Investing direct to avoid IFA fees - possible?

bostonerimus

Deleted_User wrote: »

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

The portfolio was presumably developed by professionals at Royal London who believe that 73% equities and 17% commercial property as "moderately cautious".

[Deleted User]

Quite. “moderately cautious or balanced risk“. Over 90% of the portfolio is in equities, property, commodities, junk bonds.

Charges 1% for the pleasure plus 15 bp in transaction costs.

Why would an IFA pick something like this? Makes no sense.

bostonerimus

Deleted_User wrote: »

Quite. “moderately cautious or balanced risk“. Over 90% of the portfolio is in equities, property, commodities, junk bonds.

Charges 1% for the pleasure plus 15 bp in transaction costs.

Why would an IFA pick something like this? Makes no sense.

This is a bit of a cheap shot, but over the last 5 years RLGP 4 has returned a cumulative 43% and VLS80 has returned 63%, even VLS60 has grown 52%

SonOf

bostonerimus wrote: »

This is a bit of a cheap shot, but over the last 5 years RLGP 4 has returned a cumulative 43% and VLS80 has returned 63%, even VLS60 has grown 52%

Since VLS launched on 23/06/2011 RL GP4 has outperformed VLS40 and VLS60 net of charges.

These are the figures excluding platform charge and any fund based discounts/rebates.

VLS60 - 96.62%
RLGP4 (tracker version) - 89.45%
RLGP4 (active version) - 83.90%
VLS40 - 80.33%

VLS would have a platform charge not included in those figures. Reducing the figures on VLS down by around 0.25-0.45% p.a.

RL figures assume a 1% charge and doesnt have a platform charge. However, it has fund based discounts on fund size which rebates some of that charge. Often by 0.5-0.6% (you only need more than around £25k to get 0.5% off). Plus, being a mutual, it rebates a further 0.15-0.18% p.a. So, you can add around 0.65% p.a. to the RL figures and deduct around 0.25%-0.45% p.a. from the VLS figures

So, RLGP has beaten both VLS40 and VLS60 since launch

Charges 1% for the pleasure plus 15 bp in transaction costs.

Why would an IFA pick something like this? Makes no sense.

You are ignoring the fund based discount. You are ignoring the mutual bonus. You are ignoring the simplicity of the contract. You are ignoring that it has 100% FSCS protection. You are ignoring that it has had good performance.

bostonerimus

SonOf wrote: »

Since VLS launched on 23/06/2011 RL GP4 has outperformed VLS40 and VLS60 net of charges.

These are the figures excluding platform charge and any fund based discounts/rebates.

VLS60 - 96.62%
RLGP4 (tracker version) - 89.45%
RLGP4 (active version) - 83.90%
VLS40 - 80.33%

VLS would have a platform charge not included in those figures. Reducing the figures on VLS down by around 0.25-0.45% p.a.

RL figures assume a 1% charge and doesnt have a platform charge. However, it has fund based discounts on fund size which rebates some of that charge. Often by 0.5-0.6% (you only need more than around £25k to get 0.5% off). Plus, being a mutual, it rebates a further 0.15-0.18% p.a. So, you can add around 0.65% p.a. to the RL figures and deduct around 0.25%-0.45% p.a. from the VLS figures

So, RLGP has beaten both VLS40 and VLS60 since launch



You are ignoring the fund based discount. You are ignoring the mutual bonus. You are ignoring the simplicity of the contract. You are ignoring that it has 100% FSCS protection. You are ignoring that it has had good performance.

Why are you using VLS40 and 60? Surely VLS80 is a better comparison and that's up 115% since 201l. Obviously time span is critical when comparing returns, but VLS80 beats RLGP4 over 5 years and also since inception. Of course there are plenty of things with similar risk that have beaten VLS80 as well, why didn't the IFA recommend those. I think it's a question of inertia, RL is just the default in this case.

Rather than giving all theses discounts why doesn't RL make things simple and just reduce their fees? That's an age old selling technique.....50% off so it must be a deal.

SonOf

Of course there are plenty of things with similar risk that have beaten VLS80 as well, why didn't the IFA recommend those. I think it's a question of inertia, RL is just the default in this case.

RL GPs are time-weighted strategies. RLGP4 is the longer-term element of a balanced strategy, which would then move into GP5 and GP6 as time gets closer to vesting date. It has 67.5% in equities currently. It is more comparable to VLS60 than VLS80

SIPPs are higher risk than personal pensions at contract level (I'm not wedded to that believe personally but that is the perception and it does carry merit in some areas). It is a requirement that advice has to be suitable to the individual. That has nothing to do with performance. It is all about suitability. That means taking into account the past history of the individual and their current knowledge and understanding.

Royal London uses insured funds (so 100% FSCS protection). It has no cash account to operate (so no mistakes on holding too much cash, as the FCA found in its research last year with DIY investors) and has a risk targetted structure with ongoing governance (allowing pension holder to leave it to others).

Its an ideal option for a low knowledge investor with no history of using advanced investment options, such as SIPPs.

Rather than giving all theses discounts why doesn't RL make things simple and just reduce their fees? That's an age old selling technique.....50% off so it must be a deal.

Many platforms operate tiers. So, why shouldnt Royal London? As a personal pension, it doesnt make a platform charge. Its a mono-charged plan and they reduce their charges as the value goes up. So, if its good enough for platforms, why is it not good enough for a personal pension?

And as for the mutual benefit, that should be commended. Not criticised. It is effectively, a dividend for policyholders instead of going to shareholders. If they were not a mutual, the shareholders would be getting this money. Not the policyholder.

bostonerimus

A closer choice would be a synthetic VLS70 (50% VLS60 and 50% VLS80) which has a gain since 2011 of 105%. I'm not saying that RL is bad, just that the IFA and all the wizards at RLAM don't seem to be adding much value and I wonder if they are necessary as long as a few simple rules are followed.

[Deleted User]

RL GPs are time-weighted strategies. RLGP4 is the longer-term element of a balanced strategy, which would then move into GP5 and GP6 as time gets closer to vesting date. It has 67.5% in equities currently. It is more comparable to VLS60 than VLS80

Nope. RLGP4 has less than 10% in bonds. The rest is in highly volatile assets, such as

- stocks
- commercial property (correlated with stocks)
- commodities (different from stocks, but volatile and zero long term growth in real terms).

The risk profile is similar to a portfolio with >90% stocks.