Large inheritance DIY vs professional

johnadams7

Hi all,

I have money to invest for the long term. I do not need to touch it for at least 10 years possibly 20 years. Where it is invested, the fees are almost 2%, the performance averaged 8.5% over 5 years for the dynamic profile before fees were taken.

I'm considering if I get it managed, to go to St James Place, I know they aren't popular on here. But the fact they are used to managing large sums of money reassures me. I'd prefer to find a local IFA, but concerned about the risk. I might find an excellent guy or a dud.

Anyway, I'm considering DIY. My portfolio would be as follows.

25% Vanguard Lifestrategy 80%
25% HSBC global portfolio dynamic
10% LT, global equities.
7.5% Legal and General US index
5% Lindsell Train UK equities.
5% Rathbone global opportunities.
5% Ballie Gifford Japense
5% Ishares Pacific ex Japan Equity.
5% Ishares Corporate Bond index
5% Ishares Emerging markets
2.5% JP Morgan Emerging markets

Any advice welcome on DIY vs IFA, plus comments on the portfolio also welcomed.

Alice_Holt

DIY instead of St James Place.
https://www.investmentweek.co.uk/investment-week/news/3069156/fees-erode-retail-investors-fund-returns
https://www.moneyadviceservice.org.uk/en/articles/understanding-investment-fees

If DIY then I'd suggest simplifying the range of funds.
The Vanguard fund could be used for all the money.
A ISA with Vanguard would cost c.0.37%.Very, very, very doubtful a mix of managed funds costing 2% would accrue returns exceeding 1.6% per year (compared with the Vanguard fund) for the next 20 years. Goodness knows what SJP would cost you over this term!

Give some thought as to the best vehicle for your investment - can it be used to boost your pension?
Make sure you are happy with a 80% equity exposure, you could always mix 80 and 60 funds to arrive at 70%.
Maximise the use of tax free shelters.
Assess your financial needs over the next 5 years, and keep this money in a risk free asset.

If not DIY then a local IFA (I guess this decision would also depend on the amount inherited).
Look at all your finances overall - not just this pot in isolation.

AnotherJoe

johnadams7 wrote: »

Hi all,

I have money to invest for the long term. I do not need to touch it for at least 10 years possibly 20 years. Where it is invested, the fees are almost 2%, the performance averaged 8.5% over 5 years for the dynamic profile before fees were taken.

I'm considering if I get it managed, to go to St James Place, I know they aren't popular on here. But the fact they are used to managing large sums of money reassures me. I'd prefer to find a local IFA, but concerned about the risk. I might find an excellent guy or a dud.

Anyway, I'm considering DIY. My portfolio would be as follows.

25% Vanguard Lifestrategy 80%
25% HSBC global portfolio dynamic
10% LT, global equities.
7.5% Legal and General US index
5% Lindsell Train UK equities.
5% Rathbone global opportunities.
5% Ballie Gifford Japense
5% Ishares Pacific ex Japan Equity.
5% Ishares Corporate Bond index
5% Ishares Emerging markets
2.5% JP Morgan Emerging markets

Any advice welcome on DIY vs IFA, plus comments on the portfolio also welcomed.

So do most IFAs but they dont cream off 2x-4x as much in fees (which amounts to 25% of the total growth or more)
In my book, SJP are "the dud" ! What other measure would you use for an organization that has mediocre funds, locks you in, and takes a substantial percentage of your gains ? What was it with a big fund over 30 years, a million quid in one estimate I saw ofa decent sized portfolio? No wonder they have posh offices and shiny brochures.
At least if you go with an IFA and dont like them after a couple of years you can up and leave with no issue.

I could quibble about your portfolio and mildly will, I'd up the VLS 25% to 50% of similar that is global without the 25% artificial UK emphasis. And dial down the japan and US additions.

Linton

How much is a "large" inheritance? If it is a life changing amount, say nX £100K, and you have little experience of investing, I think you would be foolish not to consult an IFA, at least initially, as there are significant issues in addition to which funds to hold - eg tax. You say that your time frame is "at least 10 years and possibly 20 years". The time period difference is significant and at some stage in the near future should be reflected in the make-up of yor portfolio. A local IFA should be well used to managing £100,000s and will be much cheaper than SJP. If you are into multi-millions that is a different story.


At the other extreme, if your inheritance is less than £50K it may well not be worth using an IFA and whatever happens wont have a major impact on your whole future.


As to your proposed portfolio - I do not understand the rationale. You have 25% Vanguard Lifestyle 80% which will give you a particular % allocation of underlying investments and then you use the other 75% of the portfolio adding bits and pieces which will largely duplicate underlying investments already held by the Vanguard fund but in different proportionss or even in the case of your trackers, in the same proportions. If you dont like the Vanguard allocation why buy it in the first place?


What you are proposing isnt wrong and wont lose you all your money, its just a little pointless. If you want VLS80 but dont want it for everything, allocate say 80% of your portfolio and then use the other 20% to include things which it does not not already hold.



