Annual Review - Rebalancing and Changes to Investments Concerns

GSP

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

This is something that is making me feel uncomfortable. By such wholesale changes after such a fall, how can he guarantee by taking on these 13 new funds is any better than my existing investments.

GSP

dunstonh said:

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

a change of 13 funds (ignoring any share class changes. e.g. INC to ACC) suggests a wholesale change of direction in the portfolio.  Possibly a new data supplier.    Many advisers have gone more focused on index trackers.  Some are still progressing on that.  So, a move from managed to passive would result in a lot of changes.  That wouldn't be a bad thing.  

Is the portfolio definitely advisory?  Or has there been any mention of discretionary fund management?

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

The regulator has been instrumental in this.    This is not a bad thing.  But it does mean the number of bespoke portfolios will drop.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

If he is recommending index trackers in the portfolio, then that is unlikely.  TP's platform charge is higher than most IFA platforms.  TP's portfolio charge is high.  So, moving people into trackers where the portfolio could be 0.1% would be difficult to explain if he wanted to later move it to TP where the charge could be 0.8%.

It is possible that he has another IFA firm in mind and is aligning the portfolios with their models in readiness to hand over.  Just a hypothetical scenario as handovers can often go through years of preparation.

This was his reasons for the investment changes.

We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

bostonerimus

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Sure, it is for the IFA's benefit, he effectively says so.  Companies often make internal efficiency changes which inconvenience customers.  These changes would not seem to adversely affect the customer at all.

How do the changes "justify the fees"?

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

No devious plan, it's just the way the financial services industry has evolved. Often unnecessary services are sold and happily purchased and both parties actually believe their is value in the transaction. It's sort of a group delusion.

[Deleted User]

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  Pretty sure the OP didn’t sign his IFA contract for life.

Linton

Deleted_User said:

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  

Minor changes to, for example, INC vs ACC are a totally different issue to a major fall in value and the latter should be investigated, understood, and explained to the OP.   The former is irrelevent noise.  The fees also are a totally separate issue - a poorly constructed portfolio would still be poorly constructed even if the fees were zero. 

So if we can see the portfolio and understand the objectives driving its construction we would be able to have a more sensible discussion.  Though of course as is said many times on this forum 1 year's performance figures are not necessarily of great significance.

dunstonh

We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

That is entirely reasonable and sensible. It shaves a bit off the costs whilst still maintaining asset allocation.

We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

These are not fund changes. They are share class changes.  Irrelevant to the actual investments.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

This is to comply with recent increased regulatory requirements.

Linton

Deleted_User said:

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  Pretty sure the OP didn’t sign his IFA contract for life.

Looking at trustnet, a drop of 25% in the past 12 months suggests the average fund in the portfolio is in the bottom decile of all funds.  A spectacular achievement if true.

[Deleted User]

Linton said:

Deleted_User said:

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  

Minor changes to, for example, INC vs ACC are a totally different issue to a major fall in value and the latter should be investigated, understood, and explained to the OP.   The former is irrelevent noise.  The fees also are a totally separate issue - a poorly constructed portfolio would still be poorly constructed even if the fees were zero. 

So if we can see the portfolio and understand the objectives driving its construction we would be able to have a more sensible discussion.  Though of course as is said many times on this forum 1 year's performance figures are not necessarily of great significance.

Annual returns are very much of significance if the portfolio is failing.  This kind of underperformance would not mean too much for someone in the early stages of retirement saving.  If its a 90 year old then withdrawals could be large and the drop might not be an issue either.  If, however, its someone in the early stages of retirement then whatever IFA did isn’t meeting the objectives. Combination of underperformance vs benchmarks and the scale of the fall underperformance are serious.  It was likely inappropriate to start with. And wholesale changes are just another warning flag. 

[Deleted User]

Linton said:

Deleted_User said:

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  Pretty sure the OP didn’t sign his IFA contract for life.

Looking at trustnet, a drop of 25% in the past 12 months suggests the average fund in the portfolio is in the bottom decile of all funds.  A spectacular achievement if true.

I am assuming 25% drop isn’t return but change in value and includes withdrawals. OP isn’t very specific. But (wild guess) the withdrawals are a small proportion of the drop. If he withdrew 20% of the total value then fund is performing roughly as expected. If he withdrew 5% then major problem.  Again, this is particularly unfortunate if the OP is in the early phases of withdrawal and then it tells us the advisor does not understand risks.

dunstonh

Linton said:

Deleted_User said:

Linton said:

bostonerimus said:

Linton said:

bostonerimus said:

GSP said:

dunstonh said:

He is Chartered Financial Planner.

