S&S ISA by financial advisor - opinions needed

GreenSnake

Thrugelmir wrote: »

Foreign equities introduce currency fluctuation into the risk equation. If you had bought Apple on 31st May 2017 @ $153 a share at an effective exchange rate of $1.29. For £10,000 you could have bought some 84 shares.

Although Apple is now priced $171. An increase of 12%. Valuing your holding at $14,364. In sterling terms those dollars only convert to £10,187 (@ $1.41). A gross gain of only £187 or 1.9%.

Reduction in income to. Currently quarterly dividend would have reduced from 49p to 45p. When converted into £.

Only used Apple purely as an illustration. Stocks performing less well could be underwater so to speak.

True.
But it works both ways.
If the pound drops, it works in your favour.
I wouldn't try and predict currency movements.

But long term trend is pound dropping against the dollar.
Personally, I think Brexit is now priced into the pound (why wouldn't it be?).
But BoE has shown it is happy to trash the pound and there seems no real inclination for them to increase interest rates.

I think holding too much Sterling could be risky right now. Probably not as risky as equities, but who knows?

Long term I'd probably put more faith in the large cap multinationals, than I would do in the British government.

BananaRepublic

The fund looks okay, the performance looks okay. But it looks like they are charging an ongoing fee for doing nothing. Nice work if you can get it.

bostonerimus

BananaRepublic wrote: »

The fund looks okay, the performance looks okay. But it looks like they are charging an ongoing fee for doing nothing. Nice work if you can get it.

That's my issue. Maybe all the fees add up to 1.5% or 2% (0.75% for IFA and the same or more for Brewin and the funds), I don't know. Does the 0.75% fee include everything? Will the portfolio really do better than VLS60 with 0.25%...oops sorry 0.33% including transaction costs....fees. Looks like the IFA and Brewin have really done minimal amounts of work for a tidy sum. maybe they have ongoing costs and insurance to pay for, but there's no need for most people to pay for these as they can do better for themselves if they get a little knowledge and DIY. I stand by my advice to buy VLS60 as I think it will do as well as the IFA/Brewing portfolio and also that because I'm not charging for that advice I'm doing a better job for the OP than the IFA.

dunstonh

But it looks like they are charging an ongoing fee for doing nothing. Nice work if you can get it.

The adviser takes the liability (not the DFM) and is required to check ongoing suitability (not the DFM). There is less work on the investment front (which is why 0.75% seems expensive) but the IFA still needs to most of the stuff that is required.

I have said many times before that I am not a fan of DFMs. However, if in their own range of investments. However, they can be useful if acting on the adviser model and charge a very low fee for doing so.

bcfclee27

Ok so have re-read my pack regarding the investments.

The Annual ongoing charges are as follows...

Platform charge - 0.25%
Total weighted fund charge - 0.64%
Brewin Dolphin portfolio charge - 0.36%
Ongoing Adviser Fee - 0.75%
TOTAL ONGOING - 2.0%

It then goes into Reduction in yield and states on my ISA the RIY is 2.1% a year which means at the mid growth rate of 4.6% each year the RIY would reduce to 2.5% a year.

On my wife's ISA the RIY is 2.3% a year which means a mid growth rate of 4.1% each year the RIY would reduce the growth rate to 2.0%.

Now if it's as I understand it basically if our funds achieve average growth we will only just be beating rates if we had put them in savings accounts !!!

Can someone explain this to me am I reading this right...

Bit confused and somewhat concerned to be honest.....

chrisgg

Most DFMs have been told to be overly cautious with their growth rates, so that they're covered if there's a market crash. One I have had a lot of dealings with are using a 5% annual rate on their MIFID II illustrations, even though over the past 5 years, that figure gross of fees is more like 10-11% for their medium risk portfolio.

AnotherJoe

Yep i think you are reading it right, thats what happens when you use an IFA all other things being equal in your case you are loading about 1% on top of what you'd get if you DIY'd those funds

The classic response would be "well if you DIY'd it that might cost you more" but once you have a portfolio selected (which might be as simple as one fund), the portfolio charge and ongoing adviser fee arent buying you anything so instead of losing 50% of performance you'd lose 25% (eg 4 to 3 instead of 4 to 2).a nd you can reduce that more by selecting the platform and funds you us as well.

Of course if you/your IFA deem it necessary to have a complex set of funds and rebalance every year etc, well then you might deem that worth the cost because you'll get better performance (you hope / they tell you).

OTOH once you start thinking this way you generally are on the verge of becoming a DIY investor with a simple portfolio that long term is much cheaper and therefore will give better performance. If you have (say) £100k in VLS100 it wont perform any better if you have an IFA "managing" it !

