S&S ISA by financial advisor - opinions needed

ValiantSon

bcfclee27 wrote: »

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 ?

They are similar, but not the same. VLS60 is weighted towards government bonds, whereas HSBC Global Strategy (Balanced?) is weighted towards corporate bonds. Corporate bonds should deliver a higher return, but they are also more likely to result in losses. Of the two, VLS is the "safer" option.

You could split your investment between the two, but you need to be aware that this will change the asset allocation of your portfolio. As long as you understand how it affects the portfolio, and the potential outcomes of this, then there is no particular reason not to do it.

If you want to keep half of your investment with the IFA to see what happens then fine, but you need to keep in mind that to get any reasonable comparison you need to stay invested in both portfolios (DIY and IFA) for at least ten years. That's a long time to continue paying those high fees if the IFA portfolio doesn't significantly outperform, and looking at the allocations, I have doubts that it will. It probably won't do badly, but I'd be surprised if it did well enough to justify the fees! (Of course I could turn out to be wrong. If I am, then feel free to come back and tell me so!).

Honestly, I really think the IFA has sod you some snake oil.

BananaRepublic

bcfclee27 wrote: »

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 ?

Just because your portfolio does better does not mean the IFA is pants. She will find a product that matches your risk level, so statistically it might be better, but not in real life with unexpected events.

BananaRepublic

ValiantSon wrote: »

Honestly, I really think the IFA has sod you some snake oil.

In which case you don’t know what you are talking about.

ValiantSon

BananaRepublic wrote: »

In which case you don’t know what you are talking about.

Thanks for that.

You are talking rubbish, of course. You do know what snake oil is, I assume?

The IFA portfolio is sold with the claim that it will do better than self-investing through a multi-asset tracker. From everything that I can see about this portfolio there is no evidence to support that and therefore this meets the criteria to be described as snake oil.

Nevertheless, thank you for another of your charming posts.

ValiantSon

BananaRepublic wrote: »

Just because your portfolio does better does not mean the IFA is pants. She will find a product that matches your risk level, so statistically it might be better, but not in real life with unexpected events.

What exactly is that supposed to mean?

AnotherJoe

bcfclee27 wrote: »

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 ?

About 3 or 4 years ago i had a similar decision to make with two funds that seemed really similar and in the end decided heck, 50/50, and those funds have tracked so close together since then I'd be quite happy to flip a coin now and have either. What doing that also helped me with was investing straight away rather than spend say 6 months dithering over which to get. paralysis by analysis

VLS has an "artificial" concentration in the UK and because of that its concentrated in a handful of sectors and companies, and so if it was me I'd go for the HSBC fund instead which IIRC has UK at the UK global level of 6 or 7%

bcfclee27

ValiantSon wrote: »

They are similar, but not the same. VLS60 is weighted towards government bonds, whereas HSBC Global Strategy (Balanced?) is weighted towards corporate bonds. Corporate bonds should deliver a higher return, but they are also more likely to result in losses. Of the two, VLS is the "safer" option.

You could split your investment between the two, but you need to be aware that this will change the asset allocation of your portfolio. As long as you understand how it affects the portfolio, and the potential outcomes of this, then there is no particular reason not to do it.

If you want to keep half of your investment with the IFA to see what happens then fine, but you need to keep in mind that to get any reasonable comparison you need to stay invested in both portfolios (DIY and IFA) for at least ten years. That's a long time to continue paying those high fees if the IFA portfolio doesn't significantly outperform, and looking at the allocations, I have doubts that it will. It probably won't do badly, but I'd be surprised if it did well enough to justify the fees! (Of course I could turn out to be wrong. If I am, then feel free to come back and tell me so!).

Honestly, I really think the IFA has sod you some snake oil.

Thanks again for the input, to be honest with my limited knowledge the reason for splitting would be to have a safe option in the VLS 60 but also the HSBC to dilute a heavy uk bias.
Does this sound a good plan or not ?

bcfclee27

AnotherJoe wrote: »

About 3 or 4 years ago i had a similar decision to make with two funds that seemed really similar and in the end decided heck, 50/50, and those funds have tracked so close together since then I'd be quite happy to flip a coin now and have either. What doing that also helped me with was investing straight away rather than spend say 6 months dithering over which to get. paralysis by analysis

VLS has an "artificial" concentration in the UK and because of that its concentrated in a handful of sectors and companies, and so if it was me I'd go for the HSBC fund instead which IIRC has UK at the UK global level of 6 or 7%

Again, great advice thanks Joe.

However if you've been happy with both why not keep both than just choose 1. Also if the uk started under performing is it not a good thing having the back up of the HSBC with its smaller uk portion ?

ValiantSon

bcfclee27 wrote: »

Thanks again for the input, to be honest with my limited knowledge the reason for splitting would be to have a safe option in the VLS 60 but also the HSBC to dilute a heavy uk bias.
Does this sound a good plan or not ?

There's nothing particularly wrong with doing that. AnotherJoe is quite right that VLS is overweighted to the UK. Home bias does have some advantages as it reduces the impact of currency conversion, but this is not to say that reducing the UK exposure of the total investment is intrinsically bad.

Over the last five years the performance of the two funds is actually very similar, with HSBC being the slightly better performing. Of course, all of this has happened during an equity bull market, so the government bond weighting of VLS has probably had a slight drag on returns, compared to the corporate bond weighting of HSBC. In a bear market, the corporate bond weighting in HSBC might result in sharper falls than VLS, as corporate bonds are significantly riskier than government bonds, and a downturn in equities is likely to result in a downturn in corporate bonds too. None of this is to say that you shouldn't invest in HSBC. I actually think that the HSBC fund is a good one.

If you want to split the investment then go ahead and do it. I don't think that you are likely to be terribly disadvantaged by it, and it may even give you a slightly better result than just investing in one of them.

Be aware that the costs involved will increase with a split investment like this, so if you use iWeb, as I suggested earlier, you will pay double the trading costs, although the overall ongoing costs will be slightly lower for the total investment because of the differing charges for the two funds.

bostonerimus

2% in fees is a massive headwind to overcome. I don't see why you would keep any money with this IFA and "Distillery Porpoise" combination. At least find a reasonably priced IFA, or better still take a few months to educate yourself and then DIY