Wealth management performance and charges

bostonerimus

Zadumbreion said:

GeoffTF said:

Zadumbreion said:

I was quoted all-inclusive fees of 1.8% with no entry charges or exit fees (we didn't discuss pensions yet for a couple of reasons) and when I started to look around  this didn't seem madly out of whack with the combined cost of an IFA (he gets 0.5%) and a separate investment manager / platform etc. His assertion is that SJP - in his experience over the long term - do usually outperform the benchmarks enough to cover their fees, which in the end is surely what it all boils down to.

As for the the DIY approach - I'm the sort of person who has spent his whole life learning to do stuff other people often pay for, and would normally spend a week without sleep learning everything I can find online but I recognise that an experienced FA or IFA has a shed load of knowledge and decades of experience I do not have, just as my clients don't have the 30 years of experience I do in my field. Also the stakes are high - I only get one shot at this. So this is a case where I don't mind paying an expert for their skills. I just don't want to waste money, and as I said I fundamentally don't believe that (made up numbers) a £5M portfolio is 5x as complex or time consuming to manage as a £1M portfolio would be.

You do not need thirty years experience to buy a cheap packaged tracker fund. Nobody can beat a tracker in risk adjusted terms except by chance. There is no extra value added by making things more complicated. Using your made up numbers, 1.8% of £5M is £90K per annum. It is worth a bit of work to save that.

Agreed, and that's why I hate the percentage approach, but I don't believe anyone's cheap tracker performance over the last 8 years really means anything because S&P500. How will the cheap trackers fare if the next few years are "interesting"?

My two cheap trackers and a cheap active income fund have netted me 13% average annual return over the last 5 years. Of course I've lost 10% over the last month, but as I'm in this for the long haul high frequency variations don't bother me and if this drop is sustained I'll do some rebalancing. We cannot know the future, but over 30 the last years my cheap tracker portfolio has returned an average of just over 9% per year through major down turns and crashes. Many portfolios will have done better, many worse, but a sensibly managed, ie almost no management, tracker portfolio is a very valid approach and probably appropriate for the DIY investor looking to keep fees low.

Zadumbreion

OldMusicGuy said:

You say you can learn to do stuff that people pay for, so why not do it for one of the most important aspects of your life? I did, many other people on here have done as well. You can keep things simple or make them as complex as you want. You don't need specialist skills or knowledge but you do need some basic understanding of financial matters. Start with books like "DIY Simple Investing: A Guide to Simple but Effective Low Cost Investing" by John Edwards and "Investing Demystified" by Lars Kroijer. Watch videos on the Pensioncraft Youtube channel - Ramin on there will give you FOR FREE a far better understanding of what is going on in the global economy and the world of investing than any IFA or SJP adviser.

One potential issue of course is that right now I'm both running my business and selling the business, so there's really not a lot of spare time available for learning. And I'll need to make decisions soon because there are unused ISA entitlements as well as the sale proceeds, both a matter of weeks away....!

Zadumbreion

bostonerimus said:

My two cheap trackers and a cheap active income fund have netted me 13% average annual return over the last 5 years. Of course I've lost 10% over the last month, but as I'm in this for the long haul high frequency variations don't bother me and if this drop is sustained I'll do some rebalancing. We cannot know the future, but over 30 the last years my cheap tracker portfolio has returned an average of just over 9% per year through major down turns and crashes. Many portfolios will have done better, many worse, but a sensibly managed, ie almost no management, tracker portfolio is a very valid approach and probably appropriate for the DIY investor looking to keep fees low.

I think that's really impressive. 9% is significantly more than we are hoping or expecting to achieve in the long term. If we can consistently beat inflation by a couple of percent I think we'd be pretty happy..!!!

bostonerimus

Zadumbreion said:

bostonerimus said:

My two cheap trackers and a cheap active income fund have netted me 13% average annual return over the last 5 years. Of course I've lost 10% over the last month, but as I'm in this for the long haul high frequency variations don't bother me and if this drop is sustained I'll do some rebalancing. We cannot know the future, but over 30 the last years my cheap tracker portfolio has returned an average of just over 9% per year through major down turns and crashes. Many portfolios will have done better, many worse, but a sensibly managed, ie almost no management, tracker portfolio is a very valid approach and probably appropriate for the DIY investor looking to keep fees low.

I think that's really impressive. 9% is significantly more than we are hoping or expecting to achieve in the long term. If we can consistently beat inflation by a couple of percent I think we'd be pretty happy..!!!

It really isn't impressive. I didn't do much of anything other than keep cool through the crashes, rebalance a bit and stay invested. I've ridden the stock and bond markets upwards.

GeoffTF

Thrugelmir said:

GeoffTF said:

Zadumbreion said:

I was quoted all-inclusive fees of 1.8% with no entry charges or exit fees (we didn't discuss pensions yet for a couple of reasons) and when I started to look around  this didn't seem madly out of whack with the combined cost of an IFA (he gets 0.5%) and a separate investment manager / platform etc. His assertion is that SJP - in his experience over the long term - do usually outperform the benchmarks enough to cover their fees, which in the end is surely what it all boils down to.

As for the the DIY approach - I'm the sort of person who has spent his whole life learning to do stuff other people often pay for, and would normally spend a week without sleep learning everything I can find online but I recognise that an experienced FA or IFA has a shed load of knowledge and decades of experience I do not have, just as my clients don't have the 30 years of experience I do in my field. Also the stakes are high - I only get one shot at this. So this is a case where I don't mind paying an expert for their skills. I just don't want to waste money, and as I said I fundamentally don't believe that (made up numbers) a £5M portfolio is 5x as complex or time consuming to manage as a £1M portfolio would be.

You do not need thirty years experience to buy a cheap packaged tracker fund. Nobody can beat a tracker in risk adjusted terms except by chance.

Now that the current trade is ending. Which "passive tracker" or actively managed multi asset fund are all these more recent DIY investors going to select. For them it's going to feel like they've been blindfolded and left in the middle of a desert without a compass. Volatile markets may well be with us for some time. Returns are going to differ widely depending upon the route choosen. 

They certainly should not pick an actively managed fund. That is a mugs game. Vanguard LifeStrategy will do. If they pick a fund whose equity component differs markedly from the global index, they could significantly over or under perform. They are more blindfolded if they go to an FA, and the FA will not offer any guarantee that he will beat the index, even before costs.

OldMusicGuy

Zadumbreion said:

One potential issue of course is that right now I'm both running my business and selling the business, so there's really not a lot of spare time available for learning. And I'll need to make decisions soon because there are unused ISA entitlements as well as the sale proceeds, both a matter of weeks away....!

I hear you. That's why companies like SJP do well. They target professional types who are too busy to pay much attention to a really important topic. They look slick and to be fair they do offer a service that many find acceptable but at a cost, and also with a very limited choice. I know all of this because I was one of those people. I'm really glad I made the effort to take control of this aspect of my life, but if you can't do this, most MSErs would encourage you to use an IFA.

Watch these videos to save you some time and effort:
https://www.youtube.com/watch?v=ivKpn_-F2oI
https://www.youtube.com/watch?v=qJbzDeX604A   

Audaxer

OldMusicGuy said:

Zadumbreion said:

One potential issue of course is that right now I'm both running my business and selling the business, so there's really not a lot of spare time available for learning. And I'll need to make decisions soon because there are unused ISA entitlements as well as the sale proceeds, both a matter of weeks away....!

I hear you. That's why companies like SJP do well. They target professional types who are too busy to pay much attention to a really important topic. They look slick and to be fair they do offer a service that many find acceptable but at a cost, and also with a very limited choice. I know all of this because I was one of those people. I'm really glad I made the effort to take control of this aspect of my life, but if you can't do this, most MSErs would encourage you to use an IFA.

Watch these videos to save you some time and effort:
https://www.youtube.com/watch?v=ivKpn_-F2oI
https://www.youtube.com/watch?v=qJbzDeX604A   

It's interesting to read what @Zadumbreion says as I've not heard many people that are happy with SJP, especially when they realise the amount they are paying in fees. However as he has £5m to invest he can probably comfortably afford to pay these high fees if he cannot find a suitable IFA or does not wish to manage such a large amount himself. 

I certainly wouldn't be happy be paying the level of fees SJP charge, but I'm not sure I'd be that comfortable DIYing such a large portfolio, so in these circumstances I might look for an IFA. However from what I've read it is quite difficult to find a good IFA, as the truly independent ones are in small firms that don't need to advertise.

Thrugelmir

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Zadumbreion said:

I was quoted all-inclusive fees of 1.8% with no entry charges or exit fees (we didn't discuss pensions yet for a couple of reasons) and when I started to look around  this didn't seem madly out of whack with the combined cost of an IFA (he gets 0.5%) and a separate investment manager / platform etc. His assertion is that SJP - in his experience over the long term - do usually outperform the benchmarks enough to cover their fees, which in the end is surely what it all boils down to.

As for the the DIY approach - I'm the sort of person who has spent his whole life learning to do stuff other people often pay for, and would normally spend a week without sleep learning everything I can find online but I recognise that an experienced FA or IFA has a shed load of knowledge and decades of experience I do not have, just as my clients don't have the 30 years of experience I do in my field. Also the stakes are high - I only get one shot at this. So this is a case where I don't mind paying an expert for their skills. I just don't want to waste money, and as I said I fundamentally don't believe that (made up numbers) a £5M portfolio is 5x as complex or time consuming to manage as a £1M portfolio would be.

You do not need thirty years experience to buy a cheap packaged tracker fund. Nobody can beat a tracker in risk adjusted terms except by chance.

Now that the current trade is ending. Which "passive tracker" or actively managed multi asset fund are all these more recent DIY investors going to select. For them it's going to feel like they've been blindfolded and left in the middle of a desert without a compass. Volatile markets may well be with us for some time. Returns are going to differ widely depending upon the route choosen. 

They certainly should not pick an actively managed fund. That is a mugs game. Vanguard LifeStrategy will do. If they pick a fund whose equity component differs markedly from the global index, they could significantly over or under perform. They are more blindfolded if they go to an FA, and the FA will not offer any guarantee that he will beat the index, even before costs.

VLS is an actively managed portfolio. Nor is there one definitive global index. Benchmarks are made man made creations. 

I'm not recommending an active fund either. I'm highlighting the challenges that lies ahead. A decade ago it was the 60/40 portfolio. More recently it's a global index. At the end of the next decade it will be something else that's the talk of the social media forums. Behind every trade there's a story and all trades eventually cease to be effective. 

GeoffTF

Thrugelmir said:

GeoffTF said:

Thrugelmir said:

GeoffTF said:

Zadumbreion said:

I was quoted all-inclusive fees of 1.8% with no entry charges or exit fees (we didn't discuss pensions yet for a couple of reasons) and when I started to look around  this didn't seem madly out of whack with the combined cost of an IFA (he gets 0.5%) and a separate investment manager / platform etc. His assertion is that SJP - in his experience over the long term - do usually outperform the benchmarks enough to cover their fees, which in the end is surely what it all boils down to.

As for the the DIY approach - I'm the sort of person who has spent his whole life learning to do stuff other people often pay for, and would normally spend a week without sleep learning everything I can find online but I recognise that an experienced FA or IFA has a shed load of knowledge and decades of experience I do not have, just as my clients don't have the 30 years of experience I do in my field. Also the stakes are high - I only get one shot at this. So this is a case where I don't mind paying an expert for their skills. I just don't want to waste money, and as I said I fundamentally don't believe that (made up numbers) a £5M portfolio is 5x as complex or time consuming to manage as a £1M portfolio would be.

You do not need thirty years experience to buy a cheap packaged tracker fund. Nobody can beat a tracker in risk adjusted terms except by chance.

Now that the current trade is ending. Which "passive tracker" or actively managed multi asset fund are all these more recent DIY investors going to select. For them it's going to feel like they've been blindfolded and left in the middle of a desert without a compass. Volatile markets may well be with us for some time. Returns are going to differ widely depending upon the route choosen. 

They certainly should not pick an actively managed fund. That is a mugs game. Vanguard LifeStrategy will do. If they pick a fund whose equity component differs markedly from the global index, they could significantly over or under perform. They are more blindfolded if they go to an FA, and the FA will not offer any guarantee that he will beat the index, even before costs.

VLS is an actively managed portfolio. Nor is there one definitive global index. Benchmarks are made man made creations. 

I'm not recommending an active fund either. I'm highlighting the challenges that lies ahead. A decade ago it was the 60/40 portfolio. More recently it's a global index. At the end of the next decade it will be something else that's the talk of the social media forums. Behind every trade there's a story and all trades eventually cease to be effective. 

I do not believe it is accurate to call VLS a managed fund. Vanguard has a committee which meets periodically to decide its composition. They made material changes on one occasion. Their decisions appear to be influenced mostly by what they think will sell, rather than what they think will do well.

The 60 / 40 portfolio is alive and well. I have one myself. The market portfolio dates back to the 1960s, and notably CAPM. A global tracker just is the equity part of the market portfolio. There is nothing new there.

Albermarle

I will shortly have a fairly decent lump sum to invest and so a few months ago I started looking for local FAs and IFAs. One of the first I spoke to seemed to tick all the boxes: he seemed very well informed, very knowledgeable, clearly passionate about his work and did not give off any salesman type vibes at all. In essence, I got on very well with him and rapidly came to the conclusion he wasn't an idiot and I could work with him. We did some initial work on establishing my needs etc and through all of this he did nothing but reinforce my impression that he was an honest, knowledgeable, friendly and professional Chartered Financial Planner.
He is also an SJP partner. I had spent a lot of time reading nothing but bad things about SJP, and even though on paper the idea of a company carefully selecting external fund managers and ruthlessly cutting them if they perform badly seems like a great concept, I struggled to find much support for them (including obviously on this forum).

I think this conundrum is easy to explain.

Firstly you do not normally see on this forum comments that SJP are unethical or unprofessional, and that will apply to most of their FA/sales people. As a financial services company they have to be seen to be reasonably trustworthy . The comments are all aimed at their rather expensive offering and usually some kind of lock in/exit fees . This is an MSE forum so people are naturally looking for better deals and helping others to get better deals.

Regarding the person you are dealing with ( and at this point I will say I was in sales for a long time) 

A good salesperson can be intelligent , easy to deal with , knowledgeable, inspire you with confidence , good listener, be very professional etc and be someone good and beneficial to deal with .

However that does not stop them trying to screw you for every penny possible , as from their and their companies point of view, that is also what makes a good salesperson.