Should an IFA be a fund tracker too?

grizzly1911

dunstonh wrote: »

There were fears that those outgoing would look to make changes before the RDR to be able to get more value from their book when they sold up.

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That was my feeling, including the 2.5% dealing fee, but I didn't want to appear cynical.;)

atush

To the question. Is it reasonable for us to expect that the IFA would have noticed this and switched funds? We've had meetings where he has lamented the poor performance but not recommended changes.

No, your adviser brought up the poor performance, it would have been up to you to tell him that you wanted to change things.

The fact of the matter is, that you may have filled out your fact find incorrectly as losing 20% or more has upset you enough to consider changing advisers. So you may have just been investing beyond your true risk profile.

Totton

My original question was should we be expecting our IFA to review funds and suggest changes, and the answer seems to be "no". Thank you all for that and the additional suggestions.

My experience of IFA's etc is very good and we got a 6 monthly reviews with recommendations. If the IFA isn't giving advice then get rid.

2% gain in 6 years, pathetic. Obviously a mixed portfolio will give lower results than plucked out of thin air investments but as an example, Finsbury Growth Trust up 81% in 5 yrs, Witan up 30% in 5yrs. I would expect any IFA handling my portfolio to be ringing me up for an urgent appointment, not making some excuse about it not being my job :-)

FatherAbraham

hc25036 wrote: »

However, a few years on a good salary and early retirement with a big lump sum payout changed that. The IFA advised further investment in ISAs and a joint unit trust and picked the funds for us after due process and discussions about our risk profile and a compliance checks. That investment is doing OK and we are happy with it.

About 60% of the money went into an offshore product (reasonable at the time) and has increased just a couple of percent in 6 years. This is due to a couple of the funds losing 20% of their value in that time, falling continuously over the past 3 years. The other funds are OK.

...

Not looking for any kind of action, just to understand our situation and maybe to have a reason to give him at what will be a difficult meeting if we decide to take our money elsewhere.

From a financial-advice point-of-view, the bit which sounds like it's come adrift is the assessment of your tolerance for risk.

As Dunstonh points out, the volatility of return you've experienced on these funds is perfectly normal.

Remember that you have a (diversified, hopefully) portfolio of investments, and you need to consider the overall position. There will normally be some parts of a well-designed portfolio which don't do so well, but a sensible mix of investment choices tends to reduce overall risk, whilst providing a suitable "expected" return in the longer term.

If you look for "poorly-performing" assets in a portfolio, you will always find them. However, that's not the point. If we knew in advance which assets would perform well or badly, then diversified portfolios would be a terrible idea. But we don't know in advance.

If you really can't bear the thought of any losses in your investments, you need to accept the low expected returns which demanding this kind of "loss-insurance" will cost you. Perhaps that is right for you, and so you would need to look at why the risk-profiling performed three years ago was incorrect.

Warmest regards,
FA

redbuzzard

The IFA seems to be getting off lightly here notwithstanding that he? might not have done anything "wrong".

There have been meetings where the IFA "lamented" the poor performance. What else? What was the discussion? Maybe these weren't strictly "review meetings" but I imagine the OP thought they were something of the kind.

As I said earlier, I would want a good adviser always to say what questions I could be asking if I wasn't coming up with them myself.

If the adviser here had done his job properly a better job, perhaps the OP would not be having this discussion now on a forum instead of when it should have taken place at those meetings.

Is that an unreasonable view? It shouldn't be necessary to be an expert oneself, and to pay an adviser. That isn't really the point of them is it?

dunstonh

redbuzzard wrote: »

The IFA seems to be getting off lightly here notwithstanding that he? might not have done anything "wrong".

There have been meetings where the IFA "lamented" the poor performance. What else? What was the discussion? Maybe these weren't strictly "review meetings" but I imagine the OP thought they were something of the kind.

As I said earlier, I would want a good adviser always to say what questions I could be asking if I wasn't coming up with them myself.

If the adviser here had done his job properly a better job, perhaps the OP would not be having this discussion now on a forum instead of when it should have taken place at those meetings.

Is that an unreasonable view? It shouldn't be necessary to be an expert oneself, and to pay an adviser. That isn't really the point of them is it?

The problem is that we dont know what conversations have taken place or what basis the adviser was employed.

The number of times I have been with clients who when you try to explain things, either switch off or tell you not to bother as they dont want to know but leave it to me is very high. Nowadays, I try not to take that type of client on or put them in very basic options if they are like that. However, frequently, they are the ones that come back later because they don't understand something or decide they want something different.

hc25036

I really am very grateful for the discussions and am learning all the time. Let's try to answer some of the questions.

The investment is better than £100k and our risk profile was discussed in depth and calculated using a questionnaire to be low to middle (4-6 on a 10-point scale, me a bit higher, Mrs hc lower and the fund is in her name). It is spread over 7 funds which include Axa, Invesco CFM, M&G funds plus 25% in BRIC, climate change and recovery funds. The target over the (then) planned 15+ years was steady low-risk growth to supplement our pensions.

We have annual meetings for this and slightly longer term investments that are doing OK and which fund yearly ISAs. The annual advice for this investment was to stick with it as it has front-loaded costs (now ended) and should improve. More recently the advice has been to cash in and move it all to the current employer (the IFA moved from independent to employed a couple of times recently). Remember, this is an overseas investment.

Volatility I can take, but the highest this investment has ever reached is +9% (at the time, +1.5% annualised) and it is currently +3%. 5 year performance is about +3%, 3 year performance roughly +0%. The funds today are all around +20% with the exception of 2 (~20% of the original investment) at -20% or more and one (10% of the original investment) at -10%.

So, we are torn between do nothing, cash out and start again (the IFAs preferred option) or rebalance. I know there is no crystal ball and expecting continuous growth is madness. Is 7 years too short to make the call?

bigadaj

Doesn't sound as if you are happy with this ifa, so if I were you I would be looking round for another adviser. You are paying as much for a relationship that you can trust as you are for any technical analysis or expertise and it sounds to me as if you don't trust this guy anymore, might be a shame if he's a friend but your view may be that he has taken advantage of your trust so far.

Knowledge is power so whilst you can get another adviser it would also pay to do your own research and examine what you are currently invested in. Some of these investments may well be appropriate but it sounds as though changes will need to be made. A simple review of your funds on trustnet can give you some idea of risk, relative historic performance and costs and could be valuable.

Totton

Is 7 years too short to make the call?

No, imho. Take a look at each fund and compare its performance against its peer group using a tool such as Trustnet http://www.trustnet.com

If your portfolio compares well then that's good, if not then ask what is your IFA providing that you can't do yourself.

hc25036

Thanks guys. It was Trustnet that really alerted me to the problems. The investment is behind even the cautious benchmark by (from memory) 10-12%.

I guess we will have a meeting in a week or two and will need to thrash out what to do. My preference is to rebalance, but I know his idea is to cash out and start a new investment. I don't like the need to pay tax and more fees even though there is an offer on the table to pay the tax out of the IFAs payment from the new investment.

I need to find a mix of funds that are more likely to be slow and steady!