Scottish Friendly My UK Tracker Options (ISA)

masonic

mal48 wrote: »

My Options is expensive, but My Choice is a lot cheaper and has the same underlying funds. It is 1-5% with no initial or exit charges. This is still too expensive for the Uk Tracker fund, but the policy works like a platform with 9 funds to chose from. The Higher, Medium and Lower funds are based on a number of Legal and General funds and are robo advised with active management of tactical changes between the underlying funds.

A 1.5% patform fee is still pretty expensive for robo-advice and this does not include the underlying fund fees according to the key features document. One should aim for <1% including underlying fund costs.

There is also an active fund managed by SVM which is in the top quartile of growth funds. I currently hold 60% in the Higher fund and 40% in the Active fund. This portfolio has outperformed the Uk All Stocks Index by at least 5% and considerably outperformed, for example, Nutmeg .

Beating Nutmeg really isn't a very high hurdle.

It compares well with similar Vanguard funds on net results. Platform charges for Vanguard should be taken into account. SF's portfolio is easy to handle with a good website. Hope this helps, Mal

If you are paying an extra 1.5% or more and your performance only "compares well with similar Vanguard funds on net results", then you would be much better off opting for Vanguard funds at lower cost. When two options give rise to equivalent performance, one can usually conclude that the more expensive option is taking more risk. The platform fee for DIY Vanguard should be no more than 0.25%, so perhaps in the interests of fairness, we can only say customers of Scottish Friendly have been throwing away 1.25% of their sum invested per year in order to take on riskier investments for the same return.

jimjames

mal48 wrote: »

My Options is expensive, but My Choice is a lot cheaper and has the same underlying funds. It is 1-5% with no initial or exit charges. This is still too expensive for the Uk Tracker fund, but the policy works like a platform with 9 funds to chose from.

1 to 5% sounds massively expensive, not just too expensive. You can get a tracker at 0.06% with 0.25% platform fee so 0.31% total. You might be happy with these options but on a Money saving site it's not a great recommendation for such an expensive product.

mal48

The charge is one and a half percent, not one to five percent. This is the total charge and does include charges for the underlying funds.The Higher fund consistently outperforms Vanguard Lifestrategy 100 and at no greater risk. It is well diversified and tactically mananged. It is technically a mixed fund and has the remit to move into bonds if market risk dictates. Combined with the Active fund, it easily outperforms Vanguard 100. Index funds have no choice, but to fall with the markets. As for platform fees, Fidelity charge .35% and H and Landsdown .45% giving overall charges of .59 % and .69%, Vanguard's own fee being .24%. Bringing an active fund into play would be more expensive. However, as I said, the SF Higher fund on it's own consistently produces higher net returns than V 100, albeit not by much, Mal

masonic

mal48 wrote: »

The charge is one and half percent, not one to five percent. This is the total charge and does include charges for the underlying funds.

Well that's in direct contradiction to Scottish Friendly's own regulated statements that can be found in its key features documents. For example, on page 2, it clearly states:

The actual cash-in value of your My Choice policy within a Scottish Friendly ISA will depend on the actual expenses and performance of the fund(s) selected.

Why would the "actual expenses" of the funds selected affect cash in value if you are paying the same 1.5% that includes all expenses regardless of which funds you select? The "underlying fund" they refer to later is a fund of funds (i.e the Higher fund), which has no charge, but the funds that fund of funds invests in (the L&G trackers in the example of the Higher fund) have charges that are not included in the 1.5%. This is a classic example of the type of misdirection I have come to expect from Friendly Societies.

The Higher fund consistently outperforms Vanguard Lifestrategy 100 and at no greater risk. It is well diversified and tactically mananged. It is technically a mixed fund and has the remit to move into bonds if market risk dictates.

Consistent usually refers to rolling periods of 10 years or more, so your statement is very naive considering Vanguard Lifestrategy launched in 2012. When looking for consistency in performance, one should always look at least to the last major stockmarket crash, which would be 2008-2009. One can do that with VLS - having a static asset allocation of trackers, because it is known what it would have invested in. So how did the Higher Fund fare in 2008-2009?

From the same KID:

The Higher fund is currently linked to:
European equities: Legal & General European Index Trust.
UK equities: Legal & General UK Index Trust.
US equities: Legal & General US Index Trust

It therefore suffers from lack of diversification vs VLS, and, since weightings are varied depending on the manager's predictions of future performance, there is additional active management risk compared with VLS, which raises the question: who is the fund manager and what is their long term track record for outperforming the market?

