Investment planning - advice needed (IFA vs DIY)

gemma.zhang

Towards year end, start reviewing our investment for the New Year.
Would like to get some advice from experts! thanks in advance!

Background:
professional couple mid 30s with good income, three kids under 5 living in London. Our main outgoing is mortgage and childcare, which add up half of our total monthly income. We have healthy pension and 12 month raining day money setup.

We have been using the current financial advisor for 2 +yrs to manage our joint 110k share and stocks isa. Performance (in 70% equity portfolio) has been round 11% per year after deducting all the fees. We have also separate 40k in fidelity invested in vanguard 60%/80%.

Our financial target:
We don’t need this money for now, but plan to send all 3 to private secondary schools as secondary Around are dreadful and we don’t plan to move.

Advice needed:
1. The performance by IFA doesn’t look that impressive, but I like the fact that we don’t need to manage it ourselves and someone professional is taking care of it, however at 1% charges.

Shall we switch IFA. Or ditch it to DIY. I have some experience in general, but not too much nor having much time on dealing it regularly.

2. How do we plan our investment wisely, so hopefully we could build up a nice pot for their mountain high private school fees?
1st one will be in secondary in 6 years,
2nd one will follow 3 yes afterwards, same with 3rd.
We could pay 1.5 school fees out of our regular income. But would have a few hard years due to 3 set of fees add up to 60k/year in today’s money.

I know I need to move money to high risk profile: 100% vanguard. Or move 15k fidelity to FTSE 100 index tracker.

Anything else I could do?
Massive thanks!

Linton

gemma.zhang wrote: »

......

Advice needed:
1. The performance by IFA doesn’t look that impressive, but I like the fact that we don’t need to manage it ourselves and someone professional is taking care of it, however at 1% charges.

Shall we switch IFA. Or ditch it to DIY. I have some experience in general, but not too much nor having much time on dealing it regularly.

2. How do we plan our investment wisely, so hopefully we could build up a nice pot for their mountain high private school fees?
1st one will be in secondary in 6 years,
2nd one will follow 3 yes afterwards, same with 3rd.
We could pay 1.5 school fees out of our regular income. But would have a few hard years due to 3 set of fees add up to 60k/year in today’s money.

You are asking whether to use an IFA or not against the wrong problem. Where IFAs provide the main benefit is advising on how to invest to meet your objectives, not how to maximise your return by some unknown time in the future.

Your comment on not having time to deal regularly suggests to me that you are not yet ready to manage life changing amounts of money. You should aim not to deal regularly, not at all if possible. A properly set up portfolio should not need anything more than an annual or possibly 6-monthly review.

I know I need to move money to high risk profile: 100% vanguard. Or move 15k fidelity to FTSE 100 index tracker.

Another reason for me to suggest you continue with your IFA. The school fees start in 6 years time. That is far too short a period for you to put all your money into higher risk investments like the higher equity Vanguard funds. Even worse to put a significant amount in the FTSE100 - one of the worst performing of all the major world indexes over many years. How would you and your children be placed if a major crash reduced your investments by 40% in 6 years time?

gemma.zhang

Thanks for your prompt reply.

For the 6-10 year timeline.
What sort of investment/risk you would recommend?

Also for the around 70% portfolio setup by ifa. 10% annual return.
Looks like my vanguard 60% was performing close To that . Hence I think might need to switch IFA.

dunstonh

1. The performance by IFA doesn’t look that impressive, but I like the fact that we don’t need to manage it ourselves and someone professional is taking care of it, however at 1% charges.

If you think that 11% is not impressive then you in line for a large disappointment in the future.

I know I need to move money to high risk profile: 100% vanguard. Or move 15k fidelity to FTSE 100 index tracker.

Noting wrong with going DIY. You could do a better job if you know what you are doing. However, you could do a lot worse if you don't. However, your statement above indicates you do not know what you are doing. Two issues:
1 - Why do you think you have to move to a high risk profile. Especially as wtihdrawals are needed in the short term?
2 - FTSE100 Tracker? you couldnt have picked a worse investment option. However, lets go with that.... That is your UK allocation. What about all the other sectors?

fred246

You"re going to be spending at least £300k on private schools. Wouldn't that money be better spent on buying a property in an area with good schools. That would probably be a good investment. Paying for schools when there are perfectly good free schools is throwing money down the drain.

gemma.zhang

fred246 wrote: »

You"re going to be spending at least £300k on private schools. Wouldn't that money be better spent on buying a property in an area with good schools. That would probably be a good investment. Paying for schools when there are perfectly good free schools is throwing money down the drain.

