S&S ISA by financial advisor - opinions needed

capital0ne

bcfclee27 wrote: »

We decided to use a financial advisor as my father in law has done very well and recommended the IFA he uses.

He has invested our money with Brewin Dolphin.
Mine is in the Brewin Dolphin MPS Balanced.
Wife's in the Brewin Dolphin MPS Cautious.

Without listing every single holding the asset allocation is....

33% Equities UK
19% Equities US
5% Equities Europe ex UK
4% Equities Asia ex Japan
2% Equities Japan
2% Equities Emerging
16% Bonds
12% Absolute Return
4% Cash
2% Commercial Property

So just wanted to know people's opinions on this.

======================================

He charges us 2.25% initial one off charge.
0.75% ongoing advisor fee.

You can see why IFAs get a bad reputation, he's just put your money into a couple of 'canned' portfolio's which look a bit dubious. All those 2% holdings seem a bit pointless, they will have very little affect on balancing your portfolio.
Keep it simple, pick your ratio of equities to fixed income 60:40 50:50 etc and just pick say 5 ETFs/ITs to cover UK/Global/Property/Fixed Income.

And what exactly does your IFA do for £62/month (plus VAT no doubt)? I would be willing to bet all he'll do is to print out a statement and make few adjustments - maybe change cash to 3% and property to 3%! And of course there will be dealing charges.

Good luck and remember - KISS

bostonerimus

So IFA gets 0.75% and a lump sum up front. You get a portfolio from "Distillery Porpoise" on a third party platform that will have fees as well......who's paying those? and there will be fees on the funds as well. Can anyone say "middleman". Seriously, this sounds like an expensive way to invest your money. How much are you paying in total? Here's a suggestion, buy VLS60 directly from Vanguard. it will be way less expensive and I'm charging nothing for the advice.

dunstonh

Here's a suggestion, buy VLS60 directly from Vanguard.

What makes you think cheap is best?

Our model portfolio has consistently beaten VLS60 despite being more expensive. Costs are certainly important but they are a secondary consideration to how you invest. And is that the same Vanguard that has just been caught hiding over 50% of its charges on the VLS funds by not declaring them in the OCF?

and I'm charging nothing for the advice.

And if one of my clients was to follow your free advice, they would get less. Plus, they would have issues with CGT (when you consider the value a typical IFA investor has)

I will say that I think 0.75% is probably high in this case. 0.5% more reasonable.

It is also worth noting that a number of DFMs will run the model portfolio the adviser wants on a discretionary basis and not necessarily the DFMs own in-house portfolio.

bostonerimus

dunstonh wrote: »

What makes you think cheap is best?........

And is that the same Vanguard that has just been caught hiding over 50% of its charges on the VLS funds by not declaring them in the OCF?

A cheap portfolio isn't best if return is your criterion, but it won't be the worst either and the issue is always identifying those winning portfolios year after year. Obviously there will be lots of portfolios that beat a cheap multi-asset fund or a simple passive portfolio, but I doubt that the OP's portfolio will be one of them.

If Vanguard UK are hiding fees then that is very hypocritical. Please give a link with some explanation so people can judge Vanguard's behaviour.

And if one of my clients was to follow your free advice, they would get less. Plus, they would have issues with CGT (when you consider the value a typical IFA investor has)

I will say that I think 0.75% is probably high in this case. 0.5% more reasonable.

It is also worth noting that a number of DFMs will run the model portfolio the adviser wants on a discretionary basis and not necessarily the DFMs own in-house portfolio.

Well I'm sure you get great returns. But will the OP get great returns from their potted portfolio with high fees? I'm saying the OP is paying high fees for what looks like a pretty average portfolio and the IFA hasn't given much value. I think they will do better with VLS60, I'm not saying they might not do even better with you. I'm not sure why you bring up capital gains as I was advising the OP who has the money in ISAs, obviously if you have large amounts outside of tax deferred accounts (as I do) then capital gains and dividend tax planning becomes important, but the OP hasn't mentioned that as an issue.

bostonerimus

FYI folks here is more info on the extra hidden transaction costs on many funds.

https://www.ft.com/content/78918c88-fd13-11e7-a492-2c9be7f3120a

If the link doesn't work google this
"Large hidden fund charges revealed by Mifid II rules"

I'll leave it to you to decide whether the singling out of Vanguard above is justified. Charges are important and transparency is important. I wonder if we could get a total cost (including transaction, fund fees, Brewin Dolphin charge, and IFA fees) for the OPs structure and compare it to VLS60's 0.33% fee plus transaction costs. Personally, I think that's still too high even though it remains the least expensive of many popular funds.

