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aroominyork

ChainsawCharlie 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.

So if for instance I was to stick it all into a multi asset fund, would I be investing more into bonds too, if we take the Vanguard life strat funds as an example, whereas the way my portfolio is at present, I have relatively low exposure to bonds.
I ask because I don't properly know, rather than to question someone who clearly knows much more than I do

Multi-asset fund have a range of bond allocations, eg from VLS20 (80% bonds) to VLS80 (20% bonds). A few months ago I might have said, given the warning signs for fixed interest, that a dynamically managed multi-asset fund would be worth considering, but it might (might) be that bonds have taken most of the hit they will (see, for example, Vanguard's global bond index).

aroominyork

ChainsawCharlie said:

Linton said:

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.

To be honest we are financially secure from now until the day we depart, as long as my wife and I are both alive and of course both have state pensions. If one of us departs this earth then the surviving spouse would lose that pension income

 So the sipp portfolio of £100,000 is our kind of backup fund for later life.
I am 62 state pension age 66
Wife 60 state pension age 67

So was the 5/10 risk based on all your assets - including those which underpin your financial security - or just this pot? If the former, the IFA might have assessed your other assets as low risk (eg 3-4/10) and used this pot to bring your overall portfolio up to 5. If the score was based on this portfolio alone, the IFA invested at too high a risk level.

aroominyork

ChainsawCharlie said:

masonic said:

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.

But I really can't understand how to derisk the portfolio, as whenever I look at bonds the return looks pitiful
My original request to my IFA was a portfolio which met inflation, when it was 6% 
Bonds don't seem to be any better than cash at the moment or future for that matter.
So not sure how to derisk.

If I was to put the whole lot into a VLS 60% it would be diverse, but also include bonds, so then we are back to bonds again, and I don't understand if the bonds in vls 60 are any good either.

Then why not invest the lot in a couple of wealth preservation funds, eg CGT, Ruffer, PNL etc.?

Linton

ChainsawCharlie said:

masonic said:

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.

But I really can't understand how to derisk the portfolio, as whenever I look at bonds the return looks pitiful
My original request to my IFA was a portfolio which met inflation, when it was 6% 
Bonds don't seem to be any better than cash at the moment or future for that matter.
So not sure how to derisk.

If I was to put the whole lot into a VLS 60% it would be diverse, but also include bonds, so then we are back to bonds again, and I don't understand if the bonds in vls 60 are any good either.

Over the medium term in my view it is reasonable to expect your portfolio to meet inflation though of course we still dont know the % allocation to the individual funds.  So I assume a reasonable one.  However for a 6% return you must expect some volatility.

Why do you think your portfolio needs derisking?    Has the experience of the last few months changed your risk acceptance? For derisking I use the Wealth Preservation funds such as Capital Gearing Trust.  But my situation is different to yours in that I need a steady income from my portfolio to meet all day-to day expenses. 

Why are you so bothered about the bonds? OK safe bonds may go down somewhat in the next few years.  This risk appears to be partly mitigated by the Liontrust fund avoiding gilts. In any case you say you are investing for 10 years+ with no specific need for the money.  In 10 years time the world could be and almost certainly will be very different.  Or has your 10 year figure changed?

I fear you are floundering and potentially making your situation worsen by focusing on minor details (eg 5% SMT) and not looking at the portfolio as a whole.

Prism

ChainsawCharlie said:

Yes indeed it was, 5/10 was of course based on the way the ifa setup my portfolio, nearly all funds 13 of the 19 were 6 or 7 out of 10, then he stuck in corporate bond funds some were not even investment grade to level it down to 5

To me that seems odd, and surely would have been better to have chosen funds which were 5/10 like I asked

I can't say if it the case for your collection of funds but combining two different funds can lower the overall risk level. Risk in these terms is a measure of volatility.

adindas

ChainsawCharlie said:

masonic said:

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.

When I contacted the ombudsman, I asked if any changes I made to the portfolio afterwards would affect my claim I was told on several occasions it wouldn't, as I was seen to be trying to mitigate any further losses.
You mention the drawdown cash I had to do this because the IFA didn't take note of our documented pre discussions, which clearly stated I wanted 4 years worth of drawdown cash, so he shouldn't have invested in growth funds.
I have plenty of portfolio xrays, letters etc saved before I made any changes

In my personal opinions there is nothing wrong to invest the mix of value stocks/funds and small percentage of growth stocks but the percentage need to be proportional to the risk level. It is about risk vs reward.

You are not planning to withdraw your fund altogether in four years. If all of the funds are value stocks, a lot percentage treasury bonds and no growth stocks, the growth will be much slower stagnant or even might slowly depreciating in value.

In your previous message you mention you sold your SMT. In my opinion, if you or someone else, a professional you paid/trust have done a good research about the fund before buying them, selling them after they have dropped significantly at a significant loss is not a good idea. Presumably, it was sold at 30%+ loss. Also SMT is an investment Trust comprise a portfolio of various stocks, not individual high growth stocks. There is almost zero chance is going to zero. Let stay tune and observe this fund after the bear market is over.

