Scottish Friendly My UK Tracker Options (ISA)

psychopathbabble

edinburgher wrote: »

You've got a fairly complicated set of variables there (maternity/short term debt/medium term debt/investment) - you'll get the best responses starting your own thread. As you'll be aware, if you cash out now, your return will be pretty derisory.

Cheers, will do that then....

mal48

Bond is a different product, I won't comment on. that.
There's little room for interpretation. SF give the maximum charges of 1.5% for the Higher and Active Funds.These include the underlying funds e.g Legal and General and cover 'expenses, charges and any other reductions'. Got it yet?
Your arguments only work by saying that SF are making false and illegal claims.
The relevance of of the stakeholder funds is that the My Choice change is based on this and they were capped at 1.5%. They were regarded as high because, generally, they invested in single tracker funds and l've said before, in that case the charge is more than I'd be willing to pay.

dunstonh

There's little room for interpretation. SF give the maximum charges of 1.5% for the Higher and Active Funds.

No they do not. They give the AMC as 1.5%. However, as has been said multiple times now, the AMC is only a measure of a selection of underlying charges and is rarely used nowdays with providers using OCF as a more accurate measure.

Your arguments only work by saying that SF are making false and illegal claims.

Not illegal. Just out of date. The regulator told firms to stop using AMC back in 2013.

mal48

dunstonh. The effect on charges gives the OCF as well as 'What are the deductions for?' These are the figures, unless as you frequently suggest SF are making false claims.
Something you said in an earlier thread caught my attention. You said a platform wasn't necessary, as funds can be bought direct from managers. My understanding is that this is far more expensive and usually includes a front load. That's why people use platforms, as well as ISA issues. Unless, perhaps the funds are bought through a financial adviser like yourself. Then the funds might be cheaper, but the adviser's fees would really put the punter out of pocket. Perhaps that's your real problem with robo advised funds like SF. I'd like to hear your views on Nutmeg, for example.

lpgm

For Terry Smith, even the OCF doesn't go far enough. Here's a bit from his recent update on the Fundsmith Equity Fund. By the way, please understand I'm not pushing this fund - his comments on costs, dealing costs in particular, are useful in this discussion, I think.

"Perhaps more important than the arcane methodology of turnover
calculations is the question of how much we spent on dealing.
Voluntary dealing – in which we made a decision to buy or sell a
stock rather than deploying flows into the Fund – cost £142,915
in the first half of 2016 or 0.3 basis points (a basis point or bp
being one hundredth of a percent) – that is 0.003% of the average
value of the Fund (£5.5bn) in this period. This is very low as any
of the stockbrokers who try (mostly unsuccessfully) to deal with
us can attest. We eagerly await the day when all funds disclose
this cost to see how we compare.

"The Ongoing Charge Figure of OCF for our Fund was just 8bps over
the Annual Management Charge. If you are paying 1% AMC, as I
am for my investment in the Fund, then the OCF is 1.08% the
same as the first half of last year. If you add the costs of all dealing
to derive the Total Cost of Investment or TCI this rises to 1.12%.

"This may still appear to be acronym strewn gobbledegook but it is
an important subject. In order to maximise your returns you need
to minimise the cost of investment. Investors too often ignore this
or if they focus on it at all they merely look at the AMC or the OCF.
However, this is only part of the picture of what you pay before you
get the benefit of the performance of the shares in your Fund.

"We are confident that the TCI on the Fundsmith Equity Fund is very
competitive partly because we deal so infrequently but since most
other funds do not yet reveal their TCI, we will continue to have to
wait until they do in order to demonstrate that."

dunstonh

dunstonh. The effect on charges gives the OCF as well as 'What are the deductions for?' These are the figures, unless as you frequently suggest SF are making false claims.

Where?
I have seen it give the AMC and the RIY but not the OCF.

edit added: I just checked the key features again in case they have a new version and I did a search for OCF and ongoing and neither returned any matches. I checked the charges section and it clearly says "The fund has an annual management charge of 1.5% of the fund
value deducted on a daily basis. ". No mention of OCF there.

