IFA Advice - Commission based?

darkpool

Aegis wrote: »

You're still missing a large number of asset classes, sectors and geographies, which was my point.

so what do you suggest? investing in emerging market UTs? why don't you look at some of the portfolio turnovers in these emerging market UTs. 400% PTR and 1.72% for one of the funds in one year. i reckon that's a 9% annual fee.

i've been to asia, i really can't see them being happy giving us westerners great returns. for instance china seems hell bent on ripping off western technology and manipulating exchange rates - they aren't going to let us make great profits there.

http://www.schroders.com/StaticFiles/Schroders/Funds/SIL%20-%20Unit%20Trusts/English/Prior%20years%20TERs%20&%20PTRs.pdf

Ark_Welder

darkpool wrote: »

In all honesty i reckon the best option for most people is to have a portfolio of about 20 blue chip shares in an online account. a fair degree of diversification and not too cumbersome.

Why is this a good option for most people? There is an assumption that the ability to identify 20 companies that are better than any other is an easy task. As you claim that professionals are unable to do this satisfactorily, how would 'most people' expect to perform any better when they have less time to do an adequate job? Anything less than an adequate job is simply guesswork and speculation, not investing. Over-estimating ones own abilities is a major trap for individual investors.

20 shares may also be too few for some individuals, and even with ISAs there may still be potential CGT issues - which holding collective investments will overcome.

Are you able to provide an example of a unit trust that has the overall level of charges that you claim are 'likely'?

BLB53

I am not impressed with IFAs and would suggest your friend could do a better job of looking after the £120K. I do have a lot of time for Monevator, here's what he thinks of IFAs (have a look around the site for more info!)

http://monevator.com/2010/01/11/financial-advisors-swindlers-and-leeches/

Aegis

darkpool wrote: »

so what do you suggest? investing in emerging market UTs? why don't you look at some of the portfolio turnovers in these emerging market UTs. 400% PTR and 1.72% for one of the funds in one year. i reckon that's a 9% annual fee.

i've been to asia, i really can't see them being happy giving us westerners great returns. for instance china seems hell bent on ripping off western technology and manipulating exchange rates - they aren't going to let us make great profits there.

http://www.schroders.com/StaticFiles/Schroders/Funds/SIL%20-%20Unit%20Trusts/English/Prior%20years%20TERs%20&%20PTRs.pdf

Great. Did anyone here identify that fund as a suitable investment into emerging markets? If not, why did you cherry pick that particular fund?

My personal favourite fund in the emerging markets sector reported a PTR of 30.53%. My second favourite (and the only other emerging markets fund I hold) had so many inflows and outflows that the turnover rate was negative, i.e. no rebalancing of the portfolio ended up being necessary at all.

All in all, not a problem.

In addition, you missed the comments about bonds, property and commodities altogether.

Linton

darkpool wrote: »

so what do you suggest? investing in emerging market UTs? why don't you look at some of the portfolio turnovers in these emerging market UTs. 400% PTR and 1.72% for one of the funds in one year. i reckon that's a 9% annual fee.

Why on earth does this matter to you. Surely what is important is the return. The published return is AFTER all fees etc. Any reasonable EM UT has had returns of 50%-100% over the past 5 years. How have your FTSE 100 shares performed???

Are you so against fund managers getting paid large salaries that you are prepared to give up good returns just to spite them? That really is taking principles to an extreme.

Aegis

BLB53 wrote: »

I am not impressed with IFAs and would suggest your friend could do a better job of looking after the £120K. I do have a lot of time for Monevator, here's what he thinks of IFAs (have a look around the site for more info!)

http://monevator.com/2010/01/11/financial-advisors-swindlers-and-leeches/

Firstly, that's clearly a very well balanced and researched article (sarcasm, in case it's not immediately apparent). We have ONE person going to ONE adviser looking to invest an amount that most advisers wouldn't be the slightest bit interested in talking about (because making it worth their while would make the fees ridiculous on a percentage basis). As most funds require a minimum monthly investment of £50, this left no real choice but to use a portfolio fund of some description, otherwise a decent asset allocation would have been impossible.