We are  currently in the bear market. Nasdaq composite was already in the bear market since March 2022, S&P was already in the bear market since last week. If these major indices have fallen more than 20%, it is not a surprise if a fund containing large number of high growth stocks such as SMT to fall much further.

In the bear market, growth stocks will suffer the most. But when the bear market is over, confidence to invest in the stock market is restored, they will also recover with multipliers. It is not uncommon the stock/fund prices like this will up 50%+ in less than six months or even much less without a catalysts. For individual high growth stocks with catalysts such as in the biotech stocks it could up 200%+ in one day.

There is a research shown that during the "Bear market" doing DCA will normally outperform Lump-sum. Just imagine what happen to people who threw lump-sum of £100k during the start of downtrend in November 2021 in high growth stocks or fund containing high growth stocks such as SMT. They might have seen their fund is now down 50%. Also it easy to see that during the bear market the stocks price will fall more than it rises. Doing DCA will increase your chance to be on the right side of the trade.

Thrugelmir

ChainsawCharlie said:

aroominyork said:

ChainsawCharlie said:

Linton said:

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.

To be honest we are financially secure from now until the day we depart, as long as my wife and I are both alive and of course both have state pensions. If one of us departs this earth then the surviving spouse would lose that pension income

 So the sipp portfolio of £100,000 is our kind of backup fund for later life.
I am 62 state pension age 66
Wife 60 state pension age 67

So was the 5/10 risk based on all your assets - including those which underpin your financial security - or just this pot? If the former, the IFA might have assessed your other assets as low risk (eg 3-4/10) and used this pot to bring your overall portfolio up to 5. If the score was based on this portfolio alone, the IFA invested at too high a risk level.

Yes indeed it was, 5/10 was of course based on the way the ifa setup my portfolio, nearly all funds 13 of the 19 were 6 or 7 out of 10, then he stuck in corporate bond funds some were not even investment grade to level it down to 5

To me that seems odd, and surely would have been better to have chosen funds which were 5/10 like I asked

If you understood to construct a portfolio you wouldn't have had the need to consult an IFA. 

There's plenty number of good books with which one can educate oneself. Podcasts to listen. Quality publications to read. 

I sense you are floundering and going nowhere. Other than looking to find fault and blame. As your investments haven't performed as you hoped. You need to grow a thick skin as an investor. As the one thing you have no control over is the performance of the investments themselves. Curved balls arrive from every direction continually. As far removed from the safety of a deposit account as you can get. 

aroominyork

ChainsawCharlie said:

But do bonds stay stagnant for many years?  If I was to move the whole portfolio into a VLS 60% for example which of course would have approx 40% bonds and would be a level 4/7 this would probably not meet inflation, or would it? I currently have £17,000 of my original £100,000 invested in VLS 60% its currently down 3.3%

A portfolio of 60% equities would be expected to significantly outperform inflation over the longer (and often medium) term. I suggest you run a historic chart comparing VLS60 to inflation. (Of course past performance is not a guide to blah blah blah.)

ChainsawCharlie said:

I sold SMT because wherever I looked after googling, the general consensus was it was a fund that could sit stagnant for years on end and its had its day since Tesla sold off and moderna losing value, plus their own admision that they have invested too much in China.

'Stagnating' is not a term often used about SMT or Baillie Gifford's funds in general. They tend to give a volatile and at times wild ride. SMT might be cheap right now but I will not be buying it because it does not suit my risk profile.

davethebb

One of the points and help I was trying to give you was the fact that you went to an IFA for advice, had a prescribed risk profile over a time frame, and now seem to be going against it by doing your own thing - this itself will be against you when the FOS  make a judgment (this is my own experience and the standard argument that will be used by the FOS). The fact that you invested via an IFA, to begin with, you should have sought advice via another IFA (otherwise you are inferring that you know better than your IFA!!!). By going to a second IFA before changing your portfolio and making a complaint you would have the evidence needed to make a justified complaint and also ensure you do not enter into a different risk profile in the meantime. You can then present this evidence to your original IFA and if they don't agree then take the evidence-backed argument to the FOS to make a judgment.

Even with good evidence, if the FOS judge that you have made matters worse, based on the expected time horizon, which is from the sounds of it may be likely, then they will rule against you. 

Sorry for coming to the party late - I did not realize that I had to be involved from the beginning.

dunstonh

One of the points and help I was trying to give you was the fact that you went to an IFA for advice, had a prescribed risk profile over a time frame, and now seem to be going against it by doing your own thing - this itself will be against you when the FOS  make a judgment (this is my own experience and the standard argument that will be used by the FOS).

It is also worth noting that the FOS use a similar method to IFAs when reviewing the risk of a portfolio. They wont look at a high risk part fo the portfolio in isolation. They will look at the whole portfolio and what it averages out to.    

So, they will see SMT at the higher risk end but they will also see the gilts etc at the low risk end (and everything else in between).

We also need to consider the wider market.  Pretty much every risk profile is down around 10% or thereabouts.    So, a portfolio of £100k that has dropped 8% when the wider market has dropped more than 10% is actually doing better than the typical.