F A wants to move me to St. James's Place fund management

Mistermeaner

Rollinghome wrote: »

Almost anyone but Virgin really. Mr Branson's charges are a complete rip-off.

Use a platform such as Cavendish/Fidelity, Charles Stanley Direct or even the rather expensive Hargreaves Lansdown and you'll find a wide choice of FTSE trackers from HSBC, Vanguard, L&G, Blackrock etc. with an annual charge (TER/OCF) of 0.1.% - 0.20%. On top of that you'll pay a platform fee of 0.25%-0.40%.

Or if you really wanted to buy direct, L&G for example would charge an OCF of 0.56% for their all share tracker.

More info for you at http://monevator.com and performance figures at www.trustnet.co.uk. Paying double the going rate to Mr Branson will seriously damage your wealth.

Thanks I'll look into this a bit more

Apple as think I hijacked thus thread a little

mike88

The original poster needs to have a serious conversation with the financial adviser. Anyone who suggests moving to a high cost product needs to be questioned as to precisely whose interest he has in mind.

Rotor

mike88 wrote: »

The original poster needs to have a serious conversation with the financial adviser. Anyone who suggests moving to a high cost product needs to be questioned as to precisely whose interest he has in mind.

I think I know what he will say : - That the access to superior fund managers and the ongoing monitoring of these by independent expert assessors should provide superior returns that will more than offset the cost increase.


Does anyone know if the 0.6% performance premium needed is accurate in order to cover the extra costs?. It's his calculation and I've no idea how it was arrived at.


I must admit I'm minded to leave it with BD ; but that leaves me with the problem of having a FA with his SJP tie

dunstonh

The choice is normally to either DIY or to use a whole of market adviser (such as an IFA). Not to use a tied agent like SJP. So, by all means, get advice if you need it but dont use single/limited tied advisers as they can only advise from a small portion of the market. Their pricing tends to be higher too and some have historically operated on a salesforce basis and that is not the right environment for advice.

jimjames

mike88 wrote: »

The original poster needs to have a serious conversation with the financial adviser. Anyone who suggests moving to a high cost product needs to be questioned as to precisely whose interest he has in mind.

To see this kind of recommendation would totally destroy any level of confidence I had in an adviser. I cannot see any reason for such advice and how it could possibly benefit the investor. Losing a chunk of your investment purely to move to a high charging platform seems a very poor suggestion.

dunstonh

jimjames wrote: »

To see this kind of recommendation would totally destroy any level of confidence I had in an adviser. I cannot see any reason for such advice and how it could possibly benefit the investor. Losing a chunk of your investment purely to move to a high charging platform seems a very poor suggestion.

But this is what you get when you see an agent of a provider that retails its own investment products. It can only sell what it has to sell. And why we tell people to avoid that sort of distribution channel.

jimjames

Rotor wrote: »

By his calculation he states that over a 10 year period ( the likely minimum investment time) St. JP will need to out perform Brewin Dolphin by 0.6%/year to make it cost neutral.

So in order to stand still and remain in the position that you currently are, SJP must outperform. If they manage the unlikely option of outperforming then you are no worse off. There is still no benefit to you and you are the one taking on all that risk that they will do as they claim. To be better off they have to perform some serious outperformance which seems very unlikely.

Will SJP back that up with a guarantee that they will refund their charges if they don't outperform or do worse than Brewin? Why take the risk of being worse off when you can just stay where you are?

bowlhead99

Rotor wrote: »

Does anyone know if the 0.6% performance premium needed is accurate in order to cover the extra costs?. It's his calculation and I've no idea how it was arrived at.

You could guesstimate some figures around that 0.6% yourself pretty easily. Let's say the types of funds you're trying to hold in your portfolio are giving a total return (dividends or interest, plus capital growth) of something that annualises to 7% a year after fees (e.g. roughly 8% return before Brewin Dolphin charging their annual one percent). Where would you get to, in 10 years?

Year 1, your £1000 increases in value; times it by 1.07 and you get 1070. Then year 2, the 1070 increases in value; times it by 1.07 and you get 1,144.9. Then that goes up by 1.07 and so on. So the return on your £1000 after two years is 1000 x 1.07 squared, three years is 1000 x 1.07 cubed and so on up to ten years is £1000 x 1.07^10 which is £1967

He has suggested if the new place outperforms by an extra 0.6% you will make up the set up cost over a decade. So he is thinking you would need to get a 7.6% return after annual fees instead of the 7.0% you were getting before.

So let's try those numbers and recognise the initial one-off fee for switching which you think is 5%. Instead of £1000 you now only have £950 that you can actually invest.

