Difference between a Robo SIPP and an Investment Pathway Pension?

DaveO

Albermarle said:

I think a good IFA will actively monitor your portfolio and if the situation demands it, they will suggest changes, regardless of whether it is 'annual review time' or not.

Also with an IFA you will get the benefit of wider advice about tax planning, family finance matters etc and not just about investments.
They should work out cheaper at about 1.2% to 1.5% whereas a typical wealth manager is usually costing more like 2%.
The robo advisor will probably be around 0.8%. I would guess that Aviva pathway would be marginally cheaper ?

I looked at a couple of SIPP providers ( real ones !) and they suggest funds costing 0.25% % to 0.4% + platform fees of 0.15% to 0.45%

Unless I have completely misunderstood the responses, the IFA's who I have spoken to so far won't actively monitor the portfolio.  This seems to be because they offer two options.  The annual review or the wealth management option.  As they seem keen to push the wealth management option which comes out costing close to 2% as you suggest it doesn't make sense for them to actively monitor a portfolio for a cheaper cost.

Point taken about the other advice and one of them already suggested moving the bulk of my main pension pot to their pension platform so they could diversify it better than the current pension provider can.  Of course while that is no doubt true they also get to charge me their fees where are higher then the very low fees in the pension scheme.

As regards those  "real" SIPP providers you looked at, would I be right to assume the reason they are cheaper than Robo providers is by picking the funds yourself?  I just looked at Fidelity at random and the service/platform charge is 0.35% and if you invested in their "Fidelity Multi Asset Balanced Income Fund" (i.e. not picking funds yourself) that adds 0.49% so 0.84% in total so is no cheaper than the robo providers.

dunstonh

Unless I have completely misunderstood the responses, the IFA's who I have spoken to so far won't actively monitor the portfolio.

Depends on the business model and it also depends on what you mean by actively review.

IFAs are not investment managers.  So, don't expect activity akin to an investment manager.  However, IFAs either go down the wealth management route (which is best avoided unless the IFA discounts their charge to reflect less work or you have an ESG requirement) or they provide advisory portfolios (where the IFA buys the data/analysis/research in and builds the portfolio to match that)

This seems to be because they offer two options.  The annual review or the wealth management option.  As they seem keen to push the wealth management option which comes out costing close to 2% as you suggest it doesn't make sense for them to actively monitor a portfolio for a cheaper cost.

Wealth management firms will only push the discretionary wealth management option.  General practitioner IFAs will more likely be on advisory portfolios.

I just looked at Fidelity at random and the service/platform charge is 0.35% and if you invested in their "Fidelity Multi Asset Balanced Income Fund" (i.e. not picking funds yourself) that adds 0.49% so 0.84% in total so is no cheaper than the robo providers.

For comparison. 
IFA using Fidelity probably has them at 0.25%.    And a hybrid/passive portfolio of 0.15% and adviser charge of 0.5% is 0.90%.  There is going to be an initial charge.
DIY using a cheaper platform at 0.25% and a multi-asset fund of 0.18% and its 0.43%

coyrls

As I understand it, there is no requirement to follow an “Investment Pathway”, it’s just one of those boxes that needs to be ticked (or hoop to jump through if you prefer) before you can start drawdown.  I think the requirement is for providers to offer “pathways” but there is no requirement for the customer to take up the offer, much in the same way that they have to offer the option of a Pension Wise appointment but there is no requirement for the customer to make an appointment.

dunstonh

As I understand it, there is no requirement to follow an “Investment Pathway”, it’s just one of those boxes that needs to be ticked (or hoop to jump through if you prefer) before you can start drawdown.

Correct.  The FCA found a ridiculously high number of DIY drawdown cases where the person remained 100% in cash.  So, it wanted to bring a pathway to avoid that.  However, it doesn't stop advised or non-advised cases doing something different.