That is his qualification.  It isn't his status.  A CFP can be either an IFA or FA.

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’.

TP pay some of the highest money to retiring IFAs to move their clients on to the TP service. 8% of the value for each client.

Thanks dunstonh.
Next to his name it has BA, ACA, APFS and under his company’s name says Independent Financial Advisors.

I can have a sceptical mind at times. I have just received his email with attachments for my annual review to look over and he has recommended 13 new funds this time, rather than the several worst performers he excludes and replaces each year.

This time round, rather than geographical or sectoral advice to any recommended changes in investments, all he has put that because many clients he looks after have many investments that basically do the same thing, he wants to centralise so we are all mostly on the same investments so there is less for him to look after.

I don’t know why I’m thinking like this. Is it possible he is making preparations to try to get us all to move over to TP when he retires by simplifying investments?

Again, I should not be thinking like this but funnier things have happened.

Such a wholesale change seems to be more for you IFA's convenience that you benefit. You should have a portfolio that is matched to your strategic goals and such a radical change makes me worry that either wasn't or isn't the case.

Is it a wholesale change?  I read that according to the OP in a previous post the changes were little more than housekeeping keeping very close to the same funds.

See:

I’m still trawling through the 5 attachments sent in my annual review.

Observations for now: (He uses ‘we’, but thought he acted alone?).
In the first attachment a paragraph reads “ However, our core view remains that the best antidote to short-term volatility is a resolute focus on long-term outcomes. We believe inflation is spiking and will reduce over the next couple of years as the effects of Covid and the Ukraine war (hopefully then finished) and supply line issues work through the system. We see little to be gained by excessive portfolio changes in the current market environment”.

Then in the third attachment, and draw you to the third paragraph.
” We are rationalising our use of passive index trackers, such that we use a single preferred tracker fund in each of the major sectors. Whilst tracker funds track the index and their performance is extremely similar to one another, there are small differences in both performance and charges, and so we now recommend passive tracker funds in a similar manner to managed funds and may recommend a swap.

• We have for some time, for most clients, been favouring the use of accumulation funds (where distributions are automatically reinvested in that fund) rather than income funds (where distributions are paid into the account). Many fund managers provide both versions of their funds. We prefer to use accumulation “acc” funds (where available), since we are now better able to manage the level of cash in the account, negating the need for natural income to pay cash into the account to cover charges. This should have a small positive effect on portfolios over time. Thus, we might exchange an “inc” version of a fund with its “acc” equivalent.

• We have noticed that different clients with similar needs and risk profiles may still have different funds in their portfolios. In such cases the funds are typically very similar in make-up, performance and ratings to one another, but nevertheless we feel we should centralise such portfolio choices where possible. So we might recommend you exchange a fund for this reason. As before, we will also from time-to-time recommend that you exchange funds where performance has been below- benchmark for too long.

• Additionally, and as has always been the case, we may recommend that you reduce significantly or drop a fund that resides in a sector where we are reducing exposure for strategic reasons.

It seems like housekeeping for the IFA's benefit. That might, or might not, also be good for the client. That fact that these changes are "necessary" makes me think, "what was the IFA doing before"? It feels like a lot of words and, if it's for not much actual change, mostly a way to justify the fees. I just don't see the value in these portfolio tweaks for the client. When the IFA says we I think they are including the service he, and ultimately the client, is paying to generate the portfolios.

Why do the fees need justifying now? The OP knew them and accepted them when engaging the IFA.  If there was some devious plan to justify fees surely some more substantial changes could be made with extensive verbiage on why it was in the customer's interest to do so.

The portfolio dropped 25% in 1 year. More than a third in real terms (accounting for inflation).  Way, way more than a standard diversified  balanced portfolio. This is someone in a drawdown mode. And you are asking why do the fees need justifying? Really?  Pretty sure the OP didn’t sign his IFA contract for life.

Looking at trustnet, a drop of 25% in the past 12 months suggests the average fund in the portfolio is in the bottom decile of all funds.  A spectacular achievement if true.

Or heavier in gilts/fixed interest.