Comparing IFA managed portfolio to Vanguard LS60

enthusiasticsaver

It is coming up to the end of the year so I normally check on investment performance around this time. 

I invested in a global multi asset passive fund of funds (Vanguard LS60) for four  years from 2015 to 2019 but for comparison I am only looking at annual performance as we have been with an IFA for just over a year now since September 2019. If we had invested in VLS60 trustnet says the annual performance was 6.4%.  According to my Fidelity performance report our annualised return  with the IFA led portfolio was 13.61% for the last 12 months invested in a cautious portfolio over 14 different funds.  This is after fees including set up fees for the first year so I am pleased with that. 

Performance varies from -5.06% for the Legal and General UK property feeder account (understandable in current situation and it was suspended anyway until October) to the Baillie Gifford American fund which has done brilliantly at 114.45% for the year.  Strategic bonds have done ok and UK funds average but emerging markets, Japan and the European ones have also done well. 

I know a lot of people on here do not like IFAs but on comparing the last years performance to what it would have done had I left it in VLS60 it seems to have done much better with the IFA than a passive tracker fund even after taking fees into account.  Am I missing anything? I know that is a crude comparison over just one year and just one multi asset fund.  I would also say I do not only use an IFA with the sole objective of improving returns.  There are other benefits. 

dunstonh

I know a lot of people on here do not like IFAs but on comparing the last years performance to what it would have done had I left it in VLS60 it seems to have done much better with the IFA than a passive tracker fund even after taking fees into account.  Am I missing anything?

No.    Our comparable risk portfolio has done the same in most years.   Plenty of IFAs and DIY investors achieve that as well.
There are also plenty of IFA portfolios that wouldn't have done and plenty of DIY investors that wouldn't have done.

Another_Saver

dunstonh said:

I know a lot of people on here do not like IFAs but on comparing the last years performance to what it would have done had I left it in VLS60 it seems to have done much better with the IFA than a passive tracker fund even after taking fees into account.  Am I missing anything?

No.    Our comparable risk portfolio has done the same in most years.   Plenty of IFAs and DIY investors achieve that as well.
There are also plenty of IFA portfolios that wouldn't have done and plenty of DIY investors that wouldn't have done.

I'd love to see the evidence and know how you do it

enthusiasticsaver

dunstonh said:

I know a lot of people on here do not like IFAs but on comparing the last years performance to what it would have done had I left it in VLS60 it seems to have done much better with the IFA than a passive tracker fund even after taking fees into account.  Am I missing anything?

No.    Our comparable risk portfolio has done the same in most years.   Plenty of IFAs and DIY investors achieve that as well.
There are also plenty of IFA portfolios that wouldn't have done and plenty of DIY investors that wouldn't have done.

Thanks for your input and yes I have no doubt that some IFAs could do better and some will do worse. 

I have come to the conclusion over the last year that comparing a portfolio managed by an IFA to a DIY approach is like comparing apples and pears.  I was quite happy with doing the DIY until I wasn't and having an IFA we like and trust alongside a decent performance has given us some peace of mind over the last year that we are not  just stumbling along in the dark without a decent investment strategy.  However up until then I was happy with our approach of just one global multi asset fund with low fees. So our analysis of our IFA approach for year 1 is  favourable. 

Prism

Very nice - looks like you have selected an IFA who isn't afraid to select some good funds. Do you have a passive core in their too?

fred246

There is probably someone who bet on a horse that won and they did better than the IFA.

enthusiasticsaver

Another_Saver said:

dunstonh said:

I know a lot of people on here do not like IFAs but on comparing the last years performance to what it would have done had I left it in VLS60 it seems to have done much better with the IFA than a passive tracker fund even after taking fees into account.  Am I missing anything?

No.    Our comparable risk portfolio has done the same in most years.   Plenty of IFAs and DIY investors achieve that as well.
There are also plenty of IFA portfolios that wouldn't have done and plenty of DIY investors that wouldn't have done.

I'd love to see the evidence and know how you do it

Haha.  Wouldn't we all? The thing is though I guess it takes a lot of research and expertise and my IFA and his team review the funds quarterly so I guess other IFAS are the same. They also look at management structure and investment processes  as well as performance.  I just really wasn't confident that I knew what I was doing when looking at fund performance reports. 

enthusiasticsaver

fred246 said:

There is probably someone who bet on a horse that won and they did better than the IFA.

Funny I did think there would be a unhelpful comment of that sort.  It is invested cautiously so in no way would this be sticking it on the 3.30 at Epsom. 

enthusiasticsaver

Prism said:

Very nice - looks like you have selected an IFA who isn't afraid to select some good funds. Do you have a passive core in their too?

No.  All the funds are managed. 

Thrugelmir

And if your IFA had underperformed your choosen benchmark? Would you now be sacking them. Holding a concentrated fund that performs exceptionally is going to result in a better overall return. What's the performance excluding the Baillie Gifford American fund ? 

dunstonh

Haha.  Wouldn't we all? The thing is though I guess it takes a lot of research and expertise and my IFA and his team review the funds quarterly so I guess other IFAS are the same. They also look at management structure and investment processes  as well as performance.  I just really wasn't confident that I knew what I was doing when looking at fund performance reports. 

I wonder if they are using the same research company as us as ours does quarterly updates and the due diligence.  Although there are several support companies out there that offer their services to IFAs which are variations of that theme.

With this method, the IFA takes the cost of buying in the research and data and the IFA can implement it on multiple platforms/providers etc.     Unlike the DFM method where the IFA gets the DFM to do all the work and gets the investor to pay for it and is limited to only platforms that offer that DFM.