IFA Contact

JohnWinder

Yes, quite right. Too expensive. ‘We turn your money and our experience into our money and your experience’.

‘Am really tempted to put this years into HSBC ALL World Index Acc C.......possibly even transfer everything into it ?’

Can you tell us your best reasons for doing that?  We don’t know whether the move would be beneficial, but we’ll have a fair idea how well founded it is. If another approach is more sensible and cheaper than yours, changing could make sense; if another were similarly sensible but cheaper, changing could make sense. Have a shot.

dunstonh

Out of interest, what is the minimum they would have to do to avoid this?  For example if the quarterly statements mentioned in the OP said "Your annual review is due by x date - please contact us to arrange a suitable appointment" would they be covered?

The adviser has to be pro-active (unless you beat them to it).    They would have to try multiple times if no response and would be expected to follow up in writing.   It doesn't have to be an appointment.  It can be via phone, email threads etc. 

There are no set rules on what happens with non-responders but generally, the adviser firm has to be able to evidence sufficient attempts.   We would try three times via the preferred method, try an alternative method if there is one and then follow up in writing by post that we have been trying without success.   If it repeats until the third year, we turn off the ongoing servicing fee.  Although no one has ever gone that long. That is just our documented method.

waveneygnome

JohnWinder said:

Yes, quite right. Too expensive. ‘We turn your money and our experience into our money and your experience’.

‘Am really tempted to put this years into HSBC ALL World Index Acc C.......possibly even transfer everything into it ?’

Can you tell us your best reasons for doing that?  We don’t know whether the move would be beneficial, but we’ll have a fair idea how well founded it is. If another approach is more sensible and cheaper than yours, changing could make sense; if another were similarly sensible but cheaper, changing could make sense. Have a shot.

Reasons for doing it/HSBC All World:

Global diversity

Long term invest & forget

(from reading on here) lowest cost tracker compared to Vanguard

To be clear, I don't mind paying for advice/higher fees if I felt like I was getting any advce.......I fully appreciate the funds can go up/down/sideways well beyond IFA's ability to control........more like:  am I invested in the right assets for long term invest & forget......I was hoping by paying the IFA, i would be able to do the forget bit, not the other way round!

JohnWinder

Global diversity
Long term invest & forget, (from reading on here) lowest cost tracker compared to Vanguard

That sounds like it; I’d say you’ve got what you need to choose your own portfolio. Looking at those issue……..

Is yours diversified?

A quick look at all your funds suggests it’s (roughly) an all equity, somewhat globally cap weighted balanced collection with a UK bias (30% are UK stocks). ‘All equity’ might be right for you; that’s a topic for another discussion. The geographical distribution isn’t bad, as there’s plenty to justify a home bias for most people (particularly with no currency hedging of the others) although one could be happy without it. But there’s a lot of ‘stock picking’ in the funds: the Rathbone global fund has only 58 stocks; the AXA has 66 stocks as it tries to outdo the US market. That’s definitely less diversified and more risk taking. Perhaps you can afford to take more risk than an ‘all equities’ portfolio; we don’t know your circumstances.

I don’t think your ‘long term invest and forget’ criterion is a compelling reason to change. Be careful of epithets when clear thinking is needed to set up a portfolio. The HSBC choice still needs to be monitored, occasionally: to see if the fees aren’t going up (or better, coming down when others’ fees are); to see if the tracking error is acceptable; to see if they’ve changed the index they track etc. On the other hand, your 24 fund portfolio wouldn’t need any extra attention unless you were into market timing, tactical allocation, fund manager pursuing etc.

Then to ‘lowest cost’. That really is an important difference if it’s more than a few basis points, will apply for decades and involves a big portfolio.

Your 0.8%/year extra in current fund management fee could cost your final value a whopping 10% after 20 years. Additionally, you might do without some of the IFA service (and fees) and reduce the quilter fee if you went the HSBC route. Time for some compound interest calculations, because that’s the most compelling reason so far to change. Not our usual experience, but with investing you get what you don’t pay for.

But there are more reasons…… not only is there no guarantee that the higher fees would give better returns, the research and theory suggests you’re most likely to get lower returns with higher fees. Morningstar suggest that: https://www.morningstar.com/funds/fund-fees-predict-future-success-or-failure.

And the SPIVA research finds only a very small percentage of active fund managers can outperform the market they invest in over 20 year periods, no one had described a way to identify them in advance, and it’s likely some who do outperform have luck not skill on their side (which puts the next decade in real doubt). https://www.evidenceinvestor.com/active-outperformance-is-it-luck-or-skill/ . https://www.ifa.com/pdfs/academic-paper-luck-skill-and-investment-performance.pdf. https://www.ifa.com/pdfs/academic-paper-luck-skill-and-investment-performance.pdf. 

The difficulty in distinguishing luck from skill with successful fund management is that it can take a long period of average outperformance to be convincing. If the active manager outperformed the index by an amazing average of 5%/year and each year the outperformance hardly varied from 4.7% to 5.5%/year, you’d have every confidence in saying after only a few years that this wasn’t luck. But when the outperformance is 0.5%/year (still worth having), but the outperformance varies from 17% underperformance to 24% outperformance, then you’d need a lot of years results to convince you it wasn’t a chance 0.5%/year success. The maths is in one of those links. Hint: real life outperformance is more like 0.5% than 5%year.

In short, you have some pretty compelling reasons to move to HSBC or similar: the fund management fee saving would be worthwhile; the returns will likely be better; you could probably look after it on a ‘set and forget’ basis yourself until near retirement even more cheaply; it would be somewhat more diversified, thus safer; you could live without home bias at least for a decade more.