If you want a tactically managed multi-asset fund based on the same underlying funds (but more diversified to include other markets and property), then L&G Multi index would be a much better bet - and a fraction of the cost.

Adding the UK-only Active Fund to this would break the tactical asset allocation of this fund and leave you overweight to the UK, which further increases your portfolio's concentration in one market and therefore increases risk.

Combined with the Active fund, it easily outperforms Vanguard 100. Index funds have no choice, but to fall with the markets.

In your previous post, you stated "It compares well with similar Vanguard funds on net results", not that it "easily outperforms Vanguard 100" (which is the best performing of the VLS series), so which is it? Perhaps you can post the performance figures for the last 5 years and also 3 year volatility stats so that we can judge for ourselves.

On the Active Fund, the KID states:

The UK Active fund normally invests in an underlying fund selected by Scottish Friendly which will have the intention of outperforming the UK stock market.

So it is one UK active fund that could be bought by anyone on a much cheaper platform. So performance of this fund should be judged against (arguably) the most likely fund in this sector someone might pick, namely Woodford Equity Income (and before it Invesco Perpetual Income).

As for platform fees, Fidelity charge .35% and H and Landsdown .45% giving overall charges of .59 % and .69%, Vanguard's own fee being .24%. Bringing an active fund into play would be more expensive.

The most anyone needs to pay in platform fees is 0.25%. Since we have already established that Scottish Friendly uses dirty tricks to try to persuade unsuspecting punters that the L&G tracker and other fund AMCs are included in the 1.5% figure when they are not and are in fact deducted from performance, the comparison to make is that of 1.5% vs. 0.25%.

However, as I said, the SF Higher fund on it's own consistently produces higher net returns than V 100, albeit not by much, Mal

So now it is "not by much", which doesn't sound much like "easily outperforms Vanguard 100". Do you actually know what the performance is? Or are you just making random positive statements about the product in order to promote it?

I haven't checked, but it would not surprise me one bit if they have a referral programme that pays "introducers" a slice of that 1.5% if they can live with the guilt of coercing others into what is a very poor investment decision.

mal48

Don't you guys sleep? To keep it simple to start with and to respond directly to gil 2625, you could do worse than Lower (risk) fund 80% Active fund 20 %. The returns should be good and it's straightforward. I'll come back to the detailed arguments, Mal

masonic

mal48 wrote: »

Don't you guys sleep? To keep it simple to start with and to respond directly to gil 2625 you could do worse than Lower (risk) 80% Active fund 20 %. The returns should be good and it's straightforward. I'll come back to the detailed arguments, Mal

gil2625 already had a top-notch response from dunstonh back in January:

dunstonh wrote: »

No serious investor would use this option.

This thread has been dormant for a couple of months until it was resurrected by a shill yesterday.

mal48

Obviously expenses affect performance, but these are included in the 1.5% charge. Page 6 of the key features document definitely states the 1.5 % charge includes the cost of fund management for the underlying funds, these clearly being the L and G tracker funds. On page 6 again, it says that the deductions include expenses, charges and any other reductions.
The Higher fund generally outperforms Vanguard 100 Equity by a small margin. With the Active fund added the portfolio easily outperforms V 100. The Higher fund adjusts tactically, unlike V 100 and has the option to move into bonds, again unlike V 100, so should deal better with a stock market crash.
On my calculations my portfolio is 58% weighted to the Uk market. That's my own preference. As far as anyone else is concerned, they can balance at any time and also make switches to the Medium and Lower funds.
In my view, the diversification of the risk funds is good and tends to reduce volatility. The greater weighting of the Higher fund towards the the US market in recent months has allowed it to limit Bear losses.
I have not mentioned L and G multi index funds before, but the Higher fund easily outperforms its equivalent Multi Index 7 - by a wide margin this time. Multi Index 6 for that matter. The cost of L and G multi index funds is .31% on the Fidelity platform, so .66% with Fidelity's own charge. Again, adding an active fund would be more expensive.
There is no referral programme and I've no axe to grind. Many of SF policies are way too costly and should be steered clear of. With My Choice, they seem to be aiming at a different market, Mal

jimjames

Rather than just saying "by a lot" or "by a little" can you actually give some concrete numbers, performance comparison over 3/5/10 years to demonstrate they're true? At the moment it's hard to know if you just don't understand what you're investing in or are being selective.

