Investing direct to avoid IFA fees - possible?

Albermarle

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.

I think there is a also a 4) PP providers who will deal with existing retail customers and even allow them to switch PP products , but will only take on new retail clients into their SIPP product . Aviva ?

GDB2222

Surely, you can get tracker funds with charges of 0.2% or so?

SonOf

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

Its not a multi-asset fund. Its a governed portfolio of single sector funds run on a discretionary basis.

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.

But it would cost a lot more. RL pensions get to around 0.5% pa costs all in by around £20k and get lower quite quickly. They are also a mutual soceity and return a share of their profits to policyholders each year. Typically around 0.15-0.18% p.a. So, net you are looking at around 0.35% all in.

The allocations RL use are fluid based on the economic cycle and the target volatility. They have risk based options across the board.

I would suggest that the OP disregards some of the silly posts above criticising the asset allocation as it is either someone trolling to make the OP do something wrong or they do not know what they are talking about.

Can anyone see any flaws in my thinking here?

yes. you are not comparing like for like. Remove the ongoing adviser charge from RL (as that is optional and you dont have to have it). Then compare with the SIPP and the investment fund charges.

If you are going to pick ready made portfolios, then you are going to end up more expensive than using an IFA despite you thinking it is cheaper.

Surely, you can get tracker funds with charges of 0.2% or so?

Lower than that. However, the OP has not suggested any sort of knowledge that indicates they are ready to build a bespoke portfolio of single sector funds.

[Deleted User]

While RL/IFA charges are higher than what would be good for an investor, the fact that the recommended fund has routinely underperformed its benchmark over various periods should raise the question on what basis the fund was selected. And the risk of the portfolio with just under 5% bonds, some of them low quality, is “extreme” in my book. Sure, they added lots of UK REITs to the 50% UK stock portfolio, but REITs are correlated with stocks! I struggle to see how this selection could be justified by anyone. IFA has questions to answer.

https://www.trustnet.com/factsheets/p/so14/rlp-global-managed-pn

[Deleted User]

JMChip wrote: »

Thanks for all the replies here. Very helpful.

Yes this is what I've been recommended

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?

Yes. You are rushing between options like a headless chicken.

This is your long term financial health. And your family’s. Sure, you can get 15 people to recommend 15 approaches and pick one by tossing a coin. What you actually need is to realize that it’s an important decision. For you, not me or the IFA. You are the only person who can understand your risk tolerance and circumstances in full. You need to invest a little time of your own. The time it takes to read a book, someone already suggested:

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

I would suggest another book for another perspective , e g Rational Expectations: Asset Allocation for Investing Adults by Bernstein.

Once you’ve read it, either decide what you need or get advice, but at least you will have enough information to understand the advice and make an informed choice.

[Deleted User]

To demonstrate just how meaningless is a portfolio with 5% bonds...

Let’s say there is a major downturn, similar to 2008. Stocks go down 50%. REITs (commercial property) is down 50%. Low quality bonds go down to nothing. Commodities go down. The 3% high quality bonds within your portfolio go up by 10%.

Add it all up. Your portfolio is down by 50%. If you invest in bonds, get high quality and a meaningful allocation to protect yourself (somewhat) from market fluctuations.

bostonerimus

SonOf wrote: »

Its not a multi-asset fund. Its a governed portfolio of single sector funds run on a discretionary basis.



But it would cost a lot more. RL pensions get to around 0.5% pa costs all in by around £20k and get lower quite quickly. They are also a mutual soceity and return a share of their profits to policyholders each year. Typically around 0.15-0.18% p.a. So, net you are looking at around 0.35% all in.

The allocations RL use are fluid based on the economic cycle and the target volatility. They have risk based options across the board.

I would suggest that the OP disregards some of the silly posts above criticising the asset allocation as it is either someone trolling to make the OP do something wrong or they do not know what they are talking about.



yes. you are not comparing like for like. Remove the ongoing adviser charge from RL (as that is optional and you dont have to have it). Then compare with the SIPP and the investment fund charges.

If you are going to pick ready made portfolios, then you are going to end up more expensive than using an IFA despite you thinking it is cheaper.



Lower than that. However, the OP has not suggested any sort of knowledge that indicates they are ready to build a bespoke portfolio of single sector funds.

I'm not an expert on RL and have a bias to removing levels of administration between me and my money. I'm dubious about pension/insurance companies as they come with fees and restrictions, but if RL can deliver a pension cheaper than a SIPP with a DIY platform then it's worth looking at. I'm always dubious when someone charges a fee and then gives you money back, why not just lower the fees, and I'm not convinced that an RL pension without an IFA fees would be as inexpensive as a sensible SIPP, so maybe some real numbers will decide things.

I'm not blown away by the asset allocation in the RL Portfolio 4 or by the IFA's recommendation. I bet the IFA runs the usual risk analysis and then just picks a product that matches that, they might have done less analysis of the assets in the portfolio that has happened in this forum. So I would probably ditch the IFA, certainly compare the costs of an RL pension and a SIPP and also consider any differences in flexibility and access to your money. If the OP has a little common sense I'd rather see then in a SIPP with VLS80 that what the IFA recommended or any prepackaged platform portfolios.

bostonerimus

SonOf wrote: »

...
However, the OP has not suggested any sort of knowledge that indicates they are ready to build a bespoke portfolio of single sector funds.

That knowledge is simple to gain and the OP has shown a desire to learn. However, very few people need a "bespoke portfolio of single sector funds" and it seems to me that IFAs don't often develop those, choosing instead to recommend pre-made portfolios. I think far too many investors, both DIY and professional, believe that they can take modern portfolio theory and slice and dice to include factors that will give them excess risk adjusted return. Maybe DFA can do this, but for the vast majority of investors the best approach is to keep it simple and keep fees low. That's not hard to do, but it undercuts a lot of the pension company and IFA revenue stream and so will face criticism.

AnotherJoe

SonOf wrote: »

Its not a multi-asset fund. Its a governed portfolio of single sector funds run on a discretionary basis.
Whatever. Doesn't affect its crappiness level.
But it would cost a lot more. RL pensions get to around 0.5% pa costs all in by around £20k and get lower quite quickly. They are also a mutual soceity and return a share of their profits to policyholders each year. Typically around 0.15-0.18% p.a. So, net you are looking at around 0.35% all in.
Focus on the charges after you've looked at the performance. As said this fund doesn't have a good performance record and no reason, with this allocation, to think it ever will. No point trimming off a tenth or two decimal points on charges if the actual fund is crap.


The allocations RL use are fluid based on the economic cycle and the target volatility. They have risk based options across the board.
They may do. This is a poor one though. A global fund over 30 years will be far superior since its not far too weighted in the upper echelons of the FTSE100 (and will have low costs)


I would suggest that the OP disregards some of the silly posts above criticising the asset allocation as it is either someone trolling to make the OP do something wrong or they do not know what they are talking about..

I disagree, 50% of equities in the UK is terrible, because its far too concentrated into a handful of industrial sectors and therefore underweight in many others. And getting close to 20% in property, when you likely have a fair chunk in property anyway (your home) is also unneeded.

[Deleted User]

And getting close to 20% in property, when you likely have a fair chunk in property anyway (your home) is also unneeded.

It’s commercial property, mostly British. Performance will be different from house prices, but very similar to stocks (although not as good long term).

We agree that the recommended portfolio has an unjustifiable level of home bias and is basically poor.

I would love to see justification from whoever originated this nonsense.