Secondly we have no idea who this adviser worked for or whether he was independent at all. The article simply refers to him as "the financial adviser" repeatedly. No-one on here has ever argued that all FAs are actually good to go and visit. I've personally steered people clear of various organisations because of their track records of high charges and poor quality advice.

Thirdly, and probably most importantly, the investor in question was looking to put aside £100 a month. Even at 4% initial charge, that's £48 in the first year. Given that many IFAs set a minimum case size of £500, eliminating commission (which the article is very grateful for) will not really help a consumer like the one described, as he will be waiting for 6 months just to get a positive balance in his investment account.

In summary, all it really showed was that small contributions aren't worth seeing an adviser for, which is hardly shocking.

darkpool

Aegis wrote: »

Great. Did anyone here identify that fund as a suitable investment into emerging markets? If not, why did you cherry pick that particular fund?

My personal favourite fund in the emerging markets sector reported a PTR of 30.53%. My second favourite's (and the only other emerging markets fund I hold) had so many inflows and outflows that the turnover rate was negative, i.e. no rebalancing of the portfolio ended up being necessary at all.

All in all, not a problem.

In addition, you missed the comments about bonds, property and commodities altogether.

well the pro UT argument use "perp high income" as their main argument for managed funds. can i not use a single fund to make my argument?

how can you have a negative PTR?

property - british land, land securities
commodities - rtz, bhp, xtsrata
bonds - why? if you really felt the need phone up broker and buy gilts

Ark_Welder

darkpool wrote: »

so what do you suggest? investing in emerging market UTs? why don't you look at some of the portfolio turnovers in these emerging market UTs. 400% PTR and 1.72% for one of the funds in one year. i reckon that's a 9% annual fee.

Your reckoning leaves a lot to be desired. The annual report for the fund:

http://www.schroders.com/fundDocumentRedirect?oid=1.9.273346

Page 30, note 14 'Portfolio Transaction Costs' for 2010 and 2011.

As stated earler, for facts, individuals should check the relevant annual report for their information.

Ark_Welder

darkpool wrote: »

bonds - why? if you really felt the need phone up broker and buy gilts

A comment which shows a lack of understanding of bonds.

Aegis

darkpool wrote: »

well the pro UT argument use "perp high income" as their main argument for managed funds. can i not use a single fund to make my argument?

how can you have a negative PTR?

property - british land, land securities
commodities - rtz, bhp, xtsrata
bonds - why? if you really felt the need phone up broker and buy gilts

Invesco perpetual income is regularly mentioned on here by a number of finance professionals and private investors alike as a fund they hold in high esteem and have held for many years. I can't recall a single person on here saying something similar about a Schroder emerging markets fund, so picking that one seems rather pointless except that it's clearly one of the highest PTRs you can find.

As to how you can have a negative rate, that's down to how the calculation works. If you have no inflows or outflows from the fund, it's impossible to have a negative value, but if the inflows and outflows are such that internal transactions are largely unnecessary, the PTR can be negative. In other words, the fund manager likes the look of a new stock, so purchases it with inflows. He starts to dislike a current holding, so he sells it to pay for outflows. The core holdings are left unchanged, so the calculated PTR is negative.

You might consider it somewhat artificial, but given the costs involved can be offset by swinging the mid price of the fund, it makes sense to allow it to become negative.

The property and commodity exposure you've posted are equities which invest into those. That's not the same as diversifying into those assets directly, as you get much greater correlation with equity markets than you'd get if you went into those assets more directly. Arguably it's a lot riskier going in this way because you're leveraging the price movements in the commodity due to the magnified effect on profit margins, plus you have a doubled sentiment effect (the commodities and the equities).

As for the "why" regarding bonds, does that really need an answer?