Pension Investments

dunstonh

Albermarle said:

You could put all of your money into a single low cost fund on a low cost drawdown platform and pay total fees of about 0.4 %, or you could pay an IFA who employs a DFM who favours managed funds on a low cost platform and pay 2.5 % fees

Or you could have an IFA who does not delegate the investing, and designs a portfolio of mainly passive funds. In this case the total cost would be about half way between the two% figures mentioned above.

To be fair, the RL pension with the Governed portfolio range is pretty good.  We use it for transactional clients.  Its low cost, offers all options and pretty much does what it is required to do with little or no fuss.

It isnt as advanced as many options but its good for the person that doesn't really know what they are doing.  

Pat38493

Scrudgy said:

In theory an IFA who uses a DFM should give you the best overall return, as the IFA will look after your financial planning and taxes and the DFM sole purpose is to get you the best return. The fees will be higher, but so could be the potential growth.

The reality is that you might make a poor choice of IFA, and the DFM could do a Neil Woodford to your money. Leaving you much worse off that sticking all you money in a multi asset passive fund.

From what I understand a lot of the long term historical data tends to contradict this - a clear large majority of active fund managers and IFAs fail to beat the market by a big enough margin to cover their fees over the long term, and as amateurs, our chances of identifying one of the few who does beat the market long term, in advance, is pretty slim.

I am not sure if I will use an IFA or not for my retirement, but if I do it won’t be on the assumption that I will do better financially in the long term - to me it seems like it’s more about the freedom of avoiding stress and managing things myself.  I can agree a plan with my IFA and then say “see you later I don’t want to hear from you until our next annual review unless there is a crash so massive that it means I need to change the plan immediately”.  I can then go off and have fun.  This seems quite attractive if you are not interested in managing investments or learning how to do that, and also if you are the type of person who might become obsessive about it - checking your balances every day even though realistically there is no action you are going to immediately take on 999 out of 1000 days.

Albermarle

From what I understand a lot of the long term historical data tends to contradict this - a clear large majority of active fund managers and IFAs fail to beat the market by a big enough margin to cover their fees over the long term

The issue in all these type of 'debates' is what does 'beat the market' actually mean.

For example I am invested ( not exclusively) in Two Wealth Preservation Funds. I want them to be as stable as possible, with at best keeping up with inflation long term and not to drop alarmingly when markets are falling. They have no remit to try and beat the market .

If I had an IFA, I would want them to invest my money in a way appropriate for my needs/situation. If they said that they were aiming to 'beat the market' I would run a mile !

Pat38493

Albermarle said:

From what I understand a lot of the long term historical data tends to contradict this - a clear large majority of active fund managers and IFAs fail to beat the market by a big enough margin to cover their fees over the long term

The issue in all these type of 'debates' is what does 'beat the market' actually mean.

Probably poorly worded, but what I meant by "beat the market", was beat the most comparable passive index tracking fund that you could have invested the same money in.

Most of the fund factsheets I have looked at claim that their goal is to "outperform the benchmark" which generally seems to be the comparable general market performance of the type of investments they are trading in.  It's quite funny I suppose because as Tim Hale points out in his book, they are the market, so per definition at least half of them won't beat it!

Albermarle

Pat38493 said:

Albermarle said:

From what I understand a lot of the long term historical data tends to contradict this - a clear large majority of active fund managers and IFAs fail to beat the market by a big enough margin to cover their fees over the long term

The issue in all these type of 'debates' is what does 'beat the market' actually mean.

Probably poorly worded, but what I meant by "beat the market", was beat the most comparable passive index tracking fund that you could have invested the same money in.

Most of the fund factsheets I have looked at claim that their goal is to "outperform the benchmark" which generally seems to be the comparable general market performance of the type of investments they are trading in.  It's quite funny I suppose because as Tim Hale points out in his book, they are the market, so per definition at least half of them won't beat it!

The funds seem to pick whatever benchmark suits them, so they can outperform it !