? Also, as asked for before, are you able to mention other funds worth looking at. Not advice, but generalisations? THis would be most helpful of all.

Perhaps I may be able to save 1% or 2% elsewhere, but in looking for 3-5% overall and doing it myself, I only have myself to blame if it doesn't work in the next few years. I also will not have that feeling that I have been cheated by an adviser who may only be looking at his initial commission and then not care what happens.

If IFA's were to agree to be paid by taking a % of the profit above a certain amount of growth, they would have a great incentive and potential to earn a lot of money if they are good at their investments. Perhaps the future changes of Fees will help - who knows.

Thank you anyway for your interest, it is appreciated. I await hearing from you again. OR anyone else for that matter.

Sam

dunstonh

but with my past experience of a financial adviser who moved the 5 pensions into a Sipp for me, had a large commission and did nothing at all afterwards, I do not want to same experience again, even though I feel sure that there are good IFA's around somewhere if one keeps looking.

Why did it do nothing? Was that down to timing or the how the investments work? How did your proposed funds perform during that same period?

Over the years I have heard people say that they took money out of one option to put it into another and the new option did so much better. Very often the two things were near identical and the only difference is one period included a stockmarket crash and the other period was only growth years. Often the earlier option was better than the newer option but they didnt see it that way because they were not comparing like for like.

With this size pot, an IFA would be taking over £2,500 just to move the Sipp.

It would be wrong to assume that is the case with all IFAs. On fee basis, it could be more like £500-£1000.

Perhaps I may be able to save 1% or 2% elsewhere, but in looking for 3-5% overall and doing it myself, I only have myself to blame if it doesn't work in the next few years. I also will not have that feeling that I have been cheated by an adviser who may only be looking at his initial commission and then not care what happens

If a fee based adviser costs you say 1% of the amount invested in setting in it up and you are then saving 1.5% p.a. then its clear that it wouldnt take long at all to be better off.

I respect your choice to DIY but to say you dont want to use an IFA as you want to save money but then use HL who cost the same or more as an IFA and then pick some of the most expensive investment funds going didnt seem right.

If IFA's were to agree to be paid by taking a % of the profit above a certain amount of growth, they would have a great incentive and potential to earn a lot of money if they are good at their investments. Perhaps the future changes of Fees will help - who knows.

That would be a complete disaster. It would encourage greater risk taking and we know where that got us over the last few years.

The future changes of fees will have no difference at those paying on agreed remuneration/fee basis as they have already been working that way for years. It will only have a difference on commission basis and that option is typically only best for smaller transactions.

You say that two of the funds I have selected are 'naff', would you please say which these are in your opinion and why? Also, as asked for before, are you able to mention other funds worth looking at. Not advice, but generalisations? THis would be most helpful of all.

No. I may hint at things to look at and try and steer on posts but I will not recommend funds. Mainly as the comments on an internet board still fall under regulatory supervision. Plus, that is what people pay me for (why recommend funds only for HL to get 0.5% p.a. out of it) as well as the fact that what I would do would be different to what you are looking at. e.g. if you want to use self balancing portfolio funds then I would use a personal pension rather than a SIPP with a TER of around 1%. I just very quickly ran the two HL funds through Finex comparing them to a couple of bog standard insurance company funds with a TER of 1% or less and HL's funds underperformed significantly.

SeniorSam

Thanks again,

When the investments were going down, I did ask the adviser for his advice and all he said was leave it as it was and it will come back. At that time I was heavily into Property. (nuf said) After 12 months it was still going down but without any input from the adviser, I have since been trying to recover using other funds, which have slowly improved. Hence my faith in financial advice based on up front cost is not good because when the £20k had been deducted from the pensions to pay commission, I got very little help at all.

As for my targets, personally I think that 3-5% is a reasonable target, but you have not commented on the prospects of that, even based on the present funds I have selected. Would you care to do so?

I do appreciate that my suggestion that financial advisers be paid on performance, rather than up front payment, will never happen, even though it would clearly sort out who is best at their job when it comes to investing.

Thanks for identifying the two HL funds which you feel are not so good. I will look at others and split the pot between more funds with lower TER and continue to monitor the position once the funds have been transferred.

I appreciate that you may not wish to mention other funds to 'consider worth looking at' even thought I would not think that would be considered as 'advice'. It would however show a willingness to help someone on the DIY trail and who knows, what will happen in the future.

Thanks anyway

Sam

jem16

SeniorSam wrote: »

Are you able to suggest others I should perhaps consider?

I couldn't help you there as I leave the choices to my own adviser. Plus what I would consider would not be what you would consider as our attitude to risk is different.

