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eskbanker

ChainsawCharlie said:

eskbanker said:

ChainsawCharlie said:

what you see below is 100,000 invested across these funds

But in what proportions?  A simple list of holdings doesn't really illustrate the structure of a portfolio without weightings....

Got this off the xray, is this ok?

Not really what I was getting at, no, although if you're happy with that low-level allocation then ultimately that's all that matters.

I was thinking of it more from the perspective of trying to understand the rationale behind your selections, i.e. if you have, say, 75% in a core VLS60 holding and then some small satellites to tweak the overall allocation, e.g. to increase Japan % and/or more small caps or whatever, then that would be more useful in terms of seeing the workings rather than the end result....

Linton

A simple % weighting of the most significant funds would be helpful.

IMHO...

Seeing the very large % of "unclassified" I would guess this represents the Liontrust MA passive interm which is a volatility balance multi asset fund with a risk rating of 4  on a 1-7 scale and about 50% equity.  So we could be talking about a reasonably balanced medium risk core satellite allocation with lots of satellites.  Though the number of satellites is excessive and with a lot of duplication.  The absence of Europe other than the UK seems a bit odd but one would need to see the country split.

Assuming my guess is correct...

The sector allocation of the portfolio looks pretty normal with no evidence of excess risk.  Perhaps the SMT was needed to add a bit more risk.  With 5% SMT the overall allocation would still not be unreasonable.  Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

tbh sorting out this  really needs an IFA to ask the right detailed questions about exactly what the portfolio is for and put together and explain something much simpler to the OP.

Without an IFA perhaps a single simple 40-60% equity multi-asset fund may be perfectly adequate but there isnt enough background info to recommend anything.

aroominyork

Linton said:

Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

But that's a huge "apart from". I've seen well informed posters say a single index/multi-asset fund is all you need until you are in six figures, and even when touching that threshold you would have a small number of satellites. You have identified the lack of Developed Europe and it looks like the IFA has made a call to avoid that region altogether; not what I would call responsible diversification for a mid-risk client.

Tangental to the SMT issue, people who started investing during the last decade have seen growth companies power ahead while value lagged behind, and SMT is of course growth on steroids. The recent improvement in value has usefully demonstrated that it is still breathing and might be a spur to more balanced portfolios. There are many more actively managed growth than value funds, so one way to achieve that balance is to cut back on managed funds and buy more index funds with their approximate 50/50 growth/value split.

Linton

ChainsawCharlie said:

Linton said:

A simple % weighting of the most significant funds would be helpful.

IMHO...

Seeing the very large % of "unclassified" I would guess this represents the Liontrust MA passive interm which is a volatility balance multi asset fund with a risk rating of 4  on a 1-7 scale and about 50% equity.  So we could be talking about a reasonably balanced medium risk core satellite allocation with lots of satellites.  Though the number of satellites is excessive and with a lot of duplication.  The absence of Europe other than the UK seems a bit odd but one would need to see the country split.

Assuming my guess is correct...

The sector allocation of the portfolio looks pretty normal with no evidence of excess risk.  Perhaps the SMT was needed to add a bit more risk.  With 5% SMT the overall allocation would still not be unreasonable.  Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

tbh sorting out this  really needs an IFA to ask the right detailed questions about exactly what the portfolio is for and put together and explain something much simpler to the OP.

Without an IFA perhaps a single simple 40-60% equity multi-asset fund may be perfectly adequate but there isnt enough background info to recommend anything.

Thanks Linton, for your perseverance in helping me, I really appreciate this, everyday is a school day at the moment for me, its finding an IFA that can just offer a one off bit of advice to steer this portfolio in the right direction, which is quite difficult

TBH I am happy with a set it and forget it approach, as this sort of thing gives me sleepless nights.  The only thing which concerned me with sticking it all in a Vanguard 60-40 LS or similar is the bond allocation which I keep hearing is a no no at the moment

One problem with setting up a portfolio for you and forgetting about it is your apparent 10 year time frame.   In my view It's too short a time frame for a full blown equity approach and too long for cash.  What happens in 10 years time?  By 5 years time it may be appropriate to hold a fair amount of cash.

