Annual Review - Rebalancing and Changes to Investments Concerns

bostonerimus

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

GSP

bostonerimus said:

The OP gives us some comments from the IFA about changing some¡ funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

The IFA has produced his own by his naming a ‘quick and dirty simple planner’.
Last year this must have been okay, this year with the fall in funds it’s not.
He said a few months back if you don’t have to withdraw then don’t, but that’s easier said than done when drawdown is your income.

[Deleted User]

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

GSP

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

[Deleted User]

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

All these risk numbers are unhelpful except for streamlining things. Risks can be long and short term and what is damaging to your financial success isn’t the same thing as volatility which these questionnaire derived numbers usually reflect. The same person answers the same “risk” question differently on a different day. Important to understand whats risky for you personally. 

 The point is that where you are at, large drawdowns are harmful. Wouldn’t be an issue for a 30 year old climbing career ladder. The standard approach is to say “5 out of 10 risk appetite, lets give him lots of bonds”.  Thats (and I am guessing) what happened.  That’s fine when inflation is decreasing but bouts of inflation can be devastating to such a portfolio.  Inflation wasn’t hard to anticipate; plus after 2020 bonds had nowhere to go but down.  As a minimum yourportfolio should have had international diversification and that (again, guessing from the return) didn’t happen either.  

You are not alone; its a fairly typical story.  If I were you, I would spend a month reading, understanding what is risky to you, and then I would decide on asset allocation and ditch the advisor. 

GSP

Deleted_User said:

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

All these risk numbers are unhelpful except for streamlining things. Risks can be long and short term and what is damaging to your financial success isn’t the same thing as volatility which these questionnaire derived numbers usually reflect. The same person answers the same “risk” question differently on a different day. Important to understand whats risky for you personally. 

 The point is that where you are at, large drawdowns are harmful. Wouldn’t be an issue for a 30 year old climbing career ladder. The standard approach is to say “5 out of 10 risk appetite, lets give him lots of bonds”.  Thats (and I am guessing) what happened.  That’s fine when inflation is decreasing but bouts of inflation can be devastating to such a portfolio.  Inflation wasn’t hard to anticipate; plus after 2020 bonds had nowhere to go but down.  As a minimum yourportfolio should have had international diversification and that (again, guessing from the return) didn’t happen either.  

You are not alone; its a fairly typical story.  If I were you, I would spend a month reading, understanding what is risky to you, and then I would decide on asset allocation and ditch the advisor. 

I have now:
Region
UK 30%.
North America 24%.
Emerging Markets? 15%.
Japan 13%.
Europe (not UK) 11%.
Asia (not Japan) 7%.

And Equity’s 69%.
Fixed Interest 26%.
Money Markets 5%.
 

Whether this is fair split of International diversification?

bostonerimus

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

Has you IFA given you any specific advice on drawdown and how your portfolio is set up for that? What you have shared with us so far sounds very generic. 

You have 69% in equities which seems like a high percentage for the average retiree. Has your IFA set that percentage taking into account your budget and other sources of income. I also wonder what the justification for 13 funds is, I bet your IFA is just passing on the recommendations of a portfolio service he employs and didn't come up with that themselves.

[Deleted User]

GSP said:

Deleted_User said:

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

All these risk numbers are unhelpful except for streamlining things. Risks can be long and short term and what is damaging to your financial success isn’t the same thing as volatility which these questionnaire derived numbers usually reflect. The same person answers the same “risk” question differently on a different day. Important to understand whats risky for you personally. 

 The point is that where you are at, large drawdowns are harmful. Wouldn’t be an issue for a 30 year old climbing career ladder. The standard approach is to say “5 out of 10 risk appetite, lets give him lots of bonds”.  Thats (and I am guessing) what happened.  That’s fine when inflation is decreasing but bouts of inflation can be devastating to such a portfolio.  Inflation wasn’t hard to anticipate; plus after 2020 bonds had nowhere to go but down.  As a minimum yourportfolio should have had international diversification and that (again, guessing from the return) didn’t happen either.  

You are not alone; its a fairly typical story.  If I were you, I would spend a month reading, understanding what is risky to you, and then I would decide on asset allocation and ditch the advisor. 

I have now:
Region
UK 30%.
North America 24%.
Emerging Markets? 15%.
Japan 13%.
Europe (not UK) 11%.
Asia (not Japan) 7%.

And Equity’s 69%.
Fixed Interest 26%.
Money Markets 5%.
 

Whether this is fair split of International diversification?

Nothing’s particularly wrong with that.   Is Fixed Interest 100% UK? Longterm bonds? Still, Surprised that the fall in your portfolio is quite as large as it is. Do you know how much you withdrew over the period of 25% reduction in the value (in %)? Was it over 12 months?

It looks like the actual fund selection might be the problem. Also, do you know the total annual costs (platform, fund fees,advice, etc)? 

GSP

Deleted_User said:

GSP said:

Deleted_User said:

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

All these risk numbers are unhelpful except for streamlining things. Risks can be long and short term and what is damaging to your financial success isn’t the same thing as volatility which these questionnaire derived numbers usually reflect. The same person answers the same “risk” question differently on a different day. Important to understand whats risky for you personally. 

