Active funds outperform trackers

SonOf

The big advantage of keeping things simple with trackers is that it makes DIY less intimidating and eliminating the drag of IFA fees is, IMO, a big benefit over a lifetime of investing.

People go on about the drag of IFA fees but it doesn't need to be a drag. It can be if you go to an expensive one (and some can use expensive investment options) but fee differences may not be that big with some. For example, I took on a new investor in the week. IFA ongoing charge is 0.50% (the most common). Platform charge was 0.16% and investment OCF charge was 0.13%. A total of 0.79% pa. They had mentioned about doing DIY with popular DIY platform using their MM funds. That would have been around 1.68%. p.a. yes, they could have got cheaper but even if they used the same platform and VLS that would have been 0.67%. 0.67% is cheaper than 0.79% but its hardly a difference that could be considered a drag.

Its all very well going DIY if you know what you are doing but if you are going to DIY and plonk it in expensive multi-asset funds, then yes you avoid the IFA but it could be costing you more than double to do so. DIY needs a bit more than going with an expensive platform that covers 90% of the DIY market and picking a fund or funds from their marketing list.

Also, we know from FCA research that DIY investors tend to hold more cash in their platforms than advised investors. The FCA thinks this is down to lack of knowledge (not reinvesting dividends or getting bored after initially showing interest in their investments as something exciting or just giving up). We also know that DIY investors tend to take more investment risk than advised investors. That can be great in a long period of growth but you watch the posts appear on this site every time there is a major downturn.

green_man

SonOf wrote: »

People go on about the drag of IFA fees but it doesn't need to be a drag. It can be if you go to an expensive one (and some can use expensive investment options) but fee differences may not be that big with some. For example, I took on a new investor in the week. IFA ongoing charge is 0.50% (the most common). Platform charge was 0.16% and investment OCF charge was 0.13%. A total of 0.79% pa. They had mentioned about doing DIY with popular DIY platform using their MM funds. That would have been around 1.68%. p.a. yes, they could have got cheaper but even if they used the same platform and VLS that would have been 0.67%. 0.67% is cheaper than 0.79% but its hardly a difference that could be considered a drag.

I wish I could find someone like you!!

The last IFA I spoke to charged 0.8% ongoing, on a 0.4% platform + fund fees. Comparing this to my existing Halifax sharedealing account (and proposed SIPP) I’d be paying 1.1% more than I currently do. I’m not saying that they definately aren’t worth that but it’s a consideration as that is £4400 per year.

[Deleted User]

green_man wrote: »

I wish I could find someone like you!!

If only there was some way you two could make contact..

bostonerimus

The continual trope that DIY investors are “ lambs to the slaughter” is getting old. Simply put most people do not need an IFA as long as they follow a few simple rules. Thrift is the most important thing for the majority of people to practice on their route to financial independence. IFAs etc come along to “help”, but in many cases they are simply not necessary and hurt more than they help. Of course if you do dumb things you might well suffer the consequences; a DIYer should develop a sensible financial strategy, and that includes asset allocation as well as going without the drag of IFA fees. This is not rocket science as much as the finance industry would want you to believe.

Audaxer

Linton wrote: »

Let see what happens in the next major crash to all the newbie investors who have leapt in with VLS100.

I would have thought newbie investors who invested in a portfolio of 100% equity active funds would possibly suffer bigger losses in a major crash to those who invested everything in VLS100.

Audaxer

SonOf wrote: »

For example, I took on a new investor in the week. IFA ongoing charge is 0.50% (the most common). Platform charge was 0.16% and investment OCF charge was 0.13%. A total of 0.79% pa.

If there are a lot of good IFA firms like yours around the country that are available to investors at these rates, then that is great. However I'm not sure how easy it is for investors to find good small truly independent financial advisers, as I think it has been said in here before that many are now being taken over by larger wealth management companies that are more expensive and not independent?

SonOf

The continual trope that DIY investors are “ lambs to the slaughter” is getting old

The continual trope that that DIY is a panacea is getting old.

One thing you should know by now is that the same subjects come up time and again. So, the same responses get made time and again. Repeating is inevitable.

Simply put most people do not need an IFA as long as they follow a few simple rules. Thrift is the most important thing for the majority of people to practice on their route to financial independence

Simply put, most people do not have the inclination to do it themselves. Many of the posters on this site do but the majority of the population do not.

Albermarle

Simply put, most people do not have the inclination to do it themselves. Many of the posters on this site do but the majority of the population do not.

From my experience , not only do the large majority not have the inclination to DIY , but in fact are basically clueless about financial matters . Even people in professional jobs often seem to lack the basic knowledge, numeric skills and understanding of risk needed (as we seen every day from the posts on this forum)

Prism

bostonerimus wrote: »

The continual trope that DIY investors are “ lambs to the slaughter” is getting old. Simply put most people do not need an IFA as long as they follow a few simple rules.

I'll give you a few examples of what my very intelligent professional wife does not know about

What a share is
What a bond is
What a fund is
She only knows what a dividend is because I pay her those from my company.
How tax works
How much she needs to save for the future
She couldn't tell you when a single recession or stock market crash occurred
How an ISA works
She has never heard of companies such as Vanguard or Hargeaves Lansdown

And to be honest she has absolutely zero interest in any of this stuff. I imagine there are more people like her than people who could do this themselves. The chance that she would make a mistake if trying to do it herself outweighs the small % cost of an IFA.

bostonerimus

Albermarle wrote: »

From my experience , not only do the large majority not have the inclination to DIY , but in fact are basically clueless about financial matters . Even people in professional jobs often seem to lack the basic knowledge, numeric skills and understanding of risk needed (as we seen every day from the posts on this forum)

Yes people have been conditioned to be scared of money and finances and the ones that remain intimidated will seek out help. The financial industry has a vested interest in keeping people scared and ignorant, but it doesn't need to be that way and by following a few very simple rules they can successfully DIY and become financially independent. Teaching children more personal finance in school would help a lot.