Picking Funds

Moonwolf

tldr, should I consider diversifying the fund within my plan and where would I start?

I'm 53, I have about £200,000 in a Standard Life Flexible Retirement Plan. This was a BT retirement savings scheme so is heavily discounted although I don't work for BT anymore the discounts still apply. I have three other small DB pensions.

I have just used their investment plan which is based on my low risk profile. However the money is only in four funds and half of it is in a single fund the Standard Life International Equity Pension Fund. Performance has been as you expect for a low risk plan, pedestrian but not frightening. However in the light of Woodford, should I consider diversifying across more funds rather than having all my eggs in one basket?

How on earth do I work on picking the fund? The discount (.73 percentage points off the management charge, credited as additional unit purchases every month) apply to selected funds mainly SL and Blackrock as far as I can see. I am still low risk and particularly at the moment where my near future employment is uncertain, I am happy to sacrifice growth for reduced volatility.

I spoke to an IFA but they wanted a fee to transfer and then 1% AUM, then there would still be the charges levied by the funds they were going to put me into.

SonOf

should I consider diversifying the fund within my plan and where would I start?

Do you have the knowledge, experience and understanding to build a portfolio of funds?

However the money is only in four funds and half of it is in a single fund the Standard Life International Equity Pension Fund. Performance has been as you expect for a low risk plan, pedestrian but not frightening.

Low risk?

50% in global equities with another 3 funds in unknown areas (Whcih could be equities as well) does not indicate low risk. 50% equities is more medium risk.

However in the light of Woodford, should I consider diversifying across more funds rather than having all my eggs in one basket?

Woodford Income was a niche fund with a high level of illiquid assets that was known about for a good number of years. Adviser research had Woodford removed from their lists by 2017 because of the illiquid assets. Woodford Income Focus was the more suitable fund for those that liked Woodford. Somehow the niche fund became the more commonly used fund. Woodford was mostly used by DIY investors who didnt know what they were doing and fell for marketing lists that heavily promoted him.

I spoke to an IFA but they wanted a fee to transfer and then 1% AUM, then there would still be the charges levied by the funds they were going to put me into.

They would do as research, knowledge and understanding costs money if you are getting someone else to do it.

You can do far more damage by making bad DIY decisions that will cost you far more than the advice fees. DIY is a good thing for people that know what they are doing. Its a bad thing for those that do not. Maybe a sensible single multi-asset fund is the best option here. SL have plenty of those on their pensions.

MaxiRobriguez

Need to know what the three other funds are but the international equity is a decent split of US, Europe, UK, Japan and Emerging markets. If the other three funds are bond funds then you'll have a 50/50 equity/bond split with the equities part highly allocated to developed markets. It would be low/medium risk.

Other thing to consider is if the plan rebalances based on your age/retirement age like lots do now. It could be the case in the next five years, with a prospective 67 retirement, that your equity allocation comes down automatically.

This thread might be better in savings and investments too...

Moonwolf

SonOf wrote: »

Woodford Income was a niche fund with a high level of illiquid assets that was known about for a good number of years. Adviser research had Woodford removed from their lists by 2017 because of the illiquid assets. Woodford Income Focus was the more suitable fund for those that liked Woodford. Somehow the niche fund became the more commonly used fund. Woodford was mostly used by DIY investors who didnt know what they were doing and fell for marketing lists that heavily promoted him.

They would do as research, knowledge and understanding costs money if you are getting someone else to do it.

You can do far more damage by making bad DIY decisions that will cost you far more than the advice fees. DIY is a good thing for people that know what they are doing. Its a bad thing for those that do not. Maybe a sensible single multi-asset fund is the best option here. SL have plenty of those on their pensions.

Thank you, these are the useful bits. The funds as allocated seem to be doing what I want and if the risk of major losses through bad management is negligible and not really predictable by me then I won't worry.

I fully acknowledge I could make a huge mess so I don't want to do it.

As for an IFA, can they really do so much better than my current funds with all that extra off the top to begin with, and without changing my risk profile?

[Deleted User]

SonOf wrote: »

Woodford was mostly used by DIY investors who didnt know what they were doing and fell for marketing lists that heavily promoted him.

.

Do yo have evidence that the fund was mostly used by DIY investors rather than those advised by IFAs or institutional investors?

Many IFAs certainly put (and kept) their clients’ money into the fund. Are you saying they are incompetent? How does one know an incompetent IFA from a competent one? https://citywire.co.uk/new-model-adviser/news/ifas-when-woodford-gates-open-we-wont-rush-to-exit/a1235562

AnotherJoe

Moonwolf wrote: »

Thank you, these are the useful bits. The funds as allocated seem to be doing what I want and if the risk of major losses through bad management is negligible and not really predictable by me then I won't worry.

