SIPP Fee Question

westv

I was just trying to clarify the charges deducted from my AJ Bell SIPP (via an advisor). It contains a 7IM investment with Standard Life Myfolio Managed IV Platform One Acc.

As far as I can see the fees are:-

0.30% 7IM
0.50% Advisor
1.10% Standard Life

£50 per qtr (+VAT) SIPP fee.

So total percentage 1.90% + £220 annual SIPP fee??
None of the fees are included in any of the other percentages?

Edit: Correction. I think the 7IM and advisor fees are taken from the net balance (after the 1.1%) so the total will be less than 1.90%.

zagfles

Very expensive - as you're using an adviser suggest you have a word with them about the costs, surely they could get you better value than that combination of charges. Most actively managed funds are around 0.75% and trackers around 0.2% or lower.

dunstonh

The adviser charge is fine.
The platform charge seems fine.
The fund charge is what the fund charge is irrespective of the fund platform you hold it on. The SL Myfolio funds are at the more expensive end of the scale.

Overall, it is not that expensive. It could be cheaper. it could be more expensive but it is fine for the fund held. If you want to reduce costs, you could use a cheaper fund but it may not be the best option for you to do that as costs are always secondary to suitability of the investment. The suggestion above from zagfiles is also not comparing like for like as SL is a multi-asset fund. If you start using trackers then you are building a portfolio of multiple funds (around 10 typically) which requires more work and an increased level of understanding from you. You may be ready for that but you may not be. However, there are cheaper multi-asset funds that could easily be considered similar and potentially better than the SL fund.

zagfles

dunstonh wrote: »

The adviser charge is fine.
The platform charge seems fine.
The fund charge is what the fund charge is irrespective of the fund platform you hold it on. The SL Myfolio funds are at the more expensive end of the scale.

Overall, it is not that expensive. It could be cheaper. it could be more expensive but it is fine for the fund held. If you want to reduce costs, you could use a cheaper fund but it may not be the best option for you to do that as costs are always secondary to suitability of the investment. The suggestion above from zagfiles is also not comparing like for like as SL is a multi-asset fund. If you start using trackers then you are building a portfolio of multiple funds (around 10 typically) which requires more work and an increased level of understanding from you. You may be ready for that but you may not be. However, there are cheaper multi-asset funds that could easily be considered similar and potentially better than the SL fund.

Why does it require any understanding from the OP? What's he paying the adviser for? Surely any decent adviser would be able to construct a suitable portfolio with reasonable charges as part of his fee. There seems to be a totally unnecessary layer of charges here.

dunstonh

Why does it require any understanding from the OP?

Because they have to be able to understand the advice and the risks. A requirement under the Markets in Financial Instruments Directive.

Surely any decent adviser would be able to construct a suitable portfolio with reasonable charges as part of his fee.

Tell the FOS that. It considers a portfolio of single sector funds (doesnt matter if active or passive) to be a more advanced option than a multi-asset fund.

Whilst I generally don't agree with the FOS position, it does have a point. If the person doesnt understand asset allocation and doesnt want to understand it then having one fund that goes up when another goes down is likely to confuse them and can lead to poor decision making. Often seen as taking the money out of one fund and putting it into the other. You can explain things as much as you like but some people dont want to know or really cannot follow it. So, in those cases, a multi-asset fund does make more sense. Where I disagree with the FOS position is where they uphold a complaint for a portfolio of single sector funds being too difficult to understand when the person is a company director who also has investment properties.

There seems to be a totally unnecessary layer of charges here.

Multi-asset is always going to be more expensive than single sector.

zagfles

dunstonh wrote: »

Because they have to be able to understand the advice and the risks. A requirement under the Markets in Financial Instruments Directive.



Tell the FOS that. It considers a portfolio of single sector funds (doesnt matter if active or passive) to be a more advanced option than a multi-asset fund.

