6 Year Investment Review - Good or Bad?

Heedtheadvice

There is a lot of truth in the response if that meets your lower risk profile.
It would not seem to meet your current risk wishes and perhaps given your time scale I would agree with your current view but that is only my amateur opinion!
However I do agree that your costs are eating into your returns quite a bit. If you have confidence in managing your own affairs and with help from this and other sites you could rebalance your portfolio and DIY.



I'd wait till you get more expert opinions than mine posted before making a decision. EDIT: I see I was beaten to it!


Your annual percentage gain of your investment is similar to your mortgage interest. Have you been receiving income from the distributions on top of your gain? Note that your ISA gains are tax free but mortgage probably comes out of taxed income. Mortgage costs are likely to rise if the interest rate does climb (as per general opinion!) but your investments might not be so certain. Over the longer term a more adventurous balance on your portfolio should give better gains than you are currently seeing and almost certainly would have done over the last six years (given the correct selections!) but not been as low a risk.


if you go down the DIY route seek from here comments on your portfolio balance as well as risk.


...and I repeat only my personal thoughts!!

dunstonh

You have to be wary of examples that are giving returns at much higher risk levels than yours. Dates need to be considered as well as 2012 saw some volatility where the actual date would make a difference in the returns. Did you invest at the peak or the trough in that year?

Context of risk is important as some of the examples on this thread are much higher than what your risk level. Indeed, yours appears to be very low risk. And the last 6 years have seen very good returns on higher risk.

Today, I’m prepared to keep maybe 50% in same risk profile but split the remainder into higher risk/potential growth funds. Perhaps 20% moderate, 20% high, 10% very high. (Forgive me if my terminology is poor, but I hope you get the idea).

That is very 1990s in investment style. However, nowadays you would expect to weight the overall portfolio to your risk profile and it would include investments from above and below but not set on the basis you have done them.

Hendel

Thanks dunstonh,
Although there is conflicting advice being offered, I’m finding it very useful , not least to guide the questions I shall pose to my IFA when we meet soon.


I do feel there is a majority view that I’ve paid a lot relative to the modest gains. I’m keen not to perpetuate that situation unnecessarily.


Thanks again to everyone.

kennyboy661

Hendel wrote: »

I’ve broached this with IFA. His response was: “Balancing growth potential with wealth preservation is very important. Many studies have proven that it is more important to minimise losses than maximising returns for longer term growth.”

This is just gibberish mumbo jumbo.


I'd avoid the advisor just based on this statement.


You timescale is 15-20 years - most of your investment should be in equities unless you are very risk adverse / cautious. Perhaps thats what you initially told the advisor.


The charges are brutal - do it yourself

thickasabrick

Just ran an example on the Trustnet portfolio with your figure with a single fund.

£36000 purchase of Vanguard LifeStrategy 60% Equity A Inc at £105.92 on 30/08/2012

Name Vanguard LifeStrategy 60% Equity A Inc
Units 342
Purchase Price 30/08/2012 105.92
Total cost (GBP) 36224.67
Bid / Offer 20/09/2018 163.5
GBP Value 20/09/2018 55948.81
Profit/Loss GBP 20/09/2018 19724.14
Profit/Loss % 20/09/2018 54.45

You could probably add a "Dividend reinvestment" of approx £3245 to the figures as well.

So your total would probably be £55948.81 + £3245 - £3700

£ 55493.81

Reason I've used a single fund is that I've just reviewed my SIPP. Similar timeframe to you except I had that single fund and no changes or additional purchases throughout the period.

For me the figures were (not exactly like for like SIPP/ISA):
Ongoing Adviser Charge £ 10256.07 so about £150 a month compared to your £38.54
Platform Charge £ 4728.97 so about £ 69 a month compared to your £8.79
Although my initial investment was about 3.5 times yours at £139847. There was a "Dividend reinvestment" of £12608 over that period so I have included a portion for that as well in the example.

Hendel wrote: »

I invested £36k in an ISA wrap containing 5 or 6 funds selected by my IFA in 2012 and I’m about to review them 6 years on.