I wouldn't go near most pathway options as they are not going to be the best option.  However, it stops certain groups of people doing the worse alternatives

Albermarle

SIPPs, being whole of market (real ones that is!) offer funds from 0.05% upwards. 
SIPP providers make no recommendations on funds.  Although several have marketing lists where they may promote certain funds.

I was just referring to the 'Investment Pathways' offered. In each case I looked at, the SIPP provider said if you opt for Investment Pathway 3 ( for example ) then we will invest all your money into one named fund. These funds had charges in the 0.25% to 0.4% region ( basically types of multi asset fund) . I suppose a kind of very basic Robo advice .

As regards those  "real" SIPP providers you looked at, would I be right to assume the reason they are cheaper than Robo providers is by picking the funds yourself?  I just looked at Fidelity at random and the service/platform charge is 0.35% and if you invested in their "Fidelity Multi Asset Balanced Income Fund" (i.e. not picking funds yourself) that adds 0.49% so 0.84% in total so is no cheaper than the robo providers.

You are correct and as Dunstonh has pointed you can get very similar funds on a different platform for less.
If you had a big pot and you knew enough to pick and buy individual ETF's in the right ratios etc you could probably get down to less than 0.2% 

BritishInvestor

Albermarle said:

I think a good IFA will actively monitor your portfolio and if the situation demands it, they will suggest changes, regardless of whether it is 'annual review time' or not.

A good IFA will set the correct portfolio at the outset and there should be very little need to tinker with it (other than periodic rebalancing).

https://www.mavenadviser.com/blogcontent/2017/3/7/why-its-important-to-practice-what-i-preach-97bj6

"2: Making very little changes with their portfolios.

Money is like a bar of soap - the more you touch it the less you have. Timing markets is a fool’s errand and predicting market swings is the preserve of the crazies. Misinformed clients emotionally may feel joy in an adviser continually tweaking their portfolio and what they’re invested in. The elite adviser knows the only sure indicators to long-term success (performance) are discipline, patience and costs. Frequently picking outperformers in advance is impossible. Our lack of ‘action’ may be perceived as a weakness but actually, it is one of our strengths.

DaveO

BritishInvestor said:

Albermarle said:

I think a good IFA will actively monitor your portfolio and if the situation demands it, they will suggest changes, regardless of whether it is 'annual review time' or not.

A good IFA will set the correct portfolio at the outset and there should be very little need to tinker with it (other than periodic rebalancing).

https://www.mavenadviser.com/blogcontent/2017/3/7/why-its-important-to-practice-what-i-preach-97bj6

"2: Making very little changes with their portfolios.

Money is like a bar of soap - the more you touch it the less you have. Timing markets is a fool’s errand and predicting market swings is the preserve of the crazies. Misinformed clients emotionally may feel joy in an adviser continually tweaking their portfolio and what they’re invested in. The elite adviser knows the only sure indicators to long-term success (performance) are discipline, patience and costs. Frequently picking outperformers in advance is impossible. Our lack of ‘action’ may be perceived as a weakness but actually, it is one of our strengths.

This does make sense to me in years I have had a stocks and shares ISA and its all been in tracker funds in various markets, its done very well and I have hardly touched it.

However what constitutes periodic rebalancing of a portfolio from the “good IFA”?   There seems a contradiction here in that whenever they do that aren’t they going against what the IFA in that blog advocates unless this periodic rebalancing is done rarely?

I just had the documentation from the second IFA back and their wealth management option does a quarterly rebalancing of the portfolio and they say they contact you to see if you want to do it.   Now it may be some quarters they recommend no change but this definitely looks counter to what the IFA in that blog advocates.

Presumably the IFA in that blog thinks quarterly rebalancing is stupid. 

If so and there is now a wealth management industry which bases its high fees on regular “touching” of the portfolio which is detrimental, why hasn’t this industry been called out or come to the attention of the FCA as bad practice?  Are we heading for another mis-selling scandal here?

