Using an IFA to recommend funds in my Company Pension... What should I expect.

EdInvestor

If they find that difficult then it suggests that they shouldnt be doing it themselves.

What evidence is there that advisors get asset allocation right? IME they are much more likely to get it wrong, usually by putting people into funds which are too high risk for their profile ( eg With profits, balanced managed funds).

Most people who were sold those products were cautious investors and those funds, with 75%+ invested in the stockmarket were too high risk for their profile.Hence they all made unexpected losses on endowments and such.

Foreign funds for instance are subject to much higher (hidden) charges than UK onshore equity funds plus currency risk, and are thus significantly higher risk than even a plain vanilla UK equity growth fund, much less an Equity Income fund.

Yet people are obviously being advised to choose on a geographical basis, a bit of the US, bit of Europe, Japan etc. result is they end up often with nearly half their portfolio in high risk funds which they had no idea were high risk.

Foreign funds are not a "sector" in their own right.

They are just a higher risk type of equity fund - as are trackers.

dunstonh

What evidence is there that advisors get asset allocation right? IME they are much more likely to get it wrong, usually by putting people into funds which are too high risk for their profile ( eg With profits, balanced managed funds).

I'm not talking about advisers. I am talking about asset allocation. You should stop looking back at with profits and balanced managed funds and use in the past. You cannot compare modern availability of funds with those available 5-10 years ago when many providers only had a with profits fund or a balanced managed fund.

It is with some irony that you say that advisers are more likely to get it wrong (baring in mind that only IFAs can make fund recommendations. Tied agents cannot and its mostly tied agents where people end up in balanced managed/with profits). You regularly tell people to look at the citywire top10 league tables and tell people to pick their funds from there. That is past performance investing and is the one thing you shouldnt be doing.

Foreign funds for instance are subject to much higher (hidden) charges than UK onshore equity funds plus currency risk, and are thus significantly higher risk than even a plain vanilla UK equity growth fund, much less an Equity Income fund.

Wrong.

Invesco Perpetual Income fund TER 1.58%
Artemis European TER 1.59%

And what is signifantly higher risk about investing in European funds than UK? Do you think that Germans or French think about investing in UK funds?

Artemis European is a risk 7 fund and Inv Perp equity income is 6. Most "vanilla" UK Growth funds are between fall at 6-7.

Yet people are obviously being advised to choose on a geographical basis, a bit of the US, bit of Europe, Japan etc. result is they end up often with nearly half their portfolio in high risk funds which they had no idea were high risk.

Wrong. A cautious risk portfolio may only carry a tiny percentage across the higher risk sectors. The portfolio is built to the risk profile. Unlike your posts which always send people into a higher risk product (SIPP) and buying single company shares in a single investment sector/strategy without knowing what their risk profile or knowledge is.

Foreign funds are not a "sector" in their own right.

Wrong. They are a sector within the asset class. So, when people refer to the European Sector or North American sector, what would you replace the word sector with?

EdInvestor

dunstonh wrote:

I'm not talking about advisers. I am talking about asset allocation. You should stop looking back at with profits and balanced managed funds and use in the past. You cannot compare modern availability of funds with those available 5-10 years ago when many providers only had a with profits fund or a balanced managed fund.

Even at the really bog standard insurers, there were cautious managed funds which would have been a much better choice.Yet no-one was put into the cautious funds.Why not?

It is with some irony that you say that advisers are more likely to get it wrong (baring in mind that only IFAs can make fund recommendations. Tied agents cannot and its mostly tied agents where people end up in balanced managed/with profits).

I refer to them as a group.

That is past performance investing and is the one thing you shouldnt be doing.

Oh really?Did you have a special bit of computer software that tells you about future performance in advance?

According to the regulator "past performance is no guide to the future." This is of course strictly correct, in that a fund can be a star performer due to the abilities of its expert manager: the manager leaves and the fund can lose its star quality.

Always check this aspect - which you can do on the Citywire site: it rates fund managers too.There are only about 20 fund managers who produce consistent top end results, year after year. This narrows fund choice quite considerably. The other 4,500 can be binned staright away

Invesco Perpetual Income fund TER 1.58%
Artemis European TER 1.59%

Hidden charges ( dealing costs, stamp duty etc) are on top of the TER.They normally add about 1% to the TER, but with foreign funds it can be double that. Half your returns at normal growth rates are gone.

