DIY or IFA?

StellaN

Sally57 wrote: »

Thank you to all of you for your input and views which is greatly appreciated and interesting.

I have decided to carry on with DIY for the time being and will do a lot more research! Only time will tell if this is the right decision and I suppose I can always change my mind (many women do) in the future if I feel I need advice from an IFA.

Well good luck to you Sally. As quite a few posters have mentioned there is nothing vastly wrong with the funds you currently hold so I wish you the best moving forward and I'm sure you can reduce your risk exposure accordingly. As you said you can always consult an IFA in the future if you are worried about your choices many of them will give you an initial free meeting/advice before you hire them!

StellaN

Rollinghome wrote: »

So even less in equities or the US than some other popular strategic bond funds. Would agree though that the precise logic behind the full selection isn't immediately obvious.

What are the other popular strategic bond funds? I notice the OP has Henderson as well as Artemis - your thoughts?

MonroeM

Linton wrote: »

The objective for many retirees isnt being well ahead on performance, it's having a portfolio of acceptable risk that can reliably provide the required income in good times and bad. You cant do that effectively simply by choosing a VLSxx. The OP has improved on what VLS would do by using Strategic Bond funds rather than the fixed % of gilts etc provided by VLS. You need to adjust the risk/return ratios and time to maturity of the bonds you invest in according to market conditions, VLS cant make that judgement.

The choices made by the OP look sensible to me for a minimal maintenance portfolio that is still in the accumulation phase. However once there is a net outflow of money I think a review by an IFA could be helpful.

Looking at the IFA portfolio there seem to be too many funds to manage efficiently. Why 3 (or is it 4) Strategic Bond funds? 1 certainly, 2 perhaps, but 4? Some of the asset allocations seem unusual - why so little US? Perhaps if the list was structured with explanatory text it would be clearer.

Looking at the IFA portfolio, I seem to have held 8 of the 19 funds mostly in the past because I have now gone for more index funds mixed with some bonds & property (active & passive).

The 8 funds I have held are:

Fundsmith
Vanguard US Equity Index
CF Lindsell Train UK Equity
CF Woodford UK Equity
Stewart Asia Pacific Leaders
Jupiter European
Fidelity Emerging Markets
Fidelity Strategic Bond

From the IFA list I now only hold Fundsmith in my overall portfolio and the only other active funds are in bonds.

AnotherJoe

dunstonh wrote: »

0.5% is the dominant figure across the industry. 1% tends to be on smaller amounts and tapers downwards as the amounts get bigger. Obviously every firm can be different.

Maybe I misread but in this thread which i happened across when looking at something else (rather than stalking you ) you say that 1.65% "isnt bad" and that's on a very large sum, >£1M.

https://forums.moneysavingexpert.com/discussion/5542705

bowlhead99

AnotherJoe wrote: »

dunstonh wrote: »

AnotherJoe wrote: »

Same for IFAs I think of most of the numbers I've seen here 0.5% would be as low as you'd find and 0.75% to 1% is more typical.

0.5% is the dominant figure across the industry. 1% tends to be on smaller amounts and tapers downwards as the amounts get bigger. Obviously every firm can be different.

Maybe I misread but in this thread which i happened across when looking at something else (rather than stalking you ) you say that 1.65% "isnt bad" and that's on a very large sum, >£1M.

Joe: you said 0.75 to 1% was more typical and Dunstonh said 0.5% was the dominant figure. To me, 0.5% sounds about 'normal' on a decent sized pot - i.e. you wouldn't get it on 50k but on the figures the OP mentions (£220k of pensions and ISAs and £80k of cash) it would be in line with what you see on plenty of other threads.

The 1.65 in the other thread wasn't the amount for IFA services to be compared with the 0.5%, but a total overall cost including IFA and all asset management.

Which if the IFA was 0.5-0.65 (not greedy like 0.75 or 1% on a large pot), would assume the funds and platform together were costing 1-1.15.

If you think of platform services costing 0.2-0.3 and then the active funds at 0.7-0.9 (some more, but cancelled out by use of trackers in other areas) then you do get to that sort of ballpark, so 1.5-1.65% 'all in' for platform, fund and IFA would not be surprising if the funds were mostly actives. Not cheap, but 'not bad' as if the OP from that other thread was engaging with someone who was ripping them off through charges way out of line with the industry norms.

