St James Place Pension Fund - Stay or Transfer to a SIPP

dunstonh

A third party may be able to tell if the advice is suitable according to the facts at their disposal at that time. Nobody can know if the investment will rise in price, however.

Advice is not about investment returns. They will be whatever they will be. It is about suitability.

I'm not trying to be contentious but predictions can be wrong whether the governor of the Bank of England, the Chancellor of the Exchequer , or an IFA makes them.

it is usually daft to make predictions on things that are so variable. However, it is fair to make projections based on assumptions as long as the assumptions are valid. An IFA is not there to predict the best investment out there. That is not their role and it is unlikely that the best returning investment in the future would be suitable for you. So, getting the best returning investment would probably be bad advice.

racey

dunstonh wrote: »

Advice is not about investment returns. They will be whatever they will be. It is about suitability.



it is usually daft to make predictions on things that are so variable. However, it is fair to make projections based on assumptions as long as the assumptions are valid. An IFA is not there to predict the best investment out there. That is not their role and it is unlikely that the best returning investment in the future would be suitable for you. So, getting the best returning investment would probably be bad advice.

OK. I accept that it is fair to make projections based on assumptions. My point is that the assumptions can be wrong.
I hope I'm not labouring the point here

bowlhead99

racey wrote: »

A third party may be able to tell if the advice is suitable according to the facts at their disposal at that time. Nobody can know if the investment will rise in price, however.
I'm not trying to be contentious but predictions can be wrong whether the governor of the Bank of England, the Chancellor of the Exchequer , or an IFA makes them.

You may have a misconception over what an IFA does. They use their judgment and a variety of tools to provide advice suitable for the person, in relation to their needs, goals, risk tolerance, risk capacity, understanding etc, to deliver a solution in line with the person's objectives, under a regulated framework.

They don't claim to know if an investment will rise in price. They know there will be up years and down years and pretty much nothing years. They make sure the investor is under no illusions about this, and then work with them to propose a sensible solution (tax wrappers, allocations, products etc) and then either implement it or (on an ad hoc transactional basis) perhaps just provide the advice and a plan for the investor to implement it themselves

So, a competent third party should be able to tell if the IFA advice is suitable or fit for purpose given the relevant facts and circumstances. Of course the competent third party is not able to say if a particular investment will go up or not next, and neither is the IFA. Crystal ball gazing is not the service on offer. Making sensible judgments based on available information is what you pay for.

I think this misunderstanding is carried over from the other day when £500 minimum was mentioned for a low value (i.e. inherently inefficient to outsource to an IFA) piece of work, and you said "that's a lot for a guess"'. The service is not a guess of what will go up the most over the next x years.

Nobody is trying to guess the very best one thing to invest in for a year and then the next year have another guess at the very best thing to invest in and so on, where failing to guess the very top performing asset class is a failure in the service. It is about advising a solution that works and is suitable - and can be generally defended and agreed as suitable to do what you need, subject to your expectations being realistic.

If you only have a small amount of money so that the advice on it can not really be worth more than a few quid, by reference to the potential gains or losses, then it is much less likely to be worth engaging one.

For example, if my garden tap is leaking and it has some bizarre connection that I don't really know how to fix it myself, but the only thing that gets wet if I fail is a small patch of lawn... I can probably order a load of mail order washers for a pound, download some internet tips and YouTube clips, and have a crack myself.

Alternatively I can find a plumber who has several years of training and experience and has set up a company with advertising and premises costs and equipment costs and certifications and customer testimonials and a small workforce which can install heating, bathrooms and build a house's plumbing from the ground up. I could take up some of his time on the phone and email working out how good he seemed to be compared to the competition. Then invite him and his van full of tools round to my house to spend an hour stuck in traffic on the journey over and the journey back, at a time when he could be doing lucrative plumbing work at £50ph or teeing up a £5k project for his whole crew.

Then be could diagnose the fault and change the washer, and give me his £100 invoice for callout plus £10 for time on-site turning the water off and doing the work and checking the results, plus £0.20 for parts.

