Excessive or reasonable charges for managed SIPP?

[Deleted User]

Linton wrote: »

Morningstar provides annualised figures.
From Morningstar: returns for complete years:
Year/OP/VLS80/VLS60

2014/17.37/12.44/12.13
2015/6.34/3.19/2.85
2016/20.95/22.15./18.27
2017/15.24/10.91/8.67
2018/-4.05/-4.04/-3.11
YTD/7.08/8.27/7.05

If you disagree with the numbers I suggest you do what I did and put the OPs portfolio into one of the many online portfolio tracking systems. Anyone else who is interested can do the same. It would be interesting to see.

But the OPs numbers are different. For 2018 it could easily be the charges. For the others perhaps we need more info from the OP. Has the portfolio changed over time? Were there any large additions since January 2016 or by the end of January 2016 was the portfolio much the same size as now and invested in the same way? Or Morningstar could be wrong or I could have typed the numbers in wrongly - as I say its no great effort to check.


I said it was 70% Equity. Morningstars figures:
Equity: 69.9
Bonds: 14.6
Cash: 4.1
Other:11.4

The 2/3rds of the "other" is Property. Yes, real physical property, made out of concrete, steel, bricks etc. Property has similar levels of returns to bonds, perhaps a bit higher but with "events". I dont know why they happen, perhaps revaluations. Most of the rest of "other" is in an otherwise mainly bond fund, so I guess some sort of derivative.

So matching up with a hypothetical VLS70 does not seem unreasonable to me.

According to Morningstar the difference was minimal.



Also, the portfolio has a much lower % US than VLS. The US recovered more quickly than elsewhere from the correction. It also has a higher % small companies which again are taking longer to recover.

1. For starters, does Morningstar include the effects of IFA (very large) charges? No? Then why compare apples and oranges? VLS is a “put in your money and forget” type of fund. Don’t need any annual charges to run it beyond MER (included) and platform costs (smaller than the delta).

2. So, you say, property has low (bond-like) returns but high (stock-like) volatility. Indices in VLS already include property. Property is correlated with stocks during major downturns (2008 in US). Why go overweight in property in one’s pension pot, particularly when it had been on an upward run? Makes no sense.

3. IFA might be messing with portfolio every year. Alternatively he might be letting the allocations drift. We don’t know. It’s irrelevant. You including years prior to investment start date is interesting though. He appears to have been swayed by the “recency” bias and invested in funds which have just had a run up. Rookie mistake.

4. Sure, US performed well. IFA was free to advise reasonable regional allocations. As I said, there is way too much home bias in the portfolio IFA built. As a result industry weightings are weird too.

Bottom line - using Morningstar rather than actual returns from the portfolio IFA built with all the chargesis utterly meaningless

[Deleted User]

Linton wrote: »

I am talking about drawdown not accumulation. Drawdown over 30 years is not trivial and there are a large range of variables.


workplace DC pensions dont manage drawdown. Perhaps you can correct me - but I dont believe robo does either.

What’s so magic about drawdowns that requires a 9-months training course to handle and justifies annual charges? Are you concerned with tax minimization between different pension pots? Or with keeping expenses at a sustainable level so you don’t outlive your money?

[Deleted User]

zagfles wrote: »

It wasn't a portfolio "for the customer to manage", it was a portfolio that the customer was paying ongoing fees to the IFA to "manage".

Right. Also, how long does the annual management of a single fund take for this IFA? One minute? And he charges thousands annually for this exercise? Nice job if you can get it.

zagfles

Deleted_User wrote: »

Right. Also, how long does the annual management of a single fund take for this IFA? One minute? And he charges thousands annually for this exercise? Nice job if you can get it.

This was the thread https://forums.moneysavingexpert.com/discussion/5553079/sipp-fee-question

[Deleted User]

zagfles wrote: »

This was the thread https://forums.moneysavingexpert.com/discussion/5553079/sipp-fee-question

Wow! An IFA is claiming that ~2% in charges is just fine,

Overall, it is not that expensive.

That’s really, really, really bad advice. He then goes on to claim that you need at least 10 index funds. Also misguided,

Not surprised.

dunstonh

Deleted_User wrote: »

Wow! An IFA is claiming that ~2% in charges is just fine,



That’s really, really, really bad advice. He then goes on to claim that you need at least 10 index funds. Also misguided,

Not surprised.

Not surprised at your attitude either. You are wrong and misguided. You appear to have so little understanding of suitability and investing.

[Deleted User]

dunstonh wrote: »

Not surprised at your attitude either. You are wrong and misguided. You appear to have so little understanding of suitability and investing.

Annual charges of 1% are too high. 2% charges are detrimental to one’s long term prosperity. There is no person on earth who is suited investments with 2% charges (except the advisors and the expensive fund managers). Your competence is questionable. And that is the kind explanation.

As Warren Buffett says, “The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”

https://finance.yahoo.com/news/warren-buffett-active-vs-passive-204108360.html

[Deleted User]

Do explain why one needs 10 index funds when a single fund can cover the whole world of stocks and bonds. 3 to 5 funds can do the same in a slightly more efficient manner for large portfolios with additional cost and tax considerations.

dunstonh

Annual charges of 1% are too high.

Your opinion but not fact.

2% charges are detrimental to one’s long term prosperity.

Your opinion but not fact.

There is no person on earth who is suited investments with 2% charges.

Wrong.

Your competence is questionable. And that is the kind explanation.

And your knowledge and understanding about investments and suitability appears non-existint and that is being kind.

As Warren Buffett says, “The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”

Yet he doesnt actually follow a low cost strategy himself.

Do explain why one needs 10 index funds when a single fund can cover the whole world of stocks and bonds. 3 to 5 funds can do the same in a slightly more efficient manner for large portfolios with additional cost and tax considerations.

If you dont understand then perhaps you shouldn't pretend that you do.

[Deleted User]

That is a whole lot of hand waving. All to defend a rip-off. Vs facts. 2% fee eats away 40% of your portfolio after 25 years. https://investor.vanguard.com/investing/how-to-invest/impact-of-costs