£955 x 1.076^10 is £1976. So yes, the final pot is just as good as it would be if you started off with more money and got a worse return. You'd get the same sort of answer if you compared getting a 6.6% return with a 6.0% return. Basically, with typical long term returns from equities he is correct that is indeed going to need the annual return to be boosted and be 0.6% better over the next 10 years to catch up the effect of the swingeing initial fee.

I think I know what he will say : - That the access to superior fund managers and the ongoing monitoring of these by independent expert assessors should provide superior returns that will more than offset the cost increase

There are many thousands of active fund managers out there and most of them will claim to be superior for the type of fund they are trying to run. They can be accessed through DIY platforms or by platforms that sell through IFAs or through tied advisors. It is not difficult to get access to decent funds.

However in your case, your FA has decided that your affairs are so complex or you have such a large pot of money or he is such a weak advisor that he cannot handle the selection of the funds from all the thousands of choices, or the allocation of what fund to be in at what time, and feels you would benefit greatly by paying for further advice from a discretionary manager for picking the funds.

So rather than simply using actively managed funds selected by an IFA - you need another layer of active management providing this ongoing monitoring by independent expert assessors, or whatever he calls it. Whether you are calling it discretionary fund management at Brewin or a hands on monitoring investment service at SJP - however you dress it up, is a high cost approach in terms of annual fees.

With those sort of solutions you are paying a percent or more for the fund management side and half a percent retainer for the financial adviser / ongoing financial planning and so you are spending 1.5% in fees. I presume SJP is not really any worse than Brewin in that respect if you say they are charging you a percent for DFM while your adviser presumably doesn't work for free. In total you're probably paying the same ongoing costs before and after.

So, the big incremental expense to switch is this massive one-off fee to 'get in' with SJP and then they need to be better than everyone else in the market by 0.6% year in year out for an entire decade without taking a fraction more risk, to catch it up. That performance claim does not really seem realistic.

I must admit I'm minded to leave it with BD ; but that leaves me with the problem of having a FA with his SJP tie

If you don't believe SJP are realistically any better than their DFM competition by 0.6% a year after fees and by non-DFM solutions by over 1% a year after their fees (a claim for which there is no real evidence otherwise everyone in the country would be with them) then don't switch.

Unfortunately if your adviser is now 'aligned' to SJP and not an independent, you are not going to get a good service from him in respect of your ongoing assets with BD. He is just going to say they are a poor choice (even though he was OK with them before) and you should get out and pay a huge charge to a different group. He has already given you that advice and if you have any sense you will stick to your guns and reject it. However, paying him for ongoing advice which your inclination is to reject, does not make for a happy and valuable relationship. So I don't see it working, you keeping him with his SJP tie while using other groups to manage your money.

So, you could find another IFA instead, and with them, one option is to tear up the playbook entirely and start again which may or may not result in you keeping the DFM service from Brewins.

A downside of changing advisors is that I assume that a proper IFA wanting to understand all your assets and circumstances and goals and attitudes would still want to charge an initial one-off fee when establishing the relationship with you. However in that case you would at least be getting truly independent advice about how your affairs are best managed, rather than someone who already knows all about you and can't think of anything better for you than to pay a large sum of money to a new group that he is coincidentally now 'aligned' with.

A final alternative is of course to just DIY.

magpiecottage

Bottom line - only somebody able to advise you on the whole market can give you best advice.

A tied adviser can only advise you on the best of what his firm offers.

So if all the firm offers you is expensive rubbish, he can sell you the best expensive rubbish it offers - but nothing else.

If your adviser has moved from whole of market to being tied to SJP he has done it to serve his interests not yours. Time to find another adviser. Have a look here.

And when (it will be when, not if) your old adviser tries to persuade you that it is all going to be better at SJP stick to your guns and say that if it is then your new adviser, being independent, will be able to recommend it anyway.

You owe no loyalty to an adviser who is trying to stitch you up.

FeetUp_2

Over the long term you may expect averaged annualised real returns from stock markets of around 5-6% - although there are those that suggest that this may be lower in future. No-one knows. Managed funds always claim to do better, but it's hit and miss - past performance and all that.

But the point is, if you are paying 1.5% in fees, plus possibly more - then you are giving away 33% of your growth. And that is not all. Even if that sounds 'reasonable' (it isn't in my view) the real issue is that if you compound that lost growth over 20 or 30 years, you will be shocked at how much smaller your final investment is compared to if you had cut out most of those costs. Do it on a spreadsheet and see. Plus they get their share of your money even if your fund goes down, making it even smaller.

I suggest you check out monevator.com for more on this.