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

Aminatidi

OK this is all a bit cloak and dagger and I don't really get why but.

Let's assume you put £100K in on Jan 1st 2018 which is what you hinted at in your first post.

If you'd put it in LS60 you'd have £123K
If you'd put it in HSBC Global Strategy Balanced you'd have £128K

That's without touching it and you said you withdrew £10K.

So personally no I think you've had a shocker given you've paid £6K for the privilege.

I don't work in the financial industry so I'm probably looking at it very simplistically and I'm sure other people may have a different opinion.

Section62

cleverdic said:

Aminatidi said:

4 pages and we still don't even know the asset allocation (or the exact 18 individual funds).

It would help.

I think I'm not explaining myself well enough. Firstly my IFA works for a financial company that offers a portfolio service actively managing funds on my behalf. My IFA doesn't actually allocate the funds. That is done by advisors in the company that should analyse and understand the market at any given time. I can see my funds on an online platform and can use a tool like Trustnet to go and look at the history of each of the 18 funds. Up to now, I have never investigated any of these funds. The reason is that, as I am not knowledgeable at all about fund investing, I engaged a professional to invest on my behalf.

I prefer not to share the funds in this discussion as I am not seeking a critique on what has been chosen. I understand the desire to know the makeup of the funds but I am really dealing in generalities by trying to gauge the expected performance of our fund sold to us as medium growth with risk against other funds offered in similar circumstances. I was happy with the risk profile as this investment was only typically around 25% of our cash/property/investment portfolio. In summary I am really asking whether I am getting value for money.

I really appreciate the discussion around the original question but If I was to ask the question again, and based on the feedback so far, it would be this.

"Coming up to retirement, I engaged an IFA to make an investment of £100K that is being managed actively on my behalf. I fully understood I was investing in a basket of funds that should offer medium growth with some risk. After 5.5 years, and now fully retired, the fund has only gained 5.74% over that period. I have been charged £6K for that service. Does this represent a typical return over that period. Should I start looking at baling out and looking at alternatives."

Without giving the information other posters have been asking for (appreciate you have reasons why you don't want to give it) the word "typical" in that sentence has no meaning.

Your question is broadly the same as asking whether your new car's fuel economy of 30mpg is 'typical' without the context of whether you are talking about a 2CV or a Hummer (or somewhere between).

What a typical return look a like depends on what you've invested in, and whether that's good or bad will also depend on what your investment objectives were.

cleverdic

"Your question is broadly the same as asking whether your new car's fuel economy of 30mpg is 'typical' without the context of whether you are talking about a 2CV or a Hummer (or somewhere between)."

Section62, let me use your analogy.

I know absolutely nothing about cars. I don't want to know how the car works or what type of engine is under the bonnet. (what is in the fund) I go to an expert, the car dealer (IFA).

I explain I want a car that fits my requirements. (coming up to retirement, balanced portfolio etc etc.)

He tells me I should purchase a 2CV because it offers me the fuel consumption I want (medium growth with risk)

I buy the car on his recommendation. After 5.5 years, I discover that the 2CV is in fact consuming fuel as much as a Hummer. Remember, I know nothing about cars. I go out to my mates that know about cars (This forum)

They express a view comparing what I was sold with what I should expect from a 2CV or similar car. Should I hope that my 2CV can improve on its performance by tinkering with the engine or should I dump it and buy an Astra (or Tesla?)

I want to thank everyone that has contributed to this conversation. I've learned a lot and it has given me a good idea of the next steps I need to take. I may return to pour over recommendations about investing by myself rather than relying on a professional. Possible steep learning curve ahead!

Albermarle

Aminatidi said:

OK this is all a bit cloak and dagger and I don't really get why but.

Let's assume you put £100K in on Jan 1st 2018 which is what you hinted at in your first post.

If you'd put it in LS60 you'd have £123K
If you'd put it in HSBC Global Strategy Balanced you'd have £128K

That's without touching it and you said you withdrew £10K.

So personally no I think you've had a shocker given you've paid £6K for the privilege.

I don't work in the financial industry so I'm probably looking at it very simplistically and I'm sure other people may have a different opinion.

I also quoted similar figures in a previous post, (although based exactly on the last 5 years) which maybe the OP missed.

OP - some figures based on the above comments, if it helps.
 Firstly medium risk covers a wide spectrum, and is not a hard and fast definition at all.

However a typical 60/40 ( 60% equities ) low cost multi asset fund has gained about 20% over the last 5 years
A 40/60 fund ( 40% equities) has gained about 11 % over the last 5 years.

Both results are after subtracting the typical fund fee of 0.2% pa, but do not take account of platform fees ( say 0.25% pa ) or of course any advisor fees. 

Linton

cleverdic said:

Aminatidi said:

4 pages and we still don't even know the asset allocation (or the exact 18 individual funds).

It would help.