I am not saying they are making false claims. I am saying that by using the AMC and not the OCF, they are not allowing a like for like comparison and not acting in line with the FCA expectations is detailed in TR14/7

FCA publication TR14/7 says (again):
Using the AMC as the headline charge figure on marketing material does not provide investors
with a clear, combined figure for charges as it excludes additional charges and expenses that
are taken from funds. Additional ongoing charges can add significant amounts to the cost
of a fund and we saw some small funds with charges of up to 0.9% in addition to the AMC.
Using the AMC could therefore result in retail investors finding it difficult to accurately compare
charges and potentially underestimating the cost of some funds.

it goes on to say:
There are two main messages from our work:

-using the annual management charge (AMC) in some marketing material and the ongoing charges figure (OCF) in other documents may confuse investors and hinder their ability to compare charges
-using the OCF consistently in all marketing material for UCITS funds is likely to help investors understand and compare charges

What are our expectations?

- fund charges to be clear to investors, particularly retail investors, so they know what they are paying for and can compare between funds
- communications with retail customers should be fair, clear and not misleading for both UCITS and non-UCITS funds
- for UCITS funds, charges information in marketing material, including websites, must be presented to investors in a way that is consistent with the key investor information document (KIID). This means using the ongoing charges figure (OCF) as the headline charges figure
- platforms, advisers and other intermediaries should also use the OCF as the headline charges figure for UCITS funds
- descriptions of charges in the prospectus should explain clearly how the charges work.fund charges to be clear to investors, particularly retail investors, so they know what they are paying for and can compare between funds

On one of their funds, the Scottish Friendly UK Growth fund, they do publish the AMC and the OCF. The AMC is 1.00% but the OCF is 1.59%. Look at that difference.

Something you said in an earlier thread caught my attention. You said a platform wasn't necessary, as funds can be bought direct from managers. My understanding is that this is far more expensive and usually includes a front load

Sometimes, but not always.

Unless, perhaps the funds are bought through a financial adviser like yourself.

When bought via an adviser then there would not be an initial charge on the fund as the initial charge is a commission and advisers are not allowed commissions. So, there are different share classes available which are non-commission (and therefore cheaper).

Perhaps that's your real problem with robo advised funds like SF

SF is not robo-advice. It is a retail product.

I'd like to hear your views on Nutmeg, for example.

Relatively simple solution but not particularly cheap. Their advertising overstates the charges on alternatives and they are in a pretty poor financial position with losses increasing on an annual basis. Their turnover last year was comparable to a local sized IFA firm except they had losses of £5.2million

mal48

As I've said before before, I cross check performance with the underlying funds from my online account. I'll take the Active Fund for 1st September, the underlying fund being SF Growth. The annualised return in Money Observer/FE for the underlying fund net of charges was 8.9%. In my online account, the return for the Active Fund was 9.07%. I check once a month on all the underlying funds and the results are always consistent.

bowlhead99

mal48 wrote: »

As I've said before before, I cross check performance with the underlying funds from my online account. I'll take the Active Fund for 1st October, the underlying fund being SF Growth. The annualised return in Money Observer/FE for the underlying fund net of charges was 8.9%. In my online account, the return for the Active Fund was 9.07%. I check once a month on all the underlying funds and the results are always consistent.

But presumably you don't have an explanation for why your return was over 9% while the published return was under 9%?

Reasons for deviation from expectation when measuring two things that were expected to be the same, can come down to a few things such as:

- difference in start and end dates
- difference in actual portfolio composition or charges
- difference in way an 'annualised' figure is calculated from some shorter period

So, when one or more of those factors are present, for which you haven't adjusted to reconcile, and you're not getting the same figures - then how can you draw the conclusion that it's all in line with expectation?

In your example above, your return seems to be somehow beating the underlying assets by 0.17% a year. And you know that if it showed that your fund was underperforming (instead of outperforming) the underlying assets by a sixth of a percent a year, we would all be saying that it was probably due to hidden charges.

The fact that it's off in the opposite direction means there is some apparent tracking error. And if there's some tracking error involved, then how do you know there isn't a tracking error which was 0.32% favourable, offset by extra running costs of 0.15% on your product, producing the 0.17% in your favour (9.07 vs 8.9%) this time around.

So, is there a measurement inconsistency, timing difference, operating costs difference, misunderstanding, what?

mal48

The annualised returns month by month are always consistent with no significant variation.This slight difference can be accounted for as the Scottish Growth Fund bought separately from My Choice has a higher cost-.09% and the fact that My Choice is in an ISA wrap could be relevant. The results are certainly enough to demonstrate that no extra charges are being applied on top of those stated. Cross referencing the L and G underlying funds in the Higher Fund gives similar consistency.

dunstonh

The results are certainly enough to demonstrate that no extra charges are being applied on top of those stated.

Except they are and everyone knows that because the AMC does not include all charges.