Whilst I generally don't agree with the FOS position, it does have a point. If the person doesnt understand asset allocation and doesnt want to understand it then having one fund that goes up when another goes down is likely to confuse them and can lead to poor decision making. Often seen as taking the money out of one fund and putting it into the other. You can explain things as much as you like but some people dont want to know or really cannot follow it. So, in those cases, a multi-asset fund does make more sense. Where I disagree with the FOS position is where they uphold a complaint for a portfolio of single sector funds being too difficult to understand when the person is a company director who also has investment properties.

So what is the adviser actually doing for his fee? I thought people paid advisers to take investment decisions, at least in terms of asset allocation? If they're going to simply buy a multi-asset fund then what exactly is the role of the adviser?

Multi-asset is always going to be more expensive than single sector.

You can get good value ones for instance Vanguard charge around 0.24%

dunstonh

So what is the adviser actually doing for his fee?

Giving advice that is suitable for the individual.

I thought people paid advisers to take investment decisions, at least in terms of asset allocation?

One of the many things but for many people, that is not the most important thing they use the adviser for.

You can get good value ones for instance Vanguard charge around 0.24%

Although the SL fund the OP mentions has beaten Vanguard after charges over 5 years.

AnotherJoe

dunstonh wrote: »

Although the SL fund the OP mentions has beaten Vanguard after charges over 5 years.

That is disingenuous when you are well aware that five years is no basis on which to make a comparison indeed I think you've made many posts to that effect.

bowlhead99

AnotherJoe wrote: »

That is disingenuous when you are well aware that five years is no basis on which to make a comparison indeed I think you've made many posts to that effect.

Right, but the Vanguard fund to which zagfles referred has only existed for five years so the point being made is that the lower fee has not delivered a better performance over the length of time the fund existed.

The point being made is not that half an economic cycle is a great length of time over which to judge two funds. But useful to state the obvious that funds which offer "good value" fees do not necessarily deliver better performance after gross return and fees have both been taken into account. Focus entirely on one aspect and you lose the big picture. The two fund managers selected different assets to hold, and did not intend to produce the exact same return.

Dunstonh has said that the SL fund is at the expensive end of the scale but of course as a regulated advisor he can't say whether it is appropriate for OP whom he hasn't met. Pointing out that one fund delivered a higher performance than another fund which someone had said was "better value", is a useful observation, as it would give some credence to SL who claim that they add some value for the extra fee they charge.

dunstonh

AnotherJoe wrote: »

That is disingenuous when you are well aware that five years is no basis on which to make a comparison indeed I think you've made many posts to that effect.

bowlhead covered it off nicely.

The point is that westv was given an early impression that what is held is massively expensive and that cheap is best. So, it is only fair to point out that over the last 5 years (and you cant go back longer due to short timescale VLS has existed) the SL fund outperformed it.

That is not to say it will do so in future as that is unknown. That is not to say that there are alternatives (either active or passive) that I feel personally may be better than the SL fund. I am just keeping my comments unbiased and balanced. It has been pointed out that the platform and adviser charge are where you expect them and the fund charge is at the upper end and cheaper is available but in this instance over the last 5 years, the more expensive fund has outperformed the cheaper. Is that not a fair assessment?

zagfles

dunstonh wrote: »

Giving advice that is suitable for the individual.

One of the many things but for many people, that is not the most important thing they use the adviser for.

Although the SL fund the OP mentions has beaten Vanguard after charges over 5 years.

Absolutely - personally I'm a believer in active management (with careful choice of manager), and most of the funds I invest in are actively managed and so have higher fees, and have generally outperformed trackers.

However the issue here is paying a premium for multi-asset, 1.1% instead of typical 0.6-0.8% or so. This is fair enough for a DIY investor who isn't confident or doesn't have the time to select a balanced portfolio and rebalance periodically.

But for those using an IFA, I would expect the IFA to select/rebalance the fund as part of his ongoing fee rather than just buying a multi-asset fund.

I really don't get the point about the client not understanding the investments. That's the whole point of using an adviser, surely? They let the adviser advise. If they're going to ignore the advice and do their own thing then why are they paying for advice?