more SIPP dilemmas

ColdIron

When you started you were looking for a medium risk fund, one of the target retirement funds, multi asset with a mix of equities and bonds. The All Cap is 100% equity, hardly medium risk. The LifeStrategy 60 is medium risk and much the same as the target fund but without the lifestyling. I don't think it was established whether the extra cost of the managed/do it for you option just bought lifestyling at an extra cost

To summarise

Vanguard FTSE Global All Cap: 100% equity, 0.38% fee

Vanguard LifeStrategy: multi-asset equity/bonds, 0.37% fee

Vanguard Target Retirement: multi-asset equity/bonds 0.39% fee. Lifestyling

Vanguard managed/do it for you: multi-asset equity/bonds, 0.61% fee. Lifestyling unknown

dunstonh

just reviewing the sjp information vs vanguards 2035 fund. much higher fees at sjp but actually maybe better performance

What you have been sent is is open to sales manipulation.   What they have done is use FEFundinfo (paid version of Trustnet with much greater functionality).    They have created three virtual portfolios with those names and inside of them they have selected a range of funds.        When building those virtual portfolios, do you think they would have used their worst performing funds or their best ones?    Hindsight allows that manipulation.   Without knowing the underlying funds, the data you have been shown is meaningless.

The date range selected is interesting, as quarter 4 of 2018 was negative and turned 2018 into a negative year.   The chart starts after that negative period which will make higher equity funds look more attractive.   

martin7575

@ColdIron thanks for that

its not that clear how if differs from lifestyling - my inexperience & insecurity says go managed but annoyiung if its essentially just the same as a target fund

1. DIY SIPP (Do-It-Yourself):

   • With the DIY SIPP option, you have full control over your pension investments.
   • You are responsible for selecting and managing your investment portfolio.
   • Vanguard provides you with a range of investment options, including individual stocks, bonds, mutual funds, ETFs (Exchange-Traded Funds), and other investment products.
   • You have the flexibility to make investment decisions based on your own research, investment goals, risk tolerance, and preferences.
   • This option is suitable for investors who are confident in their investment knowledge and prefer to actively manage their pension investments.

2. Managed SIPP (We Do It For You):

   • With the Managed SIPP option, Vanguard or a professional investment manager manages your pension investments on your behalf.
   • The investment decisions, asset allocation, and portfolio rebalancing are handled by Vanguard's team or the designated investment manager.
   • Vanguard typically offers a selection of diversified investment portfolios based on your risk tolerance and investment goals.
   • This option is suitable for investors who prefer a hands-off approach to managing their investments or who may not have the time or expertise to actively manage their pension portfolio.
   • Managed SIPPs can offer convenience and peace of mind for investors who want professional management and guidance.

martin7575

@dunstonh thank you for taking the time to look at that. minefield!

GeoffTF

martin7575 said:

its not that clear how if differs from lifestyling - my inexperience & insecurity says go managed but annoyiung if its essentially just the same as a target fund

You either have professional manager make decisions for you, or you make your own decisions. You cannot do both. A manager could choose packaged fund, or do something more complicated that is likely to be similar but more expensive. There is no reason to believe that will do better. If you feel it in your waters that a fixed equity percentage throughout your life will do better than one that reduces both before and after retirement, you can buy LifeStrategy. You can always reduce your equity percentage later on if you choose.

6000_a_year_is_plenty

In the long run managed funds don't beat the market. Index tracker funds or ETFs are a better investment because they have lower ongoing costs.

One thing I'd be cautious of current global valuations of funds or indexes that are skewed to the US markets "magnificent seven" (Amazon, Apple, Google, Meta, Microsoft, NVidia and Tesla), particularly share prices boosted by hype, especially AI hype. They represent over a quarter of the US large cap market which is rather too much concentrated risk for those funds and trackers to be thought of as diversified investments.

The potential for AI is huge, but so is the hype. Remember the dot com boom. I'd take a little of that risk, but not at the ratios of current global values. Of course I could be wrong and I'll miss out on huge returns, but I'd rather have my eggs in a few more baskets.

gm0

Wealth management agents charge a big initial charge as discussed upthread.....or they charge nothing.  If they want the customer for the ongoing - larger pot and other services expected.  Negotiated.  Not a rack rate.  You can't come on a forum and say brand x is "5%".  Or indeed say that it is free.  FA and IFAs quote high or low according to desire for a given piece of business.  Price is - not regulated.  Price mechanisms are - commission etc.   They give the impression that the quoted price is the only price.  Which is just sales.  Any business FA or IFA will quote you.  And they may or may not be open to much haggling vs just moving on without doing a deal - depending on their focus and your wealth.  The advice "gap" of people who would find it useful but can't easily buy it - is a thing.

