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davethebb

Why did you originally allow (e.g. hand over the money) to the IFA to invest money that you knew you would need in 3 months' time - this seems ludicrous to me and clearly, shows a lack of knowledge and experience on your part (see the second para.) - so maybe this isn't the full story?  You have not mentioned the AJ Bell Investcentre before now so no I don't get the drift.

Yes, you can mitigate your risk but the FOS will measure how this is done e.g. by simply undertaking it yourself when you have used an IFA in the past may not be considered an appropriate measure of risk reduction in the long term - yes immediate future, yes but you must consider the long term and this is what the IFA has designed your portfolio for.

If you were unhappy about the risk/ profile/portfolio why didn't you discuss it with your IFA, ask him to explain it, and if appropriate ask your current IFA to adjust it?

masonic

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.

An example that would have derisked and released cash for drawdown would have been to keep the medium risk holdings and sell from the highest risk. Other than the 5% SMT, it appears you've done the opposite and as a consequence increased the risk of your residual holdings.

I think your aversion to bonds is really hindering you at this stage. As others have mentioned, we're mostly through the difficult period and a fund like VLS is not going to create as much downside risk as some of your retained equity funds. Cash is zero return in a SIPP, so short dated bonds are preferable. Over several years, bond holders won't be nursing losses from this point. Equity investors might.

Linton

ChainsawCharlie said:

davethebb said:

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.

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

I didn't mean that!  my point was you have posted into this thread right at the end, without reading my posted information, I clearly explained what was discussed with my IFA

I lost confidence pretty quick since appointing this so called IFA, what kind of an IFA invests money into a pension SIPP investment which he knows will be required in 3 months time.....Get the drift?

Then locks me into AJ Bell Investcentre, but fails to point out I have to have an IFA to be in Investcentre.....what if I want to go it alone later?  why didnt he tell me this?  Get the drift?

I have it on record after speaking to ombudsman, I made it clear i would need to make changes to the portfolio to mitigate any further losses, they said this is looked at favourably by them, and wont affect my claim I have that recorded

AIUI If you are advised your account needs to have different facilities to a standard DiY account.  For example would you expect your IFA to log in as you?  But you would want access through your own login to view what is happening although it would not be sensible for you to have the power to change the investments whilst they are under IFA management.  The IFA could want all his clients on the same platform as it would make monitoring and report generation much easier.  It is easy to transfer from one account to another so it is not an issue if you wanted to DiY.

Did you ask about going it alone later?  If so he should have explained.