Dumping IFA portfolio to go DIY

thunderroad88

I have casually lurked on this forum for quite a while but never felt I had a need to ask anything..but now I think I have.

Been with an IFA for 7 years and in that time a largely Dimensional fund dominated pf on the Nucleus platform has evolved  into what I’ll post below. All our equity pf is now within ISA wrappers and I’m finally confident/stupid enough to want to part ways with my ifa and move everything into a DIY platform like Vanguard, II or AJ Bell. My annual platform, ocf and ifa costs currently come to about £8k which I think I can reduce by at least £5k.

 I think our personal circumstances are going to be stable for the next 5 to 7 years. I am 62, my wife is 60 and both retired, mortgage free and no dependants. I have a £16k db pension, my wife does pt work providing £10k income and we have a lot of cash in a combination of 5 year and easy access savings accounts providing another £10k income. We have enough accessible cash to provide any additional income for another 5 years so our equities can be left untouched to provide purely growth. I have calculated that in 7 years time once both our state pensions and my wife’s db teacher pension have kicked in we’ll have an annual income of £50k and may need to be then drawing down £20k per annum. Obviously an assumption is that no major catastrophe happens which changes our plans dramatically.

So, finally the question. Our pf current value £600k is split as follows

Vanguard Ftse Dev Wrld ex UK 38%
Vanguard FTSE UK All Share      2%
Dimensional Global Small Companies 17%
Dimensional Global Value 17%
Dimensional Emerging Markets 11%
L&G Global Tech Index 8%
iShares environment and low carb real estate 7%

This pf has done quite well, in the last year it has grown c 17%, but I do wonder if it’s a bit overweight in small companies and EM. I am thinking of simplifying things by putting most of it into VWRP (up 20% the last year), or possibly VHVG or LGGG, with a bit kept in the L&G fund for a little excitement. Would this be a reasonable course of action? Any thoughts would be welcomed with thanks.

GeoffTF

That portfolio is pointlessly over complicated. The two Vanguard funds are fine. You can advantageously ditch Dimensional Global Small Companies, Dimensional Global Value, L&G Global Tech Index and iShares environment and low carb real estate. You can also replace Dimensional Emerging Markets with VFEM. Those three funds cover the whole FTSE Russell global index at a low cost. Better perhaps, you could replace these three funds with a single all-world tracker, such as HSBC FTSE All-World Index Fund. 100% equities is risky, but that is up to you.

aroominyork

I don't agree this portfolio is overcomplicated. Many people have a core developed world fund plus some smaller companies, an actively managed emerging markets fund and couple of other tilts. Given some of the other portfolios posted on here, this is not at the weird end of the spectrum. But moving to a self-managed index fund with a tilt or two could still be a good idea (it's what I would do in your situation).

thunderroad88

Thanks Geoff, I should have added that I am only interested in addressing the equity element of my total “wealth” as I am comfortable with my fixed interest/cash plans which are not under ifa management. Don’t worry, I’m not 100% in equities. HSBC more than VWRP … a little bit cheaper I guess. Clearly you think ditching the IFA is sensible given I should need little if any ongoing advice in the next 5-7 years all being well and could always get adhoc advice if needed?

xylophone

You have both checked your state pension positions?

https://www.gov.uk/check-state-pension

thunderroad88

xylophone said:

You have both checked your state pension positions?

https://www.gov.uk/check-state-pension

Yes, a few extra years bought to fill the gap in mine so both all paid up. 

thunderroad88

aroominyork said:

I don't agree this portfolio is overcomplicated. Many people have a core developed world fund plus some smaller companies, an actively managed emerging markets fund and couple of other tilts. Given some of the other portfolios posted on here, this is not at the weird end of the spectrum. But moving to a self-managed index fund with a tilt or two could still be a good idea (it's what I would do in your situation).

This portfolio has done ok, some parts better than others. I could obviously easily replicate it and my adviser must have had reason to choose what he did (diversification?) and the splits he settled on. Compared to most of the favoured all world trackers, he seems to have put more in EM and small cos. so if I simply went for an all world tracker like the HSBC one or VWRP then I’d be changing the geographical and cap balance vs my existing but performance should be equal or better? Or I could put 85% into my existing Vanguard FTSE Dev Wrld ex Uk and split the rest between an EM fund and a global small cos. fund. as you are suggesting. Either way should be ok, lower costs and no adviser fees. Just need to pick the right funds or etfs….

dunstonh

This portfolio has done ok, some parts better than others

A portfolio will always have some parts doing better than others in different discrete periods.   its the same if you go with the ETFs you mention.

my adviser must have had reason to choose what he did (diversification?) and the splits he settled on. 