Where we are £300k could hardly get you a 2 bedroom flat. 2 bed starts off at £500k, and there is no grammar school around except we move far away.

Good area within grammar secondary school catchment 5 bed house starts with rocking 1M+, that’s if you pass the exams - another unknown.

Comparing to above and considering moving(selling and buying) cost etc, private is less expensive while still crazily expensive.

gemma.zhang

dunstonh wrote: »

If you think that 11% is not impressive then you in line for a large disappointment in the future.



Noting wrong with going DIY. You could do a better job if you know what you are doing. However, you could do a lot worse if you don't. However, your statement above indicates you do not know what you are doing. Two issues:
1 - Why do you think you have to move to a high risk profile. Especially as wtihdrawals are needed in the short term?
2 - FTSE100 Tracker? you couldnt have picked a worse investment option. However, lets go with that.... That is your UK allocation. What about all the other sectors?

What is the expected considered good % return with managed portfolio?
Any benchmark or reference I could compare against?
I know some company/Platform provides managed portfolios without ifa depending on your risk level, anyone got experienced or views? Is it better to go with without ifa if I know my risk level?

1. We could pay 1.5 kids private from income. Which means we would have to start digging the pot in 8 yr time, which sounds long time to me, maybe not long enough in investment term. Hence thinking could invest into high risk portfolio, and change to low risk closer to time.

2. Was thinking on top of vanguard LS 80, could put some money on tracker fund which tracks the index, low cost and leave it long
Term.

Would love to hear your wisdom on it!
Thanks.

bostonerimus

I agree with dunstonh on this......you aren't ready to DIY yet. You are asking all the wrong questions and don't have a good understanding of asset allocation and risk. But I think you have analysed the performance of your IFA quite well. 1% fee is expensive and 11% annual return from a 70% equity portfolio over the last 2 years isn't great. But there will always be a distribution in returns and its the fee that is the main reason I think you should make a change.

To increase your understanding I suggest that you go to this US based website and read it's pages carefully to get a good grounding in risk, asset allocation and portfolio management. Be aware that it's written for a US audience, but the basic principals are valid anywhere.

https://www.bogleheads.org/wiki/Main_Page

Here are a series of 10 short videos that give financial and investing advice from the perspective of
the Vanguard fund's chairman John Bogle. You might not agree with everything, but it is a good
starting point and then go off and read more from other sources.

https://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_investment_philosophy

gemma.zhang

Thanks! Will definitely do homework reading up these.

fwor

If you're planning on being in the UK for the foreseeable future, I'm not sure it's wise to be starting with a US-orientated website. The problem is that they tend to introduce terms like "IRA and taxable accounts" and "401(k)" - both of which appear quite quickly on the Bogleheads website, and neither of which have any relevance at all to a UK-based investor. The principles are good, but the detail may just lead to confusion.

For UK based investors, it's probably best to start with ones that use more local terminology, such as the 3 suggested in post #4 here:

https://forums.moneysavingexpert.com/discussion/5043692

dunstonh

What is the expected considered good % return with managed portfolio?

What risk profile? A portfolio with a high return over a period could well be worse for you than a portfolio with a lower return over the same period.

I know some company/Platform provides managed portfolios without ifa depending on your risk level, anyone got experienced or views? Is it better to go with without ifa if I know my risk level?

You generally find the platform own portfolio funds are more expensive and have lower returns. Usually false economy. If your objective is to get rid of the IFA, then going into lower quality, more expensive options is not the way.

Hence thinking could invest into high risk portfolio, and change to low risk closer to time.

You typically derisk around 5-10 years before the money is needed. What is your definition of high risk? (lets say how much would you accept it going down in value before pulling out/making changes)

2. Was thinking on top of vanguard LS 80, could put some money on tracker fund which tracks the index, low cost and leave it long
Term.

Which index? Why only one? There are around 10 major sectors. One tracker covering those leaves you missing all the rest. What makes you think your management decisions, by having one fund focused in one area, is better than professional options? An expensive platform managed fund would be better than despite the cost.