Annual Review - Rebalancing and Changes to Investments Concerns

GSP

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

dunstonh

GSP said:

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

The research and due diligence companies are not IFAs.    Most advisory IFAs will buy the data and analysis in which will include governance reports.  The text of which can be used by IFAs.

JohnWinder

What 3 funds would you suggest John, and what % in equities, bonds etc

 And expose me to the ridicule your advisor has suffered? I have neither the courage nor the familiarity with UK funds or you for that. And your transcripts evoke some sympathy for your advisor whose job I would not want, damned if you do or if you don’t.

What most people need, and most don’t have a lot of money to invest, is a simple plan that barely needs touching every 5-10 years and costs little to run, but it would not be sustainable for the financial advice industry and UK is not the only country struggling to find a suitable model that works well for the common man and those giving the service. Indeed even the richest can have a simple plan: all equities, and ignore it for 20 years.

So, a few thoughts. The one-fund VLS plus cash buffer approach has the merit of low maintenance. Two or three broad, low cost index funds in equities and bonds would also work for maybe everybody, and 16 well matched low cost funds would be fine for those who like to micro-manage. In  all cases if the equity/bond mix was similar and none of them diverged markedly from a global weighting in equities and government-only in bonds, then it’s reasonable to think they’d perform similarly over a period of >10-15 years or so and no one could know which would outperform which until near the end. So keep in mind that the criticism of one portfolio over another, unless they’re rather different, is often over a difference in outcome that’s not worth a hill of beans.

A well thought out approach should not need changing short of WW3 unless one’s personal circumstances change substantially. Indeed there’s plenty to suggest that making changes based on the markets, expected interest rate changes or inflation, geopolitical upheavals etc harms returns rather than helping them mostly; as tempting as it might be if you’re trying to get blood out of a stone to fund a retirement on an inadequately funded portfolio.  On the other hand, I can understand an advice business that has 50 clients using 15 different global equity trackers saying to itself ‘this is crazy, let’s just put everyone in the same fund since the funds are all so similar anyway, it’ll simplify our lives’; it would be well justified, but each individual client doesn’t need the change but will be paying for it.

Time and again we see it on this forum, people with ‘16 funds’ (nothing inherently wrong with that) who don’t need more than 1 or 3, paying more than they need for a service (including unhelpful portfolio tinkering) they don’t need. Then comes our lamenting that they should be managing their own simple portfolio at zero cost, or having an advisor do it for them at an appropriate cost for the little work that should be necessary.  But until we get to a fee for service model (which might not sustain the current industry), rather than an assets under management fee model, the lamenting will continue. Sorry if that doesn’t help.

Audaxer

Linton said:

Deleted_User said:

GSP said:

dunstonh said:

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Some people have different opinions and investing is about opinion.    Some people may want a global tracker if they are 100% equity and go with a broad GDP match.  others may want underlying passives but want different weightings to each country.    That may require a fund for each region/country.  Then if you factor in fixed interest securities, you have different types of bonds.  

Still trawling through and trying to digest the information.
My advisor states:
” Investing in a single or limited range of asset classes or sectors may lead to greater volatility and therefore carry a greater investment risk”.

More motherhood statements.  Its all true and there are simple products on the market that do all this diversification for you. 

Simple? Why does Vanguard Life Strategy 60 which invests in funds rather than directly in low level investments need to hold about 17 .  Wouldn't a single equity global tracker and a single global bond fund do the job at least as well?

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Coming back to the question of the number of funds, I would say one needs sufficient funds to meet one's objectives and implement one's strategy but no more.  If one wants to have a lower US% than in a global index one needs separate funds for each geography.   You can buy tech funds, getting extra non-tech investments is more difficult possible requiring at least one more fund.  The number of funds in the OPs portfolio is not unreasonable for a portfolio contructed in this way.

I agree that there is nothing wrong with having a reasonable number of funds if deemed necessary to achieve your retirement income objections. 

As regards US equity, included in my portfolio I have a Global Equity Income fund and a Global Equity Income IT both with well under 40% US equity. 

GSP

JohnWinder said:

What 3 funds would you suggest John, and what % in equities, bonds etc

 And expose me to the ridicule your advisor has suffered? I have neither the courage nor the familiarity with UK funds or you for that. And your transcripts evoke some sympathy for your advisor whose job I would not want, damned if you do or if you don’t.

What most people need, and most don’t have a lot of money to invest, is a simple plan that barely needs touching every 5-10 years and costs little to run, but it would not be sustainable for the financial advice industry and UK is not the only country struggling to find a suitable model that works well for the common man and those giving the service. Indeed even the richest can have a simple plan: all equities, and ignore it for 20 years.

So, a few thoughts. The one-fund VLS plus cash buffer approach has the merit of low maintenance. Two or three broad, low cost index funds in equities and bonds would also work for maybe everybody, and 16 well matched low cost funds would be fine for those who like to micro-manage. In  all cases if the equity/bond mix was similar and none of them diverged markedly from a global weighting in equities and government-only in bonds, then it’s reasonable to think they’d perform similarly over a period of >10-15 years or so and no one could know which would outperform which until near the end. So keep in mind that the criticism of one portfolio over another, unless they’re rather different, is often over a difference in outcome that’s not worth a hill of beans.

