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

cleverdic

masonic said:

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?

No, no annuities. I've been drawing an occupational pension for a few years now and now draw a state pension. There were no long term plans at all for this investment when it started except to invest in what I consider as part of our rounded portfolio. Right now, we don't need an income from the fund. 

Beddie

cleverdic said:

masonic said:

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?

No, no annuities. I've been drawing an occupational pension for a few years now and now draw a state pension. There were no long term plans at all for this investment when it started except to invest in what I consider as part of our rounded portfolio. Right now, we don't need an income from the fund. 

I think you need to discuss this with your IFA. The performance was not great, but then any bond funds will have taken a battering in 2022. I doubt my self-selected funds have done much better overall. The IFA will have had many discussions with their other clients about this exact same issue.

If they put your mind at rest, great. If they offer alternatives that you like the sound of, also great. If they fob you off and don't ease your concerns, then maybe it's time to look at something else.

Bostonerimus1

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Certainly many funds of funds will contain double digit numbers of funds, but is that really necessary? I'd say not as my portfolio is basically a couple of large US and global equity index funds and a bond heavy income fund. So that's just 3 funds, but they do own thousands of individual stocks and bonds. There's plenty of ways to own your target asset allocation and I'd advise people to do that in the simplest way possible; that might be the wrapper of a multi-asset fund of funds or a few individual funds as promoted by Bogleheads, but don't give yourself the headache of 18 individual funds or take advice from anyone who thinks it's a sensible way to manage a portfolio.

masonic

Bostonerimus1 said:

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Certainly many funds of funds will contain double digit numbers of funds, but is that really necessary? I'd say not as my portfolio is basically a couple of large US and global equity index funds and a bond heavy income fund. So that's just 3 funds, but they do own thousands of individual stocks and bonds. There's plenty of ways to own your target asset allocation and I'd advise people to do that in the simplest way possible; that might be the wrapper of a multi-asset fund of funds or a few individual funds as promoted by Bogleheads, but don't give yourself the headache of 18 individual funds or take advice from anyone who thinks it's a sensible way to manage a portfolio.

When you look into these fund of funds, you tend to see that they include multiple equivalent funds, for example, VLS has a US Equity Index fund and a S&P 500 ETF, also a FTSE All share index fund and FTSE100+FTSE250 ETFs. Likewise for Developed World Ex-UK and Developed Europe, Japan, Pacific ex-Japan, etc. There will be some very small differences between these funds, but it seems unlikely there would be a material impact on performance in reducing the number of holdings.

There must be a reason for this, and perhaps it boils down to the scale and liquidity constraints of managing £13.9bn of capital with daily inflows and outflows. I'd wager whatever the reason is, it isn't a reason that would be applicable to a private investor. So I don't think it follows that just because a well known fund of fund does it, that it's a valid approach for all.

Of course, if the adviser has, as it appears, just plonked the OP into some ready-made portfolio from some wealth management firm, which may contain a bunch of diworsified active funds, then there are much cheaper ways of accessing such asset mixes, and probably with better growth prospects.

EthicsGradient

Perhaps another comparison worth looking at is the "Adviser Fund Index" set -
AFI Methodology | Adviser Fund Index | Trustnet
eg the Balanced one: AFI Balanced Portfolio | FE Adviser Fund Index | Trustnet
(for someone retiring at 65, what a pool of advisers would recommend to someone in their mid 40s - about 23 of the 123 constituents are bond-based)
or the Cautious - which might  have fitted your shorter term horizon more (what they'd recommend to someone in their late 50s, though since you had other resources, the "Balanced" seems a more like what you asked for)
https://www2.trustnet.com/Tools/AFIIndexSelect.aspx?afiType=Cautious
Since Jan 2018, Balanced is up about 12%, Cautious about 10%. If you add the £6k fees on to the £5,740 return, you are in the ball park; the fees have been quite high (about 1.1% pa) for mediocre performance. Your return, if you hadn't paid those £6k fees, also looks roughly similar to the Vanguard LifeStrategy 40% fund:
Chart Tool | Trustnet
(you cad add the AFI indices to that chart, by clicking on "Add to this chart:" and selected Indices - the AFI ones are at the top of the list - though the tool won't let me save a link that includes them). In fact, your performance of +20% from early 2018 for 2.5 years (eg Jan 2018-July 2020) is a bit better than those - it's after that when you've fallen back (which make it look more like Vanguard LifeStrategy 20%, though if only 4 out of 18 funds were bond-based, you would have expected better returns.