To re-emphasise what Alice Holt says, you should consider using some or all of your money to increase your pension contributions. Also transfer the maximum into an S&S ISA each year.

johnadams7

Fair point. It wasn't an attack at IFA's. I'm sure the majority are excellent. But as with all professions there are some "duds". I just don't want to fall subject to such a person. That is all.

Please voice your comments with my portfolio. If I go to a professional at least it tells me what I should look out for.

Aminatidi

The amount matters I think, for the reasons Linton states above.

You don't need to be specific but ballpark would be useful.

Keep in mind many IFAs are, apparently, struggling to offer cost effective advice for clients with < £250K under management.

johnadams7

Thanks for the advice. I have taken a fair bit out, to allow for day to day spending. Plus a fairly large rainy day fund. Other areas are covered, hence long term and I can go for day to day risk.

So roughly where it sits, has it achieved 6.5% pa over the last 5 years net of fees. So just over 30%. I believe over 10 years, the figure is closer to 10%, so 80%. But it wasn't invested in the dynamic account, rather the lowest risk one, as clearly my dad had a different objective.

johnadams7

mediocre funds, locks you in, creams off, AND performs below competitors I would call a dud.

Even with the 5% lock in, and 2% fees, say it delivers 3.5% more PA so 35% over 10 years, minus the extra fees of 1.5% p.a = 15% -5% lock in, that is 20%, so 15% more.

If the funds are mediocre, and therefore won't deliver the returns then the whole concept is awful and the company is a waste of time for my needs.

Aretnap

Tend to agree with the view that if you use a local IFA you might get a dud, but if you use SJP you will definitely get a dud, and pay far over the odds for the privilege.

Your proposed portfolio is heavy in equities - I don't have time to work out the exact percentage but eyeballing it, it must be in the region of 80% equities. This is rather high if you're not a particularly experienced investor. Are you prepared to watch it fall by 30-40%, or more, on the next big crash, and will you keep it invested in equities afterwards while you are being bombarded by newspaper articles telling you that there are bigger falls to come? Or will you panic and withdraw it all as cash just at the lowest point and never have the chance to see it recover? Think carefully! (By inexperienced investor I mean someone who wasn't investing in 2008/9 - the last 10 years have been exceptionally kind to investors and don't really prepare anyone who has started investing since then for what the equity markets can throw at you from time to time)

80"% equities is also rather high if you think that you might need the money as soon as 10 years - if there's a big fall after a few years that doesn't leave much time for it to recover before you need the money.

I also agree it is a little... odd... to buy a fund of funds like VLS, then buy a load of sector funds on top of it. Basically by buying VLS you are asking the fund manager to choose you an allocation of UK equities, US equities, Japan equities, bonds etc, and then paying him a premium over what you would pay just to buy the underlying Vanguard sector funds in the same proportions. But then by buying extra US or Japan sector funds, you are saying that you don't think the manager has got enough US equities, or enough Japan equities in his allocation, so you're going to get some extra ones. But if you don't like his allocation, what are you paying him for in the first place? VLS type funds are really intended to be used as your only fund... there may be reasons for buying other funds as well in some cases, but often it is a sign of an investor who doesn't really have a well thought out strategy.

DrSyn

1. You mentioned SJP then these may be of interest, of course things may have now changed:-

https://www.yodelar.com/insights/st-jamess-place-review
https://citywire.co.uk/wealth-manager/news/sjp-tops-complaints-list-for-specialist-wealth-firms/a1046440
https://www.which.co.uk/news/2017/07/exclusive-wealth-manager-st-jamess-place-misleading-customers-on-charges/


2. If you have little experience of investing then it makes sense to consult an IFA, especially with a large inheritance.
https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/
https://www.which.co.uk/money/investing/financial-advice
https://www.moneysavingexpert.com/savings/best-financial-advisers/#find


3. You may find you do not have sufficient money to be of interest to an IFA. Or you may wish to DIY. Then I suggest you watch both of these first:-
http://www.kroijer.com/
https://www.ifa.com/indexfundsthemovie/

Then you could consider investing in one of the Global Multi Asset Funds below:-

Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

Examples

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

johnadams7

I have been investing since 2012. Duplication isn't always bad, because whilst it may have the same funds, it may also offer additional. Plus I feel like putting all my money with vanguard is putting all my eggs in one basket.

So is that really what people do. Just buy vanguard life strategy and call that it. Plus i'm choosing the proportions for the remaining 50%. Vanguards experts choose for 25%, HSBC for 25% and I am for 50%.

If I go to an IFA, they will not recommend the vanguard and they will buy the funds they recommend and like in percentages they want.

Can anyone else recommend a multi asset fund similar to vanguard, but has different underlying funds - I know there will be some duplication or indeed a lot - for instance companies like microsoft, novartis pornhub etc.

In terms of the amount it is over a million, but not millions. The exact amount I'd rather not say. When I said 10 years, I mean't I have no reason to need it for 10 years even if the unexpected happened. If I got a rare form of illness which costs hundreds of thousands of pounds in 11 years then I will need access otherwise not.

I won't worry if it dips significantly. I know to expect volatility, especially given in such a high risk investment. But say over 20+ years I'd expect to see a positive trend.