 The point is that where you are at, large drawdowns are harmful. Wouldn’t be an issue for a 30 year old climbing career ladder. The standard approach is to say “5 out of 10 risk appetite, lets give him lots of bonds”.  Thats (and I am guessing) what happened.  That’s fine when inflation is decreasing but bouts of inflation can be devastating to such a portfolio.  Inflation wasn’t hard to anticipate; plus after 2020 bonds had nowhere to go but down.  As a minimum yourportfolio should have had international diversification and that (again, guessing from the return) didn’t happen either.  

You are not alone; its a fairly typical story.  If I were you, I would spend a month reading, understanding what is risky to you, and then I would decide on asset allocation and ditch the advisor. 

I have now:
Region
UK 30%.
North America 24%.
Emerging Markets? 15%.
Japan 13%.
Europe (not UK) 11%.
Asia (not Japan) 7%.

And Equity’s 69%.
Fixed Interest 26%.
Money Markets 5%.
 

Whether this is fair split of International diversification?

Nothing’s particularly wrong with that.   Is Fixed Interest 100% UK? Longterm bonds? Still, Surprised that the fall in your portfolio is quite as large as it is. Do you know how much you withdrew over the period of 25% reduction in the value (in %)? Was it over 12 months?

It looks like the actual fund selection might be the problem. Also, do you know the total annual costs (platform, fund fees,advice, etc)? 

I can’t see with the splits of information if the Fixed Interest is 100% UK, or long term bonds.
£35k withdrawn.
platform/fees/advice £4.6k.

Linton

GSP said:

Deleted_User said:

GSP said:

Deleted_User said:

GSP said:

Deleted_User said:

bostonerimus said:

The OP gives us some comments from the IFA about changing some funds from income to accumulation and rationalizing portfolio contents across similar clients and of course this all comes with the usual boilerplate macro-economic BS taken from a copy of Barrons or The Economist that is so broad and vague to be meaningless. What I haven't heard anything about is what the IFA suggests for drawdown actions and management of the portfolio with that in mind that are specific to the OP's situation. If I employed an IFA I'd want them to be modelling various income levels and the sustainability of the portfolio. Is that being done. has the IFA suggested a 25% drop in income to match the portfolio losses?

Yep. All true. Motherhood statements which are typed once and sent out to every client with a different name on the top and a very special individualized invoice.

But there is a more fundamental issue. How exactly did he lose 25%?  Very heavy allocation to long term term British bonds? Illiquid assets?  Was the IFA unaware that longterm bonds are risky in an inflationary environment? Didn’t he think some international diversification would be helpful? What was the added value vs a simple and cost efficient all-in-one fund? 

My risk appetite is 5 out of 10, so whether on that scale I was more exposed than that rating suggests? Out of interest, I wonder what falls should have occurred for someone on my risk profile?
With my losses of 25%, I do wonder with the proposed recommendation of 13 new funds how these will perform? My concern wonders if my overall loss is better left alone and has a chance to recover, rather than chasing a better return or less losses with new funds?

All these risk numbers are unhelpful except for streamlining things. Risks can be long and short term and what is damaging to your financial success isn’t the same thing as volatility which these questionnaire derived numbers usually reflect. The same person answers the same “risk” question differently on a different day. Important to understand whats risky for you personally. 

 The point is that where you are at, large drawdowns are harmful. Wouldn’t be an issue for a 30 year old climbing career ladder. The standard approach is to say “5 out of 10 risk appetite, lets give him lots of bonds”.  Thats (and I am guessing) what happened.  That’s fine when inflation is decreasing but bouts of inflation can be devastating to such a portfolio.  Inflation wasn’t hard to anticipate; plus after 2020 bonds had nowhere to go but down.  As a minimum yourportfolio should have had international diversification and that (again, guessing from the return) didn’t happen either.  

You are not alone; its a fairly typical story.  If I were you, I would spend a month reading, understanding what is risky to you, and then I would decide on asset allocation and ditch the advisor. 

I have now:
Region
UK 30%.
North America 24%.
Emerging Markets? 15%.
Japan 13%.
Europe (not UK) 11%.
Asia (not Japan) 7%.

And Equity’s 69%.
Fixed Interest 26%.
Money Markets 5%.
 

Whether this is fair split of International diversification?

Nothing’s particularly wrong with that.   Is Fixed Interest 100% UK? Longterm bonds? Still, Surprised that the fall in your portfolio is quite as large as it is. Do you know how much you withdrew over the period of 25% reduction in the value (in %)? Was it over 12 months?

It looks like the actual fund selection might be the problem. Also, do you know the total annual costs (platform, fund fees,advice, etc)? 

I can’t see with the splits of information if the Fixed Interest is 100% UK, or long term bonds.
£35k withdrawn.
platform/fees/advice £4.6k.

If you can tell us the full fund names and their %s we can tell you what their performance has been and what they are invested in.  That is if you are interested.

It sounds like this 25% figure that people have been quoting is not too meaningful.