I'd say the problem has been the size of the fees; that didn't get you advice that saw the bond problems coming, it seems, and there could be a case for picking a few funds yourself from big names in balanced sectors (Flexible Investment? Mixed Investment 40-85%) and not paying the fees.

JohnWinder

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Some useful insights there; and informative replies that followed.

The VLS series used to have three funds. Perhaps the managers feel they can be a bit 'active' while holding a fixed eq/bond split, by having lots of funds. Nonetheless, performance aside, it seems to cost the investor little or nothing extra of their time or money that folk at Vanguard are fussing with 17 funds; which is a bit different than an investor doing it themselves or paying extra for an advisor to get it done.

Maybe 18 funds from your advisor? I do buy it for the investor who expresses special needs, but for the average joe I doubt it would be worth it, given market beating portfolios are so hard to pick.

And as an aside, that last line would once have elicited 'there are lots of markets, which one?'. Those were the days.

Bostonerimus1

JohnWinder said:

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Some useful insights there; and informative replies that followed.

The VLS series used to have three funds. Perhaps the managers feel they can be a bit 'active' while holding a fixed eq/bond split, by having lots of funds. Nonetheless, performance aside, it seems to cost the investor little or nothing extra of their time or money that folk at Vanguard are fussing with 17 funds; which is a bit different than an investor doing it themselves or paying extra for an advisor to get it done.

Maybe 18 funds from your advisor? I do buy it for the investor who expresses special needs, but for the average joe I doubt it would be worth it, given market beating portfolios are so hard to pick.

And as an aside, that last line would once have elicited 'there are lots of markets, which one?'. Those were the days.

Fixed income can be hard to cover if you want geographical, type and risk "completeness" and that can lead to fund bloat when you use a Wealth Management company algorithm or Vanguard develops something like VLS. But the average investor can use broad global indexes or multi-asset funds to develop a simple and perfectly adequate portfolio. It's a shame that many advisors still see the need to justify their fees by offering overly complex portfolios when I think they would serve their clients better by sticking with more strategic advice about, debt, saving, investing, tax and budgeting.

dunstonh

Bostonerimus1 said:

JohnWinder said:

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Some useful insights there; and informative replies that followed.

The VLS series used to have three funds. Perhaps the managers feel they can be a bit 'active' while holding a fixed eq/bond split, by having lots of funds. Nonetheless, performance aside, it seems to cost the investor little or nothing extra of their time or money that folk at Vanguard are fussing with 17 funds; which is a bit different than an investor doing it themselves or paying extra for an advisor to get it done.

Maybe 18 funds from your advisor? I do buy it for the investor who expresses special needs, but for the average joe I doubt it would be worth it, given market beating portfolios are so hard to pick.

And as an aside, that last line would once have elicited 'there are lots of markets, which one?'. Those were the days.

Fixed income can be hard to cover if you want geographical, type and risk "completeness" and that can lead to fund bloat when you use a Wealth Management company algorithm or Vanguard develops something like VLS. But the average investor can use broad global indexes or multi-asset funds to develop a simple and perfectly adequate portfolio. It's a shame that many advisors still see the need to justify their fees by offering overly complex portfolios when I think they would serve their clients better by sticking with more strategic advice about, debt, saving, investing, tax and budgeting.

If a portfolio has one fund costing 0.10% or 20 funds costing 0.10% then the cost to the investor is still 0.10%.  So, the number of funds is a red herring.     

It is a regulatory requirement for advisers to be responsible for the investment selection.  Even if they farm it out to a DFM.   It may be different in your country but that is the requirement in the UK.

You say the average investor can use "broad global indexes or multi-asset funds" but as already pointed out, VLS has 17.     An adviser can use VLS and the investor can be charged 0.22% OCF.  Or the adviser can use the single sector tracker funds within their own portfolio build and the investor is charged 0.09% OCF.     You say the 0.22% option is better for the investor than the 0.09% option.     (remember that it is the investor that gives their instruction on investment style. i.e. ethical, ESG, active or passive - the adviser has to follow the investor wishes.  The adviser may have a default that could be passive only, active only or hybrid but the investor gets the final say)

Mothman

It amazes me why someone would start a thread then refuse to provide the required information to enable people to answer their question.  They are asking for people to critique the return they gave experienced but then say they don't want to list the funds in case people critique the IFA's choices, yet the two things are inextricably linked. As the old saying goes 'You can lead a horse to water but you can't make them drink'.

