Excessive or reasonable charges for managed SIPP?

[Deleted User]

fronty wrote: »

Was just breaking down my portfolio performance, my IFA summarised it as an average of 7.31% per annum. Simply looking at the per annum performance from years 1, 2, 3, start Jan 2016, I get these figures:

Yr1 (2016): +16.36%
Yr2 (2017): +8.42%
Yr3 (2018): -5.11%

However since January, the portfolio has gone up +5.32% YTD, so it's recovered the losses from yr 3.

This performance doesn't strike me as being particularly stella but I have no idea how this compares with other peoples managed portfolios. The dilemma of course is whether another IFA can do a better job for lower fees....?

Maybe I just ditch the IFA and stick the whole lot into a small number of global funds via II or AJBell etc. but then I'm back to having to keep an eye on them, which was the whole point of having an IFA do this for me in the first place.

Like you say, “portfolio returned X over 3 years” is meaningless as a measure of IFA’s performance. You should compare against an appropriate benchmark. In your case, to keep it simple, you could compare against an index of bonds and an index of world equities. Assign 20% weight to bonds. The rest is equities. If you want to be more accurate, split equities into UK and non-UK indexes in the same proportion.

In my opinion your IFA should have provided this information. Why not ask if they haven’t?

Three years is a bit short to really judge; in a perfect world you need more than 10 years to capture a major downturn, but I assume you don’t have it. Still, 3 years should provide some indication.

And in answer to your your question, I would agree - ditch the ISA, read a book or 2 and buy something really simple. For example Vanguard FTSE All-World UCITS ETF charges 0.25% and provides all stockmarket diversification you would ever need. Recent returns in GBP:

2016: 30.12%
2017: 12.91%
2018: -4.55%

Note how your complicated super expensive IFA selected portfolio managed to underperform in a great year. And in the average year. And in the bad year too. That’s what I call “consistent”.

You would also need a similar fund for fixed income for your 20% British bonds allocation (assuming that’s what you actually want and need).

Then set up a policy and a rebalancing threashold. That’s it. You are done.

But don’t take my word for it. Read a couple of books and make your own mind. This is your money. Neither me nor all IFAs in the world have as much vested interest in this as you do. And you should take responsibility.

And once you pick your a) asset allocation and b) funds to represent it, you must stick to your investment policy. Through thick and thin. That’s the important part.

EdSwippet

Deleted_User wrote: »

For example Vanguard FTSE All-World UCITS ETF charges 0.25% and provides all stockmarket diversification you would ever need. Recent returns in GBP:

2016: 30.12%
2017: 12.91%
2018: -4.55%

The OP's portfolio is 20% bonds, so Vanguard LifeStrategy 80 would be a better comparison point. Its numbers are:

2016: 22.15%
2017: 10.91%
2018: -4.04%

This doesn't alter your point, though. Just trying to provide a more valid comparison.

Joey_Soap

What a rip off this "managed" SIPP sounds.


Think of it like this - If you have really good investments you "might" be able to draw down 4% per annum from your funds. You want to give an adviser 1/4 (1% or 25% of 4%) of your total pension income? Honestly, that's outrageous.


I have Terry Smith, Nick Train and Steven Yiu managing my SIPP invesments. And I don't pay an IFA to run his Mercedes, BMW or his Audi out of my hard earned savings pot.

dunstonh

In my opinion your IFA should have provided this information. Why not ask if they haven’t?

There is no requirement and the vast majority are not interested. So, "should" is not correct. However, most advisers have the software to do it if asked.

Note how your complicated super expensive IFA selected portfolio managed to underperform in a great year. And in the average year. And in the bad year too. That’s what I call “consistent”.

Note how you manipulated the figures to give a comparison that was not like for like (100% equity vs 80% equity) You also failed to include a deduction for the platform charges.

beamyup

Joey_Soap wrote: »

What a rip off this "managed" SIPP sounds.


Think of it like this - If you have really good investments you "might" be able to draw down 4% per annum from your funds. You want to give an adviser 1/4 (1% or 25% of 4%) of your total pension income? Honestly, that's outrageous.


I have Terry Smith, Nick Train and Steven Yiu managing my SIPP invesments. And I don't pay an IFA to run his Mercedes, BMW or his Audi out of my hard earned savings pot.

Fantastic summary which i completely agree with.

