Asset allocation and fund selection - thoughts please!

Aminatidi

There is enough information out there.

https://www.investorschronicle.co.uk/the-big-theme/2018/05/03/does-your-investment-trust-have-skin-in-the-game/

I don't know whether it has to be made legally available or quite how, but it seems pretty well known especially where investment trusts are concerned.

Linton

I feel that a decision not to use an IFA could be foolish. You are focusing on the choice of funds. With that amount of money chosing funds is the last thing you should be doing. I am not saying you should not be doing it but rather you should be doing it last. It is the things you should be doing first where I believe working with an IFA can be most helpful



Are you just letting it tick over for the time being or looking for real growth or are you about to retire and want to drawdown? Ticking over is easy. Growth with a view to drawdown needs more thought and actually drawing down can be tricky. What strategy are you going to use for drawdown? Are you planning to use most of your wealth or are you looking for a substantial inheritance for your offspring/relations/favourite charities? What income do you need? What about tax and the LTA? What level of risk do you need and what are you prepared to accept? Do you need an income buffer, what size?



Once you have a coherent strategy chosing funds becomes much more straightforward, and which particular ones you choose is really a secondary concern.

DrSyn

If all types of financial advisers had by law a fiduciary duty. Then their clients could reasonably expect that the adviser would put them first.However there is no UK law at present.

It would be prudent if a large amount of money is involved, to seek expert help if you have no experience or interest in investment.

The OP did indeed see an adviser. Perhaps the OP would tell us, if the matters mentioned by Linton as important functions of an IFA were ever mentioned or discussed. For at least some of those matters he could see a solicitor and an accountant.

Maybe the OP might have better luck using the website of a professional body, such as below:-

(a) Chartered Institute for Securities & Investment
http://www.financialplanning.org.uk/wayfinder

(b) Personal Finance Society (PFS)
http://thepfs.org/yourmoney

Snakey

Looks like I have plenty of stuff to look at over the bank holiday then! Continued thanks to everyone who's commenting.

Linton wrote: »

Are you just letting it tick over for the time being or looking for real growth or are you about to retire and want to drawdown? Ticking over is easy. Growth with a view to drawdown needs more thought and actually drawing down can be tricky. What strategy are you going to use for drawdown? Are you planning to use most of your wealth or are you looking for a substantial inheritance for your offspring/relations/favourite charities? What income do you need? What about tax and the LTA? What level of risk do you need and what are you prepared to accept? Do you need an income buffer, what size?

I'm 47 and don't have a detailed drawdown strategy at this stage but the last cash flow plan (based on giving up work at 50, a net income of £35k, and 3.5% growth) had me burning through ISA/GIA first and then drawing on the pension, and the estimate start date for the pension under that plan was 60. Which would maybe indicate no real need to take risks, but while I'm still paying in it seems daft to go cautious. If there was a crash tomorrow it'd have 10-15 years to sort itself out, and I could always carry on working if things went from bad to worse.

I'm single with no kids and planning to swallow my last penny on my deathbed. If I need to go in to expensive care then the flat will be sold (the cash flow is done to age 100 and assumes not selling the flat).

My profession means I don't need a lot of the "extras" like IHT planning or calculating the optimum pension contribution. I have a Will, I have POAs... they were quite disappointed as the 0.75% is purely for investment management and does not include anything else. They do offer it all, and I did get the speech about how it's not just about investment management, but it all costs.

I don't rule out getting back into bed with an IFA when I'm coming up to pension access. This weekend's issue I suppose is whether I need to carry on paying one throughout, especially having apparently had the worst of both worlds up until now - paying for investment management/advice only to get a portfolio described above as "confused", "very bad", "nightmare" and "ridiculous" - all adjectives that I could presumably have achieved myself at zero cost.

bostonerimus

Linton wrote: »

I feel that a decision not to use an IFA could be foolish. You are focusing on the choice of funds. With that amount of money chosing funds is the last thing you should be doing. I am not saying you should not be doing it but rather you should be doing it last. It is the things you should be doing first where I believe working with an IFA can be most helpful



Are you just letting it tick over for the time being or looking for real growth or are you about to retire and want to drawdown? Ticking over is easy. Growth with a view to drawdown needs more thought and actually drawing down can be tricky. What strategy are you going to use for drawdown? Are you planning to use most of your wealth or are you looking for a substantial inheritance for your offspring/relations/favourite charities? What income do you need? What about tax and the LTA? What level of risk do you need and what are you prepared to accept? Do you need an income buffer, what size?



Once you have a coherent strategy choosing funds becomes much more straightforward, and which particular ones you choose is really a secondary concern.

I'm not as concerned about the need for an IFA as Linton, but wholeheartedly agree that you need to have a well defined plan going into drawdown. This needs you to understand your budget and income sources and have sufficient contingency to survive spending emergencies and market volatility. If you have guaranteed income sources like DB pensions then you might end up with a different asset allocation from someone who relies entirely on drawdown for their income. I don't think it's that difficult for most people to come up with a solution on their own, but the discipline of following a retirement income plan can be difficult for some and tax efficiency is an area where advice can be useful.

Aminatidi

Isn't this the difference between possibly paying someone on a "time" basis for help on how best to structure things vs. paying 1% forever for someone to do what appears to be more of the same with portfolio construction?

I've already said I'm not lucky enough to have a million but I know I'm reasonably confident about choosing investments that are roughly in the right allocations and risk tolerances.

I know much less about tax and wrappers and drawdown and the various rules and laws that might impact how I should structure them if my own situation were more complicated.

A_T

I think the OP needs to concentrate on fees. If advice is going to be sought then it should most certainly be one-off advice and not on the basis of an ongoing percentage - even 1% pa will kill returns. If Warren Buffet had been paying a 1% fee he'd only have half the wealth he has now.

Prism

A_T wrote: »

I think the OP needs to concentrate on fees. If advice is going to be sought then it should most certainly be one-off advice and not on the basis of an ongoing percentage - even 1% pa will kill returns. If Warren Buffet had been paying a 1% fee he'd only have half the wealth he has now.

As an IFA fee then 1% is a bit too high however as a total fee (platform + IFA + funds) its not too bad. I try to stick to around 1.25% or less. Getting to platform fee down is a good start.

Snakey

Platform+IFA+funds is coming out at 1.8%, which just feels painful (it was 1% before, not that I appear to have had much bang for my buck based on the feedback from you guys). The only option for reducing that (and still going with the IFA) appears to be to invest into cheaper passive funds... but the impression I got from that part of the conversation was another "worst of both worlds" thing - I'd still be paying their full investment management fee, but I wouldn't be getting the full service as they'd be putting me into what they consider to be sub-optimal funds.

One thing I am sorted on is the tax side. I've fully researched the "putting things in" phase anyway, and have a basic understanding of the "taking things out" part which I can consider in more detail when I get there since the rules might have changed by then. I just need (want) someone to do the investments for me - unless I'm either being ripped off or paying for a monkey with a pin in which case why not DIY.

bostonerimus

It makes me weep when I see people paying well over 1% in total fees to have their money managed and administered. Choose a low cost platform and use low cost ETFs and index funds and you'll be around 1% better off before you even start. There is a perception that index funds are "sub optimal" and that simply isn't the case, but many people feel that they should always try to beat the market and that's not the way to maximize your probability of success,