IFA or DIY - any thoughts appreciated

[Deleted User]

1. You dont understand currency risk. Profits have to be converted before becoming “gbp denominated”. 

2. So?
3. So?
4. There different types of political risks. Some apply some dont
5. I am not “speculating”. The future is an event tree with probabilities. We dont know what will happen but you are opening yourself to bad scenarios.
6. Take another point. 1995. Japan is no longer in a “bubble”. Still bad to be overweight Japan. Long periods of underperformance happened in many developed markets for long periods of time, including in the U.k and US. 

83705628

You expect higher returns from the UK? Presumably you are hoping that the Labour party stays out of government for a generation then?

Things arent great here now, but I shudder to think how bad it would be now if Corbyn and his 1970s politics of Venezuela had won in 2019. It really doesnt bear thinking about. 

Well if you think differently I'd love to hear your thoughts, I just prefer to keep emotion, politics, and anything that sounds like something you would read in the Daily Mail comments section out of investing decisions.
There is no evidence that the current government has any significant influence on equity returns.
But if you want to think of it that way, you should know that the only 2 times the UK has done significantly worse than US/global markets have been post-Brexit, and the 1972-1974 crash, both times under a Tory government. Prior to those incidents the worst long-term period on record had something to do with temporarily emigrating the country's prime productive population to engage in a 4 year long solely destructive activity in Europe because someone shot a Duke.
In fact the best period for UK equity (after the expansionary 80s - which was really just a recovery from the 1972-4 crash, a credit boom, and a one-off demographic phenomenon as the baby boomers came through their prime economically productive age) was during the post-war social democratic consensus. Who'd have thought that having a healthy, educated population, who don't have to worry about healthcare or education costs, or about financial ruin if a business doesn't work out (thus arguably enabling more innovation) and providing a social safety net so that people don't fall into the trap of long-term poverty and unemployment every times there's a recession... who'd have thought these were sound economic policies and not Communism?
¯\_(ツ)_/¯ .

83705628

Deleted_User said:

1. You dont understand currency risk. Profits have to be converted before becoming “gbp denominated”. 

2. So?
3. So?
4. There different types of political risks. Some apply some dont
5. I am not “speculating”. The future is an event tree with probabilities. We dont know what will happen but you are opening yourself to bad scenarios.
6. Take another point. 1995. Japan is no longer in a “bubble”. Still bad to be overweight Japan. Long periods of underperformance happened in many developed markets for long periods of time, including in the U.k and US. 

1-3. well ok there's some indirect currency risk

but its never materially affected the uk stock market before

and global is maybe 95% currency risk

so relatively speaking there's no currency risk

and the "bad" end of that currency risk would be £ appreciation, which will affect uk returns less than global returns measured in £.

4. fair nuff i just don't see the uk as having material political risks to a uk investor

5. i don't think we actually disagree on this one but investing is about dealing with unknowns, i just happen to expect more from the uk than global equity over the foreseeable future

6. there will always be examples in hindsight that can counter any proposed asset allocation.

[Deleted User]

1. UK has MUCH higher volatility vs global market. See figure 2. https://www.vanguard.com/pdf/ISGGEB.pdf

2. Historic under/overperformance tells nothing about the future. Nothing at all about the next 10 years. Value  stocks traditionally outperformed historically but massively underperformed over the last 10 years. 

3. Apart from anything else, UK stocks incur an additional tax (stamp). 

4. Corbyn was very different from Tony Blair or any other Labour leader who made it to PM. Saying “it would have been fine because markets did ok under Blair” is not “neutral, disinterested commentary “. Its just misinformed

83705628

Deleted_User said:

1. UK has MUCH higher volatility vs global market. See figure 2. https://www.vanguard.com/pdf/ISGGEB.pdf

2. Historic under/overperformance tells nothing about the future. Nothing at all about the next 10 years. Value  stocks traditionally outperformed historically but massively underperformed over the last 10 years. 

3. Apart from anything else, UK stocks incur an additional tax (stamp). 

4. Corbyn was very different from Tony Blair or any other Labour leader who made it to PM. Saying “it would have been fine because markets did ok under Blair” is not “neutral, disinterested commentary “. Its just misinformed

1. It doesn't in the long-term. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1940165 Table 1, UK and US standard deviation from 1900-2010 was 20%. The total world market's standard deviation was the lowest at 17.7%, no single country had lower volatility (except Canada for some reason, 17.2%). So no that isn't true. You can also go on the charting tool on trustnet.com and compare FTSE 100/All-Share/250 with a global index or a global sector, and again, you can see that aside from post-Brexit, your statement is not true.
2. It's an indication of reversion to the mean. Long-term equity returns cannot exceed the dividend yield + GDP growth.
3. Similar things happen with a lot of international stocks.
4. I didn't say that. I didn't say anything about Corbyn. People said the same thing about Blair, Wilson, Attlee and MacDonald. People also say the same thing about every politician. I don't listen to what other people say.

paulbyrne60

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

Pick a decent Mutual fund every time over an FP/IFA, IFA's  are normally one man bands and you don't want to become their cash cow.   Its a fact Tracker Mutual Funds 9/10 will out perform a managed fund, so what value do you expect to receive from paid advise?

Albermarle

Please note this is is a consumer forum , which generally tries to help people with personal finance issues, misunderstandings etc.
It is not supposed to be for detailed debate about ones own personal opinion about a particular investment strategy. I think we know your point of view, so lets call it a day .

83705628

Albermarle said:

Please note this is is a consumer forum , which generally tries to help people with personal finance issues, misunderstandings etc.
It is not supposed to be for detailed debate about ones own personal opinion about a particular investment strategy. I think we know your point of view, so lets call it a day .

I'm going to have to start my own thread 😍

Paulreno

Salary sacrifice pension contribution.

Hi

I was clicking through the MSE page on 'pension need to know' and under salary sacrifice it says this:

Because your pension contribution comes out of your pre-tax salary, you'll pay less income tax at 20%. You'll also avoid your 12% NI contributions on the amount you sacrifice. This means for every £68 you sacrifice from your pay packet, £100 goes into your pension pot.

Could someone please explain.

I understand the part about less tax and NI contribution but I don't understand the part that says

for every £68 you sacrifice, £100 goes into your pension pot.

When my company takes my pension contribution from my salary, the amount taken is the amount deposited in my pension and as this is taken as a sacrifice, I don't get tax relief on it.

Who is right? The MSE website or the company I work for?

Thank-you,

Paul

BritishInvestor

paulbyrne60 said:

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

Pick a decent Mutual fund every time over an FP/IFA, IFA's  are normally one man bands and you don't want to become their cash cow.   Its a fact Tracker Mutual Funds 9/10 will out perform a managed fund, so what value do you expect to receive from paid advise?

It might be worth understanding what an IFA does.