Bostonerimus1

dunstonh said:

Bostonerimus1 said:

JohnWinder said:

dunstonh said:

Does a portfolio ever need to be spread across 18 funds to get the spread/diversity one might like (require)?

Yes.     And is worth noting that VLS60 has 17 funds.  So, all those posting that using 18 funds is bad investing are effectively saying that Vanguard Lifestrategy funds are bad as well.

it all boils down to your portfolio build/strategy. If a core and satellite approach strategy is being used, then that could go to 18.   Higher risk portfolios may introduce increased weightings to small cos or targeted areas and that will increase the number.   Bucketing your portfolio can utilise more funds as you are looking at time weighted investing and the assets will need to vary between the time periods.     Yielding strategy will also often have more funds if you aim to have distribution dates covering all 12 months.

And larger portfolios may want to use more funds purely for increased FSCS protection and potential liquidity.  

If you look at VLS60, it has 10 funds covering fixed interest securities. and 7 covering equities.   

Some useful insights there; and informative replies that followed.

The VLS series used to have three funds. Perhaps the managers feel they can be a bit 'active' while holding a fixed eq/bond split, by having lots of funds. Nonetheless, performance aside, it seems to cost the investor little or nothing extra of their time or money that folk at Vanguard are fussing with 17 funds; which is a bit different than an investor doing it themselves or paying extra for an advisor to get it done.

Maybe 18 funds from your advisor? I do buy it for the investor who expresses special needs, but for the average joe I doubt it would be worth it, given market beating portfolios are so hard to pick.

And as an aside, that last line would once have elicited 'there are lots of markets, which one?'. Those were the days.

Fixed income can be hard to cover if you want geographical, type and risk "completeness" and that can lead to fund bloat when you use a Wealth Management company algorithm or Vanguard develops something like VLS. But the average investor can use broad global indexes or multi-asset funds to develop a simple and perfectly adequate portfolio. It's a shame that many advisors still see the need to justify their fees by offering overly complex portfolios when I think they would serve their clients better by sticking with more strategic advice about, debt, saving, investing, tax and budgeting.

If a portfolio has one fund costing 0.10% or 20 funds costing 0.10% then the cost to the investor is still 0.10%.  So, the number of funds is a red herring.     

It is a regulatory requirement for advisers to be responsible for the investment selection.  Even if they farm it out to a DFM.   It may be different in your country but that is the requirement in the UK.

You say the average investor can use "broad global indexes or multi-asset funds" but as already pointed out, VLS has 17.     An adviser can use VLS and the investor can be charged 0.22% OCF.  Or the adviser can use the single sector tracker funds within their own portfolio build and the investor is charged 0.09% OCF.     You say the 0.22% option is better for the investor than the 0.09% option.     (remember that it is the investor that gives their instruction on investment style. i.e. ethical, ESG, active or passive - the adviser has to follow the investor wishes.  The adviser may have a default that could be passive only, active only or hybrid but the investor gets the final say)

I'm not talking about costs, just convenience, and also arguing that 17 or 18 funds, even for Vanguard, is not necessary to get an adequate portfolio. Small percentage holdings of funds are stroking some aspect of an algorithm with diminishing returns. 

As far as a 0.22% fee vs a 0.09% fee well yes cheaper can be better, but 0.22% is better than 0.09% plus 1% advisor fee for an 18 fund portfolio that performs poorly. Three of four index funds will be just fine for most people and those can be had very inexpensively, or you can pay a bit more an get the "Wealth Management" type portfolio in a VLS or anyone of numerous other offerings from the major financial firms.

The customer's wishes do need to be followed, but why complicate things with an 18 individual funds? I believe it's mostly just dogma and as the advisor has paid for the Wealth Management company's portfolios they won't vary from them and also they can pass the buck when things don't perform. I'm sure there are liability issues. The result is the customer gets the usual solutions and service that are really pretty silly because of the way the industry is set up. As I've said before there will be self-selection in these "horror stories" as people don't feel compelled to post to a forum when things are just fine so I expect there are some advisors recommending more sensible portfolios and taking the time to talk to clients and explain the choices and why they might be rebalancing or doing some strategic asset allocation as retirement approaches. It would be good to hear those stories.