The OP said that he did not want to spend his time managing his own portfolio but what would this take- maybe 4 hours per year?
Even if I assume that the Vanguard (or any other) good portfolio is just equal to the existing one I cannot even calculate what difference that would make to the end result (final pension value) - it could be a few hundred thousand of pounds assuming 30 years of growth being attenuated by the 1% IFA PA fee (assuming you put that fee into the pension rather than spend it elsewhere!). Surely that is worth a few hours per year?

[Deleted User]

dunstonh wrote: »

There is no requirement and the vast majority are not interested. So, "should" is not correct. However, most advisers have the software to do it if asked.

Note how you manipulated the figures to give a comparison that was not like for like (100% equity vs 80% equity) You also failed to include a deduction for the platform charges.

Nonsense.

1. All responsible money managers should be providing comparisons vs benchmarks. Anyone selling a product should be open about the qualities. Otherwise they are selling BS. Lack of readily available information is the only reason people are “not interested” in how their portfolio is really performing. Perhaps something IFA regulators should look into.

2. Given that I am not his money manager, I did not feel like spending time on finding the exact match but that really does not equate to “manipulation”. I suggested how he can go about it. Ed Swippet helpfully provided a better comparison point. Does not change a thing.

Note that we do not know what his bond allocation should be. In my personal experience advisors are usually wrong because they don’t spend the time and don’t ask the right questions about risk tolerance and personal circumstances.

3. Platform costs for an all in one ETF can and should be less than 10 bp. Again, I do not know his specifics and I am not going to do the research for him but here is an interactive tool. http://www.comparefundplatforms.com/compare.aspx

dunstonh

Nonsense.

There is no need to refer to your posts like that. They weren't that bad.

1. All responsible money managers should be providing comparisons vs benchmarks.

Please let us know where in the FCA handbook where it says that.

Perhaps something IFA regulators should look into.

Perhaps you need to understand the role of an IFA more.

2. Given that I am not his money manager, I did not feel like spending time on finding the exact match but that really does not equate to “manipulation”.

Posting misinformation doesn't help anyone though. You compared a 100% equity to an 80% equity return. That is not helpful as clearly the 100% one would be better in growth periods.

Note that we do not know what his bond allocation should be. In my personal experience advisors are usually wrong because they don’t spend the time and don’t ask the right questions about risk tolerance and personal circumstances.

I doubt your personal experience amounts to much though as you don't appear to know what an IFA does. And seeing how risk profiling has developed so much over the years, you cannot compare today with 5 years ago, let alone 10 or 20.

Also, DIY investors have a habit of investing above their risk profile. Often significantly.

[Deleted User]

Insults aside, people who manage money should provide clients with information allowing them to evaluate performance. Given the performance of this individuals portfolio, I am not surprised they didn’t.

Also, the three year period provided a year when most portfolios showed negative returns. His portfolio still underperformed a 100% stock portfolio. What kind of risk does that show?

Saying that I provided “misinformation” is of course false. Information I provided stated exactly what it was and what has to be done to get an accurate benchmark. I can see you have some kind of a problem. That’s ok.

Having said this, nothing that anyone says, let alone on a board, should be taken as a gospel without checking.

[Deleted User]

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”.

dunstonh

people who manage money should provide clients with information allowing them to evaluate performance.

That information is available for those that want it. However, you are saying they should provide it. There is no requirement for advisory firms to provide that information. So, saying they should provide it is incorrect. It gives the op the impression that they have not been given something that is mandatory to give out.

Given the performance of this individuals portfolio, I am not surprised they didn’t.

Whats wrong with the performance?

We dont have exact dates for 2016 as it was sometime in January. That month saw a large movement of nearly 6% for 80% equity. The OP would also have paid an initial charge in year 1. That would reduce the return.

Also, the portfolio has a yield focus. We dont know the reason why they did that. However, it does tend to reduce the risk levels down a bit but also the growth. Yield portfolios tend to perform better/worse in different parts of the cycle.

All investment decisions, whoever makes them, is based on opinion. I don't agree with some of the things in that portfolio and if you asked 100 people to build a portfolio of single sector funds you would get 100 different builds.

Saying that I provided “misinformation” is of course false. Information I provided stated exactly what it was and what has to be done to get an accurate benchmark. I can see you have some kind of a problem. That’s ok.

What do you call comparing 80% equity with 100% equity then?
You did say what it was but the OP isnt to know that its not comparing like for like.