Returns from S & S ISA’s

welchj295

My hubby and I are very disillusioned with returns after charges on our ISA’s over the last three years.  We have an IFA. After the big crash in March this year we are basically back where we started.  How have others faired? What kind of returns on a level 5 fund should we realistically expect?

grumiofoundation

As I posted before you need to provide more detail.

What is a 'level 5 fund'?
What are you actually invested in?
Who is the provider?

What other people have returned is determined by what they invested in 


For example, a 'popular' fund, vanguard life strategy 60 (6-% equities, 40% bonds), has returned ~16% in 3 years. 
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-60-equity-accumulation/charts

Whereas HSBC FTSE all-world index (100% equities) has returned ~ 26%
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-all-world-index-class-c-accumulation/charts

But FTSE100 tracker (also 100% equities but only biggest 100 companies in UK) has lost 11% 
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-100-index-accumulation/charts

dunstonh

My hubby and I are very disillusioned with returns after charges on our ISA’s over the last three years.

The last three years have not been great on equities but that is to be expected.   The end of a cycle often has the poor years compared to the start of the cycle.

UK equities have been quite poor compared to most regions.

We have an IFA. After the big crash in March this year we are basically back where we started.

Most people are back to where they were in January of this year.  Some a bit more, some a bit less but that is your ballpark.  Those with a higher level of UK equity have tended to perform worse than those with a higher global weighting.

What kind of returns on a level 5 fund should we realistically expect?

Level 5 in what context?   5 out of 5, 5 out of 7, 5 out of 10?    There is no universal risk scale.

Albermarle

welchj295 said:

My hubby and I are very disillusioned with returns after charges on our ISA’s over the last three years.  We have an IFA. After the big crash in March this year we are basically back where we started.  How have others faired? What kind of returns on a level 5 fund should we realistically expect?

As mentioned the typical medium risk, middle of the road low cost funds are approx. back where they were on Jan 1st +/- 5% 
and as also mentioned probably about 15% up over a three year period.
You say the charges are 'high' . What are they for IFA + S&S ISA platform + funds ?

dunstonh

Add on as the OP posted different details on another thread that said the following:

Advice please. My hubby and I currently have approx 90k in ISAs managed by an IFA.   After three years they are worth the same as when we invested or less in some cases.  Obviously we are aware stocks can go up or down but the charges seem to erode any gains away.  We have a low income. My hubby is a basic rate tax payer and I’m not earning so do not pay any tax.   If we keep our ISAs what kind of return should we expect if we went for a level 5 investment?   Do people on a low income need to bother with ISAs or are there any alternatives for savings/investments in this age of low interest rates?  

You cannot invest £90k in ISAs in one go.  So, that would suggest some bed & ISA activity has gone on.  i.e. you started with a GIA and ISA and then each year, £20k is moved from the GIA to the ISA.  Ultimately, you end up in ISAs with nothing left in the GIA.
When this happens, the platforms often treat the £20k as new money on the amount invested and do not take into account the £20k drawn on the GIA.     As it is all in ISAs now, the GIA would have dropped off and any gains on that will no longer show.    Also, if the funds have been rebalanced and with the top ups, the initial value of the funds will not necessarily be the same as they were on the first day the account was opened.    
So, are you going by the real monetary value you invested or what the platform is showing?  (i raise the point as you say some are up and some are down which suggests you are looking at the funds in isolation)

welchj295

Thank you for all the replies. Apologies if I didn’t provide enough information. We have had several ISA’s which add up to £90k. They are invested through an IFA with Prudential and Standard Life. We completed a questionnaire so he can understand our appetite for risk and it came out a 5. (On scale of 0-10) I’d assumed this risk indicator was an industry standard but I must be incorrect.  My IFA charges 0.5%. Total charges including IFA for Prudential are 1.68%  and for Standard Life 1.92%.    We have had some gains but are now back to where/or less than we started following March stock market crisis.
going forward we are not sure whether to try and manage it ourselves to save costs using something like Vanguard’s Life Strategy. Any thoughts and advice very gratefully received

Albermarle

You should speak to the IFA and tell them your concerns . Namely performance of the funds has been apparently disappointing  and that a popular low cost 'level 5 ' type fund Like Vanguard LS 60 is 15% up over the last three years .
Also this fund can be held on the Vanguard website for a total cost of 0.37% 
Of course I do not know the full story and there might be some mitigating factors but the above could be a good way to open the discussions and see what they say .
I suspect as mentioned by another poster that the expensive  Pru and SL funds are too heavily invested in the UK markets which have performed badly recently . Just a guess though.

dunstonh

We completed a questionnaire so he can understand our appetite for risk and it came out a 5. (On scale of 0-10) I’d assumed this risk indicator was an industry standard but I must be incorrect.

There is no industry standard.  Hence the need for context.  Even some different 1-10 scales have different weightings and end points.  Such as it one being a 1-10 scale of conventional options and another using risk 10 for unconventional options.  Some 1-10 scales weight differently whilst others as equal sliced.

going forward we are not sure whether to try and manage it ourselves to save costs using something like Vanguard’s Life Strategy. Any thoughts and advice very gratefully received

VLS has not been that great in the last year.   All our portfolios have outperformed VLS for some years.  So, don't assume lower costs means better returns.   It is what you invest in that matters.  Not so much what it costs, which is a secondary concern. Important but not the primary thing.

Your reference to Prudential would suggest you have some Prufund holdings.   VLS is very different to that.  Prufund, due to its smoothing mechanisms tends to lag the market a bit.  

 We have had some gains but are now back to where/or less than we started following March stock market crisis.

It isn't really correct to call it a crisis.  It was a crash but it quickly recovered except for UK equity (which VLS actually holds a bit more of than many here would like).

My IFA charges 0.5%. Total charges including IFA for Prudential are 1.68%  and for Standard Life 1.92%.   

1.92% would suggest fully active. i.e if your adviser charge is 0.5% and platform is 0.25% then the difference will be the OCF, IC & TC.  A total of 1.17%.   Most people generally disregard IC and TC but on some funds they can be quite high.   IFA figures should include them but many DIY investors do not.     That said, a total of 1.17%, or thereabouts depending on your platform charge, is something you could discuss with your adviser as they can lower it.   At the end of the day, you can give your adviser instructions and if you want to limit yourself to low cost options then the adviser will take that into account.

Alexland

welchj295 said:

My IFA charges 0.5%. Total charges including IFA for Prudential are 1.68%  and for Standard Life 1.92%.

I would cry myself to sleep each night paying that much on £90k in ISAs. Something like the HSBC Global Strategy Balanced fund is a medium risk, globally diversified (no UK bias) professionally constructed portfolio and costs 0.18% pa. If this is a static investment (with no contributions or withdraws) then iWeb from Halifax could provide the ISA wrapper and only charge £25 setup then £5 if you ever need to buy or sell the fund units. Overall if you don't trade then spreading those initial costs over the first few years around 0.20% pa on £90k if you 'do it yourself' with a ready-made fund. From what you have said the advisor isn't providing you any other value other than arranging these expensive and disappointing ISAs?