When to diversify a pension?

WSB

OK thanks folks, sounds like I've c×cked up somewhat and have some sorting out to do.
Bit depressing as thought I was doing fine with that size pension pot at 50.
Need to seek out an IFA specialising in this type of thing. 
Any recommendations on how to do this and what to look out for and avoid? 

Diplodicus

WSB said:

OK thanks folks, sounds like I've c×cked up somewhat and have some sorting out to do.
Bit depressing as thought I was doing fine with that size pension pot at 50.
Need to seek out an IFA specialising in this type of thing. 
Any recommendations on how to do this and what to look out for and avoid? 

Whoa! How did you come to those conclusions? You are doing fine. 

You were right to question the adviser's motive. I would be inclined to leave your investment where it is, although I'm not sure the figures tally with the fund's performance. Since 31/12/18, SJP Global Equity has gone up by a third:

https://markets.ft.com/data/funds/tearsheet/summary?s=gb00b46fk959:gbx

Although you may not realise it, your investment reach is already diverse. If you look down the factsheet, you will see how widely money is spread about. A favourite strategy of a fund is to invest in other funds and investment vehicles - multiplying the weight of management charges laid on the customer. Proceeding to a "fund of funds" would add yet another level of fees.

But it may well be that your adviser has the LTA in mind. If this pension is worth half LTA at 50, it may well rise to the level of the allowance before you are 60. But that is a nice problem to have. Relax, you're doing fine. WSB.

Albermarle

WSB said:

OK thanks folks, sounds like I've c×cked up somewhat and have some sorting out to do.
Bit depressing as thought I was doing fine with that size pension pot at 50.
Need to seek out an IFA specialising in this type of thing. 
Any recommendations on how to do this and what to look out for and avoid? 

I would not be hard on yourself, having a half Million pot @ 50 is certainly a better position than the large majority of people.

Dealing with pensions is the bread and butter for IFA's, so no need to search out a specialist . Just find one you like with reasonable charges and then its up to you whether you change from SJP or not.
Normally the first chat with an IFA is free, basically to see how you get on .

WSB

Thanks folks, much appreciated. 

dunstonh

 I would be inclined to leave your investment where it is, although I'm not sure the figures tally with the fund's performance. Since 31/12/18, SJP Global Equity has gone up by a third:

For someone that doesn't like advisers, your comments are strange.  You want the customer to stay in a fund that is costing 2-3 times more than alternatives.   And a fund that has a track record of consistent underperformance of the sector average.  And allow the SJP rep to continue being paid their 0.50% per annum.

Proceeding to a "fund of funds" would add yet another level of fees.

Incorrect.   Some funds of funds are cheaper.  Some are more expensive.   From what I can see the SJP recommendation is not a fund of funds but a model portfolio of in-house funds.  So, it is neither a cheaper or more expensive fund of funds.

dunstonh

WSB said:

OK thanks folks, sounds like I've c×cked up somewhat and have some sorting out to do.
Bit depressing as thought I was doing fine with that size pension pot at 50.
Need to seek out an IFA specialising in this type of thing. 
Any recommendations on how to do this and what to look out for and avoid? 

You have a decent pot and you are going to be fine. There is no point looking backwards because you cannot change anything.  SJP is costly but what you did with them is suitable.  Yes you could have done better.  But you could also have done worse.

What you can do is look forward and make sure it's right for you from this point.

Need to seek out an IFA specialising in this type of thing. 
Any recommendations on how to do this and what to look out for and avoid? 

You dont need a specialist.  This is very routine mainstream.    However, it is probably worth avoiding firms with wealth management in their name or tag line or a wealth management business model.   They are basically similar models to SJP with similar costs.    Google your local firms and speak to a few.

WSB

As i search around for local IFAs, what sort of costs can i expect and how many meetings would I expect for such as has been discussed? 
Just trying to get an idea. 

Diplodicus

dunstonh said:

 I would be inclined to leave your investment where it is, although I'm not sure the figures tally with the fund's performance. Since 31/12/18, SJP Global Equity has gone up by a third:

For someone that doesn't like advisers, your comments are strange.  You want the customer to stay in a fund that is costing 2-3 times more than alternatives.   And a fund that has a track record of consistent underperformance of the sector average.  And allow the SJP rep to continue being paid their 0.50% per annum.

