IFA and Pension fund management charges - transferring a DC workplace & private pension

DeadlyD

Right. However, the article in the above Monevator describes the platform as either passive or active. No wonder I’m confused. 

Albermarle

DeadlyD said:

Right. However, the article in the above Monevator describes the platform as either passive or active. No wonder I’m confused. 

I have just skimmed the Monevator article and I can only see that they mention comparison of funds, and I do not see where platform is mentioned ( maybe missed it) 
A platform can not be active or passive, it is just basically an administrator, where you buy, sell and hold investments.

DeadlyD

I see. I get it.  The funds recommended are named as Vanguard Lifestrategy, Fidelity Multi Asset Allocator etc hence my confusion 

This article is enlightening 
https://monevator.com/investment-portfolio-examples/

Tammer

Hi,  
I thought I should mention that I’ve read that SJP are removing exit charges on their products following a consumer duty review.

bjorn_toby_wilde

Vanguard and Fidelity are both platform providers as well as offering funds.  The key difference is that on the Vanguard platform you can only purchase Vanguard funds. On most other platforms you can purchase lots of other funds as well as Vanguard.

I’m a novice compared to most on this board so maybe my perspective will help. Having gone through much the same process as you a few months ago with a smaller pension I chose my platform first, based on positive feedback from this forum and fees. In my case this was AJ Bell because their management charges were low and they have a big selection of funds to choose from. I must say I like the app and find them really easy to deal with. For larger sums I think interactive investor would have been my choice but Albemarle makes a good point about the HL deal.  I might have gone for that then transferred later to II or AJB

Secondly, once the transfer was complete, I chose the funds. The HSBC funds mentioned are a favourite with many and they have options for different risk levels.  AJBell have their own set of similar funds.

On the subject of IFAs, a good local one is worth going with, but avoid anyone using the “Wealth Management” title. The ones I spoke to all seemed to use another layer of management called a DFM (Quilter is an example). As far as I can see this just adds another layer of fees with no discernible benefit to the client.

DeadlyD

bjorn_toby_wilde 

In my case this was AJ Bell because their management charges were low and they have a big selection of funds to choose from. I must say I like the app and find them really easy to deal with. For larger sums I think interactive investor would have been my choice but Albemarle makes a good point about the HL deal.  I might have gone for that then transferred later to II or AJB

Secondly, once the transfer was complete, I chose the funds. The HSBC funds mentioned are a favourite with many and they have options for different risk levels.  AJBell have their own set of similar funds.

On the subject of IFAs, a good local one is worth going with, but avoid anyone using the “Wealth Management” title. The ones I spoke to all seemed to use another layer of management called a DFM (Quilter is an example). As far as I can see this just adds another layer of fees with no discernible benefit to the client.

Thank you, you can relate to my confusion then particularly Vanguard but understand these funds such as Fidelity are accessible via a platform provider eg HL. 

Yes the IFA chose Quilter and the % management shot up.. I have decided to go for a multi asset fund, Fidelity are offering a £200 cash back with slightly lower fees and doing my homework on understanding funds. So I think it’s either Fidelity or HL then choose the Multi Asset fund. All very exciting and I do feel I’ve saved £7K in Yr1 by doing my research and having a simple pension plan so negates the investment in a Wealth Lifestyle Manger  

noclaf

I currently use Fidelity and AJBELL, have recently moved away from Vanguard however that decision was related to investment choices and convenience.

I would happily recommend all 3, Vanguard have a simple no frills platform and it's the simplicity aspect I rate the most. The AJ BELL platform looks a bit 'busier' but overall both service and user experience of the platform interface has been fine. No issues with Fidelity either. I have used far worse before (old work pension platform that was something from the stone age).

LHW99

Tammer said:

Hi,  
I thought I should mention that I’ve read that SJP are removing exit charges on their products following a consumer duty review.

But only for new customers (at the moment) soanyonealready there has to wait for their 6year exit charges to expire unless they feel they can make up thecost.

dunstonh

Tammer said:

Hi,  
I thought I should mention that I’ve read that SJP are removing exit charges on their products following a consumer duty review.

It took them 11 years after the RDR to do it though.  

On the subject of IFAs, a good local one is worth going with, but avoid anyone using the “Wealth Management” title. The ones I spoke to all seemed to use another layer of management called a DFM (Quilter is an example). As far as I can see this just adds another layer of fees with no discernible benefit to the client.