"£110.20 !", you might splutter, "that doesn't seem like a lot to you but it's 20x what the tap is worth and I could have screwed it up myself and relaid the turf for half that. And that washer is overpriced, they are only 18p if you get the ones without warranty and don't mind if it leaks a bit."

The answer from the plumber might be along the lines that you could and should have DIY'd a small low risk project. And it's his decades of experience that enables him to carry out all kinds of feats of engineering in five minutes and his business has to generate income to stay in business, and it's not his fault you want to use him for a simple task. So, like it or not, you are going to get an apportionment of some of his training costs and his rent and rates and his travel time whether you like it or not - even if you think a washer change should only cost 50p because you could have done it on your day off yourself for free without going too far wrong.

So, I wouldn't pay £100 for a garden tap washer change any more than I'd pay £500 for an IFA to evaluate a £501 ISA. It is not worth it to me, but I can certainly see the IFA wouldn't do tailored advice on a small pot for as low as 1%. And unfortunately non-tailored advice that doesn't contain a fact find and documentation to say why it fits circumstances, is not going to keep the regulator happy.

Personally even at larger values I an generally happy with DIY though might solicit a second opinion if I had loads more asset than I actually do. But I can see how my father could do with paying £2k+ plus £x ongoing to get his £200k of retirement investments looked at. Because he may screw it up or well overpay or underperform if left to his own devices... ...and the alternative is leaving it to *my* devices where I get the blame if he perceives the return I got him was not the best possible return.

Delegating to a third party professional can make a lot of sense sometimes.

racey

Thanks for that.
I didn't have a misconception of what an IFA does. I had no idea what an IFA does and have been trying to find out.

MPN

From this thread you know I had a lump sum of £83,000 to invest in a pension pot and chose to invest in a SJP Pension Fund. I also pay in £240.00 (£300.00 gross) on a monthly basis as a top up.

Now, if 5 years ago I had invested this £83,000 in a global tracker (say just as an example the L&G International Index Trust) and let it ride on a fire and forget basis. The L&G fund has done 100% over the 5 year period so I would now have doubled my money to £166,000 (even without the extra top up contributions of £300.00 gross per month). As of today my SJP fund stands at £126,000 even with the extra regular monthly contributions over this 5 year period so compared to investing in the global tracker I am hypothetically now £40,000 down + the regular contributions that I have invested!

The point I am making is that unfortunately there must be lots of inexperienced investors like me that over the years due to workload, social & family life etc are quite happy to leave our investments to an advisor due to a lack of time and in some cases interest and as long as it seems to be ticking away nicely (or so you think)!

Its only now that I have retired and have more time on my hands, having done some basic research and indeed joined this forum for your thoughts/comments that you realise that you have been a complete fool and totally taken your eye off the ball! I suppose its never too late to learn from your mistakes but this has been a very scary and costly insight into the investment world!

dunstonh

Now, if 5 years ago I had invested this £83,000 in a global tracker (say just as an example the L&G International Index Trust) and let it ride on a fire and forget basis. The L&G fund has done 100% over the 5 year period so I would now have doubled my money to £166,000 (even without the extra top up contributions of £300.00 gross per month). As of today my SJP fund stands at £126,000 even with the extra regular monthly contributions over this 5 year period so compared to investing in the global tracker I am hypothetically now £40,000 down + the regular contributions that I have invested!

That is not comparing like for like.

The point I am making is that unfortunately there must be lots of inexperienced investors like me that over the years due to workload, social & family life etc are quite happy to leave our investments to an advisor due to a lack of time and in some cases interest and as long as it seems to be ticking away nicely (or so you think)!

The point is that you are not comparing like for like. The SJP pension is expensive. We know that. However, the difference is not mostly down to charges. It is down to returns. The difference in returns is mostly down to the risk profile. On a 1-10 risk scale, a global tracker is risk 10. When the SJP rep looked at your risk profile when you took the pension out, he would have asked you questions, judged your knowledge and behaviour and you agree a risk profile and invest according to that risk profile. Almost certainly you would not have come out risk 10. Going 100% global equity just wouldnt have fit with you.

So, there is no point 5 years later looking at returns for a risk 10 option and saying they were better than say a risk 5 option as you wouldnt have been in a risk 10 fund in the first place.