I would not want a blind VLS40 bond holding.  However a more managed multi-asset fund like the Liontrust one one be expected to apply some judgement in its choice of funds.  Looking at morningstar data I see that its holdings of UK gilts is pretty low, replaced by a significant holdings in corporate bonds and foreign government bonds.    From memory this is also the case with the HSBC multi-assset fund which seem to be better known than Liontrust's.

However bond allocation is not something that should cause sleepless nights.  Barring end of the world scenarios a broad selection of UK gilts is not going to do an SMT on you.

Linton

aroominyork said:

Linton said:

Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

But that's a huge "apart from". I've seen well informed posters say a single index/multi-asset fund is all you need until you are in six figures, and even when touching that threshold you would have a small number of satellites. You have identified the lack of Developed Europe and it looks like the IFA has made a call to avoid that region altogether; not what I would call responsible diversification for a mid-risk client.

Tangental to the SMT issue, people who started investing during the last decade have seen growth companies power ahead while value lagged behind, and SMT is of course growth on steroids. The recent improvement in value has usefully demonstrated that it is still breathing and might be a spur to more balanced portfolios. There are many more actively managed growth than value funds, so one way to achieve that balance is to cut back on managed funds and buy more index funds with their approximate 50/50 growth/value split.

Whether 1 fund or 10 funds is appropriate depends on objectives.  For very long term investment with steady contributions then a simple high equity diversified fund could be fine.  For more complex situations such as retirement with a mixture of long and short term objectives a single fund is less likely to do the job.

The fund mix looks strange.  I find it difficult to see someone putting in the effort to chose such a variety of funds, particularly doing it for 1 client.  The thought did cross my mind whether it could be computer generated to match a set of of criteria.   Or is it some standard mix. I have no idea.

On the use of index funds,  since they bear some relationship to all transactions, in a growth dominated era they will be also be swayed in that direction.  Similarly for any other characteristic. That is  my main reason for generally avoiding index funds - by suitable choice of active funds it is possible to get any balance between characteristics one may want.  50/50 may not be appropriate for some objectives. This is generally not an option with the index funds available and not so likely to be successful since for example identifying true value companies and those that are deservedly low price requires some understanding of the fundamentals of potential investments.

However that is a discussion for a different thread.

Linton

ChainsawCharlie said:

Linton said:

aroominyork said:

Linton said:

Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

But that's a huge "apart from". I've seen well informed posters say a single index/multi-asset fund is all you need until you are in six figures, and even when touching that threshold you would have a small number of satellites. You have identified the lack of Developed Europe and it looks like the IFA has made a call to avoid that region altogether; not what I would call responsible diversification for a mid-risk client.

Tangental to the SMT issue, people who started investing during the last decade have seen growth companies power ahead while value lagged behind, and SMT is of course growth on steroids. The recent improvement in value has usefully demonstrated that it is still breathing and might be a spur to more balanced portfolios. There are many more actively managed growth than value funds, so one way to achieve that balance is to cut back on managed funds and buy more index funds with their approximate 50/50 growth/value split.

Whether 1 fund or 10 funds is appropriate depends on objectives.  For very long term investment with steady contributions then a simple high equity diversified fund could be fine.  For more complex situations such as retirement with a mixture of long and short term objectives a single fund is less likely to do the job.

The fund mix looks strange.  I find it difficult to see someone putting in the effort to chose such a variety of funds, particularly doing it for 1 client.  The thought did cross my mind whether it could be computer generated to match a set of of criteria.   Or is it some standard mix. I have no idea.

On the use of index funds,  since they bear some relationship to all transactions, in a growth dominated era they will be also be swayed in that direction.  Similarly for any other characteristic. That is  my main reason for generally avoiding index funds - by suitable choice of active funds it is possible to get any balance between characteristics one may want.  50/50 may not be appropriate for some objectives. This is generally not an option with the index funds available and not so likely to be successful since for example identifying true value companies and those that are deservedly low price requires some understanding of the fundamentals of potential investments.

However that is a discussion for a different thread.