But SJP / Investec etc. are a totally different animal to Vanguard aimed at a different segment.

Opacity comes as standard with wealth management.  Logical portfolios as an extra layer of obfuscation and lots of swapping in and out fund managers and funds underneath.  Keep the three cups moving fast and they will never know where the pea is.  Shell game.  I am reminded of the internet meme where the dog just knocks all three cups off the table to get the treat.  A good metaphor for DIY.

Let's take a simple worked example from 2023.  A single year and broadly similar risk tier of portfolios to keep things simple.

According to a well known wealth management brand - MSCI World total return index last year was 19.99%
Calendar 2023 a benchmark of 100% equities before fund management, platform, advice or other fees.

That same year - Vanguard Life strategy 80 (VLS80) fact sheet quotes 11.83% net fund management fees.
So deduct 0.15% for the Vanguard platform fee.  It should be ~11.68% or thereabouts.

Now compare the too clever for the consumer's own good - wealth manager portfolio

One of around 85% equities - so a tad spicier than VLS80.  

10.6% calendar 2023 net fees

This doesn't tell us how it will perform in other - less benign conditions.  But based on what is in the portfolio charts - I am not particularly hopeful of magic beans.

You can add back on 0.5% for the typical cost of receiving "regulated advice" i.e treating that as a value.

So 11.1% on that basis(from wealth manager) plays 11.68%. (from Vanguard, non-advised or adjust to take the "cutdown" advice service fee from the VLS80 number - 0.3% (0.45% in all).  So now 10.6% plays 11.38%. After all fees (with advice scenario). .

There is still another 0.78% of extra drag in expensive wealth manager product fees hidden in the above example for a more complicated way to hold (broadly) similar underlying assets.  Actively managed yes.  But once a portfolio is sharded across 30-40 components.  Even if some of those components are expensive and active - mean reversion of the aggregate is still a distinct possiblility.

To complete the comparison - my best fund of all is on a free platform (employer scheme subsidised) with a very low cost fund.  That did 17.35% (of the 19.99% arguably available at "par" for the market) in the same benign conditions A 100% equities fund with ethical knockouts.

So what conclusions can we draw as retail investors.   A lot of money gets stuck to fingers. 
More actors = more fingers.

A hierarchy of evil emerges

Wealth managers
IFA with DFM and no rebate on the 0.5% for the DFM extra cost.  Less work. All the fees.
IFA who doesn't really want you (priced to deter or make it worth it)
Highstreet IFA at par pricing.
Expensive DIY SIPPs that do nothing different but inexplicably cost more
Closet tracker funds that are inexplicably expensive and yet have the same assets as ones 1/5th the price.
Cheaper DIY SIPPs - that look it and feel it when you need to do something the app/website can't do.
Actual passive developed world index trackers at market "best" price.   0.12% is plenty to pay for this.  From around 0.06% is available if you look - but 0.10%/0.12

This is not to say - that you should only invest passively and not extend a portfolio to other holdings. 

But if you are holding these particular assets without committing to aggressively active stock picking (short list active funds in the same space) - there seems little incentive to pay more to do so than is necessary.

ColdIron

gm0 said:

A hierarchy of evil emerges

Blimey, that escalated quickly

martin7575

@gm0 thanks for the in depth post. If im right youre saying is a self managed packaged fund would be best in my case, without the knowledge or time to spend and with little value in the extra management that someone like vanguard would offer

dunstonh

martin7575 said:

@gm0 thanks for the in depth post. If im right youre saying is a self managed packaged fund would be best in my case, without the knowledge or time to spend and with little value in the extra management that someone like vanguard would offer

Although Vanguard is not necessarily a good one, you could do a lot worse but it is worth considering what else is available.  Here is a selection of similar funds/portfolios at the same risk level as VLS60.  All using underlying passives.  VLS60 is red. It may be bottom in this chart but it is still at the upper end.  It has just suffered with its UK bias and its Gilt funds being some of the biggest losers during the gilts/bonds decline. (which is still ongoing as 2024 YTD has wiped out 2023 gains)



I have Vanguard funds in my portfolio and there are Vanguard funds in A, B, C as well as F (VLS60)