Fund performance with Financial Advisor only gained 5.74% in five and a half years.

cleverdic

At the beginning of 2018, we placed £100k with a financial advisor to invest in a range of shares. During this period, we withdrew £10K and our fund today now stands at £96.3K which represents a return of 5.74% over that 5.5 year period. Every month, the fund can rise or fall by a few thousand. The advisor has charged over £6k for their service over this period. Thankfully, we also have cash and property investments so this investment is only part of a balanced portfolio.

We are now both retired and am questioning whether to continue with the advisor or pull out completely. We don't believe our fund stacks up to the average performance of typical funds in the last 5.5 years but are happy to be corrected on this.

We would consider placing a portion of the fund as shares for a longer term investment and the rest in cash. I see I can get 6.2% with NSI but fully appreciate there were will be a tax deduction. We also fully understand the effects of inflation on our current investments and any potential choice for the future.

My question is, should we pull out and redistribute the funds as we believe we have received a poor return over the 5.5 years or continue to stick with the fund with the inherent risk of further declines but also potential gains to make up for todays value.

InvesterJones

Did your advisor really tell you that shares were a good idea if you wanted to look at a 5.5yr time frame?!

If you are considering a longer term, why are you interested in how they perform in any given intervening period?

jimjames

Has the adviser actually invested directly in shares as you suggest or is it really funds they have invested in? (that then buy shares)

coastline

If UK investor I wouldn't be surprised if the shares are a selection of UK shares. Simple global tracker is up 50% in 5 years but UK way behind.

 Chart Tool | Trustnet

cleverdic

InvesterJones said:

Did your advisor really tell you that shares were a good idea if you wanted to look at a 5.5yr time frame?!

If you are considering a longer term, why are you interested in how they perform in any given intervening period?

Interesting, We were happy to invest in the long term and take the risk as well. I followed the principle that after 5 years, that is a good time to make an assessment on performance. I am more curious to know if our return reflects the market as whole or is our fund considerably underperforming. If the average of all funds are typically the same as ours, then our only decision then is whether we want to be exposed to that risk of shares going up or down in the next five years.

cleverdic

jimjames said:

Has the adviser actually invested directly in shares as you suggest or is it really funds they have invested in? (that then buy shares)

Funds that buy shares. Sorry if I didn't make that clear.

InvesterJones

cleverdic said:

InvesterJones said:

Did your advisor really tell you that shares were a good idea if you wanted to look at a 5.5yr time frame?!

If you are considering a longer term, why are you interested in how they perform in any given intervening period?

Interesting, We were happy to invest in the long term and take the risk as well. I followed the principle that after 5 years, that is a good time to make an assessment on performance. I am more curious to know if our return reflects the market as whole or is our fund considerably underperforming. If the average of all funds are typically the same as ours, then our only decision then is whether we want to be exposed to that risk of shares going up or down in the next five years.

I hadn't heard of the principle of 5 years being a good time frame to make an assessment of share performance - everything I've seen has classed that as a decidedly short-medium term timescale which wouldn't be suitable for equities. The reason is volatility - and it's that volatility that makes comparing between funds/other shares equally unhelpful - your funds make under or over perform in a short time frame compared to average, but because of volatility you can't make any meaningful conclusion from that - they may do the reverse in the next 5.

You're correct that your decision is whether you want to be exposed to volatility for the second half of your 10yr (in this example) timescale - so what has changed between when you took out your investment and now that might affect your attitude to risk?

Linton

Which funds?  What did you tell your advisor about your obvjectives the level of risk?

Financial advisors can only propose funds that are appropriate to you and your circumstances.  They have no control over the global economy.  

I yo let us know the funds we can comment on whether their behaviour matches expectations for the type of investment and possibly explain any special circumstances tyhat may apply.

jimjames

cleverdic said:

jimjames said:

Has the adviser actually invested directly in shares as you suggest or is it really funds they have invested in? (that then buy shares)

Funds that buy shares. Sorry if I didn't make that clear.

In which case it would be useful to know which funds and in what proportions. You can look up the performance of general market indices if you want to compare against things like the FTSE or world indexes for example. But bonds have done very badly recently as interest rates have risen so if you have significant investments in those then it would have impacted performance.

You also need to consider the point at which you withdrew the £10k. If it was at a low point then it would make the bounce back more difficult as you'd have sold more units at a low price.

Bostonerimus1

cleverdic said:

At the beginning of 2018, we placed £100k with a financial advisor to invest in a range of shares. During this period, we withdrew £10K and our fund today now stands at £96.3K which represents a return of 5.74% over that 5.5 year period. Every month, the fund can rise or fall by a few thousand. The advisor has charged over £6k for their service over this period. Thankfully, we also have cash and property investments so this investment is only part of a balanced portfolio.

We are now both retired and am questioning whether to continue with the advisor or pull out completely. We don't believe our fund stacks up to the average performance of typical funds in the last 5.5 years but are happy to be corrected on this.

We would consider placing a portion of the fund as shares for a longer term investment and the rest in cash. I see I can get 6.2% with NSI but fully appreciate there were will be a tax deduction. We also fully understand the effects of inflation on our current investments and any potential choice for the future.

My question is, should we pull out and redistribute the funds as we believe we have received a poor return over the 5.5 years or continue to stick with the fund with the inherent risk of further declines but also potential gains to make up for todays value.

How are you invested? Which funds did your advisor pick and importantly why? 

If the returns you quote are correct your advisor's choices have certainly not performed well. My portfolio is a couple of large global equity index trackers and a small percentage of mostly US bonds and that is up 50% over the last 5 years. I've done nothing to manage it and it contains no niche or special funds.

tetrarch

"5 years ago" and "now retired" are likely the key phrases in your story.

Traditional risk management and portfolio theory would have invested a significant proportion of a near-retiring investor into "safe" investments i.e. bonds and not "risky" investments i.e. equities

Unfortunately, these doctrines were not enshrined in a period of ludicrously low interest rates and did not anticipate these rates and their rapid demise

I am going to guess that your portfolio was weighted heavily towards bonds and that is where you have not made the returns that you were hoping for. I believe that a good IFA would have explained these investment decisions to you and that the fund selection would have been made with your knowledge and assent.

Regards

Tet