I recommend the customer stays in his current fund rather than the model portfolio of in house funds.

Proceeding to a "fund of funds" would add yet another level of fees.

Incorrect.   Some funds of funds are cheaper.  Some are more expensive.   From what I can see the SJP recommendation is not a fund of funds but a model portfolio of in-house funds.  So, it is neither a cheaper or more expensive fund of funds.

I think someone quoted 1.81% in respect of WSB's current investment. My understanding was that the TER or Total Expense Ratio (whose main component is the cost of fund management) was something the customer paid on an ongoing basis, reflected in the unit price of the fund, rather than a periodic discrete charge. Therefore a customer invested in a model portfolio of in-house funds would be paying the TER on that portfolio in addition to the TER on each component fund.

Not being an investor in funds, that was just my assumption. Apologies if that is wrong. How does it work, if different?

dunstonh

I recommend the customer stays in his current fund rather than the model portfolio of in house funds.

Yes I got that.  You are recommending he stays in a fund with below sector average performance, 2-3 times the cost of alternatives and the SJP rep continues to be paid 0.5% p.a.

I think someone quoted 1.81% in respect of WSB's current investment. My understanding was that the TER or Total Expense Ratio (whose main component is the cost of fund management) was something the customer paid on an ongoing basis, reflected in the unit price of the fund, rather than a periodic discrete charge. Therefore a customer invested in a model portfolio of in-house funds would be paying the TER on that portfolio in addition to the TER on each component fund.

SJP still operates the old fashioned way of having life funds for bonds, pension funds for pensions and UT/OEICs for ISA/GIA.   The 1.81% was the charge for the pension fund.

Your understanding of a model portfolio is incorrect.    Each fund in the model portfolio has its declared charge.  It is not doubled up/increased.  it is just software linking individual funds together with the ratio controlled at the platform/product level by the administrator (in this case, SJP).   

Diplodicus

dunstonh said:

I recommend the customer stays in his current fund rather than the model portfolio of in house funds.

Yes I got that.  You are recommending he stays in a fund with below sector average performance, 2-3 times the cost of alternatives and the SJP rep continues to be paid 0.5% p.a.

Given the SJP alternative, yes. I agree there are better alternatives available but working an IFA into the picture would not be a priority for me. But then, it's not my living.
 

I think someone quoted 1.81% in respect of WSB's current investment. My understanding was that the TER or Total Expense Ratio (whose main component is the cost of fund management) was something the customer paid on an ongoing basis, reflected in the unit price of the fund, rather than a periodic discrete charge. Therefore a customer invested in a model portfolio of in-house funds would be paying the TER on that portfolio in addition to the TER on each component fund.

SJP still operates the old fashioned way of having life funds for bonds, pension funds for pensions and UT/OEICs for ISA/GIA.   The 1.81% was the charge for the pension fund.

Your understanding of a model portfolio is incorrect.    Each fund in the model portfolio has its declared charge.  It is not doubled up/increased.  it is just software linking individual funds together with the ratio controlled at the platform/product level by the administrator (in this case, SJP). 

That makes sense, would be fair,  and SJP make no mention of an additional tier of charges in their portfolio factsheet but, their wholly owned subsidiary Rowan Dartington is less coy about its own Growth Fund charges:
AMC + Annual Charge + Underlying TER of a basket of other funds

https://www.rowan-dartington.co.uk/sites/default/files/2020-07/Intermediaries Growth July 2020.pdf

So, the total TER in this example is average; and if the factsheet is compelled to differentiate top and underlying fees, that's good.

But I don't see how management charges on a fund's underlying investments can wholly be assayed in the TER.
For example, the second largest holding in WSB's pension is the global asset management company Affiliated Managers Group.
Obviously, AMG charge for their management.  But WSB is also paying SJP on top. So 1.81% is not a true reflection of the investment cost. Or am I missing something?

Every day's a school day.