Personal pension advice

zagfles

TeeDubya wrote: »

Perhaps I'm doing this guy an injustice. I believe the reason was that the existing advice was based on keeping the funds within Aegon to save the costs of transfer elsewhere. The following advice was considering moving to better funds outside of Aegon.

But did he charge you a % of your portfolio a year ago? Why didn't he recommend the outside funds a year ago? What has changed?

I'm curious about what you say about moving the funds after only a year. The reading and general advice I read about suggests that you should regularly keep an eye on funds to make sure that hey are performing and if not then switch them. Isn't this part of the service that an IFA offers?

A year really is far too short a time to assess performance. Is he going to move them every year based on performance and charge you 2% a time? Annual tweaking/rebalancing, yes, but not wholesale changes, unless something substantial has changed.

Google "churning" (not saying this is necessarily happening here..but I'd be asking serious questions of the adviser and perhaps considering a complaint if he doesn't give a plausible justification).

https://www.investopedia.com/terms/c/churning.asp

http://www.financial-ombudsman.org.uk/publications/technical_notes/churning.htm

TeeDubya

Thanks Dunstonh

Well when I first spoke to him he gave me the two options of one off or on-going advice. The one off advice was a fixed fee and the ongoing was a percentage. When I asked about what constitutes the on-going advice he said that we would review the funds in a years time and amend if necessary.
To me there wasn't any difference between that and getting in touch with him myself in a years time and saving the dfference in cost between the payments. So I opted for the one off and did get in touch with him after a year as I said to him that I would.
So based on his initial advice I have it split across 15 funds. A selection of which are:
SE Artemis Income
SE NEWTON GLOBAL INC
SE BLACKROCK EUR DYN
SE SCHROD US MID CAP
SE THREAD UK PROP
SE M&G GLOBL EM MKTS

Aren't these multi asset funds with themselves anyway? What does on-going advice really mean? My understanding of fund managers is that they are constantly working to make sure that their fund is performing and that's what you are paying for if you select those funds. so I would have thought it would be the same thing if you were paying for on-going advice from an IFA.
An annual review doesn't make me feel very comfortable about what may happen to my pot if the markets are looking vulnerable and my review isn't due for 9 months.

TeeDubya

That is sound advice and much appreciated OldMusic Guy. All this joining the forum and discussing with you all is my new education

TeeDubya

Thanks Zagfles

He did say I could move them but keeping them within Aegon saved me the cost of the tansfer fee so I believe that what he was doing was giving the best option as he saw it for funds within Aegon as I did say that keeping costs down was important to me.


I did it as one off advice rather than an on-going percentage. The reason being that he said that on-going service would mean that I would get annual review. To me that was no different to me getting in touch with him in a years time myself and paying for another one off cost.


I said it in my response to dunstonh but what do these guys do as part of an on-going service?

dunstonh

To me there wasn't any difference between that and getting in touch with him myself in a years time and saving the dfference in cost between the payments. So I opted for the one off and did get in touch with him after a year as I said to him that I would.

The difference is that with ongoing, any changes are not charged for as they are covered under the ongoing servicing agreement. When you go ad-hoc/transactional, you are charged for each event.

So based on his initial advice I have it split across 15 funds. A selection of which are:
SE Artemis Income
SE NEWTON GLOBAL INC
SE BLACKROCK EUR DYN
SE SCHROD US MID CAP
SE THREAD UK PROP
SE M&G GLOBL EM MKTS

Aren't these multi asset funds with themselves anyway?

They are single sector funds. Not multi-asset.

The SE prefix indicates and old pension version as well.

What does on-going advice really mean? My understanding of fund managers is that they are constantly working to make sure that their fund is performing and that's what you are paying for if you select those funds. so I would have thought it would be the same thing if you were paying for on-going advice from an IFA.

Ongoing servicing can vary across firms. Typically, it would include reviewing the funds, checking due diligence against them, rebalancing them and recommending any changes.

An annual review doesn't make me feel very comfortable about what may happen to my pot if the markets are looking vulnerable and my review isn't due for 9 months.

You dont normally change your investments because of fear of an event that is always coming but you dont know when. Trying to chase the returns or moving up and down the risk scale to try and time events usually results in lower returns over the long term.

TeeDubya

What do you mean by 'old' pension version?


Also based on what you are saying I have paid for one off advice but been given single asset funds which I am no longer getting advised on.


What would you recommend and far as getting back on track?

TeeDubya

I'm looking into your advice OldMusicGuy including for my ISA's for low-cost funds.


I understand that you've changed your strategy since retiring. Out of interest how did you manage it all pre-retirement. Did you use an IFA and if so how did you go about choosing one. I've used one of the recommended websites from pension advisory service and received call backs from advisers. I used the service 3 times and each time only got one call from the same IFA which is the one that wanted to charge me 3% initial arrangement fee. I was pretty shocked by that and adds to my mistrust of finding someone honest.

dunstonh

What do you mean by 'old' pension version?

The SE in front of the fund name means you are using insured funds. Those insured funds are only available on previous generation pension products or the more basic workplace pension. That doesnt make it bad. It does make it harder to provide ongoing advice though and switching to a modern product that integrates with the IFA systems and accepts instructions directly from the IFA is normal when you move to ongoing advice. When its transactional, staying on the old product is not an issue.

