Halifax Managed Income - how bad?

betlarge

I have had 170k in this fund for nearly a year and have been checking up on it’s performance following dire warnings on this board.

I totally take on board comments about never trusting banks etc, and I will be diversifying out of this at some point.

However in a reply to another query on the subject, Chrismaths said ‘Have a look here to see how truly awful your fund has been’ with a supporting link.

This does seem to show the Halifax fund has performed appallingly compared to it’s peers. But I question whether Trustnet are comparing like with like. The Halifax fund is a distribution fund, i.e. income paying, whereas the others on that list don’t seem to be.

Looking at a Citywire comparison of distribution funds here, the Halifax fund performs reasonably – about middle-of-the-road. Not brilliant I would admit, but not disasterous either. The fund also is only about 50% equities with the rest in corporate bonds and property so electric performance in good times is unlikely, as is dire performance in bad times.

Over the full year, I will have drawn about 7700 (gross) in income from this and the capital will have grown a couple of grand after charges. I believe there is a dividend 'bonus' to come at the end of the year, too.

In it’s first year, about the same as shoving it in a high-interest account admittedly, but should it have more potential for growth?

I am aware that I could be trying to comfort/kid myself!

EdInvestor

It's really a very bad idea using insurance funds

Have a look at the performance of comparable proper unit trusts.

http://citywire.co.uk/Funds/Home.aspx?AnalysisCode=654abcd&RankModelID=9&FundID=103483

The returns are almost double.

Over the full year, I will have drawn about 7700 (gross) in income from this and the capital will have grown a couple of grand after charges. I believe there is a dividend 'bonus' to come at the end of the year, too.

Is this money in an investment bond?

If so that's your capital you're taking out, it's not income.Note how your capital is dwindling.This is because of the high charges and taxes you are paying within the bond will eat into the actual income so it is not high enough to replace what you are drawing out.

If you are a basic rate taxpayer you would be better to invest direct as there is no need to pay the taxes - or the high charges if you go through a discount broker.

dunstonh

I have had 170k in this fund for nearly a year and have been checking up on it’s performance following dire warnings on this board.

170k in one fund is very bad. It wouldnt matter if that is the best current fund. You still wouldnt stick it all in once place.

I totally take on board comments about never trusting banks etc

Its not about trust. Its about ability. Bank advisers are generally low skilled. It isnt their fault because they only have a product range of 5-15 products. You dont learn much with such a small range available. Also, tied advisers cant portfolio plan. So, ending up in one fund is typical.

This does seem to show the Halifax fund has performed appallingly compared to it’s peers. But I question whether Trustnet are comparing like with like. The Halifax fund is a distribution fund, i.e. income paying, whereas the others on that list don’t seem to be.

CM showed a page comparing it with sector average in the life fund catagory where distribution funds are more common. Your link shows it in the much smaller unit trust catagory. Distribution funds are more common in life funds than unit trust funds.

Over the full year, I will have drawn about 7700 (gross) in income from this and the capital will have grown a couple of grand after charges. I believe there is a dividend 'bonus' to come at the end of the year, too.

A cautious portfolio (of same risk as a distribution fund) over the year could have drawn the same amount and been up over £18,000. So, you are about £16,000 out of pocket from where you could have been (and thats not comparing it against the best but against real cautious portfolios). Dividends are not a bonus. They are key to any portfolio where income is a requirement.

It's really a very bad idea using insurance funds

Firstly it is not when it is appropriate. Secondly, we do not know if life funds or unit trust funds were used. This fund is available in both flavours.

Is this money in an investment bond?

So you ask the question saying it.

If so that's your capital you're taking out, it's not income.Note how your capital is dwindling.This is because of the high charges and taxes you are paying within the bond will eat into the actual income so it is not high enough to replace what you are drawing out.

There is absolutely nothing wrong with drawing capital as a fixed regular withdrawl. It is a very common method and can be quite tax efficient for some. If the investment makes 7% and you draw 5%, then it makes no difference. Also ignore the comment on charges. It's one Ed makes in every post of this type despite charges on the tax wrappers being virtually the same/

If you are a basic rate taxpayer you would be better to invest direct as there is no need to pay the taxes - or the high charges if you go through a discount broker.

This is an example of bad advice. We dont know your circumstances and you are being told what to do. If you are a basic rate taxpayer, aged over 65 and your income close to £20,100, then use of an investment bond could be a valid option as any income generated in an investment bond doesnt go towards your taxable income and therefore doesnt take you over £20,100. That figure is important as that is when the age allowance gets reduced which would increase your tax bill by upto £524.70. The announcements in the budget would see that figure increase closer to £1000 over the coming years.