Lomcevak

If Vanguard UK are hiding fees then that is very hypocritical. Please give a link with some explanation so people can judge Vanguard's behaviour.

Here's the Lang Cat on transaction costs

https://www.langcatfinancial.co.uk/2018/01/i-would-have-got-away-with-it-too-if-it-wasnt-for-those-meddling-kiids/

VLS is 50% in percentage terms but, I suppose, that's a framing that makes it look particularly bad - it is 50% of a fairly low base, and in absolute terms it looks much better. Others in that list are 50% of a much higher base, or less than 50% but higher absolute charges. Depends on how you want to frame it.

Fatbritabroad

Alice_Holt wrote: »

Average annual growth of 4.;5% would see a £100k portfolio valued at c.£155k after 10 years.
You've not accounted for compound interest growth in your calculation.

However, no portfolio will grow by a steady 4.5% a year over 10 years,
The sequence of returns will vary, and given that we have had strong investment growth over recent years I would anticipate the next 10 years could bring more volatility and uncertainty.

As your portfolio is reasonably aggressive, are you happy to accept it's value falling over certain time periods during the 10 years?

Being blunt if I was this Ifa I'd have steered clear of even reasonable assumptions of growth growth with you. I can see the scenario now where the investment tanks and is worth less and you panic and sell (although I guess being balanced and Cautious this is very very unlikely over ten years) and you panic and sell then accuse him of mismanaging your money. As others have said the Ifa is there to provide general asset allocation advice and as the pot grows tax efficient withdrawal advice unless he is individual stock picking for you which as far as I'm aware most simply won't do now for this reason) The performance is in the lap of the gods even over ten years.

Fatbritabroad

bostonerimus wrote: »

FYI folks here is more info on the extra hidden transaction costs on many funds.

https://www.ft.com/content/78918c88-fd13-11e7-a492-2c9be7f3120a

If the link doesn't work google this
"Large hidden fund charges revealed by Mifid II rules"

I'll leave it to you to decide whether the singling out of Vanguard above is justified. Charges are important and transparency is important. I wonder if we could get a total cost (including transaction, fund fees, Brewin Dolphin charge, and IFA fees) for the OPs structure and compare it to VLS60's 0.33% fee plus transaction costs. Personally, I think that's still too high even though it remains the least expensive of many popular funds.

The extra transparency is great but As ocf is the industry benchmark is this not going to affect all funds? So what's the issue?

username12345678

capital0ne wrote: »

You can see why IFAs get a bad reputation, he's just put your money into a couple of 'canned' portfolio's which look a bit dubious. All those 2% holdings seem a bit pointless, they will have very little affect on balancing your portfolio.
Keep it simple, pick your ratio of equities to fixed income 60:40 50:50 etc and just pick say 5 ETFs/ITs to cover UK/Global/Property/Fixed Income.

And what exactly does your IFA do for £62/month (plus VAT no doubt)? I would be willing to bet all he'll do is to print out a statement and make few adjustments - maybe change cash to 3% and property to 3%! And of course there will be dealing charges.

Good luck and remember - KISS

I was with Brewin and I recognise those allocation ratios from my own portfolio.

I did ask the Brewin guy why they went so heavy on UK equity income and it seems that’s what many investors are comfortable with.

I was paying around 17.5k a year in fees to BD and my IFA...which is around 50% of my planned annual income requirement in retirement.

bcfclee27

Thanks all, you have put my mind at ease with my investments.

Am going to leave it as is and see how things go.

In a few years once all the money the IFA has been shuttled into the S&S ISAs I will have about 40k left to invest.
This gives me a couple years to research and then I plan to have a go with that 40k on my own.

Best of both worlds if you like.

If it were now I'd either split between HSBC Global Strategy and VLS 60 or put it all in HSBC.
The reason I'd favour HSBC is it dilutes my uk exposure.

What are people's thoughts on this ?

Kind Regards
Lee