IFA or DIY - any thoughts appreciated

SteveL555

So I think I have a pretty fundamental decision to make. Do I manage my own SIPP or get an IFA involved?

I've got £350k in an HL SIPP at the mo (I'm 46). I started using up what was left of my annual allowances from the previous 3 years a few years ago, so a fair bit has gone in recently. This is the last year of that, so from 21/22 I'll put the max £40k a year in (for the next few years at any rate, then I think my earnings will drop.. off a cliff..)

What I've been doing with that influx of money will probably make some of you scream - I've just looked at what I had and thought 'oh I should get a bit more global stuff', or 'maybe a bit more small company stuff'; - all funds, no plan.

I showed it an IFA who I know (old friend of a family friend) - he said my approach had "certainly created diversification, but not in the right sectors".

He's not taken on new clients for years, but has said he'll take this on. His suggestion is a split between 6 funds, and a move from HL to FundsNetwork. He also noted that I could probably get these funds via my current platform, HL, and it might be cheaper. And he's right (though some of the funds aren't available on HL).

Ignoring the fund specific fees I'm paying ~0.4% as a platform fee to HL. His advisory fee would be 0.5% and the Funds Network platform fee would be 0.2%. So on the face of it the sensible thing to do is move across to Fidelity (Funds Network) at their 0.2% platform fee, say thanks but no thanks to him, and replicate the fund split he's suggested. (Leaving me, fees-wise, down from ~0.4% to 0.2% and having dodged the 0.7% from FundsNetwork + the advisory fee)

I really don't think he's that bothered whether he gets my pension or not - not that that should play a part in what I do of course. So I could move everything across to Fidelity, and replicate the fund split he suggested, but of course it'll need reviewing. I've got a brain, am happy in Excel and with numbers generally, understand what shares, funds, bonds, & gilts are, and - if I've got a sense of what shape my pension should have - I believe I can keep it on track. (you may disagree)

If I do go down the DIY route, how can I get up to speed quickly? Guessing the answer isn't the Dummies Guide to Investing, but is there a good starting point for me?

Any constructive thoughts would be genuinely appreciated (including suggestions that I just pay the professional - I can cope with 'robust feedback'!)

many thanks

Steve

dunstonh

say thanks but no thanks to him, and replicate the fund split he's suggested.

Putting aside the moral side of things, that would give you the allocations as they are now.  However, it wont keep you updated with changes with rebalancing or due diligence checks.   You will still need to do those yourself in future.

If I do go down the DIY route, how can I get up to speed quickly?

It depends on how detailed you want to go.   i.e. do you stop at a multi-asset fund or go into portfolio building.

Audaxer

SteveL555 said:

If I do go down the DIY route, how can I get up to speed quickly? Guessing the answer isn't the Dummies Guide to Investing, but is there a good starting point for me? 

If you go down the DIY route, you could do worse than go for a low cost multi asset fund(s), with the risk tolerance most suitable to you, such as one of the Vanguard Life Strategy funds or HSBC Global Strategy funds. They will both give you a well structured portfolio that is globally diversified. You may do better with active funds, but you could also do a lot worse if you don't get it right as regards the structure and regular rebalancing etc. 

I have an income portfolio of active funds and ITs, as well as the multi asset funds mentioned above, and the multi asset funds have fared better recently.

SteveL555

Thank you Dunstonh - I agree there's potentially a moral issue, but it was him who suggested I might get the same more cheaply going directly via my current platform; I really don't think he's bothered about getting this business. He habitually turns away new business, and I think he's offered (probably reluctantly) as he's a friend of my wife's family. Totally agree on the future updates/changes front though - that's my big concern.
As for how detailed - I was just thinking to funds, not portfolio building from shares (more a portfolio of a handful of funds). The question for me is how I go about building that portfolio of funds; one that has good geographical and sector spread  - especially given that funds generally seem to straddle multiple sectors and regions (from what I've seen). 
How do I set about deciding I want X% in North America, Y in Europe etc.. or, similarly, spreads across sectors. And then, with a theoretical target, how do I how I go about satisfying that with funds (given they themselves seem to spread).
many thanks

Albermarle

What I've been doing with that influx of money will probably make some of you scream - I've just looked at what I had and thought 'oh I should get a bit more global stuff', or 'maybe a bit more small company stuff'; - all funds, no plan.

I think most DIY investors have done this and survived and I have to plead guilty as well although eventually getting it better sorted. The main issue to look at is how risky the portfolio is, and whether that suits your risk profile. The rest is probably more fine tuning , although I guess not everybody would agree with that.

As mentioned low cost multi asset funds are a good building block for a DIY portfolio for a less experienced investor.

A book by John Edwards is often recommended and this website is quite good.

https://monevator.com/

BritishInvestor

SteveL555 said:

So I think I have a pretty fundamental decision to make. Do I manage my own SIPP or get an IFA involved?

I've got £350k in an HL SIPP at the mo (I'm 46). I started using up what was left of my annual allowances from the previous 3 years a few years ago, so a fair bit has gone in recently. This is the last year of that, so from 21/22 I'll put the max £40k a year in (for the next few years at any rate, then I think my earnings will drop.. off a cliff..)

What I've been doing with that influx of money will probably make some of you scream - I've just looked at what I had and thought 'oh I should get a bit more global stuff', or 'maybe a bit more small company stuff'; - all funds, no plan.

I showed it an IFA who I know (old friend of a family friend) - he said my approach had "certainly created diversification, but not in the right sectors".