Also, it works both ways. The last 5 years is mostly a mixture of good years and nothing years. No major crash in there. Factor in a major crash (such as looking at the 5 years prior to that) where a risk 10 fund drops to half its value vs a risk 5 fund that loses 20% of its value and suddenly the safer option looks better in that discrete period.

Its only now that I have retired and have more time on my hands,

5 years to go to retirement with a relatively low fund value and annuity purchase likely for a person with no investment knowledge or understanding should never see 100% equity recommended. It would have been a mis-sale.

100% global equity on that £83k could be valued at £41k in 12 months. It is not a case of if but when as a drop that size is always coming at some point. Are you honestly saying that with 5 years to go to retirement you would have taken on a risk that big with your retirement fund?

having done some basic research and indeed joined this forum for your thoughts/comments that you realise that you have been a complete fool and totally taken your eye off the ball! I suppose its never too late to learn from your mistakes but this has been a very scary and costly insight into the investment world!

You call it a mistake. Perhaps the mistake is what you are making now.

bowlhead99

MPN wrote: »

Now, if 5 years ago I had invested this £83,000 in a global tracker (say just as an example the L&G International Index Trust) and let it ride on a fire and forget basis. The L&G fund has done 100% over the 5 year period so I would now have doubled my money to £166,000 (even without the extra top up contributions of £300.00 gross per month). As of today my SJP fund stands at £126,000 even with the extra regular monthly contributions over this 5 year period so compared to investing in the global tracker I am hypothetically now £40,000 down + the regular contributions that I have invested

Some context is needed on those returns though isn't it. You say you are 40% down on what you could have had with a global ex-UK tracker. Well, if the thing that performs the best is global ex-UK over that time period and you pick some other allocation by constructing your own portfolio, then sure, you are not going to do as well. Conversely if global ex-UK had fallen by 50% instead of rising by 100% you would have been happy you didn't do that, and that you ended up with some less-worse outcome.

SJP have an "international equities" fund which did 98% in the 5 year to October 31 It might even be one of the ones you hold. It is a proper global fund including UK, rather than being ex-UK like L&G International, which will have hampered its performance (compared to one that excludes UK) when sterling fell heavily.

So, it doesn't seem like the returns were simply not available, just that that you didn't choose them... because you were busy picking a set of funds based on what had gone up nicely in the period immediately before you were making your choices, which was the extent of your research at the time, and inadequate given you were taking the responsibility for portfolio construction yourself and you had no real experience in doing that task.

You didn't ask your FA/ sales guy at SJP what they thought you should buy in what proportions based on their understanding of your needs, you simply picked your allocations (effectively giving yourself the advice) and had them acknowledge your intentions, and paid them high fees for the very light non-independent advisory services from a well known high cost provider. And you didn't revisit your allocations or attempt to self-educate until the five years were up.

So, there are a variety of reasons, pretty much covered on the earlier posts on this thread, why you didn't get the optimum return. But the fact that a global ex-UK equities index did better than your portfolio over that particular time period, is perhaps a red herring.

If you had gone to a 'real' IFA, they probably would have said that most or all customers do not want to be 100% equities or 0% UK. Most IFA customers are not looking for a raw return of the global market. They have particular needs which commonly include lower volatility or might include higher level of natural income or something else. So you probably wouldn't have ended up 100% in that L&G fund or another global 100% equities ex UK fund like it. So, you wouldn't have got the same result as that index, likely a more conservative one, and you might be muttering about being silly for taking your eye off the ball, perhaps without good reason.

Focusing on how big a return could have been and being disappointed in what you actually got, is a blinkered analysis if it doesn't take into account how bad it could have been if you had piled into that "happened to perform very well this time" direction and the market went the other way, and what that would mean for your wealth.

So, I'm not saying that SJP are good value, or that your fund selection was great, just that you are not comparing apples to apples when you look at a raw index fund rather than a portfolio selection. The fact that you didn't use any real model for the portfolio selection, and voluntarily paid high fees, are the major issues, not the fact that an index happened to "win" over a specific time period.