If you are a basic rate taxpayer you would be better to invest direct as there is no need to pay the taxes - or the high charges if you go through a discount broker.

tax status has nothing to do with the distribution channel you use. Your ability to do DIY is the important thing. Charges advantages can be wiped out if you get it wrong. Just look at what has happened. The OP went to a bank and saw a low skilled salesman and ended up in a cheap product but one that is poor quality. He/she is now in belief that it is the correct option and although there are a few better, it is the right area (distribution fund) to be in. So, even on DIY, the only difference would probably be a different distribution fund. Thats just out of the frying pan into the fire and indicates that the OP isnt experienced enough with investments to do DIY. That isnt something to be ashamed of and it isnt something that needs to cost much more. It can cost as little as 1% for advice (possibly lower) and FSA average shows at 1.8%. Typical maximum is 3%. A proper investment manager would have more than covered that cost compared to what has happened. Its about value for money and getting what you pay for.

betlarge

Thank-you. I am with a trusted IFA now, so this is not a mistake I will be making again.

It's a lesson well learnt although quite frankly I was just going to dump the lot into a high interest account anyway, so I probably haven't lost out particularly.

Nah, I'm probably just telling myself that!

jamesd

betlarge, well, if you were just going to use a high interest account, you did better. What has the new IFA suggested? It'll be an interesting comparison exercise showing the difference between bank and IFA.

markw5

My mother, aged 82, is being encouraged to put £50K into this fund by the Halifax - at her age what do others think - is it too risky. They are telling her that she will get £2,000/year (4.1% ish) while still retaining the capital investment. With just £87 per week in pension this obviously interests her.

But I can get over 5% in a normal cash investment in a building Society & mother will not pay tax. I think the guy at Halifax is looking to his bonus - what do you think?

The fund says that it is designed to "provide an above average income as well as some capital growth over the long term. The fund achieves exposure to the various asset classes through investment in direct assets and funds in the Halifax Financial Services Range." Doesn't look as though it achieves this from other posts here!

Advise appreciated

dunstonh

My mother, aged 82, is being encouraged to put £50K into this fund by the Halifax - at her age what do others think - is it too risky. They are telling her that she will get £2,000/year (4.1% ish) while still retaining the capital investment. With just £87 per week in pension this obviously interests her.

Her age is not a problem. It isnt a risky fund but your mother could do a much better cautious portfolio spread and get capital security on death put on it which would probably give her peace of mind and allow her to invest to get those potentially higher returns.

But I can get over 5% in a normal cash investment in a building Society & mother will not pay tax. I think the guy at Halifax is looking to his bonus - what do you think?

Your mother would pay tax surely. Her pension income plus the interest would surely take her into the tax bracket? It may be close if she has a tiny pension but an average sized pension would take her over.

The Halifax do not employ investment specialists. It isnt the Halifax's fault. No investment specialist worth their salt would work for any bank as the tied agent role doesnt allow you to portfolio plan. For example, your mother is being recommended one fund for £50k. I have just finished off a 40k investment this morning that is using 21 funds. The Halifax just cannot do that. Its not within their scope of advice or ability.

Investing is certainly a valid option and the potential for income and some growth on top does exist with the right investment. However, the Halifax managed income fund is not the way to do it.

EdInvestor

This Halifax Managed Income fund appears to be a bog standard Balanced Managed life fund, no 118 in its sector ( which excludes all the balanced managed unit trusts, which will probably have done better, so this makes it really pretty dreadful.).

http://www.trustnet.com/life/funds/?fund=8488

It doesn't appear to be a distribution fund. It appears to be set up for use in an Investment Bond ( surprise surprise).Even if it wasn't a ghastly performer it is definitely too risky on its own for ladies of 82 who normally have their cash on deposit.

Investment Bonds are almost always unsuitable for non-taxpayers.

"Personal Investment Plan" - this is the investment bond structure

See page 6: 20% corporation tax is paid on all gains within the bond and this is non-reclaimable.

But I can get over 5% in a normal cash investment in a building Society & mother will not pay tax. I think the guy at Halifax is looking to his bonus - what do you think?

7-8% payable upfront in commission to advisors who flog investment bonds, presumably less for someone on staff, but it will still be a winner.

And that much will still go out in charges on Mum's money.

AVOID.

dunstonh

It doesn't appear to be a distribution fund. It appears to be set up for use in an Investment Bond ( surprise surprise).Even if it wasn't a ghastly performer it is definitely too risky on its own for ladies of 82 who normally have their cash on deposit.

Its available in unit trust and investment bond form.

Investment Bonds are almost always unsuitable for non-taxpayers.

I can think of a few exceptions.

7-8% payable upfront in commission to advisors who flog investment bonds, presumably less for someone on staff, but it will still be a winner.

Halifax dont pay commission to their advisers. Its a bonus and hybrid pay scheme based on performance. Fairly typical of all banks.

We dont know if they have recommended the unit trust or the investment bond option so it isnt really time for one of your unqualified anti bond posts Ed.

markw5

Thanks for the latest posts.
To clarify Halifax have recommended the Bond

dunstonh

Your first question to that then mark is why havent they done an ISA (top of the pile) and then unit trust (next in the list for most basic rate taxpayers)?

Investment bonds are are best for about 15% of investment cases now. It used to be higher when funds like distribution funds and property funds were only available in bond form. However, with the fund recommended, the amount concerned (bonds are typically cheaper at investments over 100k) and the unlikely chance of your mother being a higher rate taxpayer (although if her earnings are close to £20,100 there may be merits in the bond for some of the money), it seems unlikely that the bond is the best option.