SJP S&S ISA, Worth it?

boshdmg

Im 26, I have saved up 16k as a deposit for a house. I now looking to invest in an S&S ISA instead of getting a repayment mortgage, and as a means of saving a lump some to put in my pension, as I am currently holding off on getting a pension as my current employer does not offer pension contributions.

This in mind I visited St James Place to get some advice:
http://www.sjp.co.uk/portal/internet/investments.

I said i initially wish to invest 400 a month, and they recommended i invest it equally across 4 trusts:

THSP: Greater European progressive
THSP: UK&General Progressive
MPC: UK growth
Invesco Perpetual: UK High Income

To me the advice seemed solid and all the trust seem to have good historic growth. I just wanted to know am i making the right choice arranging this through SJP, admittedly there is value in the face to face service and expertise they provide, but how much cheaper would the fees be if i arranged something similar myself with Hargreaves Lansdown?

The small print on this ISA quote says regarding the costs:
"These have been valued at 1209.60 in the first year and then £72 a year from year 6 onwards. An additional amount of 0.25% of the bid value of the fund is paid on each anniversary"

The projections based on a illustrative 7% growth was:

year 1: Invested to date:4800 Deductions to date: 298 Might get back 4680
year 2: Invested to date:9600 Deductions to date: 712 Might get back 9590
year 3: Invested to date:14700 Deductions to date: 1250 Might get back 14700
year 5: Invested to date:24000 Deductions to date: 2780 Might get back 25800
year 15: Invested to date:72000 Deductions to date: 24300 Might get back 100000

Are these costs competitive? Seems the deductions are quite damaging in the first few years, is this normal?

Ian_W

Not an expert view by any means and not really aware of your tolerance to risk - but it all seems very UK-centric. Even a little diversity would suggest to me at least maybe a couple of UK funds, a totally European one and something global to spread your dosh [and risk] around a bit.
Of the funds themselves:

THSP: Greater European progressive
In a small sector of Europe inc UK, whereas most Euro funds are ex UK and have generally performed better for it over the last few years. Steady Eddy but nothing special at 17 out of 30 similar funds over 12 months and 11/23 over 3 yrs. Sector description HERE.
THSP: UK&General Progressive
UK All co's - I'm no great fan of trackers but considering the initial charge you'd probably do better in an all share tracker IMO. 238/335 over one year, 241/288 over 3 years so quite a below average performer.
MPC: UK growth
Too new to have much data. All the SJP Funds are listed HERE.
Invesco Perpetual: UK High Income
One of the best Equity Income funds and managers around over a very long period.

SJP funds aren't available at HL but the IP one has no initial charge saving you 5% and rebates 0.25% annually of the trail commission. HL are cheaper if you don't have advice - execution only - but you need to pick the funds and the areas you want to invest in.
I'm sure someone with more expertise will be along shortly but to me it looks expensive for nothing special in the way of advice. Will they offer further advice/servicing in future years about whether you should rebalance/switch funds etc or were you left with the impression that was it?

jamesd

I'm unimpressed. Looks like full commission, funds that are poor performers, except Invesco Perpetual High Inome which is one of the best around, and very UK-centric investments.

Have a look at Ok then - How do I choose a S&S ISA to get an idea of what a sector allocation is and see some of what you can get of you're not restricted to the poor-looking SJP fund range. Example allocations for medium and high risk.

dunstonh

SJP are very slick but very expensive. They are not IFAs either. Its a panel or multi-tie. A lot of Allied Dunbar reps ended up there!

Typical average commission on ISAs are 1.8% initial commission of the contribution. Typical maximum is 3%. (these figures are published by the FSA).

So, the commission on the SJP recommendation is well above the typical maximum, let alone the average. The product structure seems more like a structured ISA as the trail commission of 0.25% is lower than normal and it appears that the adviser is getting it indemnified in an upfront payment as well as possible extra admin charges. It doesnt sound like a clean contract that you would get from an IFA using a fund supermarket such as Skandia/Selestia, Cofunds or Fidelity FNW (there are others but they are the three popular ones).

If you want advice then you should always see an IFA. There is no guarantee that the IFA will be perfect and many will not be able to be as slick with the marketing literature that SJP have but they all have the ability to come in cheaper and with full whole of market products.

HL is cheaper but you dont get advice. If you dont need advice, then they are fine. Execution only basis with HL would give you no FOS protection so you couldnt come back in 15 years time and say you should have had a repayment mortgage. HL will neither track the ISA to your mortgage or provide you with projections or advise you if the amount you pay needs to be altered to fit your target growth rate. If you are happy to do that yourself, then use them.

boshdmg

Hi Guys, thanks for taking the time to reply its very kind of you, I was worried what i had written didn't really make sense.