DaveO

@dunstonh “ For comparison.  
IFA using Fidelity probably has them at 0.25%.    And a hybrid/passive portfolio of 0.15% and adviser charge of 0.5% is 0.90%.  There is going to be an initial charge.
DIY using a cheaper platform at 0.25% and a multi-asset fund of 0.18% and its 0.43%”

Thanks for the reply.   

Is there a list or web site that compares platform charges?  When I set up my ISA years ago I went with Cavendish as it was cheaper to go through them even when investing in funds from Fidelity than going via Fidelity directly (but of course since then Fidelity bought Cavendish).   I remember looking at Hargreaves’s Landsdown at the time and they had just put their platform charge up to something like 0.45%.

I can see the various platforms giving discounts to IFA’s but are cheaper platforms available for individuals to invest in directly?

dunstonh

However what constitutes periodic rebalancing of a portfolio from the “good IFA”?   There seems a contradiction here in that whenever they do that aren’t they going against what the IFA in that blog advocates unless this periodic rebalancing is done rarely?

The general consensus (if there is ever such a thing when it comes to investing) once a year is fine. 

I just had the documentation from the second IFA back and their wealth management option does a quarterly rebalancing of the portfolio and they say they contact you to see if you want to do it.  

That is unusual.  One of the differences between discretionary and advisory is that with discretionary, no permission is required.   Whereas advisory, it is.

Now it may be some quarters they recommend no change but this definitely looks counter to what the IFA in that blog advocates.

Remember that investing has a lot to do with opinions.    

Presumably the IFA in that blog thinks quarterly rebalancing is stupid. 

My personal view is not that it is stupid but that it is unnecessary.    Most of the asset allocation models from the various suppliers update their weightings on a quarterly basis.   So, some will use that as a reason to rebalance.    Those using managed funds may run their due diligence quarterly.   So, any adjustments will be made at that point.   More often than not, there are no adjustments to the funds.  Reviewing it quarterly is not the same as making changes quarterly.  But if a fund changes or there is a significant change to the weightings, there is an argument to be made that the change should occur there and then.       There is a point of view that you should be invested in the same way you would be if you were investing the money today (unless there are contractual reasons otherwise).

If so and there is now a wealth management industry which bases its high fees on regular “touching” of the portfolio which is detrimental, why hasn’t this industry been called out or come to the attention of the FCA as bad practice?  Are we heading for another mis-selling scandal here?

There is no right or wrong here.  Just opinions.  There is no misselling.  Just an opinion that a particular method is best.   

There are many different investment strategies. A modern platform can utilise over 30,000 different investments.  This gives you a near-infinite level of variety.       Every different strategy will have a period it is the best option and a period when it is the worst.   The key is really having structure and process.   Not random hit and hopes.

Is there a list or web site that compares platform charges?

There is for DIY investors with Snowmans spreadsheet. it is linked somewhere.  It doesn't include intermediary platform pricing.

I can see the various platforms giving discounts to IFA’s but are cheaper platforms available for individuals to invest in directly?

Yes. There are some loss-making platforms looking to buy business by having extremely low pricing.  

zagfles

DaveO said:

@dunstonh “ For comparison.  
IFA using Fidelity probably has them at 0.25%.    And a hybrid/passive portfolio of 0.15% and adviser charge of 0.5% is 0.90%.  There is going to be an initial charge.
DIY using a cheaper platform at 0.25% and a multi-asset fund of 0.18% and its 0.43%”

Thanks for the reply.   

Is there a list or web site that compares platform charges?  When I set up my ISA years ago I went with Cavendish as it was cheaper to go through them even when investing in funds from Fidelity than going via Fidelity directly (but of course since then Fidelity bought Cavendish).   I remember looking at Hargreaves’s Landsdown at the time and they had just put their platform charge up to something like 0.45%.

I can see the various platforms giving discounts to IFA’s but are cheaper platforms available for individuals to invest in directly?

Have a look at http://www.comparefundplatforms.com or google "snowman's spreadsheet"

Note that if you use IT/ETF's there is often a cap on platform charges, eg with HL it'd be £200. So 0.1% if you have £200k.