At a Loss

Jackson00

Hi people, this is my very first post on this board, although I regularly read quite a number of the articles posted, there is certainly a fair bit of information to be gained from the questions and replies that can be viewed, I must say its a great credit to the many knowledgably people who go out of their way to help others who are struggling in the complex world of pensions and investments.      

A little insight about myself, I have just gone sixty and now retired, I transferred a Defined Benefit Pension with advice out to a D.C. scheme which I now manage myself, I am very comfortable managing investments and have done so for many years starting way back in my twenties even before those fateful days in October87 which was quite a shock to myself at the time.

Anyhow to get to the point, a friend and former work colleague who’s about half my age has got in touch and would like my opinion on his current pension situation. He was advised as were many other work colleagues at the time to transfer their D.B. pension to a D.B. scheme, he took advice from a local financial firm and ultimately did transfer his D.B. pension, his pension is now managed by this company and the value is just over 100K, he is being charged 1.5% a year plus the other associated platform and fund costs.

He is of the opinion that the performance of his pension is not matching other people’s who transferred at the same time and used different advisors, I asked about his investments and he actually sent me a copy of the investment funds held, I didn’t know what to expect but thought it would be interesting to see how the professionals go about managing a portfolio.

To say I was taken aback is an understatement and it would be interesting to know what the financial savvy people on this forum think of the following points I have concerns about.

1. The number of funds held – 35 wow I have a lot of funds in my portfolio but 35 really?
2. The number of funds held with the same fund providers, over twenty with Merian and Janus Henderson, why so many with these Fund providers? 
3. The method they use to select funds, the portfolio consists of all single sector funds, these include trackers and funds covering different world areas, looking at some of the funds they have selected the performance has been well below average, I would like to think there are better alternatives available how often should IFA’s monitor the selections?

 

This firm of IFA’s in question are not a micky mouse outfit they are independent and class themselves as being superior wealth managers in the city where I live, in many areas where expertise is required you have the good and the bad, I have my doubts about this bunch.

I’m at a loss of what to say apart from telling my friend to dump these bunch of muppets and find himself a reliable IFA to look after his interests, I believe you need to have confidence that your affairs are being taken care of in the best way, any thoughts people, how easy is it to switch advisors? 

MaxiRobriguez

If the funds are single sector and niche then 35 might not be outrageous. It's a lot by most peoples standards but if the composition of the funds is broadly in line with what many have (1 or 5-10 funds which covers most sectors in most geographies with a main weighting to the US) then I don't think there's a huge complaint to be had, as long as the fees are in line with a typical portfolio as well.

Given the scale/nicheness of some of these then many will have underperformed, that really shouldn't be unexpected. Anything that is transport, retail, hospitality, airline, banking is probably down 50% for starters. You wouldn't see this in a broader S&P500 fund for example as other sectors are doing enough to mask those sector performances, but if your friend has a portfolio with them split out then of course you will see more volatility. 

Perhaps you could share the 35 funds and their weightings, and we may be able to pass more of a judgement. 

Audaxer

Jackson00 said:

his pension is now managed by this company and the value is just over 100K, he is being charged 1.5% a year plus the other associated platform and fund costs.

Apart from the number of funds, I would be concerned about the charges as wealth managers are known to be costly. Adding on the platform and fund costs, I would think that could amount to total charges of at least 2.5% (£2,500 per year for the £100k portfolio). It would be interesting to compare the performance of his portfolio, with the performance of a low cost multi asset fund like one one the VLS or HSBC Global Strategy funds with a similar risk profile.

[Deleted User]

1.5% before fund and platform charges is a large handicap. The same money gets “taxed” by this amount again and again and again every year. Over long periods of time his portfolio is bound to underperform the market. 

Personally, I would never consider either single sector funds or a 35-fund portfolio. 

“A lot of funds with the same provider”. So? 

dunstonh

There are several discretionary investment portfolio managers that focus on high net worth who would routinely have around 30-40 funds held at any one time.  There is nothing wrong with it and it does not increase costs.   However, the benefits of such a wide spread are diluted if this is used with smaller fund values.

he is being charged 1.5% a year plus the other associated platform and fund costs.

What does the 1.5% include?  At a relatively low value of £100k, you wouldnt expect the adviser charge to be 0.5%.   1% would be more typical.  However, 1.5% is very high.  In fact, I have never come across a firm charging as much as that.  So, I wonder if there are other fees in there as well.
Unless it is not an IFA but a wealth management firm instead, A number of these have their own portfolio fund of funds which could have dozens of funds within them.   

The number of funds held with the same fund providers, over twenty with Merian and Janus Henderson, why so many with these Fund providers? 

