Drawdown management

OldMusicGuy

Albermarle wrote: »

Or be somewhere in the middle , where you do not pay an IFA , or make a big DIY mess, but you are not an expert.
In this case you are never quite sure if by saving the 0.5% fee , you are losing out by one or two per cent because your situation is not fully optimised.

So here's my problem with that thinking. You are assuming that IFAs are "experts". They are not IMO. They don't know about factors driving the global economy, they aren't experts in analysing company accounts or stock picking. They just happen to know more about a lot of the funds out there than the average Joe in the street. They also know about the rules and regs and, if you have complex financial affairs, I'm sure could suggest some use of investment vehicles that might be of benefit. But no way do I believe that any IFA is an "expert" that can somehow give you better performance.

If there was any truth to this, IFAs would be paid by their performance relative to a benchmark. I'd happily pay extra if they, as "experts", proved they could outperform from a cost and performance perspective my chosen portfolio. But they won't, hence I refuse to give them a large slice of my hard earned money when I can put together a simple portfolio that achieves my goals.

IFAs are for people who are scared of making these decisions or just can't be bothered. For example, my brother (an actuary) pays an IFA when he could definitely work all this out himself (especially as he spent his life in the pension industry). But he just can't be bothered, so fair play to him.

PS I'll add that I also like the Pension Craft channel.

[Deleted User]

I see that Investment Pathways are now being put off to January. Are these mandatory? And if so, is this the death of SIPPs in retirement drawdown?

coyrls

As I understand it Investment Pathways document your options; they don't restrict your choices.

[Deleted User]

coyrls said:

As I understand it Investment Pathways document your options; they don't restrict your choices.

From the reading I am doing - it is put into a single fund but you can elect to keep it in cash if you are insistent. https://www.pensionsage.com/pa/AJ-Bell-urges-FCA-to-delay-investment-pathways-implementation.php

coyrls

My impression was that, as a non-advised consumer, you could tick the boxes and then go ahead with what ever strategy you choose.

dunstonh

Deleted_User said:

I see that Investment Pathways are now being put off to January. Are these mandatory? And if so, is this the death of SIPPs in retirement drawdown?

Investment pathways were effectively dumbed down solutions into very simple limited outcomes for people that dont know what they are doing and dont want advice.   
SIPP providers could go down that route if they had a DIY distribution channel (some could argue that certain high profile DIY platforms already have such a thing - and they use their own brand funds to meet that need).    However, its more likely that it would be of more use to the robo-adviser style service.     

Also, if a SIPP provider has less than 500 exception only cases a year, then it doesnt need to offer a pathway solution.

The solution could be a multi-asset fund or it could be a model portfolio.  it doesnt matter which.   It just creates a flow chart process that will almost certainly not be the cheapest option, wont be the best option and some providers will take advantage of it to put people into more expensive options.  However, it wont be the worst option either as there will not be much scope to make a mess of things.      
Knowledgeable DIY investors won't go near them.  Advised investors won't go near them (with some caveats as transactional advice may use the pathways.  However, solutions already exist that do all that anyway).

Basically, the FCA did a review of drawdown and found a number of concerns on the DIY side in respect of how money was being invested after drawdown decisions were being made.  Far too much was sitting in cash as no investments were being used.      So, pathways are there to aid the investment solution to avoid people leaving it in cash.