A well thought out approach should not need changing short of WW3 unless one’s personal circumstances change substantially. Indeed there’s plenty to suggest that making changes based on the markets, expected interest rate changes or inflation, geopolitical upheavals etc harms returns rather than helping them mostly; as tempting as it might be if you’re trying to get blood out of a stone to fund a retirement on an inadequately funded portfolio.  On the other hand, I can understand an advice business that has 50 clients using 15 different global equity trackers saying to itself ‘this is crazy, let’s just put everyone in the same fund since the funds are all so similar anyway, it’ll simplify our lives’; it would be well justified, but each individual client doesn’t need the change but will be paying for it.

Time and again we see it on this forum, people with ‘16 funds’ (nothing inherently wrong with that) who don’t need more than 1 or 3, paying more than they need for a service (including unhelpful portfolio tinkering) they don’t need. Then comes our lamenting that they should be managing their own simple portfolio at zero cost, or having an advisor do it for them at an appropriate cost for the little work that should be necessary.  But until we get to a fee for service model (which might not sustain the current industry), rather than an assets under management fee model, the lamenting will continue. Sorry if that doesn’t help.

Thanks very much John.
Some very interesting points and views in there.

GSP

dunstonh said:

GSP said:

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

The research and due diligence companies are not IFAs.    Most advisory IFAs will buy the data and analysis in which will include governance reports.  The text of which can be used by IFAs.

Thanks dunstonh.

bostonerimus

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Those are long debated questions. First remember that a 3 fund portfolio can be more diversified than a 13 fund portfolio. And also remember that the financial services industry has a vested interest in making things seem complicated. I don't think this is usually done on purpose, it's just the industry received wisdom; it also gives them something to do for the money in fees they charge. It's their business plan. Financial advisors come into their own for strategic planning ie estate planning or what pensions should I open, but I don't see their value in shuffling funds around. Most people will do just fine with a single multi-asset fund that has an underlying portfolio of 10 or 20 funds, the key being you don't have to worry about the composition and the fees should be low, or having a 3 or 4 index fund portfolio that you rebalance yourself.

GSP

dunstonh said:

GSP said:

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

The research and due diligence companies are not IFAs.    Most advisory IFAs will buy the data and analysis in which will include governance reports.  The text of which can be used by IFAs.

Is it possible my advisor is in touch with the company True Potential with this information?

dunstonh

GSP said:

dunstonh said:

GSP said:

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

The research and due diligence companies are not IFAs.    Most advisory IFAs will buy the data and analysis in which will include governance reports.  The text of which can be used by IFAs.

Is it possible my advisor is in touch with the company True Potential with this information?

True Potential have their own salesforce and are FAs. Not IFAs.   That said, I did a quick search online and found several on unbiased and yell that claim to be IFAs but working with True Potential Wealth Management.   True Potential Wealth Management  on their own website state "True Potential Wealth Management offers restricted financial advice.".  When you search for those advisers on TP's website, they do not refer to themselves as IFAs.     So,  I am putting that one down to being a financial promotions breach.

The fact is that someone restricting themselves to True Potential Wealth Management cannot be an IFA.

I believe they have offered some of their technology to IFAs in the past but I don't know if they still do that.

Is your adviser an IFA or FA?

GSP

dunstonh said:

GSP said:

dunstonh said:

GSP said:

dunstonh said:

Observations for now: (He uses ‘we’, but thought he acted alone?).

No IFA acts alone.   Indeed, it is possible that that the documents are not written by your IFA.

This is a surprise, but welcome at the same time. Are these people other IFA’s, and who might write the documents he sends?
Thanks

The research and due diligence companies are not IFAs.    Most advisory IFAs will buy the data and analysis in which will include governance reports.  The text of which can be used by IFAs.

Is it possible my advisor is in touch with the company True Potential with this information?

True Potential have their own salesforce and are FAs. Not IFAs.   That said, I did a quick search online and found several on unbiased and yell that claim to be IFAs but working with True Potential Wealth Management.   True Potential Wealth Management  on their own website state "True Potential Wealth Management offers restricted financial advice.".  When you search for those advisers on TP's website, they do not refer to themselves as IFAs.     So,  I am putting that one down to being a financial promotions breach.

The fact is that someone restricting themselves to True Potential Wealth Management cannot be an IFA.

I believe they have offered some of their technology to IFAs in the past but I don't know if they still do that.

Is your adviser an IFA or FA?

Thanks dunstonh.
He is Chartered Financial Planner.

He is retiring soon I believe. I remember reading somewhere that retiring IFA’s were being sought by TP to put client’s books ‘their way’.

Bit of a story from 5 years ago when I transferred out, but I would not touch TP with a barge pole.