During the period of the investment, the IFA has recommended fund swaps on 3 occasions, which I’ve duly authorised.

Today’s value is £45k and charges have totalled nearly £3700, comprising £633 for the wrap platform, £2775 IFA fees, and £260 trading fees.

I’m about to review the investment with the IFA and would like to ask forum members what they think about performance so far.

Do you think it has done Ok? Has it proved to be expensive? etc.

Any thoughts you have will be gratefully received. Thanks in advance.

Linton

I analysed your portfolio with Morningstar:


It is split about 20% equity, 21% bonds, 34% cash, and 44% "Other". So the funds suggested by a previous post are far higher risk and cannot be meaningfully compared with your situation. This does indicate a danger with naively going for high performance without advice.


Looking at performance, some of your funds have only been around for about 5 years so I have analysed your theoretical performance on that basis. Morningstar shows an annual return of 6.1%. The nearest risk-equivalent Vanguard fund is Lifestrategy 20% with a 5 year annual return of 5.1%. However the non equity investnments are rather different so again a comparison is not too meaningful.


From your figures I get a gross annual return of 5.2%. This difference is partially due to a significant market fall in 2012/2013 and also due to my assumption that all fees were deducted at the end. However it is near enough for my purposes. The problem is the fees reduce the annual return to a bit below 4%.


So my conclusion is that if you want a pretty cautious portfolio the one chosen by your IFA seems reasonable and is better diversified with better performance than the simplest alternative. The main opportunity for improved performance would come from a reconsideration of your risk. I would question whether a 20% equity allocation is far too cautious for your longish timeframe. The fees per year do not seem particularly high though it is no great money-earner for your IFA as £36K is a rather small portfolio to pay someone else to manage.

Albermarle

Hendel wrote: »

Thanks dunstonh,
Although there is conflicting advice being offered, I’m finding it very useful , not least to guide the questions I shall pose to my IFA when we meet soon.


I do feel there is a majority view that I’ve paid a lot relative to the modest gains. I’m keen not to perpetuate that situation unnecessarily.


Thanks again to everyone.

As already said difficult to make exact comparisons , due to the different risk factors involved . However just out of interest I am invested in various funds in ISA's and via pensions. Mainly it is in medium risk balanced funds with some lower and some higher risk .
Over the last 6 years they have increased between 35 and 65%, with an average around 50+%
Charges between 0.5% and 1 .2% . I think the OP should have been more in this area but if he told the IFA he was a low risk person then this is probably the issue + the charges are high

Linton

Albermarle wrote: »

As already said difficult to make exact comparisons , due to the different risk factors involved . However just out of interest I am invested in various funds in ISA's and via pensions. Mainly it is in medium risk balanced funds with some lower and some higher risk .
Over the last 6 years they have increased between 35 and 65%, with an average around 50+%
Charges between 0.5% and 1 .2% . I think the OP should have been more in this area but if he told the IFA he was a low risk person then this is probably the issue + the charges are high

The charges do not seem outrageously high to me. The platform fee is around 0.25% and the IFA charge about 1.2% annually. The 1.2% figure seems rather high but it only amounts to £450 or so per year so the IFA isnt getting rich on the work. The key problems are the low gross returns and the small size of the pot makes IFA management more difficult to justify economically.

BLB53

Before your next meeting I suggest you research whether you could manage your investments yourself. If you feel reasonably confident to do this then ditch your adviser...I am sure you (and most diy investors) could do a lot better than an average annual return of 3.8% over the past 6 yrs.

Its not rocket science...all the information is freely available. The hardest part I guess is managing yourself!

Hendel

Thanks All,

Meeting with IFA very soon, so I feel much better armed for the discussion now.

Incidentally, I have another £4K's worth of shares in a non-ISA Halifax share dealing account (started with £2k about 6 years ago on the basis that I was prepared to lose the lot - who says I'm not a high-roller?). I was thinking of cashing in and reinvesting within the ISA wrap. Again, I'm prepared to lose it all so I'm happy to put it in a high risk/potential growth asset. IFA recommended SEI Aggressive Fund.

Any thoughts?