Investing direct to avoid IFA fees - possible?

JMChip

Hi all,

I'm mid 30s and have a chunk of cash (around £30k) I would like to invest in a pension coming from my limited business. I had a meeting with an IFA and she has suggested Royal London Managed Portfolio 4. I appreciate the time they have spent discussing this with me and would be happy to pay a one off fee for this advice, but I feel uncomfortable about the ongoing fees going forward in terms of their annual % cut of my pot.

Royal London will not deal direct with the public, so does anyone know of any funds with a similar make up and risk profile as the Royal London Managed Portfolio 4 which I could invest directly in?

Thanks

Mick70

I can’t help you with an alternative fund , but my IFA did tell me that I had to use an IFA if I trans my funds into Royal London .
I didn’t want to use a pensions company I had never heard of , and my current dc is in Royal London hence more comfortable trans into Royal London as large and established , but not dealing with general public is a pain

Albermarle

Many providers have similar type investments available .
You would have to make a choice between a personal pension provider similar to RL or a SIPP.
A personal pension is easier to manage and is 100% covered for compensation ( although with mainstream PP or SIPP providers this is very unlikely ever to come into play). Here we are talking about Standard Life, Aviva, Scottish Widows etc . There seems to be a trend for PP providers moving to advised business only but some remain happy to deal with Joe Public.
The main problem will be is that you will not get as good a deal on charges as the IFA can get, so you need to balance this out against their fees. Especially as £30K is quite small beer in pension terms .Maybe you will have to pay 0.8% as opposed to 0.4%?
If you go for a SIPP and choose the right one for your needs you could get these charges down. However you might have to make up the 'Managed Portfolio' yourself from individual funds to keep the costs down.

xylophone

It would be possible to set up a personal pension or a SIPP and make payments to it from your limited company.

https://www.crunch.co.uk/knowledge/expenses/can-i-make-pension-contributions-through-my-limited-company/

You might read DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning
by John Edwards

https://www.hl.co.uk/pensions/self-employed may be worth a read.



https://www.cavendishonline.co.uk/pensions-retirement



https://monevator.com/vanguard-target-retirement-funds/

SonOf

I appreciate the time they have spent discussing this with me and would be happy to pay a one off fee for this advice, but I feel uncomfortable about the ongoing fees going forward in terms of their annual % cut of my pot.

Ongoing fees are optional. If you dont want ongoing servicing then you reject that.

Royal London will not deal direct with the public, so does anyone know of any funds with a similar make up and risk profile as the Royal London Managed Portfolio 4 which I could invest directly in?

Why dont you just refuse the optional ongoing servicing?

There seems to be a trend for PP providers moving to advised business only but some remain happy to deal with Joe Public.

There isnt.
Adviser based companies have always required advisers to place business through them. Some have opened up to direct contributions over the years but providers have basically split into three camps. 1) adviser only 2) DIY only or 3) a version of a product for advisers and a cut down version for DIY.

bostonerimus

I assume you are being recommended this:


Governed Portfolio 4
RLP Property 17.50%
RLP Long (15yr) Gilt 1.59%
RLP Long (15yr) Corporate Bond 1.39%
RLP Long (15yr) Index Linked 1.47%
RLP Short Duration Global High Yield 1.05%
RLP Commodity 4.50%
RLP Global Managed 72.50%
The Global Managed fund invests in UK and
Overseas equities. The current benchmark split is
50% UK Equities and 50% Overseas Equities.

So it's an multi-asset fund with mostly equities and property and a high UK bias.

I'd open a SIPP and if you like you could replicate the RLP fund or just buy another multi-asset fund with maybe 80% equities and maybe not so UK biased. You should design the asset allocation to fit in with the rest of your finances.

I have a self employed pension in the US with Vanguard and just put it 50/50 into a US equity index and an International equity index and leave it alone. Since I started it in 2016 it's annual return has been an average of 10%.

[Deleted User]

bostonerimus wrote: »

I assume you are being recommended this:


Governed Portfolio 4
RLP Property 17.50%
RLP Long (15yr) Gilt 1.59%
RLP Long (15yr) Corporate Bond 1.39%
RLP Long (15yr) Index Linked 1.47%
RLP Short Duration Global High Yield 1.05%
RLP Commodity 4.50%
RLP Global Managed 72.50%
The Global Managed fund invests in UK and
Overseas equities. The current benchmark split is
50% UK Equities and 50% Overseas Equities.
.