Also based on what you are saying I have paid for one off advice but been given single asset funds which I am no longer getting advised on.

Which is allowed. The spread is basic (which could be partly due to the lack of range available on the product version and partly due to there not being ongoing servicing).

What would you recommend and far as getting back on track?

I can't as a) not enough to go on and b) not allowed to on the board. Anything here is just discussion. However, I would think the product is likely to be improved and if you went ongoing servicing, the fund range would change. If you went DIY, the product would likely need changing and the fund range would change.

I've used one of the recommended websites from pension advisory service and received call backs from advisers. I used the service 3 times and each time only got one call from the same IFA which is the one that wanted to charge me 3% initial arrangement fee. I was pretty shocked by that and adds to my mistrust of finding someone honest.

Why does it create mistrust and question their honesty? The adviser needs to earn a living. You cannot get advice for free. One of the first things an adviser is going to have to do is analyse the existing pension and compare it to others and make a recommendation. That is initial advice and carries an initial cost. If you then decide to employ them to provide ongoing advice, then each year your pension is going to be reviewed, rebalanced etc and you pay on an ongoing basis.

kidmugsy

TeeDubya wrote: »

The reading and general advice I read about suggests that you should regularly keep an eye on funds to make sure that hey are performing and if not then switch them.

You chose the funds originally because you believed that you, or your advisor, had magic fund-choosing skills. If they haven't "performed" then clearly your skills are deficient. Why do you think you'll do better next time?

Frequent trading wil make money for someone but it probably won't be you.

OldMusicGuy

TeeDubya wrote: »

I'm looking into your advice OldMusicGuy including for my ISA's for low-cost funds.
I understand that you've changed your strategy since retiring. Out of interest how did you manage it all pre-retirement.

I mainly did it on an ad hoc basis and from a position of ignorance which I now regret. I have no defined benefit pensions (which most people on here seem to have had at some stage) so should always have been saving into a DC pot. But I didn't.....

For the first 10 years of working I did nothing and had no pension. I then joined a company that had a DC scheme and used a local IFA to advise their employees. That IFA was very good and got me started down the pension path. I then moved companies a fair bit, always with other DC schemes and I then got involved with another IFA who gave me some good advice but ended up doing some very dubious things and got kicked out of his firm. Fortunately I didn't lose anything but I know other of his clients that lost money as a result.

So that made me a bit wary of IFAs, thus as I moved jobs I just contributed whatever I had to get the maximum employer contribution but never paid much attention to where the funds were invested (I usually just took the default fund or lowest risk option). In my mid-50s I started to think properly about pensions (which I should have done much earlier) and saved like crazy into my DC pot. I combined the six individual pots I had built up over the years into one on the HL platform, because that's where my (then) current employer had set up a SIPP.

About four years ago I paid for one-off advice from a tied FA who worked for HL. I didn't have a problem with this, because all my money was with HL and I was very happy with the choice of funds they had. A bit like you, the FA helped me construct a portfolio of funds. It was ok but as I started to think about early retirement, I did a lot more reading and research and started to get to the point where I felt I could select my own funds. I felt the portfolio I had was too biased towards higher fee funds and because I had told the FA that I wanted a cautious portfolio, he fulfilled on that so the returns weren't great.

So about one year ago I decided to manage my own fund choices. I moved everything into a mix of low cost multi-asset funds but also selected an actively managed fund that was supposed to deliver income, as I felt that would be good once I retired. However, I found that the active fund was too volatile for my liking, especially once the market went into its correction phase earlier this year. Also, the choice of fund may have had something to do with it (it was one of the Woodford funds, which have not performed well).

So I have adapted my strategy and because I am very risk averse, I am happy with just three multi-asset funds with different global exposures and risk profiles. This has reduced volatility already and I can see that the portfolio falls at a lower rate than the market (although of course it grows at less than market rates). But that suits me fine because I have a big DC pot and if it grows in line with, or slightly ahead of, inflation, it should last into my 90s and beyond (I have other investments as well).

What I've learned:

- Managing your own investments is perfectly feasible (I manage a fund that is between between six and seven figures). However, you need very clear objectives and you must read and educate yourself so that you are comfortable with your choices and can stick with them. It's taken me 2 to 3 years to get to that point.

- IFAs can be very helpful or complete shysters (hopefully most are in the former category). Choose carefully. If you are not confident in making your own choices, I think a well chosen IFA would be a good move.

- Don't rush into decisions. The worst thing you can do is to chop and change all the time, and there will always be someone on here that will say "these fund choices are better than the ones you have". It can be too tempting to chase returns which exposes you to risk of making poor decisions IMO.

- I was very happy using an FA from HL but then I had all my money with HL, so they weren't trying to "sell" me anything. You should be wary of tied FAs.

- My biggest mistake was being too risk averse early on, because I didn't understand enough about pensions and investments. I should have been more aggressive in my choices while accumulating. I'm happy with a very risk averse strategy now because I am retired and am looking to protect what we have while we spend it over the next 30 to 40 years (hopefully!).

- Make your own fund choices if you go DIY. I don't tell people what I have because I have chosen them and am happy with them. They may not be right for you and I'm sure some people on here might say "why did you do that, why not do this instead". I will tell you that I have one of the Vanguard Lifestrategy funds and one of the HSBC Global Strategy funds among my holdings.