IFA recommended funds

Dithering_Dad

My IFA recommended putting the Dither Millions into the following funds, invested via/by Scottish Equitable - anyone got any comments?

Cash 5%
NT Cautious MOM 20%
SE INVESCO Perp In 15%
SE Lazard Eur Sml Co 10%
SE JPM Natural Res 10%
SE Property 10%
SE SG Bal Man 10%
SE Schrod UK Mid 250 10%
SE First St Asia PL 10%

Forecasting about 9% growth, giving £522,000 pot on a transfer of 76k & monthly investment of £300.

EdInvestor

You can check their performance here:

https://www.citywire.co.uk/Funds/Home.aspx
Choose ABI for the SE funds.

A few observations:

IV income, JPM Nat resources and the property fund are all mainstream choices, no problem with them.

The Schroder mid cap fund has been a good one, but sentiment seems to be moving away from mid caps fairly big time.

MOM funds have high charges and generally don't show compensating outperformance . Balanced Managed, why, when you already have property - better to choose a bond fund if you want that type of broader exposure? Cash, why?Much better interest rates outside pensions for cash assets.

Dunstonh will be seriously on your case about only 10% overseas exposure.This wouldn't bother me ( you have good exposure via the IP and JPM funds and anyway there's no eveidence investing overseas produces higher returns to justify the higher risks). I don't know the Asian fund in question.

Has the IFA explained the risk level of the funds to you? He should do.

dunstonh

I so wanted him to come out with a decent spread.

There is nothing fundamentally wrong with the funds. However, there appears to be no strategy or reasoning there. Its 10% here and 10% there. WHY?

Why have a cautious managed fund and a balanced managed fund in with a selection of individual funds? Why a cash fund at 5%?

Dunstonh will be seriously on your case about only 10% overseas exposure.This wouldn't bother me ( you have good exposure via the IP and JPM funds and anyway there's no eveidence investing overseas produces higher returns to justify the higher risks). I don't know the Asian fund in question.

overseas exposure is 20% as far as sector allocation is concerned. There is evidence overseas investing performs better. Just look at the average when the UK is top performing sector. Historically it is once every 5-7 years. Going forwards with globalisation, its likely to be even less frequent.

Overseas doesnt mean higher risk either. A general European fund is lower risk than the schroder 250.

Overseas investing also doesnt mean you go gung ho into it. The spread of funds here is quite a high risk. Roughly around 7 to 8 on a 1-10 scale.

A risk 7 portfolio to me would be

European 10%
Far East 4%
Emerg Mkts 4%
Specialist 6%
Japan 6%
N America 10%
Property 27%
UK Equity 28%
Fixed Interest 5%

That is only 34% overseas (assuming you didnt use overseas specialist funds) and the riskier areas only have 4% going into them each.

Debt_Free_Chick

Dithering_Dad wrote: »

Forecasting about 9% growth, giving £522,000 pot on a transfer of 76k & monthly investment of £300.

Just to be clear (and apologies if you realise this) he not forecasting that these funds will give you 9% pa growth. He is telling you that any funds giving 9% pa growth would produce the same figures (similar figures ... depending on the charges. There should be a statement about the effect the charges will have on the resulting fund).

Also, it's not a forecast or such - it's a "what if?" statement. The question being "What if I achieved annual growth of 9% on my initial investment (plus any ongoing contributions, if applicable)?"

Dithering_Dad

dunstonh wrote: »

Why have a cautious managed fund and a balanced managed fund in with a selection of individual funds? Why a cash fund at 5%?

He said that he had to have a cash fund, but I wasn't clear on who was forcing him to - the FSA or Scottish Equitable. I was a bit confused about this and the cautious managed fund being in the mix - I had said that I was happy to go for a high risk (7) strategy with my pension because I was going for a low risk strategy with my mortgage overpayments and because I'm only in my 30s, I'll be able to ride out a few highs and lows before retirement.

I agree with the 10%'s here and there - they do seem to have been applied arbitrarily. The main strategy he said he was going for was to spread across a lot of financial sectors and industries. He was especially keen on the "Manager of Managers" fund as this allows me to invest across a range of the best managed funds that already have a high amount of diversification and overseas element.

I'm not sure whether to go with this or to stick within my L&G stakeholder plan, but look at spreading my L&G funds.

The IFA also sold me an executive income replacement plan, which as someone who is self-employed, albiet through a limited company, I desperately needed. I can now (well, once the medical checks have been carried out) be involved in a car crash, be paralysed and still receive an income until I retire (it also pays my pension contribution, tax and NI), so that's something to look forward too.

dunstonh

I agree with the 10%'s here and there - they do seem to have been applied arbitrarily. The main strategy he said he was going for was to spread across a lot of financial sectors and industries. He was especially keen on the "Manager of Managers" fund as this allows me to invest across a range of the best managed funds that already have a high amount of diversification and overseas element.

You have been here long enough to know that I will point out the good and the bad when necessary. Even if it pains me. I think this is random stockpicking that you could do yourself to the same level potentially. The IFA should be there to add value and the main things the IFA can add value on are investment strategy and product and provider. That doesnt seem to be the case here.

