Investing with Santander Portfolio - have i wasted money? (long post)

royal23

here's my situation:
i'm 30 years old and have about £40K in capital available.
Cash ISA already maxed out, the rest was in savings.
my income is about 55K p.a. (48K plus max. 10K commission).

so after years of just saving, i decided it was finally time to put money in the market. i did that a couple of weeks ago, and only started reading this forum (plus other sites) AFTER my decision... and now think i wasted money.

because i have all my banking with santander (and i'm happy with them unlike others), i made an appointment at the branch about investments. after 2 sessions of which the first was an hour of assessing my situation etc i picked the following product;
with an intial investment of 18K (i.e. just under half of my total avlable capital) and a further £250 monthly going in:
Santander International Equity Portfolio
http://funds.ft.com/uk/Tearsheet/Summary?s=GB00B3KKYH59:GBX

i have a long term horizon of at least 5 years, understand the risk and volatility, and i don't need to touch that money.

so far so good. now to the costs...
Initial charge is 1.9% (that's of the 18K, and also going forward for the monthly instalments)...
AMC is just under 1%
so in total i'm paying 3%.

did i waste money here? (and i think i know the answer already)

the thing is, AFTER i took out the investment, after having had the two sessions with the santander advisor (nice chap, of course), only then did i start reading, researching, investigating...
and i think i should be able to do this all myself, DIY. e.g. open an account with a platform, and put together a passive portfolio. maybe a bit of rebalancing, maybe not. job done. at virtually no cost.

now with this santander managed fund, it has to grow by at least 3% annually for me to just break even on my money!
but really it has to grow by at least 6 or 7%, because if i had kept the money in cash isas (at 3.3%, or even higher if fixed...) it would have grown, guaranteed.
so unless this manged fund performs at 10% annually i'm not really better off at all, right?

as for the fund investment: the purchase was made at June 27th price of 196.20, so at least i'm up already of course i'm not seriously looking at this way.

one positive thing to mention though: because of the investment, santander upgraded my cash isa to 4% super isa (for 12 months), so that makes up a some of the charges at least.
i have 18K left in my cash isa (it was just under 25K before, we trnasferred 7K from cash to S&S ISA, and topped it up with this year's allowance, and the rest went into the fund via non ISA OEIC)

sorry for the long post, it's been on my mind since i took up the investment 2 weeks ago.
i think thre are worse deals out there, i.e. other banks charge a lot higher intial charges and annual fees, and IFAs do too. but i feel i should have done reasearch first and set this all up myself...

now i'm hoping that the managed fund will at least show some good performance that i might not have otherwise have access to?!

dunstonh

now to the costs...
Initial charge is 1.9% (that's of the 18K, and also going forward for the monthly instalments)...
AMC is just under 1%
so in total i'm paying 3%.

No you are not paying 3%.

You paid 1.9% initially.
You then pay 1.95% p.a. (fund has an AMC of 1.1% and a TER of 1.95%)

did i waste money here? (and i think i know the answer already)

Its a naff fund. You are paying managed fund prices for what is effectively a benchmark fund. Since it was launched, it has never had above average performance on a calendar year basis. It has no redeeming features or anything that would appeal to an investor.

one positive thing to mention though: because of the investment, santander upgraded my cash isa to 4% super isa (for 12 months), so that makes up a some of the charges at least.

Its not a positive. They are refunding some of the commission they earned on the investment side back to you via the interest rate on the savings side.

Don't use FT as a source of data for funds. The data is frequently flawed and nowhere near as comprehensive as it should be. I spotted several data errors on the link you gave.

srcandas

royal23 wrote: »

so far so good. now to the costs...
Initial charge is 1.9% (that's of the 18K, and also going forward for the monthly instalments)...
AMC is just under 1%
so in total i'm paying 3%.

It's not as bad as you think. The 3% is the first year. That money in the second year should only be subject to the annual charge (TER).

So in reality yes you could have done better but as you say you could have done a lot worse. And who knows if this fund will perform well.

But with investments one has to make decisions. When to sell being harder than when to buy But if you invest long enough you will sell just before a big rise and buy just before a big fall. And vice versa

Just see it as tucked away for 5 years and then have a think. And in the meantime jump in here, there, and read lots and play with virtual portfolios. You can always redirect your monthly payment if you find something better and then add other investments.

Enjoy the ride. Life is too short to worry :beer:

jem16

royal23 wrote: »

here's my situation:
i'm 30 years old and have about £40K in capital available.
Cash ISA already maxed out, the rest was in savings.
my income is about 55K p.a. (48K plus max. 10K commission).

How much are you paying into your pension? You are roughly £13k into higher rate tax so paying extra into a pension and getting 40% tax relief would be very good if you expect to only pay 20% in retirement.

so far so good. now to the costs...
Initial charge is 1.9% (that's of the 18K, and also going forward for the monthly instalments)...
AMC is just under 1%
so in total i'm paying 3%.

Not exactly. The initial charge of 1.9% on the £18k is only for that initial deposit. After that it will be 1.9% on £3k each year ( £250 x 12) and not 1.9% of the total amount which you are taking it to be.

With the TER of 1.95% plus the initial on £3k, it works out at around 2.22%.

royal23

thanks everyone!

srcandas wrote: »

Just see it as tucked away for 5 years and then have a think. And in the meantime jump in here, there, and read lots and play with virtual portfolios. You can always redirect your monthly payment if you find something better and then add other investments.

Enjoy the ride. Life is too short to worry :beer:

sounds reassuring. i may just do that. certainly going to read and learn a lot more.

jem16 wrote: »

How much are you paying into your pension? You are roughly £13k into higher rate tax so paying extra into a pension and getting 40% tax relief would be very good if you expect to only pay 20% in retirement.