Not a great portfolio. Here is why:

- 5% or so in bonds, some of them high risk - that’s a meaningless allocation. If you want bonds to smooth the ride, you need more than that and not the “high yield” variety.
-4.5% Commodity. Again, meaningless allocation. Worse, it’s to an asset class that does not provide long term growth.
- property would be your second largest investment. Why??? Property underperforms stocks.
- RLP Global Managed has been remarkably consistent in underperforming the benchmark.
- as noted by Boston, UK market allocation of this portfolio is more than half. Almost certainly translates into higher risk. Likely lower return too, the worst of both worlds. And this is the one component which will determine your risk and return (several of portfolio’s other components will have a high degree of correlation to Global Management).

I don’t think you owe this particular advisor a penny.

Spreadsheetman

The UK bias makes that portfolio a fail, apart from all the other things Mordko picked out.

AnotherJoe

bostonerimus wrote: »

I assume you are being recommended this:
Governed Portfolio 4
RLP Property 17.50%
RLP Long (15yr) Gilt 1.59%
RLP Long (15yr) Corporate Bond 1.39%
RLP Long (15yr) Index Linked 1.47%
RLP Short Duration Global High Yield 1.05%
RLP Commodity 4.50%
RLP Global Managed 72.50%
The Global Managed fund invests in UK and
Overseas equities. The current benchmark split is
50% UK Equities and 50% Overseas Equities.

So it's an multi-asset fund with mostly equities and property and a high UK bias.

For someone mid 30's that looks like a shocker to me*(actually I'd say almost any age), and OP's actual question should have been "where can i get a fund that doesn't have a similar make up and risk profile to this"
Oh and yes, I'd be dumping this adviser. That is just horrible, and you are paying to get that as well :eek: Do some research and DIY, or get a better adviser.

* way too much property, way too much UK, not enough bonds to be worthwhile (if you want them at your age OP). IMO something between 80-100% global equities with no UK bias would be much more suitable given 30 years at least more investment ahead of OP. Dozens of suitable funds.

JMChip

Thanks for all the replies here. Very helpful.

Yes this is what I've been recommended

Governed Portfolio 4
RLP Property 17.50%
RLP Long (15yr) Gilt 1.59%
RLP Long (15yr) Corporate Bond 1.39%
RLP Long (15yr) Index Linked 1.47%
RLP Short Duration Global High Yield 1.05%
RLP Commodity 4.50%
RLP Global Managed 72.50%

It was suggested that it meets my appetite for risk - i.e. above average but not extreme.

To avoid the 0.8% IFA fees I am now thinking of doing a SIPP with AJ Bell and using their ready made portfolios (as I don't think I have the knowledge to pick funds individually?). They have an 'adventurous' option which you can see on their website - just Google 'AJ Bell Ready-made portfolios' (I'm not allowed to post links on the forum yet as just joined)

This mix of funds performance is comparable to the Royal London Portfolio 4, but fees for the AJ Bell SIPP would be just 0.45% per year compared with going down the Royal London route with my IFA which would be 1.3% per year. Note - I have negated the charges of the funds as when comparing performance of RL Portfolio 4 and the suggested funds here both present performance net of charges. Am I correct here?

Can anyone see any flaws in my thinking here? Are there any hidden charges I'm not accounting for?

Albermarle

Can anyone see any flaws in my thinking here? Are there any hidden charges I'm not accounting for?

There are no hidden charges but some visible ones:
IFA + RL charges 1.3% +any charge for the fund , unless this is included in the RL charge ?
AJ Bell platform charge 0.25% ( not sure where you got 0.45% from?) + charge for ready made portfolio fund 0.85%

The fact that performance is reported as net of charges does not mean you can ignore the charges.

A SIPP/A J Bell is best when you pick your own funds, as charges can be reduced . If you use ready made portfolios , then probably not much point having SIPPand
a PP is better/cheaper ( if of course you do not pay an IFA )