If it had been a good chunk more, like 2.0% 'all in' instead, it wouldn't be 'not bad', it would be expensive. And if the 2.0% was not the all in price but just the loading premium over and above the cost of using simple blunt-instrument trackers, it would be super expensive. But it wasn't.

As I said in my earlier post, actives are typically half a percent more than passives, and ongoing IFA servicing is typically half a percent more than not having an IFA. So the extra 'loading' from having an active IFA solution is in total about percent or maybe a little more; maybe a little less if the IFA is using more passives within his mix.

Whereas in post #7 you said that the cost of paying a premium for active and a premium for IFA service was 2%, which does sound a lot to be giving away in the context of the long term gross return. But as the premium is not really 2%, but 1%, it is not as bad a state of affairs as you implied.

MPN

MonroeM wrote: »

Looking at the IFA portfolio, I seem to have held 8 of the 19 funds mostly in the past because I have now gone for more index funds mixed with some bonds & property (active & passive).

The 8 funds I have held are:

Fundsmith
Vanguard US Equity Index
CF Lindsell Train UK Equity
CF Woodford UK Equity
Stewart Asia Pacific Leaders
Jupiter European
Fidelity Emerging Markets
Fidelity Strategic Bond

From the IFA list I now only hold Fundsmith in my overall portfolio and the only other active funds are in bonds.

I too have held some of these funds but IMO I think the cost of all these active funds (there are only 3 index funds) together with monitoring them for performance/rebalancing and the IFA fees then I honestly can't see it doing any better than an all world index fund with bonds/property in the same ratio as the IFA list?

dunstonh

MPN wrote: »

I too have held some of these funds but IMO I think the cost of all these active funds (there are only 3 index funds) together with monitoring them for performance/rebalancing and the IFA fees then I honestly can't see it doing any better than an all world index fund with bonds/property in the same ratio as the IFA list?

You are too focused on fees. I don't know whether the spread will outperform or not as no such guarantee will exist but there are some good funds in there with good potential to beat mid table tracker. Over the space of a year it only needs 0.x% to be better. So, easily achievable. Although not guaranteed.

Maybe I misread but in this thread which i happened across when looking at something else (rather than stalking you ) you say that 1.65% "isnt bad" and that's on a very large sum, >£1M.

I refer to Bowlhead's response.

dunstonh

Re the NA equities issue on that fund mentioned higher up, I just got a response back from the data supplier saying that there was a new mapping field used with that fund which they did not have in place at the time of that snapshot. They have since created the field and will be correct on the new snapshot they are grabbing overnight. They used NA equities because it had the same risk level as the asset type in the fund and their preference was to ensure the risk was correctly reported even though the underlying assets were not. The other versions had pulled a new snapshot two weeks later after they fixed the mapping but this one was left behind for an unknown reason.

MonroeM

dunstonh wrote: »

You are too focused on fees. I don't know whether the spread will outperform or not as no such guarantee will exist but there are some good funds in there with good potential to beat mid table tracker. Over the space of a year it only needs 0.x% to be better. So, easily achievable. Although not guaranteed..

Most world index funds are better than mid table?

Out of interest, which of these 'good funds' do you particularly rate?

bowlhead99

MonroeM wrote: »

Most world index funds are better than mid table?

By design, they aim to hit the midpoint of the gross performance table and then charge a fee of 0.2-0.33% for doing it. At least half the funds that an investor might rationally pick after doing their due diligence would probably be able to finish higher in the table, with the index being 'mid'.

Almost certainly, an assessment of what actually makes a 'comparable' active fund to put into the table comes into it, as the purpose of most active funds is quite specifically *not* to give the same risk, volatility and performance as a tracker.

Out of interest, which of these 'good funds' do you particularly rate?

You usually find that IFAs are reluctant to suggest their favourite funds or rate them as good, what with that being a regulated activity and them not knowing your needs, because the IFA's job is all about suitability for an objective.

Typically they are happier to tell you something is a bad overpriced fund or blatantly unsuitable for an objective and then by elimination you can work out that the ones that remain without comment are less objectionable, or even 'good', without them explicitly stating it