mal48

I'm no shill-just an amateur investor. It's true that many of Scottish Friendly policies should be avoided , including My Options which has a 5% load and £50 pound exit fee in the first 5 years, yet has exactly the same underlying funds as My Choice. I would also avoid the single tracker funds in My Choice as too expensive, unless I was making some kind of tactical ploy.
As for figures, you can check both L and G funds and the Scottish F Active fund every weekday on the Money Observer website, Mal

masonic

mal48 wrote: »

Obviously expenses affect performance, but these are included in the 1.5% charge. Page 6 of the key features document clearly states the 1.5 charge includes the cost of fund management for the underlying fund. On page 6 again, it says that the deductions include expenses, charges and any other reductions.

I still think you are wrong, because the underlying fund itself invests in other external funds which themselves have costs, which is why on page 2 it states "actual expenses" as a variable that affects returns, but let me concede on this because reducing a 1.5% fee to 1.4% or 1.3% hardly makes this any better as an investment proposition.

The Higher fund genrally outperforms Vanguard 100 Equity by a small margin. With the Active fund added the portfolio easily outperforms V100.

You need to compare like with like. Namely VLS100 with an actively managed UK fund (such as Woodford or Invesco Perpetual Income).

The Higher fund adjusts tactically, unlike V 100 and has the option to move into bonds, again unlikeV 100, so should deal better with a stock market crash.

Might, not should. It depends on the manager's ability to correctly time the market. Equally, the manager could get it wrong and do worse than VLS100, because they sold at the wrong point and missed out on 6 months of great gains, only to relent and buy back in to equities just in time for an actual downturn, magnifying losses.

On my calculations my portfolio is 58% weighted to the Uk market. That's my own preference. As far as anyone else is concerned, they can balance at any time and also make switches to the Medium and Lower funds.

This is supposed to be robo-advised, and you are paying a high premium of >1% for someone else to make your asset allocation decisions for you. So going ahead with an expensive product like this and then using it for DIY is incredibly wasteful.

In my view, the diversification of the risk funds is good and tends to reduce volatility. The greater weighting of the Higher Fund towards the the US market in recent months has allowed it to reduce Bear losses.

Or could it be that they are just using market cap weighting, which is why the performance is so similar to VLS? The term "closet tracker" has gained popularity in recent months to describe funds that charge for active management, but are in effect expensive trackers. They have to take on a bit more risk in order to deliver the same performance after fees than a tracker, though, so the cheaper tracker is a better proposition. The same logic applies to robo-managed portfolios and funds of funds. No point paying 1% extra to hold something that is essentially the same as a global tracker in the hope that the manager can time the market and move out of equities when the time comes (which he almost certainly can't).

I have not mentioned L and G multi indexes before, but the Higher fund easily outperforms its equivalent Multi Index 7 - by a wide margin this time. Multi Index 6 for that matter. The cost of L and G multi index funds is.5%. So, on the Fidelity platform , 85%. Hardly a fraction of the cost and without the combination of an active fund. The multi index funds cannot be bought direct from L and G.

Posting factually incorrect information will not serve you well here. The charges for L&G Multi index, unlike your Scottish Friendly funds, are a matter of verifiable fact. TER/OCF 0.31%, for the "7" fund, for example. Held on the platform linked, this will cost a total of 0.56%, which is almost a third of the cost of the Scottish Friendly ISA you are promoting. That's assuming someone is starting with no investments. I pay considerably less than 0.25% in platform charges - more like 0.05%.

You've made several statements about the comparative performance of your Scottish Friendly funds vs others for which the performance data is in the public domain, yet you have failed to provide any data to back up your statements. Clearly past performance could have been better or worse, and future performance could be better or worse. However, the golden rule of investing is do not invest in something you don't understand, and the opaque nature of the investments you are promoting means nobody can hope to understand them prior to investing (and maybe they don't get enough information even after investing).

All I know is that every now and then someone comes along trying to promote this type of investment, making unverifiable claims about performance and each and every time, they fail to substantiate those claims.

There is no referall programme and I've no axe to grind.

Oh, really? http://www.scottishfriendly.co.uk/referral

Many of SF policies are way too expensive and should be steered clear of. With My Choice, they seem to be aiming at a different market, Mal

Bringing charges down from 3% to 1.5% is a start, but the policies are still not competitive and I wouldn't touch them with a barge pole.