He would need to ask the adviser.  All advisers should have investment governance in place and should be able to explain the portfolio structure and investments used.

The method they use to select funds, the portfolio consists of all single sector funds, these include trackers and funds covering different world areas, looking at some of the funds they have selected the performance has been well below average, I would like to think there are better alternatives available how often should IFA’s monitor the selections?

Underperforming over what period and relative to what risk?  

Albermarle

I would think that he needs to review the situation, he’s already paid a significant amount in charges to transfer and obviously would be concerned about further charges should he decide to find a new advisor.    

The original transfer was DB to DC so very expensive . DC to DC ( with a new advisor ) would be much cheaper.
If he was to DIY it wouldn't cost anything normally.

Marcon

Jackson00 said:

He is of the opinion that the performance of his pension is not matching other people’s who transferred at the same time and used different advisors, 

Is this 'opinion' based on hard fact or simply vague conversations? People aren't known for admitting to former colleagues that their pension transfer probably wasn't a good idea and tend to present their poor choice to proceed in the rosiest light possible, if only to reassure themselves.

Jackson00 said:

I’m at a loss of what to say apart from telling my friend to dump these bunch of muppets and find himself a reliable IFA to look after his interests, I believe you need to have confidence that your affairs are being taken care of in the best way, any thoughts people, how easy is it to switch advisors? 

You are very dismissive about 'this bunch of muppets', who may actually be doing a very good job and following your friend's expressed preferences (possibly against their advice). It's easy enough to switch advisers, but doesn't guarantee better results, so undermining a firm when you know so little about the situation probably isn't the most helpful thing you can do.

Dox

Jackson00 said:

This firm of IFA’s in question are not a micky mouse outfit they are independent and class themselves as being superior wealth managers in the city where I live, in many areas where expertise is required you have the good and the bad, I have my doubts about this bunch.

I’m at a loss of what to say apart from telling my friend to dump these bunch of muppets and find himself a reliable IFA to look after his interests, I believe you need to have confidence that your affairs are being taken care of in the best way, any thoughts people, how easy is it to switch advisors? 

On what are these 'doubts' based, given your own limited knowledge of investments? Have you ever been their client? Do you know what instructions your friend has given them, what his attitude to risk is, whether he has a clue what he's talking about?

I'm sure you mean well, but well meaning friends and their take on investment advice is rarely a successful mix!

[Deleted User]

Jackson00 said:

Albermarle said:

I would think that he needs to review the situation, he’s already paid a significant amount in charges to transfer and obviously would be concerned about further charges should he decide to find a new advisor.    

The original transfer was DB to DC so very expensive . DC to DC ( with a new advisor ) would be much cheaper.
If he was to DIY it wouldn't cost anything normally.

 Yes much better off DIY but not very knowledgeable when it comes to investments i'm afraid, so needs an advisor. 

He can become knowledgeable enough by reading one or two books. 

These days investing without IFAs is very simple thanks to excellent products that are available. And I don’t consider it “DIY” to buy a single multi-asset fund or a small number of well designed products any more than I consider buying an  IKEA set of draws as “DIY”. DIY is when you start picking your own stocks, which does require a lot of knowledge and research as you would be  competing with professionals. 

Anyone prepared to invest a couple of hours in reading can do it. Ones future financial security is worth it.   

Thrugelmir

Jackson00 said:

Marcon said:

Jackson00 said:

He is of the opinion that the performance of his pension is not matching other people’s who transferred at the same time and used different advisors, 

Is this 'opinion' based on hard fact or simply vague conversations? People aren't known for admitting to former colleagues that their pension transfer probably wasn't a good idea and tend to present their poor choice to proceed in the rosiest light possible, if only to reassure themselves.

Jackson00 said:

I’m at a loss of what to say apart from telling my friend to dump these bunch of muppets and find himself a reliable IFA to look after his interests, I believe you need to have confidence that your affairs are being taken care of in the best way, any thoughts people, how easy is it to switch advisors? 

You are very dismissive about 'this bunch of muppets', who may actually be doing a very good job and following your friend's expressed preferences (possibly against their advice). It's easy enough to switch advisers, but doesn't guarantee better results, so undermining a firm when you know so little about the situation probably isn't the most helpful thing you can do.

My friend is simply comparing his investment performance with other people who used different advisors and has come to the conclusion that he’s worst off.         

With hindsight majority of investors would have invested elsewhere. Advisors don't possess crystal balls so cannot predict the future. Likewise people have different appetites for risk. 

[Deleted User]

Jackson00, your friend should not stick with the existing arrangement out of bad sentiment. Don't expect to "catch up" in time, it seldom works like that.