Woodford Concerns

Sailtheworld

ericthelobster wrote: »

What specific questions should I be asking him?

I know you want to be hands off but before the meeting you should calculate your investment return and compare that to the return on a World Equity tracker.

Hopefully you're ahead but you might want to ask what additional risk you're being asked to take to achieve this. If you're behind you might wish to double-check why you've decided to pick him to pick fund managers on your behalf.

Sailtheworld

Linton wrote: »

Woodford was a one off and the only example of its type I can think of in my past 20 years of investing.

For fund managers under-performance is the norm. Woodford is only a one-off in that we don't usually get such a spectacular demonstration.

The chap who lost money on Woodford is reliant on an awful lot of good decisions. First he's had to pick a good IFA. Then he's got to hope the chosen IFA has a knack for picking funds. Then he's got to hope the fund managers aren't like most and can pick stocks to achieve a return (after fees) ahead of the benchmark. It all sounds very unlikely.

Prism

Sailtheworld wrote: »

I know you want to be hands off but before the meeting you should calculate your investment return and compare that to the return on a World Equity tracker.

Hopefully you're ahead but you might want to ask what additional risk you're being asked to take to achieve this. If you're behind you might wish to double-check why you've decided to pick him to pick fund managers on your behalf.

That only works if you are 100% equities - more difficult when including other sectors like bonds and property. Its also only meaningful after we have had a full cycle including a crash or downturn. Many managed funds are set up to protect during those events and will not show their true worth until that happens.

gadgetmind

Prism wrote: »

That only works if you are 100% equities - more difficult when including other sectors like bonds and property.

You can compare against a Vanguard Lifestrategy, but these haven't been running very long.

Many managed funds are set up to protect during those events and will not show their true worth until that happens.

Yes, and I do hold some investment trusts with that mandate, but the under-performance during the good times can test your patience.

gadgetmind

Sailtheworld wrote: »

Then he's got to hope the chosen IFA has a knack for picking funds.

Most IFAs don't even try and do this and outsource to companies that construct a portfolio for them.

And even if an IFA did choose the funds, what does adding another layer of management gain?

Linton

Sailtheworld wrote: »

I know you want to be hands off but before the meeting you should calculate your investment return and compare that to the return on a World Equity tracker.

Hopefully you're ahead but you might want to ask what additional risk you're being asked to take to achieve this. If you're behind you might wish to double-check why you've decided to pick him to pick fund managers on your behalf.

A World Equity tracker would be a totally irresponsible investment for a new investor. Any IFA who did that would have a serious mis-sale problem with the FCA and his insurer when the investor loses 40% of his wealth in the next crash.


The purpose of an IFA is to choose an set of investments that achieves the customers objectives at an acceptable risk not to maximise return.

Moe_The_Bartender

gadgetmind wrote: »

Most IFAs don't even try and do this and outsource to companies that construct a portfolio for them.

Which is what my IFA did when I used to have one. Just because my tolerance for risk at the time was high should not have meant being put into an odd assortment of funds like Fidelity Emerging Europe Middle East and Africa. My IFA should have been able to figure out for himself that this was not appropriate for me.

bowlhead99

Moe_The_Bartender wrote: »

Which is what my IFA did when I used to have one. Just because my tolerance for risk at the time was high should not have meant being put into an odd assortment of funds like Fidelity Emerging Europe Middle East and Africa. My IFA should have been able to figure out for himself that this was not appropriate for me.

Difficult to pass comment without knowing what 'odd assortment of funds' he and his support team/ outsourced screening firm thought appropriate for you to hold.

Still, if you are going to say "just because I have a high tolerance for risk, doesn't mean you should use an emerging markets fund as part of the portfolio", something is perhaps lost in translation. Emerging EMEA should be no more 'off the table' for a 'high risk tolerance' investor than emerging Asia or Latin America. Whether you hold a single global emerging market fund or employ three managers for three emerging regions and rebalance them, neither approach is a fundamentally flawed choice, if you don't mind having more moving parts in the model.

That particular fund has done ok over the last decade or so, coming out of the last crash better than the IA Emerging Markets sector generally. Held on its own, you would probably say 'not one for widows and orphans', but it wouldn't be held on its own and you were not a widow or orphan, and had a high risk tolerance. Am I missing the point somewhere?

itwasntme001

ericthelobster wrote: »

I've lost - or will have lost - a substantial amount of money currently invested in Woodford funds. My investments are well enough diversified for it not to break me but I am still one very unhappy cat.

I don't pretend to know much about the markets, and therefore, although I'm well aware of what most people think of IFAs, I pay one for a fully managed service to look after my investments. Although he has recommended other funds which have performed extremely well, as far as I 'm concerned the reason I pay for a managed service is to avoid stuff like this happening to me. I have not yet addressed this with the IFA - once the Woodford fund had been locked it was obviously too late for any remedial action anyway. Nevertheless I will be expecting some answers when I met him next week. Fair?

What specific questions should I be asking him?

I am quite surprised by some of the replies you got to your questions. In your position i would be more firm with the IFA. His job is to find appropriate investments given your objectives. He should also be monitoring the selection on a regular basis (at least once a year if not quarterly). That is why he is an "advisor" and he is "independent" so should not have any interest in you continuing to hold woodford and he is a "financial" guy as in he is an expert in finance.


I am not qualified as an IFA. I am a simple retail investor. Yet i sold out of woodford over a year ago as i realised things had changed with the fund. Why dd i notice this and made a decision to sell out when your IFA did not? It appears he was asleep all this time.


I would give him the example of people like me selling out of the fund in good time so why did your IFA miss this. Afterall that is what you pay him for. I would then ask for compensation - perhaps at least all the fees he charged you. Then i would just sack the IFA.


If he goes on about how other IFAs also missed this tell him that is not the point. Even if all IFAs missed this, it does not make it ok, it just suggests how lazy or stupid IFAs are in general.



Hope it works out for you.

itwasntme001

Linton wrote: »

A World Equity tracker would be a totally irresponsible investment for a new investor. Any IFA who did that would have a serious mis-sale problem with the FCA and his insurer when the investor loses 40% of his wealth in the next crash.


The purpose of an IFA is to choose an set of investments that achieves the customers objectives at an acceptable risk not to maximise return.

Depends on the client's objectives, risk tolerance, current financial position, income etc. Advising someone to have some of their wealth in a world index tracker is not a necessarily on its own bad advice.


If you are suggesting that any portfolio should not be compared against a world equity tracker then yes i agree with you as most people should not be all in equities (and instead have a portfolio that meets objectives without taking excessive risk as you mention) and so the comparison is meaningless.