Good that you are taking some time out to look into this stuff now though, and you are right that a late realisation that you've made mistakes is definitely better than never realising it This doesn't mean that a sudden swing to invest via one or two simple indexes is actually a great fix.

MPN

dunstonh wrote: »

That is not comparing like for like.

The point is that you are not comparing like for like. The SJP pension is expensive. We know that. However, the difference is not mostly down to charges. It is down to returns. The difference in returns is mostly down to the risk profile. On a 1-10 risk scale, a global tracker is risk 10. When the SJP rep looked at your risk profile when you took the pension out, he would have asked you questions, judged your knowledge and behaviour and you agree a risk profile and invest according to that risk profile. Almost certainly you would not have come out risk 10. Going 100% global equity just wouldnt have fit with you.

So, there is no point 5 years later looking at returns for a risk 10 option and saying they were better than say a risk 5 option as you wouldnt have been in a risk 10 fund in the first place.

Also, it works both ways. The last 5 years is mostly a mixture of good years and nothing years. No major crash in there. Factor in a major crash (such as looking at the 5 years prior to that) where a risk 10 fund drops to half its value vs a risk 5 fund that loses 20% of its value and suddenly the safer option looks better in that discrete period.

5 years to go to retirement with a relatively low fund value and annuity purchase likely for a person with no investment knowledge or understanding should never see 100% equity recommended. It would have been a mis-sale.

100% global equity on that £83k could be valued at £41k in 12 months. It is not a case of if but when as a drop that size is always coming at some point. Are you honestly saying that with 5 years to go to retirement you would have taken on a risk that big with your retirement fund?

You call it a mistake. Perhaps the mistake is what you are making now.

Thank you for your reply/comments and I do realise it is not a pure like for like comparison, however I feel it is more down to the returns from the SJP funds rather than the risk profile.

You are quite right my wife and I did agree a risk profile with our advisor and we came out as an 8 medium/high risk. This is mainly because my wife has a much larger pension pot than mine, we own 2 properties (one in the UK and one abroad) and we have substantial cash assets set aside for any downturns in the market. Therefore, we agreed to a high risk element to my pension pot which as you say is is a relatively low fund value. Therefore, initially we went for 80% equity, 10% property and 10% international corporate bond.

I just feel the return on a 80/20 split with SJP has not been very good compared to maybe even a VLS80 instead of an 100% global equity fund?

What I am trying to say is that I should have kept more up to date with how my funds were performing compared to others with my risk file? I'm certainly not blaming the advisor but myself for not paying due diligence to my pension pot.

dunstonh

Thank you for your reply/comments and I do realise it is not a pure like for like comparison, however I feel it is more down to the returns from the SJP funds rather than the risk profile.

Bowlhead reminded me that you didn't take the advice back at the time but self selected and chose SJP (that was a daft decision and you are correct to regret that). However, the differences are still mostly down to your fund selection. So, it is unfair to criticise SJP in this case (something you dont say often!).

I just feel the return on a 80/20 split with SJP has not been very good compared to maybe even a VLS80 instead of an 100% global equity fund?

It may be not have been but it may have been.. I use the VLS funds and I create bespoke portfolios. The bespoke portfolios tend to outperform VLS but I still use VLS with some people as it is best for them. There is no guarantee that the bespoke portfolios will continue to outperform VLS and in some periods they wont because the asset allocations are different. I have never used and would not use a global equity exc UK fund in isolation with an investment. So, there is really no point comparing returns against one.

What I am trying to say is that I should have kept more up to date with how my funds were performing compared to others with my risk file? I'm certainly not blaming the advisor but myself for not paying due diligence to my pension pot.

Absolutely. if you build a bespoke portfolio then you need to keep ongoing reviews with it. It will lose balance. The allocations will change and sometimes you have to change funds as many single sector funds suit different parts of the economic cycle. If you are not going to do that or pay for someone to do that for you then you should use a multi-asset fund.

MPN

bowlhead99 wrote: »

Some context is needed on those returns though isn't it. You say you are 40% down on what you could have had with a global ex-UK tracker. Well, if the thing that performs the best is global ex-UK over that time period and you pick some other allocation by constructing your own portfolio, then sure, you are not going to do as well. Conversely if global ex-UK had fallen by 50% instead of rising by 100% you would have been happy you didn't do that, and that you ended up with some less-worse outcome.

