How can I find and compare Friendly Society performance?

masonic

jouef said:

Eyeful said: So if you are looking for any type of financial information and you find it is either hard to find or even non existent the chances are high that it is because that it will shown the company, organisation, or sector in a poor light.

Albermarle said:I looked at the Shepherd's Friendly website. All I could find is that there were two with profits funds ( one green one and one not). There was no past performance info, or at least I could not find any.

It is indeed strange that Friendly Society returns are rarely, if ever, disclosed by them or reported on by commentators. I like to invest on a fully-informed basis (though within that I am happy to take on extreme risk). Equally, the oft-repeated warning ‘high charges and low returns’ cannot be based on figures that are not disclosed. Such a claim ought to be properly backed up with references or data but never is (it is not enough to supply a list of charges without the context of the accompanying returns, or criticise the business model without showing its performance). There is anecdotal evidence of poor returns from customers’ comments, at least some due to them misunderstanding the product or the market (for example complaining about a MVA during a slump), and positive remarks also appear.

If you do a forum search (or train a better search engine on this forum), then you should be able to find a number of threads where people have discussed actual outcomes from investing in these products. From memory, the returns ranged from reasonable (a few % above cash savings / equivalent to low-medium risk investing) to poor (below cash savings). They are a bit like a with-profits fund, where returns are smoothed (at a cost) to appeal to nervous investors, and the underlying asset mix is therefore quite conservative, though it does vary. More experienced investors can get exposure to the same asset mix minus the layers of charges and return smoothing, giving them a high probability of outperforming the plan over the long term. Though likely very few would choose the same asset mix if they had the freedom. It is unlikely that a truly talented fund manager is working behind the scenes in a product like this beating the market consistently.

jouef said:

I have been pleased with my own long-term FS returns - inflation plus about 4%pa on average.

That's an interesting development. As a long-term investor in these products, you probably have a lot of inside knowledge about the investment you intend to make, as FS usually do share a bit more with their customers than they make public. The products are all different, so if your research is telling you that you've found a great investment opportunity, you are unlikely to be convinced by anecdotes and generalisations. As you've seen, these are black boxes, and beyond pointing out the high charges and indicating that they stack the odds against outperformance, there isn't much to discuss.

It should be noted that there have been some quite good cashback offers on some of these products, which can reduce overall charges by quite a bit, at least in the short term. I was even half-tempted once to throw in the minimum balance for cashback, was it not for the requirement to ISA-wrap and deprive myself of the use of another S&S ISA for that tax year.

Edit: I missed this from an earlier post:

Limited data from my own experience, 2022 figures: four Friendly Society ISAs over 20-22 years have returned 6.08%pa, 3.44%pa, 3.43%pa and 3.36%pa (inflation 2.4%pa). In the 2000s, my old FS endowment returned approx 1.8%pa, due to a guarantee in the small print, while some of the market was negative due to the crash. The FS pension plan I had is hard to work out, but I’m guessing achieved in excess of 10%pa.

Those figures of inflation +0.9%, inflation +1%, inflation +1%, inflation +3.4% look a bit more realistic than an average 4% real return. Inflation being quite low for most of that period, and not including our recent inflationary spike. Compared with inflation + 5-8% for equities over a similar period, someone with a relaxed attitude to risk such as yourself probably could have done better. I dare say the 2023 data will favour the FS products as it has been a poor year for investments across the board, so smoothing will compensate for that. However, longer term returns will likely revert to historic norms.

The pension is the only one that looks potentially good, depending on the accuracy of guessing. However, you probably beat cash in the others. Based on this data, I'm not seeing a compelling reason to consider a further lump sum investment.

jouef

masonic said:

Compared with inflation + 5-8% for equities over a similar period, someone with a relaxed attitude to risk such as yourself probably could have done better.

That’s the point - I did. As well as Friendly Societies etc, I have extremely risky positions in other classes. My results range from complete loss of capital to stratospheric rises. Overall I am comfortably in double-digits over inflation. I need safer, lower returns in there for balance and sanity. This lump sum is family money which I must resist ‘putting on a horse’. Thanks for the detailed response, much appreciated.

masonic said:

It should be noted that there have been some quite good cashback offers on some of these products, which can reduce overall charges by quite a bit, at least in the short term.

Yes, and upfront bonuses, guaranteed capital return points, MVA holidays and guaranteed fixes also appear. I’d spread a lump sum across different providers to get a piece of each while spreading performance.

Albermarle

One Family publish investment performance info. Not sure if they are actually a Friendly Society, but they operate in a similar way.
Their Child Trust Fund has grown 10% in 5 years ( to end Dec2022)
How Your Child Trust Fund Is Performing | OneFamily
Their S& S ISA - 100% global climate friendly equity - 12.5% in 5 years ( that is serious underperformance)
40:60 fund ( approx) 5% in 5 years.

jouef

jouef said:

Looking into friendly society investment bonds for a lump sum. Complete absence of information on what they actually pay out in practice. Where can I find and compare their historic rates of return?

I am pleased with my previous Friendly Society investments, which beat inflation with good safety of capital. However, both sector-wide and individual provider performance and safety information is too hard to come by to make fully-informed decisions. Poor performance examples have been given above and can be found online. I have taken out one fixed-rate bond with a cashback deal, but decided against other FS investments. The iimpression is that both the regulatory system and the sector’s operating methods are dated and constricting. Thanks for all your responses.