And what is signifantly higher risk about investing in European funds than UK? Do you think that Germans or French think about investing in UK funds?

Germans and French would incur the same currency risk by investing in funds denominated in GBP as we do by investing in Euro funds.Anyone who has been in US funds in recent years will be well aware of this - the rise in the pound has wiped out any gains.

Artemis European is a risk 7 fund and Inv Perp equity income is 6. Most "vanilla" UK Growth funds are between fall at 6-7.

This is pretty meaningless unless we see the whole classification.Perhaps you would like to post it. Just because the industry says there is no significant difference between a foreign currency fund and a local fund doesn;t mean it's true of course.

Unlike your posts which always send people into a higher risk product (SIPP)

The risk lies in the investments, not the tax wrapper around them.A Sipp is just a type of personal pension.

and buying single company shares in a single investment sector/strategy

Eh?I have never recommended this.

They are a sector within the asset class. So, when people refer to the European Sector or North American sector, what would you replace the word sector with?

Meaningless word sector, as I said.These are just foreign equity funds.

dunstonh

Even at the really bog standard insurers, there were cautious managed funds which would have been a much better choice.Yet no-one was put into the cautious funds.Why not?

No there wasnt. Most of the home service insurance companies just had a with profits fund. Your Pru, Pearl, Refuge, CIS etc all ended up in with profits as that was all that was available. The banks operate a tied salesforce who cannot give investment portfolio advice. They present the funds to the consumer to match the risk profile. The consumer chooses. In reality, this mean they ended up in the managed fund the bulk of the time.

Even today, you have pension providers with just one or two funds. AXA Saver Pension and Virgin Stakeholder to name two.

I refer to them as a group.

Thats not very helpful then is it. Tied agents cannot give investment portfolio advice so you are criticising a group of individuals for doing something that they have no control over.

Oh really?Did you have a special bit of computer software that tells you about future performance in advance?

Dont be daft. You seem to have the monopoly on using hindsight.

According to the regulator "past performance is no guide to the future." This is of course strictly correct, in that a fund can be a star performer due to the abilities of its expert manager: the manager leaves and the fund can lose its star quality.

Or it can be because that sector happened to be the top performer at that time. If you look at the morningstar website, currently most of the top 10 are latin american funds. I bet you that at some point in the future that they will be the same funds in the bottom 10.

Germans and French would incur the same currency risk by investing in funds denominated in GBP as we do by investing in Euro funds.Anyone who has been in US funds in recent years will be well aware of this - the rise in the pound has wiped out any gains.

So? this is long term investing with portfolio rebalancing. Short term issues can be beneficial to the long term returns.

This is pretty meaningless unless we see the whole classification.Perhaps you would like to post it. Just because the industry says there is no significant difference between a foreign currency fund and a local fund doesn;t mean it's true of course.

I would prefer to use the independent research tools rather than the Ed o'meter that is too UKcentric.

The risk lies in the investments, not the tax wrapper around them.A Sipp is just a type of personal pension.

The investment risk lies within the investments. However, product risk is also very important. SIPPs are currently unregulated and have a complicated charging an admin structure. Whilst an experienced investor or IFA would have no issues there, a novice could easily end up confused. Especially where deposits are put into the cash fund but require the investor to manually move them into investments. 30 years on a novice could find they have 30 years of investing into cash.

Eh?I have never recommended this.

So, all those HYP posts weren't real then.

Meaningless word sector, as I said.These are just foreign equity funds.

If sector is meaningless. Can you look up "fact" in your dictionary.

You let your negative attitude towards these things cloud your judgement. It is a shame as you do raise some good points from time to time but then blow it with misinformation or harking on about events 10-20 years ago and comparing them with products, funds and information available today.

whiteflag_3

Tiggs wrote:

Always makes me chuckle when i read financial press on fund managers/funds etc and they will say stuff like "80% of IFA's back Mr X's approach to emerging markets for his funds holdings in China...." In my experience............80% couldnt find China on a map!

Thats assuming they can find a map!:rotfl: