Looking to start a pension - advice needed

bpk101

Just to address some of the comments relating to risk...

I think the idea of risk assessment is good and i'll definitely complete one. As of now i'm relatively relaxed with the prospect of my investment nosediving considerably at any given moment as i understand it will recover in time. 

My son's JISA fund (Vanguard ESG Dev World All Cap Index) has tanked in recent weeks but i know it's in for the long game, i'm happy for it to do its thing and i've not once felt the urge to cash in.

I'd like to think i'll have the same attitude with my own pension, it's a 20 year investment (and more as i continue to invest - perhaps more cautiously - throughout drawdown), so i'm fairly comfortable with the idea of seeing it tank too. As long as i feel confident it's in a good fund i'll just let it do its thing as well. 

I just hope my limited understanding of markets with which this confidence is based on is correct ... markets bounce back over time and keep climbing, right?!!

Albermarle

My son's JISA fund (Vanguard ESG Dev World All Cap Index) has tanked in recent weeks but i know it's in for the long game, i'm happy for it to do its thing and i've not once felt the urge to cash in.

Just for the record this fund is down 11% from the start of the year and 3% down in 6 months . Things can get a lot worse than that.....

dunstonh

My son's JISA fund (Vanguard ESG Dev World All Cap Index) has tanked in recent weeks but i know it's in for the long game, i'm happy for it to do its thing and i've not once felt the urge to cash in.

As Albermarle says above, the level of fall so far is not a tank.  Its not classed as a crash until its over 20%.  And the fund he has is capable of losing  50% in a 12 month period.    (two periods in the last 25 years were in excess of 40% and one at 35%)

[Deleted User]

dunstonh said:

Whose interest do I have at heart? Do tell.   But… I agree.  One should take advice of a financially disinterested financial advisor on whether to pay financial advisers.  Because IFAs know for a fact how an investor will behave in 5 years’ time during a fall. 

The risk analysis carried out by a financial adviser should include behaviour.    You can never know for sure how an individual will react during their first crash but you try your best to put them in that scenario and ask what they would do before they invest. Usually by using multiple scenarios explained in different ways to see if you get a different response.

But you wouldn't know that as you are not in this country and have no experience of IFAs or what they do.

Back in the real world, we have solid guidance on this issue. For example the “Deep risk” book by Bernstein.  What I am saying above is aligned but one should read that himself. 

And how many consumers are going to read stuff like that before they invest.  And why would they need to?  It is you that is not in the real world.

What we are seeing on this site time and again is people coming having received bad financial advice from financial advisers.  For which they had paid. Rip off… And that’s unfortunate. 

Except we don't actually see that very often.   
Over 80% of IFA firms have never had a complaint with the FOS.    The FOS complaint stats show IFAs account for around 1% of complaints made.   In numbers terms that is around 1500-2000 a year.    That number is tiny when you consider the volume of transactions that are carried out by IFAs.     That includes the factory line firms that have been so damaging.  They are not true IFAs but fall under the classification.  They were just vehicles set up take advantage.   Criticism of them is correct and reasonable.    There isn't perfection but what you say doesn't match reality.

Trying to predict how individuals will behave based on responses to questions on any given day is wasted effort.  Lots of studies showing that responses vary from day to day.  

The person who is in the best position to evaluate risk tolerance is investor himself. Nobody knows him better. He can be 100% honest with himself.  To do that he needs the knowledge of what his risks are given his circumstances. In the case of OP, the number one risk is that he started late and won’t have enough. His one and only option to mitigate this risk is to learn to ignore the noise and be aggressive. He needs to learn and control his behaviour rather than make an inappropriate investment because he might misbehave in the future.  Newsflash: people are biologically the same and have the same brains even if they are not in Britain right now. 

Portfolios we are seeing from IFAs are invariably expensive, unnecessarily complex,  and often include illiquid investments.  In a few cases they are awful. I recall an older guy with a smallish portfolio whose “friend”/IFA managed to ensure a loss between 2010 and 2020.  A remarkable achievement for that decade.  Infuriating. I am sure most IFAs are a bit better than that but how do you guarantee that won’t happen?  You learn so you can evaluate  the advice. By the time you’ve done that you don’t need an IFA for routine investments. 

bpk101

Albermarle said:

Things can get a lot worse than that.....

Yes but 15 years (hopefully longer if he keeps it invested when it changes into his name) is long enough for it to recover and grow. 

bpk101

dunstonh said:

As Albermarle says above, the level of fall so far is not a tank.  Its not classed as a crash until its over 20%.

Poor choice of words sorry, I didn’t realise it had specific connotations… I just meant it’s gone down. 

But my assumption remains that 15+ years is long enough to weather the storms and no matter how alarming? 

Albermarle

bpk101 said:

dunstonh said:

As Albermarle says above, the level of fall so far is not a tank.  Its not classed as a crash until its over 20%.

Poor choice of words sorry, I didn’t realise it had specific connotations… I just meant it’s gone down. 

But my assumption remains that 15+ years is long enough to weather the storms and no matter how alarming? 

Historical data would support what you are saying, but many investors panic and pull out when there is a big drop and/or keep tinkering with their investments . If you just buy and hold you should be OK .

dunstonh

Portfolios we are seeing from IFAs are invariably expensive, unnecessarily complex,  and often include illiquid investments.

Often include illiquid investments?   yet reviews into this have found under 1% of IFAs used them.     Most were put in place by unregulated people masquerading as advisers.  And the numbers indicate that with regulated firms, like in many issues, it was a small number of firms doing it on a bulk basis.   You see the same names coming out again and again with these.  Accusing the majority for the actions of a minority serves no benefit.

The use of illiquid assets inappropriately is shameful and regulated firms that used them inappropriately should have been struck off.   The FCA didn't act properly in that respect.  

Secret2ndAccount

bpk101 said:
Be interesting to see how easy i can put that strategy into practice as i'll only really know how much over the threshold i'll be as i get closer to the end of the tax year....Not the invest-and-forget plan i had in mind ...

You could just opt for a simple 1k per month if you don't want to spend too much time on it. Maybe you end up paying a little bit of 40% tax. Maybe you end up only getting 20% back on a little bit of your contributions. Not the end of the world.

bpk101

Secret2ndAccount said:

You could just opt for a simple 1k per month if you don't want to spend too much time on it. Maybe you end up paying a little bit of 40% tax. Maybe you end up only getting 20% back on a little bit of your contributions. Not the end of the world.

I think that's the way i'll approach it for now, maybe i get a bit more hands on with it once it's set up and come to understand it all a bit more.