I am of the mind that I would like to arrange the investments myself to save on commission, but i don't really have the expertise to pick the right funds, especially as I would like to take above average risk. I could just spread my cash around afew recommended funds and see what happens, but i'm scared i will make a foolish mistake. Thats why I was going to rely on SJP, but i guess i could falling for the slickness, they do come across as very competent, and assured me of an on going service, they will also be managing my mortgage so i guess they will be able to advise me if my investments are wise inlight of the mortgage, but im not sure that is worth "well above the typical maximum" charges.

Say if arranged similar funds myself through HL would i be saving myself thousands over the long term?

boshdmg

Just look at the site Ian posted.....

Should i not be looking at funds like these:

http://www.trustnet.com/ut/funds/?fund=1700
http://www.trustnet.com/ut/funds/?fund=481

They have very high growth over many years, it seems odd i haven't been advised to put some of my money in something like these, are funds like these much higher risk is that why?

dunstonh

boshdmg wrote: »

Just look at the site Ian posted.....

Should i not be looking at funds like these:

http://www.trustnet.com/ut/funds/?fund=1700
http://www.trustnet.com/ut/funds/?fund=481

They have very high growth over many years, it seems odd i haven't been advised to put some of my money in something like these, are funds like these much higher risk is that why?

You certainly need advice based on the above comments.

They are very high risk funds and even a high risk investor wouldnt put large amounts into those. They typically would make up less than 10-20% even on a high risk portfolio.

Just because something has gone up, doesnt mean it will keep going up at the same rate. They certainly have potential for increases and could be good for some of the regular contribution but you need to be aware that both of these funds are capable of dropping 70% in a year (as has happened in the past).

SJP is way too expensive. Better option is to go to an IFA who will at least match FSA typical average or better. If you get typical average or better then the cost of advice wont make a big dent in the overall return. The potential for loss if you get it wrong is far higher than the cost of advice.

jamesd

boshdmg, those funds are OK if you're comfortable with them going down in value by 20% in one day and 75% over a week. Typical daily variations in the 0-5% range. Both are at close to the top of the volatility range.

it's extremely unwise for a new investor to be putting a substantial portion of their investments into those funds.

Gartmore China Opportunities is a fine China specialist fund. As a single country fund and an emerging markets fund I generally work on the assumption that it can fall to 25% of its current value, or by what it's grown by in the last few years. It's one of the most volatile funds you can possibly buy. Lots of both long term growth and short term plummet potential.

Invesco Perp Latin American is a decent Latin American fund. Latin America in general is regarded as one of the higher risk regions and is highly volatile. But perhaps less so at the moment than Asia-Pacific and definitely less so than a China fund like Gartmore China Opportunities.

If you don't believe in drops of 75%, take a look at Japan in the 80s and 90s: their market index reached 40,000 then dropped to 10,000. It really happens and you can see drops of value of 20% before the news even reaches the mainstream press and another 20% or 40% before you've had a chance to say sell.

If you wanted to pick just two funds you might look atInvesco Perpetual High Income for the UK and Artemis Global Growth for non-UK. Or any pair of decent funds in the UK equity income and global growth sectors.

Note also that if you look at the Artemis chart, someone who bought in April 2006 saw a 20% drop in value just a few weeks later and took a year to get back where they started. It's much more cautious than the two you mentioned but it's still high risk.

But you should really look at the sample asset allocations for guidance on how to get a better spread.

boshdmg

Thanks for spending the time to reply james.

Yeah don't think i am willing to take them sort of risks, i think what i am looking for is an investment of moderate risk that will hopefully provide me with an mid to long term investment that will generally preform better the returns i am getting from my cash ISA. SJP seem to think consistent 10% growth with there suggested fund would be possible.

A part of me want to use them so that i have a "one stop shop" for all my finance needs, but apart of me think as long as i am sensible and read these forums i could arrange a similar S&S myself with cheaper fees


It would be nice to put 10% of my portfolio into something high risk but as im initially only investing 400 a month i don't think this will be practical, considering these funds have £100 minimums.



As people have said my current suggested portfolio is abit UK centric, would it be a good idea to switch one of those out for the other options, which are:



Jupiter:Cautious
Wellingmangement: Corporate bond
Schroder: Equity income
Aberdeen: Ethical
Aberdeen: Far east
Newton: global
thsp: international
rcb:north america
Invista: property
GAM: recovery
Insight:Tracker
Polaris: World Opportunities

boshdmg

How do i go about finding reputable IFA in my area (Newcastle Upon Tyne)? Is the some sort of directory\site? Iv googled it and found a few, but i have no way of knowing if they are credible?

jem16

http://www.unbiased.co.uk/ is the best place to look.