6 Year Investment Review - Good or Bad?

Hendel

BLB53 wrote: »

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!

I'm starting to think that way too. Thanks for the encouragement.

Linton

Hendel wrote: »

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?

SEI Aggressive looks like a pretty normal diversified 100% equity global fund slightly below average in performancefor its sector though possibly a bit lower in risk than average as well. Its UK holdings are about 30% which some would judge to be too high, but the point is arguable. So not way out on the risk scale but rather more so than most investors portfolios. You wont lose the lot unless the world economy collapses and you and everyone else have a lot more to worry about than your £4K in an ISA. A 40%-50% drop isnt impossible though.


Its average annual return over the past 5 years has been 10.68% If you had invested £36K in 2012 it would now be worth about £66K before charges.


I dont know why your IFA likes SEI funds so much. They are domiciled in Ireland.

AnotherJoe

Zola said it best "you are being eaten alive by fees".


Put it in a fund/funds that meets your risk level which is maybe VLS40 or equivalent (I would say not VLS40 specifically but there are other low cost index funds from L&F and HSBC to similar risk level, and gain 20% performance. (because 5% reduced to 4% is not losing you 1% its losing you 20% of your returns.


Also read point 2 in this https://theescapeartist.me/2016/01/21/the-3-numbers-that-can-make-you-a-millionaire/

Alexland

Linton wrote: »

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.

Spot on it's a small low risk/return portfolio and the fees are reflective of the IFAs effort in providing an ongoing service. My only thought is that you might have been better asking the IFA to setup the portfolio on a transactional basis (one off cost) and not provide an ongoing service. These days that would cause them to use a single mixed asset fund (to avoid rebalancing) but they were less common in 2012.

Alex

Linton

AnotherJoe wrote: »

Zola said it best "you are being eaten alive by fees".


Put it in a fund/funds that meets your risk level which is maybe VLS40 or equivalent (I would say not VLS40 specifically but there are other low cost index funds from L&F and HSBC to similar risk level, and gain 20% performance. (because 5% reduced to 4% is not losing you 1% its losing you 20% of your returns.


Also read point 2 in this https://theescapeartist.me/2016/01/21/the-3-numbers-that-can-make-you-a-millionaire/

As I showed the problem isnt the specific funds the OP has. If anything they provide a slightly better return than the "low cost" Vanguard VLS20 equivalent. The main problem is the low % return against the costs fixed by the size of the portfolio. Investing in a VLS40 rather than VLS20 equivalent would have added a greater return than the cost of overall portfolio charges.

dunstonh

I dont know why your IFA likes SEI funds so much. They are domiciled in Ireland.

Maybe its not an IFA but an FA/wealth manager.

At £45k I would be using a single multi-asset fund unless there are other funds/family members. I would also be transactional and not servicing. That may be the solution to go for. Then you are looking at a low platform charge and a low fund charge.

I'm starting to think that way too. Thanks for the encouragement.

Although do be aware that plenty of DIYers also make a mess of it or actually end up paying more in charges. HLs top ten selling funds is made up of mostly fashion investing and two of its own brand funds which are more expensive than what you would pay with an IFA. DIY well and you can save money. DIY badly and it can cost you more.

bostonerimus

Why did the IFA recommend the trades....did your requirements change? For the amounts we are talking about a single multi-asset fund would be just fine. The OP could do that themselves and save 1.2% in IFA fees. If the OP is risk averse an investment in VLS20 would have produced a 30% cumulative return over the last 5 years....which looks comparable to the 25% return over 6 years of the IFA bespoke portfolio.

bostonerimus

dunstonh wrote: »

Although do be aware that plenty of DIYers also make a mess of it or actually end up paying more in charges. HLs top ten selling funds is made up of mostly fashion investing and two of its own brand funds which are more expensive than what you would pay with an IFA. DIY well and you can save money. DIY badly and it can cost you more.

Anything can be done poorly...DIYers can fail and so can IFA's. DIYers might fail because of ignorance and IFA's because of hubris. If the DIYer keeps it simple they can save a lot in fees and get reasonable returns using multi-asset and/or index funds. The danger comes in being seduced by focused high flying funds and the choices they make when things lose money rather than going up each year.

Linton

bostonerimus wrote: »

Why did the IFA recommend the trades....did your requirements change? For the amounts we are talking about a single multi-asset fund would be just fine. The OP could do that themselves and save 1.2% in IFA fees. If the OP is risk averse an investment in VLS20 would have produced a 30% cumulative return over the last 5 years....which looks better than the 25% return over 6 years of the the OP's portfolio.

The gross return of the OPs portfolio was about 35% over 6 years. So yes if the £36000 had been invested without paying the IFA an investment in VLS20 would have given slightly better returns, but an investment in the actual portfolio would have been even better. However what we dont know is what investments would have been chosen had the IFA not been consulted or whether the OP would have invested at all.

bostonerimus

Linton wrote: »

The gross return of the OPs portfolio was about 35% over 6 years. So yes if the £36000 had been invested without paying the IFA an investment in VLS20 would have given slightly better returns, but an investment in the actual portfolio would have been even better. However what we dont know is what investments would have been chosen had the IFA not been consulted or whether the OP would have invested at all.

Yes, I assumed the OP was risk averse and just took VLS20 as an example. The fees in this situation are a big drag on the portfolio as the returns are quite modest and the IFA fees have eaten a quarter of the portfolio's gain making the net performance worse than VLS20. I would love to know the logic behind the portfolio and the exact requirements of the OP.

This seems like an expensive IFA for the size and structure of the portfolio, but maybe an IFA becomes better value for money the riskier the portfolio...............