Excessive or reasonable charges for managed SIPP?

[Deleted User]

Linton wrote: »

Yet again you appear not to understand the UK situation. As far as investments are concerned IFAs (as opposed to FAs) are not marketing people as they get no benefit from choosing investment A rather than investment B, nor do they lose out if they advise that you dont invest at all. Commission has been banned. What you pay for initially is advice and subsequently you may choose to pay for the effort/skill in managing the portfolio.

They are marketing people. They are rewarded based on how many wealthier people fall for their bs. Their education takes 9 months. Their incentives are not aligned with client’s interests.

dunstonh

Charges are not transparent because:

a) people are not provided with a simple plot indicating cumulative effect of the 1% annual fee, plus the upfront fee, plus the expensive funds’ fee over the projected time of the investment. I doubt people appreciate the massive damage this does to their pension pots.

Again, not correct for the UK. Figures are required to be given at least annually in percentage and monetary terms.

b) people have no idea what are hourly charges of undereducated advisers, once back loaded payments are taken into account.

If advisers are undereducated when at least level 4 then what does that make DIY investors?

c) my bet is that most don’t even realise that the same pot they put into pension is subjected to 1% deductions again and again and again, By the time a typical 30 year investment period is done, a 30 percent bite has been taken out of the original investment (ignoring inflation and extra charges which will come from portfolio growth).

Yet you say those same people who cant understand annual costs should be investing on a DIY basis.

They are marketing people. They are rewarded based on how many wealthier people fall for their bs. Their education takes 9 months. Their incentives are not aligned with client’s interests.

You really don't have much of a clue about the UK requirements and levels.

[Deleted User]

You really don't have much of a clue about the UK requirements and levels.

Do tell me how long formal training takes for DipFA qualification (for level 4). Looks like it takes two units (3 and 6 months), https://www.libf.ac.uk/study/professional-qualifications/financial-advice/diploma-for-financial-advisers-dipfa

I may not have completed this course, but in 6 years of studying maths (including stats), physics and engineering at university level I have learnt that 3+6=9.

Linton

Deleted_User wrote: »

Let’s be honest with ourselves, the portfolio designed by an adviser for OP is crap. You may not be allowed to say this but it is. And it cost him thousands. Underperforms boring 1-fund tracker with 20% bonds in a good year. And in a bad year. And frankly, that’s exactly how I would expect this expensive mess of a portfolio to perform 95% of the time.

........

Lets look at real data, thanks to Morningstar. Fronty's "crap" portfolio is 70% equity, 26% of equity is UK so we can reasonably compare its 5 year annualised return with VLS60 and VLS80:
Fronty:10.82%
VLS80:10.00%
VLS60: 8.42%


Looks like the IFA hasnt done too badly.

[Deleted User]

If advisers are undereducated when at least level 4 then what does that make DIY investors?

Depends on the investor. I don’t call myself a DIY investor. Anyone buying tracker funds is no more “DIY investor” than someone buying IKEA bed is a “DIY furniture maker”. And I am taking a wild guess that I have read more modern research on asset allocation, risk and financial analysis than 99% of IFAs. Not that it’s rekevant

[Deleted User]

Linton wrote: »

Lets look at real data, thanks to Morningstar. Fronty's "crap" portfolio is 70% equity, 26% of equity is UK so we can reasonably compare its 5 year annualised return with VLS60 and VLS80:
Fronty:10.82%
VLS80:10.00%
VLS60: 8.42%


Looks like the IFA hasnt done too badly.

1. Why compare 5 year return vs 3 year return?????

2. OP fund is 20% fixed income. REITs and the like are analogies to shares in terms of risk.

3. Large and consistent underperformance over every year of the last 3 year period vs VLS80 has already been shown above

[Deleted User]

Again, not correct for the UK. Figures are required to be given at least annually in percentage and monetary terms.

How about visualising the damage? Are they adding up the combined impact of adviser fees, funds and platforms? Are they showing the impact on portfolio size at the end? Do they explain that expensive consistently underperforms cheap? Something like this? https://investor.vanguard.com/investing/how-to-invest/impact-of-costs

Linton

Deleted_User wrote: »

1. Why compare 5 year return vs 3 year return?????

3 year returns annualised:
Fronty: 11.69%
VLS80: 11.2%
VLS60:8.86%

2. OP fund is 20% fixed income. REITs and the like are analogies to shares in terms of risk.

The OP s Reit investment is directly held property and so is not really equity like in terms of risk. It isnt traded at a stock market determined price.



Sharpe Ratio
Fronty 1.42
VLS80 1.32
VLS60 1.30


3 year StD
Fronty 7.69
VLS80 8
VLS60 6.47


Any other figures you would like?

3. Large and consistent underperformance over every year of the last 3 year period vs VLS80 has already been shown above

There was a large drop and rapid recovery in world markets in early 2016, so you need to be very careful on the exact dates chosen for the comparison. My figures are all 12 months rather than whole calendar year based from Morningstar so they should be comparable. If this isnt the cause you have some explaining to do as to why VLS60/80 performed so badly against the index.

Prism

Its all very well to compare performance during this wonderful period of growth but it will be more interesting during a downturn or crash. Will the DIY investor try and time the market and sell out some or all of their investments (I bet lots will as they have invested way beyond their risk level)? Will the IFA portfolio do what its supposed to and reduce the losses? Maybe both do equally as bad. Impossible to tell as we haven't had an event now for over 10 years. What I do know is that early and late 2018 this forum had a large number of posts from investors asking, and sometime advising others, on when to sell their holdings as apparently we were days from an equities crash. Thats the worry with doing it yourself

Linton

Deleted_User wrote: »

On a side note, really wouldn’t call “DIY” investors who just buy an all in one fund or a couple of ETFs to provide the required stock/bond allocation. Like I wouldn’t call shopping in IKEA “DIY”.

So you would agree with me that the majority of people in this country with sizable DC pension pots who are not even near the IKEA level of investing (at least with IKEA there are usable instructions) should not attempt to DIY and would be better advised to use a professional?