Anyone been to an IFA and not been advised to buy Unit Trusts?

gadgetmind

Ark_Welder wrote: »

Perhaps pproperty management companies and consultancies can be brought into the topic. I'm thinking along the lines of the UK-based, FSA-authorised, fee-receiveing ones that manage collective property investments funds and other 'investment opportunities.

Not something I know anything about. Do you have any examples?

jem16

colinscott wrote: »

I don't understand, for example, why IFA's need to charge initial and annual charges for putting their clients' in OEIC's (as it seemed someone was suggesting).

The initial charge is a fee for advice which is primarily the role of an IFA. It is for the work involved in finding the client's objectives, risk profile and implementing of whatever is needed, if anything.

Surely, these are long term investments, and if they were a decent enough pick in the first place, just leave them alone.

No matter how good the funds chosen initially, over the years the risk profile of the client would soon get out of sync. The idea would normally be to have an annual review where some of the proceeds of the funds that have done well are used to increase the funds that have done badly.

Same with a portfolio of equities, which, I have to agree, would be a whole lot cheaper.

Assuming you mean direct investment into shares, some of the more popular shares of 2005/6 have tanked. Would you just have left them there or tried to find alternatives?

What would Warren Buffett do?

What he says and what he does appear to be two different things.

Rollinghome

gadgetmind wrote: »

I tend to agree, other than pointing out the need for rebalancing. Of course, investment advisers would say that you need to ensure funds continue to perform, and be prepared to switch if a manager seems to lose his magic touch.

Of course it would be perfectly possible to arrange the investment in funds that would be virually self-balancing such as the Vanguard funds etc. I'd guess though that most IFAs are unlikely to want to do that even post-RDR as lack of complication removes the need for their services.

I'd also suggest that the need to rebalance is good sales ploy but probably a tad overdone. As one sage bluntly put it, advisers love "balanced" portfolios because they haven't a clue which investment will give the best returns so bet on all the numbers to cover their a*s.

The most extreme view might be that of Andrew Carnegie: "Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket".

Ark_Welder

Berkshire Hathaway was about 2:1 equities to bonds. Be interesting to see where they're at this year. Held a portion in PMs in previous years too.

gadgetmind

jem16 wrote: »

Assuming you mean direct investment into shares, some of the more popular shares of 2005/6 have tanked. Would you just have left them there or tried to find alternatives?

Are we back at the "active managers would have seen it coming and got out" argument? Because, with very few exceptions, they clearly didn't and didn't.

What to do after a share has tanked is always a difficult one and opinions differ. Leaving it as a red stain in your portfolio might teach you an ongoing lesson, but investing is supposed to be detached and analytical rather then involved and emotional.

gadgetmind

Rollinghome wrote: »

I'd also suggest that the need to rebalance is good sales ploy but probably a tad overdone. As one sage bluntly put it, advisers love "balanced" portfolios because they haven't a clue which investment will give the best returns so bet on all the numbers to cover their a*s.

Diversification is good, but some do want to use a winkle picker to get at every last morsel of even the most niche of markets.

As for rebalancing, once a year on your birthday is about right. If things seem too volatile at that point, leave for another six months.

When it comes to market timing, only resort to a calendar if you don't have a glacier to hand.

jem16

gadgetmind wrote: »

Are we back at the "active managers would have seen it coming and got out" argument? Because, with very few exceptions, they clearly didn't and didn't.

Not in the least.

I am referring to using the gains made in some areas by selling high and buying into the areas that have done badly thus buying low. This would tend to happen on an annula basis.

A fund manager has a specific remit which is specified in the prospectus. If it's a UK equity fund they can't simply become an emerging markets fund just because that area is doing better.

I asked the question about direct shares as I don't know if the same applies.

gadgetmind

jem16 wrote: »

A fund manager has a specific remit which is specified in the prospectus. If it's a UK equity fund they can't simply become an emerging markets fund just because that area is doing better.

I could give examples of UK Equity Income funds that have big holdings of Israel-based tech companies that have never paid a dividend, and UK Smaller Companies funds that decide on a whim to buy FTSE mega-caps.

Such "mission creep" is very common.

I asked the question about direct shares as I don't know if the same applies.

It really is down to the individual investor and there is no proven strategy. If the stock still has a pulse, and might get back into the ring, then many hold.

I tend to hold if I still have confidence in the management and the strategy, whereas I'll bail even on a profit if I lose this confidence. Good management is vital and (sadly) rare.

colinscott

Jem16 says, "over the years the risk profile would soon get out of sync."

If you have chosen an OEIC that suits me, I would not be expecting you to change it any time soon. I do not see how this can justify an annual management charge, which was my point.

For example, I paid an initial fee for advice on an adapted vehicle for my disabled son. I do not expect the adviser to come back to me every year to check what he gave me still suits my needs or even to move me to another vehicle, when he thought a new one might serve me better. My initial remit was to find something that would set me up for at least five years. Why would I want him coming back to check that my needs profile is still in sync. with his recommendation, and take an annual review charge for the pleasure? I would have no confidence in any adviser who set me up with a medium to long term product, and then came back as a matter of course for an annual review, and charged for it. Even worse, if he advised on a change before the short term was up.

jem16

colinscott wrote: »

My initial remit was to find something that would set me up for at least five years.

Then the IFA would take that into account and set you up with an investment that did exactly that.

I would have no confidence in any adviser who set me up with a medium to long term product, and then came back as a matter of course for an annual review, and charged for it. Even worse, if he advised on a change before the short term was up.

If you do not want a servicing IFA then you say that at the time and all the advice would be geared towards that. No reviews would take place and you would not be charged an annual review fee.

Depending on the amount there would be no problem with this approach. Personally with a larger amount I would be expecting a servicing approach with an annual review and rebalancing, Bed&ISA/pension as appropriate.

It's basically all down to communication with the IFA so that advice can be tailored accordingly.