There is a clear structure in place with your current portfolio.  Looks like a good job.

 so if I simply went for an all world tracker like the HSBC one or VWRP then I’d be changing the geographical and cap balance vs my existing but performance should be equal or better? 

equal, better or worse.  Only time will tell.   Whenever, you change the asset mix, you do not know what the future holds.   If its a period that favours small cap then the portfolio with more small cap will do better.

Or I could put 85% into my existing Vanguard FTSE Dev Wrld ex Uk and split the rest between an EM fund and a global small cos. fund. as you are suggesting.

Many models split out the UK, EM, and Dev worlds and decide the allocations from there rather than using market capitalisation.   It can lower your costs that way too.  Plus, you don't have to use the same fund house for the different areas.  This is important as no single fund house has the best trackers in all areas.   For example, you wouldn't want Vanguard for everything. 

boingy

thunderroad88 said:

I have casually lurked on this forum for quite a while but never felt I had a need to ask anything..but now I think I have.

Been with an IFA for 7 years and in that time a largely Dimensional fund dominated pf on the Nucleus platform has evolved  into what I’ll post below. All our equity pf is now within ISA wrappers and I’m finally confident/stupid enough to want to part ways with my ifa and move everything into a DIY platform like Vanguard, II or AJ Bell. My annual platform, ocf and ifa costs currently come to about £8k which I think I can reduce by at least £5k.

 I think our personal circumstances are going to be stable for the next 5 to 7 years. I am 62, my wife is 60 and both retired, mortgage free and no dependants. I have a £16k db pension, my wife does pt work providing £10k income and we have a lot of cash in a combination of 5 year and easy access savings accounts providing another £10k income. We have enough accessible cash to provide any additional income for another 5 years so our equities can be left untouched to provide purely growth. I have calculated that in 7 years time once both our state pensions and my wife’s db teacher pension have kicked in we’ll have an annual income of £50k and may need to be then drawing down £20k per annum. Obviously an assumption is that no major catastrophe happens which changes our plans dramatically.

So, finally the question. Our pf current value £600k is split as follows

Vanguard Ftse Dev Wrld ex UK 38%
Vanguard FTSE UK All Share      2%
Dimensional Global Small Companies 17%
Dimensional Global Value 17%
Dimensional Emerging Markets 11%
L&G Global Tech Index 8%
iShares environment and low carb real estate 7%

This pf has done quite well, in the last year it has grown c 17%, but I do wonder if it’s a bit overweight in small companies and EM. I am thinking of simplifying things by putting most of it into VWRP (up 20% the last year), or possibly VHVG or LGGG, with a bit kept in the L&G fund for a little excitement. Would this be a reasonable course of action? Any thoughts would be welcomed with thanks.

Based on the thought that you put into this post I'd say you are more than capable of running your own portfolio. It will take a little bit of time and admin up front but you'll almost certainly end up better off. If it was me I'd look to simplify that portfolio but everyone is different. There is plenty of advice and suggestions to be had on here if you ask.

Linton

The portfolio looks fine to me if your aim is long term growth.  My % of both EM and small companies is higher.  Leave well alone and dont tinker any more than perhaps once a year to rebalance.

As to the suggestion that you replace Dimensional EM with Vanguard FTSE EM:

Over the past 10 years the Dimensional fund returned 99.5% against VFEM's 84.9%.   It has also outperformed it in 4 of the past 5 years.

Also the Dimensional fund can be seen as more diversified in having  13% of its portfolio in its top 10% holdings vs the Vanguard ETF's 21%

Check the evidence before changing anything.

Bostonerimus1

If you go DIY will you be able to keep the DFA funds? They are usually only available with an advisor. But if you like your asset allocation you'll be able to create something similar with Vanguard or any number of other fund families and lower what you pay in fees.

I DIY with a basically 3 fund portfolio of US equity Index, International ex US equity index and a small percentage in an income fund and don't really do any management and get good returns and save a lot of fees.