Be careful of that guide. I have fallen foul of using it unfairly too.    Wealth management doesnt mean that DFMs are used.    Its just that some of them use DFMs.      Some use Wealth management in their name or tagline and have done long before it got hijacked by the expensive ones sticking everyone on one platform with a full DFM.   (Quilter's DFM service is mostly used by Quilter FAs rather than IFAs - although it is available to IFAs)

Also, DFMs can come in two forms. 
Full DFM - expensive and really only if you want bragging rights that you have a personal investment manager who you speak to.   Extra layer of costs with no real benefit
MPS DFM - can be much cheaper.  Often only adding 0.1% p.a. and allows the portfolio to be run on discretionary basis rather than advisory.   For example, a portfolio of trackers including the fund and DFM can cost less than the VLS range.     These can and do add benefit.

JohnWinder

The problem is that it has not had the best long term returns and it is not the lowest cost and many people argue about its asset allocation.   Of course, asset allocation is down to opinion and its a management decision how you split the regions/countries and assets.  So, you are always going to get different opinions there.

But if its not the lowest cost, not had the best long term returns, not been the most consistent how can you call it the clear leader? 

You can if you put the most weight on being ‘passive’ which Monevator does (not sure I agree), and you like home bias in equities. I don’t know about ‘consistency’. Which is the most consistent if not the VLS series?
There’s a lot to unpick to pick HSBC Global Strategy vs the VLS funds, more than is worth it for me since either option is likely to be a good choice because of their diversification, but I’ll offer a couple of observations.
They both use a collection of index funds, but different funds tracking different indexes, so you’d expect their returns to be different quite apart from both tell us they’ll vary how much they’ll hold in their different funds (and both are ‘active’ in that sense). Ignore returns for a moment.
So the question becomes: do you have a view on which indexes you’d rather be tracking? For example, HSBC’s US stocks appear only to be from the SP500, while Vanguard holds 3600 US stocks. Clearly, the latter is more diversified which ought make it a better choice. It might also explain HSBC’s better returns in recent years when the FAANG etc stocks outperformed everything smaller by so much. Basically the big growth stocks where HSBC’s holdings are more concentrated.
But put aside that possible reason for HSBC’s better returns, past returns don’t predict future returns, so why put any weight on them when comparing two similar funds in order to choose one, without looking into why it might be so? Apart from us probably not finding every reason for outperformance, any reason we find won’t ensure better performance in the future, or is there such a reason you can think of?
If you’re a fan of historical outperformance as a selection criterion, how many years does it need to be? The VLS series started 12 years ago, is that long enough? The infamous Legg Mason Value Fund beat the SP500 for 15 consecutive years to 1995 until it didn’t for a decade or so.

That article effectively criticises all the multi-asset funds with variable allocations and claims the VLS range is static and its that rigidity that makes it best.’

There are sound reasons for that. Tactical asset allocation, more/less of stocks/bonds according to market timing has not demonstrated it’s a better strategy.
‘Tactical asset allocation was very popular during the 1980s and 1990; many (pension) funds offered them as choices, and the Vanguard LifeStrategy funds began as tactical asset allocation funds. They failed conspicuously enough that they are almost forgotten now. Vanguard's LifeStrategy funds still exist, but Vanguard froze their allocations at fixed values (20/80, 40/60, 60/40, and 80/20). Vanguard gave up on tactical asset allocation.

Tactical asset allocation was advocated by Mebane Faber in a book entitled Global Tactical Asset Allocation, as well as some papers and articles, and eventually he launched an ETF based on it. Here is how it performed (red) compared to a simple non-tactical fund with a similar stock-bond allocation, Vanguard LifeStrategy Moderate:
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=383012&newpost=6925407

Here’s another observation about TA: ‘Essentially, no matter where you look, wherever there is active intervention, there is usually value loss.

This doesn’t mean an active manager cannot outperform their benchmark or peer group — it’s just extremely difficult to do so, and the task is only getting harder.’  https://www.evidenceinvestor.com/tactical-allocation-funds-have-been-stinkers-morningstar/

The problem is that going with a static asset allocation is also an active decision.

Going ‘static’ is not a problem, and it would only be a relevant active decision if it was a change in fund strategy. If the fund is set up to be ‘static’ and remains so, how is that any more active than deciding to use the MSCI global index rather than the FTSE global index at set up? It seems a ridiculous proposition.

But we don’t have to misrepresent reality to support the assertion that VLS is an active fund since Vanguard say it is themselves.

‘Going with home bias is an active decision.’

I don't think that helps neophytes get on top of the subject. See above.
And yes, watch out for bias. (Ducks for cover.)