An alternative is to split your investment across two accounts, run one yourself, run one with the IFA and platform, and see how they compare and then decide which way to go later.

bcfclee27

AnotherJoe wrote: »

Yep i think you are reading it right, thats what happens when you use an IFA all other things being equal in your case you are loading about 1% on top of what you'd get if you DIY'd those funds

The classic response would be "well if you DIY'd it that might cost you more" but once you have a portfolio selected (which might be as simple as one fund), the portfolio charge and ongoing adviser fee arent buying you anything so instead of losing 50% of performance you'd lose 25% (eg 4 to 3 instead of 4 to 2).a nd you can reduce that more by selecting the platform and funds you us as well.

Of course if you/your IFA deem it necessary to have a complex set of funds and rebalance every year etc, well then you might deem that worth the cost because you'll get better performance (you hope / they tell you).

OTOH once you start thinking this way you generally are on the verge of becoming a DIY investor with a simple portfolio that long term is much cheaper and therefore will give better performance. If you have (say) £100k in VLS100 it wont perform any better if you have an IFA "managing" it !

An alternative is to split your investment across two accounts, run one yourself, run one with the IFA and platform, and see how they compare and then decide which way to go later.

Great advice thanks so much.

I think that's what I'm swaying towards, leave half invested with the IFA and invest half on my own after doing more research and see how that goes.

ValiantSon

bcfclee27 wrote: »

Ok so have re-read my pack regarding the investments.

The Annual ongoing charges are as follows...

Platform charge - 0.25%
Total weighted fund charge - 0.64%
Brewin Dolphin portfolio charge - 0.36%
Ongoing Adviser Fee - 0.75%
TOTAL ONGOING - 2.0%

It then goes into Reduction in yield and states on my ISA the RIY is 2.1% a year which means at the mid growth rate of 4.6% each year the RIY would reduce to 2.5% a year.

On my wife's ISA the RIY is 2.3% a year which means a mid growth rate of 4.1% each year the RIY would reduce the growth rate to 2.0%.

Now if it's as I understand it basically if our funds achieve average growth we will only just be beating rates if we had put them in savings accounts !!!

Can someone explain this to me am I reading this right...

Bit confused and somewhat concerned to be honest.....

From what you've written then you are reading it correctly. As I've said before, I think you are overpaying and your father-in-law's IFA has done you no favours, but would like to continue charging you a lot of money for a mediocre product that he won't actually do very much (if anything) with.

I'll re-state what I said before. If I were you I would write the costs so far off (chalk it up to experience) and invest the money in one multi asset tracker (e.g. Vanguard LifeStrategy, HSBC Global Strategy or Blackrock Consensus) on the lowest cost suitable platform.

Given that we are talking about a £100,000 investment then it might be worth considering a flat fee platform, such as iWeb which will charge you £25 one-off set up and then £5 per trade. There are no other fees, unless you choose to move to another platform, when they will charge a £25 exit fee (but you may not ever need to leave). You can open a GIA with them as well as the S&S ISA at no extra cost (they only charge one £25 set up). In this tax year you would, therefore pay £35 in platform charges (£25 set up and one purchase of funds in the ISA and one in the GIA), i.e. 0.035% platform charge. The cost of the funds vary, but if you went the Vanguard route then you'd pay 0.22%; for HSBC 0.17% - 0.21% depending on which version; and for Blackrock 0.22% or 0.23% depending on which version.

Honestly, you've been sold a mediocre fund at high prices. I'd also let my father-in-law know what I'd been sold and suggest that he had a good look at what he was paying for and how much it was costing him.

My suggestions come free.

bcfclee27

ValiantSon wrote: »

From what you've written then you are reading it correctly. As I've said before, I think you are overpaying and your father-in-law's IFA has done you no favours, but would like to continue charging you a lot of money for a mediocre product that he won't actually do very much (if anything) with.

I'll re-state what I said before. If I were you I would write the costs so far off (chalk it up to experience) and invest the money in one multi asset tracker (e.g. Vanguard LifeStrategy, HSBC Global Strategy or Blackrock Consensus) on the lowest cost suitable platform.

Given that we are talking about a £100,000 investment then it might be worth considering a flat fee platform, such as iWeb which will charge you £25 one-off set up and then £5 per trade. There are no other fees, unless you choose to move to another platform, when they will charge a £25 exit fee (but you may not ever need to leave). You can open a GIA with them as well as the S&S ISA at no extra cost (they only charge one £25 set up). In this tax year you would, therefore pay £35 in platform charges (£25 set up and one purchase of funds in the ISA and one in the GIA), i.e. 0.035% platform charge. The cost of the funds vary, but if you went the Vanguard route then you'd pay 0.22%; for HSBC 0.17% - 0.21% depending on which version; and for Blackrock 0.22% or 0.23% depending on which version.

Honestly, you've been sold a mediocre fund at high prices. I'd also let my father-in-law know what I'd been sold and suggest that he had a good look at what he was paying for and how much it was costing him.

My suggestions come free.

Thank you for your help.
As said above I think I will do half and half and see how that goes with the view of moving it all over to me if I do ok in the future.

I cannot really decide on VLS60 or HSBC Global strategy.
Is there any disadvantage from splitting the two and go half in each ?