SeniorSam wrote: »

I keep an eye on it and switch to lower risk if markets get difficult, but I expect the fund managers will be making changes themselves as markets change, so hopefully it will work out.

The fund managers cannot always react to changes as they still have a remit to follow.

but with my past experience of a financial adviser who moved the 5 pensions into a Sipp for me, had a large commission and did nothing at all afterwards,

Had you agreed a servicing contract or a transactional contract?

I also will not have that feeling that I have been cheated by an adviser who may only be looking at his initial commission and then not care what happens.

I think if you found an adviser working on fee basis who is also offering a servicing agreement, you shouldn't have this problem.

SeniorSam wrote: »

I appreciate that you may not wish to mention other funds to 'consider worth looking at' even thought I would not think that would be considered as 'advice'.

You might not consider it advice but his compliance department would and he could end up in a lot of bother.

It would however show a willingness to help someone on the DIY trail and who knows, what will happen in the future.

I think Dunstonh has given you a lot of help here with ideas and figures to help guide you on your DIY route. Asking him to give you fund ideas is expecting a bit too much.

Personally I feel you would be better with your pension pot being looked after by a servicing IFA but I respect it's your choice to go DIY.

SeniorSam

In view of past experience, I have decided to go ahead myself and consider I have a better chance than the last person after a deduction of £20,000 in commission and the promise of support, which was not followed through. Fund managers need to be more 'switched on' than a guy like me, otherwise that would not be where they are, but although they can't always be right, or quick enough when markets change, if they have a good track record, then they should be good enough for me.

Dunstonh has been very helpful and if he cannot comment on funds worth looking at, without actually advising such, then so be it. My target is to achieve 3-5% for the next few years, but you and he have not commented on the possibility of this with my choice of fund. Do you not think it possible, or are you unable to comment as Dunstonh could do if he wishes.

Sam

jem16

SeniorSam wrote: »

after a deduction of £20,000 in commission and the promise of support, which was not followed through.

Charging £20k on a pot of £280k sounds like an upfron commission charge of 7% rather than an initial fee with ongoing servicing being paid for. As they got all their money upfront I can see why they didn't provide ongoing advice. Sounds like a pretty poor deal I agree but there is no need to follow the same path this time around.

Fund managers need to be more 'switched on' than a guy like me, otherwise that would not be where they are, but although they can't always be right, or quick enough when markets change, if they have a good track record, then they should be good enough for me.

As I sais the Fund Managers have a remit to follow and can't just deviate from that by moving into different areas for example.

My target is to achieve 3-5% for the next few years, but you and he have not commented on the possibility of this with my choice of fund. Do you not think it possible, or are you unable to comment as Dunstonh could do if he wishes.

I'll be honest - I haven't a clue? What I did see in past performance figures was the possibility of 22%-26% drops in one year. Are you OK with that?

However having looked at the funds you were suggesting I see a few issues. Now this is coming from someone who leaves the fund picking to someone else so this could be a load of rubbish!

Anyway first thoughts are that you are choosing 3 multi-manager funds with high TERs ( 1.91%, 1.87% and 2.5%) and then chucking in a couple of extra funds. Either you want the self rebalancing funds or you don't.

Three of your funds are from the UK Equity Income sector and two from the Managed sector so not a lot of diversification.

Looking at your two HL funds, both contain PSigma Income and yet it's down as one of your other fund choices.

All of the funds are pretty UK centred - even the Skandia Global one has 50% in the UK.

I would imagine that an IFA following an investment strategy would either be looking at using a sector allocated portfolio ( there are about 11 sectors including cash) with more funds than 5 for your size of pot or using self balancing portfolio funds but not both as you seem to have done. At the moment you are looking at saving around 0.5% on an initial fee ( just the one off payment) and yet spending an extra 1%/1.5% each year in fees to go DIY with HL.

pension-newbie

Hello - I have taken the leap and transferred (following company sponsored advice) my SERPS pot of £50K into H&L SIPP. The transfer happened a lot quicker than I expected (within days) so is currently in cash.

Can someone help confirm where I should put this money within SIPP to get the best interest while I make the investment decisions I need (which will be at the end of the month when I have booked time off and appointments with some IFAs to get quotes for helping advice on strategy). So I do need to consider dealing charges for transfer in and out which will only be over a 2 month period

dunstonh

Can someone help confirm where I should put this money within SIPP to get the best interest while I make the investment decisions I need

The SIPP you have bought it very expensive for doing something like that. You can ask them if they have any savings accounts available for use in the SIPP though.

appointments with some IFAs to get quotes for helping advice on strategy

Which will almost certainly involve transferring the pension away from the HL SIPP as its too expensive to use under advice.