I fully acknowledge I could make a huge mess so I don't want to do it.

As for an IFA, can they really do so much better than my current funds with all that extra off the top to begin with, and without changing my risk profile?

I would say, "no".

What are you other three funds?

SonOf

As for an IFA, can they really do so much better than my current funds with all that extra off the top to begin with, and without changing my risk profile?

An IFA is not an investment manager. Their primary objective is suitability. So, that would mean putting in place something that is suitable for you, your understanding, knowledge and experience and your risk profile, tolerance, behaviour and capacity for loss.

However, IFAs are investment qualified on strategies (not the micromanagement that the fund itself will carry out). But even then, modern standards require IFAs to buy in the research, data and analysis as few will have the resources to have an in-house team. So, their knowledge, experience and the resources they buy in are almost certainly going to be better than yours at this stage. There is nothing that says an IFA will do better than any other alternative when it comes to investing. Research has found that clients with IFAs do tend to end up with larger pots. However, there is more down to the IFAs being better at getting people to pay in sensible amounts to the pension and not put it in silly investments like leaving it in cash (recent research by the FCA found that DIY investors are much heavier in cash than advised investors for example).

When it comes down to it, investing is largely about opinion. Some will claim advisers cant do better. Some will say they have done better. Some will say they have done worse. Some experienced DIY investors will have different views and performance to others. Some will say passive if best. Some will say active is best. Some will say a hybrid mix of the two is best. With over 30,000 investment options and lots of opinions, anything is possible. The key is to get it right for you. If you are not ready to DIY and dont want an IFA but have a decent multi-asset solution available, then that will likely be a strong option. Some employer schemes with SL, have pre-built strategies that automatically select the funds with SL and adjust them as you get closer to retirement.

SonOf

Do yo have evidence that the fund was mostly used by DIY investors rather than those advised by IFAs or institutional investors?

No. I read it elsewhere that IFAs had less on it than non-advised platforms and FAs. There was no mention of institutional investors. Although there was a reference to SJP being responsible for another large chunk. In 2015, 38% of the Woodford Income fund value was held on HL alone and just under 2/3rds of the Woodford Income focus in Jan 2018.

Many IFAs certainly put (and kept) their clients’ money into the fund. Are you saying they are incompetent?

Potentially yes. There were IFA research companies warning against the fund back in 2017 because of its high level of illiquid assets. Some MM funds were removing in that period too. So, what were those adviser companies that were still holding it or even buying it doing in terms of research?
I say potentially as if the adviser was employed on a transactional basis, they are not paid to review the portfolios again after they are set up. However, if the adviser was employed on a servicing basis then usually that entails carrying out a review of the funds held and ensuring that they are still suitable. Although it was only in January 2018 with MIFIDII that it became a requirement.

MaxiRobriguez

I would go as far as saying yes, definitely, if someone went to an IFA and together they conducted the view that the investor wanted low/medium risk by way of exposure to dividend stocks, then picking WEIF for them goes against that agreement, simply because the IFA was too lazy to look under the hood. If they aren't responsible, then what's the point of an IFA? How does a novice investor have any trust in IFA supported decision making?

[Deleted User]

SonOf wrote: »

No. I read it elsewhere that IFAs had less on it than non-advised platforms and FAs. There was no mention of institutional investors. Although there was a reference to SJP being responsible for another large chunk. In 2015, 38% of the Woodford Income fund value was held on HL alone and just under 2/3rds of the Woodford Income focus in Jan 2018.

Potentially yes. There were IFA research companies warning against the fund back in 2017 because of its high level of illiquid assets. Some MM funds were removing in that period too. So, what were those adviser companies that were still holding it or even buying it doing in terms of research?
I say potentially as if the adviser was employed on a transactional basis, they are not paid to review the portfolios again after they are set up. However, if the adviser was employed on a servicing basis then usually that entails carrying out a review of the funds held and ensuring that they are still suitable. Although it was only in January 2018 with MIFIDII that it became a requirement.

1. Institutional investors put money into the fund. https://www.kent.gov.uk/about-the-council/finance-and-budget/woodford-equity-income-fund-statement

2. The fund had part of its portfolio in illiquid assets from the start, aka 2015 rather than 2017.

3. IFAs quoted in the article above didn’t do it on a “transactional basis” . They have been chasing Woodford’s staff.

4. The other day you were suggesting that putting money into non-publicly traded real estate is just fine. That would be illiquid, particularly during a downturn. Did I miss something? How is that different?

5. If these qualified and licensed advisers were incompetent, how does one pick a competent one?

SonOf

4. The other day you were suggesting that putting money into non-publicly traded real estate is just fine. That would be illiquid, particularly during a downturn. Did I miss something? How is that different?

Yes you missed something.
It is very different.