He said that he had to have a cash fund, but I wasn't clear on who was forcing him to - the FSA or Scottish Equitable.

There is no requirement for a cash fund. However, SIPPs have a cash fund and some personal pensions that operate as hybrid SIPPs. Can you give me the product name of the Scot Eq plan. I think I know which one it is but want to make sure before I comment. Also, take a look at the illustration and near the back you should see a reduction in yield figure. It tends to come just before or after the values in the early years. (year 1 to 4 and then 5 or 10 year intervals). It will say something like "Putting it another way, this would have the same effect as bringing the investment growth over the term down from 7.00% a year to 5.3%." (the value it goes down to is the key value here).

I'm not sure whether to go with this or to stick within my L&G stakeholder plan, but look at spreading my L&G funds.

Its cheap and not bad for stakeholder but you cannot build a decent spread as there isnt the fund range. Im not sure the funds recommended offer value over the extra charges that you would pay compared to the stakeholder. That doesnt mean you should go with the stakeholder but go with a better fund spread.

I would be far more confident of potentially better returns with a proper defined stategy and a decent range of funds than I would be using a stakeholder. If you are willing to use the more expensive funds then they have to offer value and a random stock pick is not that in my eyes.

Also, for your fund value and contribution, I dont think there are enough funds. Where is your 1% in china or 1% in india or any other of the niche areas that are idea for small exposure within specialist, far east or emerging markets. Why is all of Europe going into smaller companies and not some of it into a general european fund.

Now your choice is either to do it yourself. Find another IFA or discuss your concerns with the IFA and see what the response is.

A lot of IFAs are not going to here in 5 years time because of FSA changes coming up. The changes are raising the standards (ironically raising it for IFAs but lowering it for tied salesforces). As many as 2/3rds will not operate as general financial advisers or professional financial advisers because they will not meet the standards. Things like random stock picking should be a thing of the past after that.

So, you need to also consider is this adviser going to be there for the long term? Its all very well getting you set up but what about annual re-assesment of risk and funds and portfolio rebalancing? Who is going to do that for you? The Scot Eq contract, if it is what I think it is, can pay an annual trail commision. So, are you going to get servicing from that? Is the adviser going to be there long term to offer that?

I'm just throwing you some concepts, ideas and questions you need to think about when employing someone to give you advice.

DavidLaGuardia

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peterg1965

dunstonh wrote: »

A lot of IFAs are not going to here in 5 years time because of FSA changes coming up. The changes are raising the standards (ironically raising it for IFAs but lowering it for tied salesforces). As many as 2/3rds will not operate as general financial advisers or professional financial advisers because they will not meet the standards. Things like random stock picking should be a thing of the past after that.

This statement concerns me. I have just consulted an IFA with a view to her managing my investments towards my retirement goal in 13 years time. Having 'gone it alone' up until now the reason I have taken, and will now pay for, professional advice is for long term peace of mind on some pretty important issues, like my retirement. I would feel let down and fairly agrieved if she goes out of business in a few years because of FSA changes. This just adds more uncetainty to the financial services industry which could do without it. It would also put more people of the prospect of investing for their futures. Whilst I realise that regulation is important, so is inculcating some sort of confidence in financial advisors.

Sorry to go 'off piste' slightly. This is a very enlightening thread by the way.

EdInvestor

dunstonh wrote: »

There is nothing fundamentally wrong with the funds. However, there appears to be no strategy or reasoning there. Its 10% here and 10% there. WHY?

I think the answer's pretty obvious when you look at the Scot Eq pension fund list:

http://www.trustnet.com/pen/funds/perf.asp?sec=all&status=all&def=1&txtS=&txtSS=&sort=4&page=35&ss=0&columns=

He's just gone down the list and picked the best apparent performers ( missing a few candidates on the way) and tacked on a MoM fund for reasons which will probably become obvious if you check the fine print of the charges.

There's no actual strategy involved at all. It suggests the advisor nhas either only a sketchy knowledge of investment principles or is too lazy to use what knowledge he does have.

After you've seen this kind of advisor performance a few times, the DIY approach does not seem quite so difficult or risky - and at least you're not paying for someone whose skills appear to be meagre at best.

peterg1965

Scot Eq, actually offer a choice of 135 funds for their PPP (Extenal and their own). This strikes me as a pretty good number. I am waiting to see if my IFA recommends a shift away from Scot Eq when she comes back to me after our initial meeting.

http://www.aegonse.co.uk/consumer/funds/905.htm

dunstonh

This statement concerns me. I have just consulted an IFA with a view to her managing my investments towards my retirement goal in 13 years time. Having 'gone it alone' up until now the reason I have taken, and will now pay for, professional advice is for long term peace of mind on some pretty important issues, like my retirement. I would feel let down and fairly agrieved if she goes out of business in a few years because of FSA changes. This just adds more uncetainty to the financial services industry which could do without it. It would also put more people of the prospect of investing for their futures. Whilst I realise that regulation is important, so is inculcating some sort of confidence in financial advisors.

Sorry to go 'off piste' slightly. This is a very enlightening thread by the way.

http://forums.moneysavingexpert.com/showthread.html?p=6049920#post6049920

Ive started a new thread on that so we can discuss the impacts if you want.