SJP have an "international equities" fund which did 98% in the 5 year to October 31 It might even be one of the ones you hold. It is a proper global fund including UK, rather than being ex-UK like L&G International, which will have hampered its performance (compared to one that excludes UK) when sterling fell heavily.

So, it doesn't seem like the returns were simply not available, just that that you didn't choose them... because you were busy picking a set of funds based on what had gone up nicely in the period immediately before you were making your choices, which was the extent of your research at the time, and inadequate given you were taking the responsibility for portfolio construction yourself and you had no real experience in doing that task.

You didn't ask your FA/ sales guy at SJP what they thought you should buy in what proportions based on their understanding of your needs, you simply picked your allocations (effectively giving yourself the advice) and had them acknowledge your intentions, and paid them high fees for the very light non-independent advisory services from a well known high cost provider. And you didn't revisit your allocations or attempt to self-educate until the five years were up.

So, there are a variety of reasons, pretty much covered on the earlier posts on this thread, why you didn't get the optimum return. But the fact that a global ex-UK equities index did better than your portfolio over that particular time period, is perhaps a red herring.

If you had gone to a 'real' IFA, they probably would have said that most or all customers do not want to be 100% equities or 0% UK. Most IFA customers are not looking for a raw return of the global market. They have particular needs which commonly include lower volatility or might include higher level of natural income or something else. So you probably wouldn't have ended up 100% in that L&G fund or another global 100% equities ex UK fund like it. So, you wouldn't have got the same result as that index, likely a more conservative one, and you might be muttering about being silly for taking your eye off the ball, perhaps without good reason.

Focusing on how big a return could have been and being disappointed in what you actually got, is a blinkered analysis if it doesn't take into account how bad it could have been if you had piled into that "happened to perform very well this time" direction and the market went the other way, and what that would mean for your wealth.

So, I'm not saying that SJP are good value, or that your fund selection was great, just that you are not comparing apples to apples when you look at a raw index fund rather than a portfolio selection. The fact that you didn't use any real model for the portfolio selection, and voluntarily paid high fees, are the major issues, not the fact that an index happened to "win" over a specific time period.

Good that you are taking some time out to look into this stuff now though, and you are right that a late realisation that you've made mistakes is definitely better than never realising it This doesn't mean that a sudden swing to invest via one or two simple indexes is actually a great fix.

Thank you for your reply which is always welcome and appreciated. First of all I did say that I was using the L&G index fund as an index example regardless of whether it is ex UK or not, it could be any world index such as VWRL, VLS100 etc. etc.

You will also note from my original post in this thread that I only changed funds about 3 months ago basically because my SJP advisor had moved on and my new advisor called me to arrange a meeting for a review. At this point I thought I would look into the funds that my previous advisor had recommended to me over 4 years ago and also see how they performed. The original funds that I had for over 4 years linked with my risk score of 8 (medium to high) was Global Managed (20%), UK Equity (20%), UK & International Income (20%), Strategic Managed (15%) Schroder Managed (15%), Far East (5%) Global Emerging Markets (5%). At this time I solely took the advice and recommendations of my advisor mainly because he's the professional and I didn't have the time so I thought it best to heed his advice.

When I had a meeting/review with my new advisor he basically recommended I carried on with this portfolio maybe with a minor few tweaks. It was only then that I mentioned the returns had not been that great and that there were other SJP funds that had consistently performed significantly better over a very long period of time such as North American, Greater European and as you mentioned the International Equity Fund. We had a constructive chat about these funds and he agreed that these funds were good performers but a higher risk which was OK with me so we agreed to change funds and since then the returns have been much better but so has nearly everything in the markets over the past 3/4 months. I must say that when SJP publish their quarterly returns all of my original funds with them apart from Global Managed has continued to under perform even to this date.

I'm definitely not trying to apportion any blame merely stating that for my risk score I feel I could have been better advised on my original set of funds that were recommended by my previous adviser.