He's not taken on new clients for years, but has said he'll take this on. His suggestion is a split between 6 funds, and a move from HL to FundsNetwork. He also noted that I could probably get these funds via my current platform, HL, and it might be cheaper. And he's right (though some of the funds aren't available on HL).

Ignoring the fund specific fees I'm paying ~0.4% as a platform fee to HL. His advisory fee would be 0.5% and the Funds Network platform fee would be 0.2%. So on the face of it the sensible thing to do is move across to Fidelity (Funds Network) at their 0.2% platform fee, say thanks but no thanks to him, and replicate the fund split he's suggested. (Leaving me, fees-wise, down from ~0.4% to 0.2% and having dodged the 0.7% from FundsNetwork + the advisory fee)

I really don't think he's that bothered whether he gets my pension or not - not that that should play a part in what I do of course. So I could move everything across to Fidelity, and replicate the fund split he suggested, but of course it'll need reviewing. I've got a brain, am happy in Excel and with numbers generally, understand what shares, funds, bonds, & gilts are, and - if I've got a sense of what shape my pension should have - I believe I can keep it on track. (you may disagree)

If I do go down the DIY route, how can I get up to speed quickly? Guessing the answer isn't the Dummies Guide to Investing, but is there a good starting point for me?

Any constructive thoughts would be genuinely appreciated (including suggestions that I just pay the professional - I can cope with 'robust feedback'!)

many thanks

Steve

Seems like you have spoken to a traditional IFA where the focus is very much on the funds and investments. When you consider that investment management/fund selection is very much commoditized you would have to question what value he would be adding if you were to proceed.

BritishInvestor

Albermarle said:

 The main issue to look at is how risky the portfolio is, and whether that suits your risk profile. The rest is probably more fine tuning , although I guess not everybody would agree with that.

Surely the starting point has to be what are the O/Ps objectives and what is the best way to go about achieving them? Risk profiles etc come a lot further down the journey, IMO.

dunstonh

The question for me is how I go about building that portfolio of funds; one that has good geographical and sector spread  - especially given that funds generally seem to straddle multiple sectors and regions (from what I've seen). 

Not necessarily.   You can use filters to show funds that hold greater than say 85% in their area.  

How do I set about deciding I want X% in North America, Y in Europe etc.. or, similarly, spreads across sectors. And then, with a theoretical target, how do I how I go about satisfying that with funds (given they themselves seem to spread).

In ours (any many other IFAs) we buy in that sort of data as its not the sort of thing that small IFAs will have the resources to work out themselves.  These weightings are usually fluid.  On that basis, you are not going to have that data either.  So, you need to accept that this would be an area of compromise if you DIY.   So, its more likely you would use a static allocation based on your opinions (be wary of internet produced ones that are static as often they are years out of date - not so much an issue if 100% equity but more so if risk targetted and using gilts/bonds/property etc).

When you realise that you probably dont have the tools or knowledge, then you are usually better off sticking with multi-asset funds until you get that knowledge.

euanlowe

I'm going to chuck in my 2 cents. A very good friend of mine is an IFA but I manage my money myself. The overall tone of this discussion I've felt has been that the IFA's value is the fund split, but I agree with @BritishInvestor that that's almost irrelevant. If you get an IFA in, typically they will write you a 40 page document analyzing the needs of you and your family. It'll cover tax, life insurance, expense related to your kids etc. My friend charges 1 percent for this, so pretty pricey, but at least its doing the work and you get to blame them for any gaps. You seem a bit early on your self management journey, so if you do decide to manage this yourself, I am going to put forward the idea of just having it all in a vanguard lifestrategy fund which is diversified by design and very low cost - and then trying not to touch it till you retire. All the space in between, with a lot of guessing and finger in the air, can work, but generally doesn't. A good IFA is a great choice - but comes with the problem of differentiating between the good ones and the bad ones. If you are determined to figure it out yourself, I'd still put most of it into something very vanilla and play around with just a portion till you have learned how to minimize the regret linked to your decisions. I really enjoy it but its a proper nerd out following the market in your spare time. It takes a lot of work not buying high and selling low.

SteveL555

Thank you Albermarle - the website looks to be the kind of rabbit hole I was hoping to dive into. As for the book; I'm guessing it's "DIY Pensions" by John Edward, rather than "One Last Time: A psychic medium speaks to those we have lost" by John Edward! (also hoping they are different John Edwards..)
Dunstonh - thank you again (and noted on the allocations and multi-asset fronts)
BritishInvestor - my objective is to retire in <10 years, but that's more vague desire than clear target. I've no idea what's coming, so really the objective is; stack it and grow it. Then hopefully I'll look at the numbers in ~8 years and conclude that I can stop my fairly pointless, if well paid and not unpleasant, job. The mortgage will be paid off in September, so I'm hoping the squirrelling can ramp up then.
 - thank you all for your time
Steve

Albermarle

BritishInvestor said:

Albermarle said:

 The main issue to look at is how risky the portfolio is, and whether that suits your risk profile. The rest is probably more fine tuning , although I guess not everybody would agree with that.

Surely the starting point has to be what are the O/Ps objectives and what is the best way to go about achieving them? Risk profiles etc come a lot further down the journey, IMO.

You are right that go through the process properly , you have to go back to the beginning about what you/they are trying to achieve.
In this case though , the reality today is that  the OP has already cobbled together ( by their own admission) their own portfolio. So  the short term risk is that IF the portfolio is too high risk for their risk tolerance, and if there was a big market downturn, it could hit harder than they are prepared for .