Adviser - worth it or not

workingboy

My pension with my provider has performed well over the last 5 years and increasing, although I have a monthly withdrawal (pension).

The company who was a IFA, handled my pensions on retirement and collected all as one into a collective retirement account with a provider. This has performed satisfactory without any advisory adjustments for some 5 years. Then my account was passed to another IFA firm to handle my pension still with the same provider.
Once we met and went through the introductions etc. Everything is as before on performance.

My question, if the pension with the provider is performing satisfactorily. Do I need an adviser where there has been no advisory changes in 6 years. When they are charging fee's or receiving commission from the provider.

dunstonh

The company who was a IFA, handled my pensions on retirement and collected all as one into a collective retirement account with a provider.

Only one provider calls it that. OMW. Good provider. Not the cheapest with their charge basis 3 but not the worst. They have the most superclean options of any platform. I have my pension with them too.

My question, if the pension with the provider is performing satisfactorily. Do I need an adviser where there has been no advisory changes in 6 years. When they are charging fee's or receiving commission from the provider.

We as advisers have a similar scenario in that we have taken on the business of another IFA who largely left the original advice alone. We are now contacting people to put them on to our more fluid and kept upto date allocations rather than allocations selected at various points in the past but not maintained since.

Obviously in the last 6 years everything has gone up. So, its not really a measure of quality to look at that alone without any context.

If you have not had ongoing advice but there was commission then this was allowed before 2013. However, firms will look to either put your on their ongoing service or knock you off their servicing list. If you have a bespoke/model portfolio then it should be rebalanced and kept under review. Sector allocations change and you need to keep on top of these. So, either you do it yourself or you use an adviser to do it for you.

bigfreddiel

Dunsty is absolutely correct, everything has gone up in the last six years, except for bonds, they e gone down somewhat as has interest rates, but never mind.

And absolutely correct again, if you think you can handle your pension funds better than paying a professional to do it then you should DIY.

Good luck fj

bowlhead99

bigfreddiel wrote: »

Dunsty is absolutely correct, everything has gone up in the last six years, except for bonds, they e gone down somewhat as has interest rates, but never mind.

No - Dunstonh was correct, broadly, when he said everything has gone up in the last six years. Including bonds, which have really not "gone down somewhat" at all, but are up over the last six years.

If you look at the average fund holding UK government bonds, it is up. If you look at the average fund holding foreign government bonds, it is up. If you look at the average fund holding index-linked gilts, it is up. If you look at UK investment grade corporate bonds, or high yield corporate bonds, they are up. International corporate bonds? Up. Emerging markets bonds? Up. Global bond index? Up.

If you go to Trustnet.com, select the Unit Trusts and OEICs section and filter by 'Fund focus' to Fixed Interest, you'll see a list of 518 bond funds. If you then sort by the last performance column to put them in order of best to worst over the last 5 years, showing 100 per page, you'll see that there are 375 of them with a five year track record. Out of those, 371 had a positive return and 4 did not.

If you scroll back up to find the fund at position 188 in the list (so that there are 187 funds better and 187 worse within the total population of 375), it is Standard Life Investments Strategic Bond, which is up 5% this year, 10% over three years, and 34.5% over five years.

If you've been around these forums long enough you'd know that Bigfreddie is a serial troll who has a chip on his shoulder about IFAs, and now he's reached retirement age he has plenty of time to post on the boards here (when he's not banned). He can't deny that usually what the IFAs write here make a huge amount of sense, given that they are experienced and professional. But he will always look to be sarcastic and have a dig where possible, e.g. "absolutely correct, everything has gone up in six years, oh except bonds which haven't so dunsty is wrong on that but nevermind".

However, Freddie is not someone with a lot of expertise or a deep understanding of investment theory. It's a bit like listening to Donald Trump - some superficial comments to put down others that are light on detail and don't really stand up to scrutiny.

It's entirely correct that bonds have risen (not fallen) over the last five years when your portfolio was doing well - on average by several time higher than inflation. This is a function of interest rates falling (hence bonds paying a known fixed return being more valuable), together with bond-buying programmes being carried out around the world by governments (a type of monetary stimulus, quantitative easing). And many foreign bonds will have received a boost in sterling terms as the pound has fallen against dollar and Euro over 5 and 6 years (and massively so over 1 or 2 years).

The broad point is that everything is up, so even a poorly constructed portfolio will have risen - not necessarily on its own merits, but because a rising tide lifts all boats in the harbour. So the overall result is a profit, but some things will have gone up more than others, which will have inevitably shifted the allocations in your portfolio if they have not been touched. This means your positioning for the forthcoming economic cycle could be poor, if the allocations haven't conveniently followed your needs.

For example if you had £60 equities and £40 bonds five years ago, and the equities are up 100% while the bonds are only up 35%, your new portfolio would be £120:£54 which is a 69:31 split instead of a 60:40 split. Maybe you or your original adviser had decided that you are happy to invest flexibly with about 60-65% of your money in equities... and then the new adviser whom you met agreed that 65-70% was fine, and so although the portfolio is now pushing right towards the upper end of the scale, it's not been considered absolutely critical that changes must be made or a full re-balance performed. Especially if you are not paying much, or anything, on an ongoing basis for that to be done?

The above is simplified but a proper portfolio is not usually just a simple two-fund split with a static percentage. Asset class, sector and geographic allocation are going to determine your overall returns and it is important that they match what you are looking for and that someone (you or advisor) stay on top of them. Otherwise the natural gains and losses in the portfolio and the withdrawals from the portfolio will inevitably add up to a creep in allocations from one year to the next. Effectively your portfolio ends up with a relative 'over-exposure' to things that have performed well recently and an under-exposure to things that could protect you from a severe downturn.

So, if you are not currently paying for advice and suggestions, or you are paying but only getting some cursory annual review with no actions ever being taken, it would seem like it would be worth having words with your current advisors on what they can do for you and exactly what it is they did this current year to satisfy themselves that the portfolio still remained appropriate for your needs, to justify their fees. If they don't satisfy you, there's always the 'pick another adviser' option - which will incur more one-off onboarding costs - or the DIY option which requires more work on your part.