You are right, the list of funds were apparently devised by a computer, the "IFA" used a software called Monte Carlo, which he proudly proclaimed covered multiple iterations, based on our attitude to risk.
We have since ditched the 4 corporate bond funds and the SMT fund.

He thought by adding the bond funds it would compensate for the many 6/7 profiled funds he chose and level out the portfolio to a 5/10 since the 10 scale was what he used. 

Not an unreasonable approach but it doesn't lead to a human-manageable portfolio.  I would be wary about arbitrarily ditchnig parts of the portfolio as that may make the rest unbalanced.  Better to look at things top down.

Thrugelmir

ChainsawCharlie said:

Linton said:

aroominyork said:

Linton said:

Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

But that's a huge "apart from". I've seen well informed posters say a single index/multi-asset fund is all you need until you are in six figures, and even when touching that threshold you would have a small number of satellites. You have identified the lack of Developed Europe and it looks like the IFA has made a call to avoid that region altogether; not what I would call responsible diversification for a mid-risk client.

Tangental to the SMT issue, people who started investing during the last decade have seen growth companies power ahead while value lagged behind, and SMT is of course growth on steroids. The recent improvement in value has usefully demonstrated that it is still breathing and might be a spur to more balanced portfolios. There are many more actively managed growth than value funds, so one way to achieve that balance is to cut back on managed funds and buy more index funds with their approximate 50/50 growth/value split.

Whether 1 fund or 10 funds is appropriate depends on objectives.  For very long term investment with steady contributions then a simple high equity diversified fund could be fine.  For more complex situations such as retirement with a mixture of long and short term objectives a single fund is less likely to do the job.

The fund mix looks strange.  I find it difficult to see someone putting in the effort to chose such a variety of funds, particularly doing it for 1 client.  The thought did cross my mind whether it could be computer generated to match a set of of criteria.   Or is it some standard mix. I have no idea.

On the use of index funds,  since they bear some relationship to all transactions, in a growth dominated era they will be also be swayed in that direction.  Similarly for any other characteristic. That is  my main reason for generally avoiding index funds - by suitable choice of active funds it is possible to get any balance between characteristics one may want.  50/50 may not be appropriate for some objectives. This is generally not an option with the index funds available and not so likely to be successful since for example identifying true value companies and those that are deservedly low price requires some understanding of the fundamentals of potential investments.

However that is a discussion for a different thread.

You are right, the list of funds were apparently devised by a computer, the "IFA" used a software called Monte Carlo, which he proudly proclaimed covered multiple iterations, based on our attitude to risk.
We have since ditched the 4 corporate bond funds and the SMT fund.

He thought by adding the bond funds it would compensate for the many 6/7 profiled funds he chose and level out the portfolio to a 5/10 since the 10 scale was what he used. 

If you've ditched the fixed interest holdings then the portfolio is going to become more volatile. Fixed interest stocks will move rapidly in line with interest rates. As there's a direct correlation. Likewise institutional investors will factor in inflation to their thinking. Equities are far more dependent upon the mood of the markets. Mood creates direction and therefore momentum.  Mood is currently fragile. Only requires a further major event to get investors scurrying for the exits. 

masonic

ChainsawCharlie said:

Linton said:

aroominyork said:

Linton said:

Apart from the number of funds I cant see that the IFA has done anything I would fundamentally question.

But that's a huge "apart from". I've seen well informed posters say a single index/multi-asset fund is all you need until you are in six figures, and even when touching that threshold you would have a small number of satellites. You have identified the lack of Developed Europe and it looks like the IFA has made a call to avoid that region altogether; not what I would call responsible diversification for a mid-risk client.

Tangental to the SMT issue, people who started investing during the last decade have seen growth companies power ahead while value lagged behind, and SMT is of course growth on steroids. The recent improvement in value has usefully demonstrated that it is still breathing and might be a spur to more balanced portfolios. There are many more actively managed growth than value funds, so one way to achieve that balance is to cut back on managed funds and buy more index funds with their approximate 50/50 growth/value split.