I think I'm not explaining myself well enough. Firstly my IFA works for a financial company that offers a portfolio service actively managing funds on my behalf. My IFA doesn't actually allocate the funds. That is done by advisors in the company that should analyse and understand the market at any given time. I can see my funds on an online platform and can use a tool like Trustnet to go and look at the history of each of the 18 funds. Up to now, I have never investigated any of these funds. The reason is that, as I am not knowledgeable at all about fund investing, I engaged a professional to invest on my behalf.

I prefer not to share the funds in this discussion as I am not seeking a critique on what has been chosen. I understand the desire to know the makeup of the funds but I am really dealing in generalities by trying to gauge the expected performance of our fund sold to us as medium growth with risk against other funds offered in similar circumstances. I was happy with the risk profile as this investment was only typically around 25% of our cash/property/investment portfolio. In summary I am really asking whether I am getting value for money.

I really appreciate the discussion around the original question but If I was to ask the question again, and based on the feedback so far, it would be this.

"Coming up to retirement, I engaged an IFA to make an investment of £100K that is being managed actively on my behalf. I fully understood I was investing in a basket of funds that should offer medium growth with some risk. After 5.5 years, and now fully retired, the fund has only gained 5.74% over that period. I have been charged £6K for that service. Does this represent a typical return over that period. Should I start looking at baling out and looking at alternatives."

The problem is that there are no underlying investments "of medium risk and some growth".  Therefore your portfolio must at the bottom level have a mixture of very safe investments and quite risky ones.  The past 2 years hve seen the worst period for very safe investments that any current  investor will have experienced in their lifetime. whereas pretty risky investments have performed fairly well. So the exact ratio of very safe to pretty risky is important to understanding the reason for your portfolio's performance and whether it is as expected or not given the economic circumstances.

masonic

cleverdic said:

Firstly my IFA works for a financial company that offers a portfolio service actively managing funds on my behalf. My IFA doesn't actually allocate the funds. That is done by advisors in the company that should analyse and understand the market at any given time.

That doesn't sound like what an IFA should be doing to me. Are you sure they are independent?

cleverdic said:

Aminatidi said:

4 pages and we still don't even know the asset allocation (or the exact 18 individual funds).

It would help.

I think I'm not explaining myself well enough. Firstly my IFA works for a financial company that offers a portfolio service actively managing funds on my behalf. My IFA doesn't actually allocate the funds. That is done by advisors in the company that should analyse and understand the market at any given time. I can see my funds on an online platform and can use a tool like Trustnet to go and look at the history of each of the 18 funds. Up to now, I have never investigated any of these funds. The reason is that, as I am not knowledgeable at all about fund investing, I engaged a professional to invest on my behalf.

I prefer not to share the funds in this discussion as I am not seeking a critique on what has been chosen. I understand the desire to know the makeup of the funds but I am really dealing in generalities by trying to gauge the expected performance of our fund sold to us as medium growth with risk against other funds offered in similar circumstances. I was happy with the risk profile as this investment was only typically around 25% of our cash/property/investment portfolio. In summary I am really asking whether I am getting value for money.

I really appreciate the discussion around the original question but If I was to ask the question again, and based on the feedback so far, it would be this.

"Coming up to retirement, I engaged an IFA to make an investment of £100K that is being managed actively on my behalf. I fully understood I was investing in a basket of funds that should offer medium growth with some risk. After 5.5 years, and now fully retired, the fund has only gained 5.74% over that period. I have been charged £6K for that service. Does this represent a typical return over that period. Should I start looking at baling out and looking at alternatives."

It would be very dangerous for anyone who doesn't understand your current portfolio to give you advice about whether or not to bail out on it. The number one reason for inexperienced investors to get poor returns on their investments is due to them repeatedly selling after poor short term returns and reinvesting in something with better historic returns that goes on to perform poorly in the next part of the economic cycle.

It's also important to take into account the future prospects of your current portfolio, as the performance to date cannot be changed. Without knowing what you hold, nobody could reasonably comment on whether this was an unusual period for the assets in question, or this performance is likely to continue.

If we are not to discuss the make-up of the current portfolio, then perhaps you could share with us which alternatives you are considering? We'll need you to assess whether these alternatives are comparable in terms of risk and appropriateness, if we are not able to compare with what you have now.

Altior

The reason why we would like the funds named is not to interrogate the performance, but it would provide an insight into your actual risk profile. If for example, it is capital preservation, it has done a reasonably adequate job. I have no evidence of this obviously, my instinct is that your own perception of your attitude to risk differs from your IFA's profiling results. 

masonic

Another aspect to consider is, you've not shared anything about your plans in retirement with us, but was any of this portfolio intended to be used to purchase an annuity at retirement at the time your adviser selected it for you (for example to provide a safe retirement income floor)? Was there any objective around protecting you against annuity rates falling?

oldfella

my home built portfolio of 8 funds is up 25% over the last 5 years. The only cost on top is platform costs which are £70pa. I suggest your investments need changing.

Aminatidi

If you replace Global Strategy Balanced with Global Strategy Cautious the return from £100K in Jan 2018 is £105K.

Take off the £10K that's been withdrawn and suddenly it's not as straightforward.

It feels like the devil is in the detail over what "medium growth with some risk" actually looks like as a portfolio/asset allocation?