Not exactly. The initial charge of 1.9% on the £18k is only for that initial deposit. After that it will be 1.9% on £3k each year ( £250 x 12) and not 1.9% of the total amount which you are taking it to be.

With the TER of 1.95% plus the initial on £3k, it works out at around 2.22%.

re: pension
3% of my basic salary, at the moment that's £120 pm. my employer tops that up with 5%, so the total is 8%.
i'm going to increase my contrbution next month to around £300.
thanks for pointing out the %. very helpful.

dunstonh wrote: »

No you are not paying 3%.

You paid 1.9% initially.
You then pay 1.95% p.a. (fund has an AMC of 1.1% and a TER of 1.95%)


Its a naff fund. You are paying managed fund prices for what is effectively a benchmark fund. Since it was launched, it has never had above average performance on a calendar year basis. It has no redeeming features or anything that would appeal to an investor.



Its not a positive. They are refunding some of the commission they earned on the investment side back to you via the interest rate on the savings side.

Don't use FT as a source of data for funds. The data is frequently flawed and nowhere near as comprehensive as it should be. I spotted several data errors on the link you gave.

@dunstonh, thanks for your reply!

where did you get the 1.95% p.a. from? in the documents santander sent me it says i'm going to pay "0.94% p.a. of the fund value". i think the info that's on the FT link about the fund isn't correct, e.g. it mentions 7% initial charge which is wrong.

what data source should i use if not FT? what are the data errors you mention? that's important, i want to look at the correct data of course.

what's your advice, given your comment that the fund isn't very good. should i get out now and DIY my investments?
can you point out what makes the fund "bad" or rather not appealing? if that's too open ended, no worries.

jem16

royal23 wrote: »

re: pension
3% of my basic salary, at the moment that's £120 pm. my employer tops that up with 5%, so the total is 8%.

Only your contribution gets tax relief though.

i'm going to increase my contrbution next month to around £300.

Better but to be honest you would be better paying the £250 into the pension as well as opposed to the Santander investment.

where did you get the 1.95% p.a. from? in the documents santander sent me it says i'm going to pay "0.94% p.a. of the fund value".

That's not the full story. 0.94% is the AMC of the fund but that doesn't include everything. The TER ( although still doesn't include everything ) is what you should be looking at and it appears to be 1.95% although Santander's KIID has it at 1.89% as of end of June 2012.

http://www.santanderam.co.uk/csgs/StaticBS?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1223423752107&cachecontrol=immediate&ssbinary=true&maxage=3600

i think the info that's on the FT link about the fund isn't correct, e.g. it mentions 7% initial charge which is wrong.

7% is correct as that is the maximum retial initial charge. It doesn't necessarily mean that is what you pay.

what data source should i use if not FT?

Trustnet or Morningstar.

dunstonh

here did you get the 1.95% p.a. from?

Financial Express Analytics. They use data supplied to them by the fund house. 1.1% is the AMC but 1.95% is the TER. TER is the figure you should really be going by. The TER will move around a bit as it is a snapshot on a given day. So, you will get slight differences.

what data source should i use if not FT? what are the data errors you mention? that's important, i want to look at the correct data of course.

You spotted the a couple of the errors already (7% initial for example). Trustnet is a good free source of data.

what's your advice, given your comment that the fund isn't very good. should i get out now and DIY my investments?

you should either DIY or IFA. If you are capable of DIY and understand the types of investments you should use, risk v reward and will rebalance, switch and monitor then DIY. if you cant then you should use an IFA.

can you point out what makes the fund "bad" or rather not appealing?

Bank investments rarely perform well. That is one of those general rule of thumbs. In this case, this fund has never achieved above average performance on a calender year basis. Performance is no guide to the future but seeing as you never expect a bank fund to do well and this one has never done well, why pay 1.95% p.a. and 1.9% initial for it? There are plenty of better managed options. Plus, if you look at the performance, you can see it very much trends towards benchmark. If you want benchmark performance then buy a tracker portfolio fund at 1/3rd of the price.

royal23

jem16 wrote: »

Only your contribution gets tax relief though.



Better but to be honest you would be better paying the £250 into the pension as well as opposed to the Santander investment.

well, i understand your point. but my £250/m savings is for a goal: house deposit at some point, or in general building up my accessible capital.

putting everything spare into my pension is not a good idea IMO, because i can't access it until retirement age. but i want to build up accessible capital now, to finally get a property at some point.

royal23

dunstonh wrote: »

Financial Express Analytics. They use data supplied to them by the fund house. 1.1% is the AMC but 1.95% is the TER. TER is the figure you should really be going by. The TER will move around a bit as it is a snapshot on a given day. So, you will get slight differences.

thanks.
but why do they put the 0.94% figure on the documents that were sent to me? shouldn't santander disclose to me the exact fees?
i don't understand, i thought TER = AMC?
how can there be higher charges than what they outlined in the paperwork sent to me...

reading all your replies again, it looks like i have done pretty badly and need to stop and offload this asap, i guess?!

but can I open an S&S ISA account via a platform and transfer the value of the santander stuff over?
i'm so confused now and really worried i made such a bad decision

jem16

royal23 wrote: »

well, i understand your point. but my £250/m savings is for a goal: house deposit at some point, or in general building up my accessible capital.

putting everything spare into my pension is not a good idea IMO, because i can't access it until retirement age. but i want to build up accessible capital now, to finally get a property at some point.

Fair enough.

if you are saving for a house deposit, you need at least 5 years and preferably 10 for regular investments. Have you got that timeframe?

royal23

yes; unless i get a +20% payrise every year from now on, i guess that's how long it'll last