Whether 1 fund or 10 funds is appropriate depends on objectives.  For very long term investment with steady contributions then a simple high equity diversified fund could be fine.  For more complex situations such as retirement with a mixture of long and short term objectives a single fund is less likely to do the job.

The fund mix looks strange.  I find it difficult to see someone putting in the effort to chose such a variety of funds, particularly doing it for 1 client.  The thought did cross my mind whether it could be computer generated to match a set of of criteria.   Or is it some standard mix. I have no idea.

On the use of index funds,  since they bear some relationship to all transactions, in a growth dominated era they will be also be swayed in that direction.  Similarly for any other characteristic. That is  my main reason for generally avoiding index funds - by suitable choice of active funds it is possible to get any balance between characteristics one may want.  50/50 may not be appropriate for some objectives. This is generally not an option with the index funds available and not so likely to be successful since for example identifying true value companies and those that are deservedly low price requires some understanding of the fundamentals of potential investments.

However that is a discussion for a different thread.

You are right, the list of funds were apparently devised by a computer, the "IFA" used a software called Monte Carlo, which he proudly proclaimed covered multiple iterations, based on our attitude to risk.
We have since ditched the 4 corporate bond funds and the SMT fund.

He thought by adding the bond funds it would compensate for the many 6/7 profiled funds he chose and level out the portfolio to a 5/10 since the 10 scale was what he used. 

Monte Carlo analysis and other forms of stochastic modelling and back-testing have their place, but if you are paying for an adviser then they shouldn't be hiding behind a computer. Such modelling can produce truly bizarre and flawed results when not appropriately constrained and guided. I've commented elsewhere on the bond funds, but suffice it to say they were not of the variety that would be typically included in a run of the mill portfolio and hardly gave the negative correlation with equities bonds should.

Overall, it seems you've now sold about a third of your portfolio, mainly funds at the medium risk level (and a 5% holding in the very high risk category). I understand you have a complaint about suitability, which could result in compensation for losses. You should be prepared for any such claim to extend to the period you started making your own changes by selling assets and not beyond. My question for you is are you now happy that your portfolio is appropriately invested? To me, even with the 30% cash being held, it does not look 5/10 on the risk scale.

davethebb

There is some contradiction in the OP statement. He refers to having a 10 years time horizon but he also has a requirement of drawing down £16k every year from his SIPP?

I also note that he has a complaint with the FOS regarding the suitability of his investments provided by his IFA. With my recent experience with the FOS they will also consider what actions the OP did after the issue. For example, he went to an IFA for advice because he was not experienced in deciding how to invest. But then he decided to undertake to invest himself - this may be deemed to be adding risk to his portfolio and probably jeopardize his position with regards to his complaint. He should ideally look for another suitable IFA so that he can support the risk profile he invests in WRT the FOS complaint.

masonic

davethebb said:

I also note that he has a complaint with the FOS regarding the suitability of his investments provided by his IFA. With my recent experience with the FOS they will also consider what actions the OP did after the issue. For example, he went to an IFA for advice because he was not experienced in deciding how to invest. But then he decided to undertake to invest himself - this may be deemed to be adding risk to his portfolio and probably jeopardize his position with regards to his complaint. He should ideally look for another suitable IFA so that he can support the risk profile he invests in WRT the FOS complaint.

Exactly this. Even though no new investments have been made so far, the act of selectively selling some of the investments, while leaving others alone, has upset whatever balance there was in the portfolio, and let the adviser off the hook as to any downstream consequences. The fact that it is predominantly the lower risk assets that have been sold, and ostensibly this cash is to be used to fund drawdowns and won't be reinvested, is going to be difficult to explain in the context of risk reduction. The OP has stated elsewhere in this thread that they are actively looking for a new IFA, but they are stuggling to find one who will carry out a one-off piece of transactional work. This is not surprising, as it is not particularly cost effective to carry out all of the fact finding to then not provide any ongoing advice on a sum this small. Robo-advice was designed to bridge this so-called advice gap. In any case, it would have been sensible to leave things be until a suitable option was found, which might take 2-4 weeks of searching and comparing available options.