Dumping IFA portfolio to go DIY

Bostonerimus1

thunderroad88 said:

JG1A said:

There is a Vanguard fund called  FTSE Global All Cap Index Fund and it includes global small caps.  Its charges are 0.23 ocf and Trans. costs about 0.04. Performance since Nov 2016 (inception date) is up over 100% similar performance to your IFA portfolio.

Yes, I’ve been looking at that as it happens.

Thanks everyone, I think I’m starting to go round in circles here….and the more I read here and on various forums and sites like monevator the more fund suggestions I end up looking at and my notes get longer. Back to basics…my original objective was to replace my high cost ifa managed pf with a low cost simplified diy pf which could offer similar returns at a similar, but not higher, level of risk. I’m not knowledgable enough about global markets and economics, nor do I have the inclination, to take on responsibility for managing allocations across a number of funds. Therefore I’m concluding that 100% in an all world tracker fund, either HSBC All World or Vanguard Global All Cap, or possibly 90% in one of those plus 10% in L&G Global100 might work best for me.

That sounds good to me, of course it would as it's quite close to what I do. Having your income sources largely independent of your investments lets you take more risk than most retirees and be sanguine about any change in value. I didn't retire so I could worry about drawdown or my portfolio management and having it simply and cheaply invested just makes life easier. It's nice that I've averaged 9.5% annual return over the 10 years since I retired without doing much of anything, but all I did was continue with my existing portfolio minus the bonds. So put it down to lack of imagination, laziness, being cheap, or just playing the averages because I recognize that I don't know enough to be "clever".

JohnWinder

'I’m not knowledgable enough about global markets and economics, nor do I have the inclination, to take on responsibility for managing allocations across a number of funds. Therefore I’m concluding that 100% in an all world tracker fund, either HSBC All World or Vanguard Global All Cap, or possibly 90% in one of those plus 10% in L&G Global100 might work best for me.'

Your inclination is justification enough for your conclusion which is sensible. But I disagree that you need knowledge of global markets or economics to manage a portfolio like you currently have. 

There'd be several justifications for making changes to your current portfolio in the coming years: one would be because it drifted away from reflecting market cap weighting, if you're a believer in the value of market cap weighting; the other would be because the riskiness of the portfolio drifted too far from your comfort level; another, tracking errors become too bad; and fund costs get too expensive rather than cheaper. I don't think any of those require special knowledge. 

The only reason I can see that knowledge of global markets and economics would be a basis for making changes to your portfolio in future would be if you thought you could reliably predict where the better returns would be coming from. Surely we're past believing that in view of all the evidence from SPIVA and Morningstar's active/passive barometer.

As to 10% in a global 100 biggest companies fund, it wouldn't be a hanging crime but I doubt it's worth the bother or do much harm. I'd find it impossible to imagine it could out-return a global all cap fund by as much 1%/year, or the opposite; were it to do so, your 10% holding would add 0.1%/year to your returns. 0.1% is not to be sneered at, but it's not much especially when it's unlikely to eventuate. And I can't recall any discussion suggesting large cap stocks have better returns than others. Plenty of people believe value stocks are a better prospect than growth stocks, and small cap better than large cap, and small cap value even better, but it's all based on slim evidence and none says large cap is the way to go to my knowledge.

thunderroad88

JohnWinder said:

'I’m not knowledgable enough about global markets and economics, nor do I have the inclination, to take on responsibility for managing allocations across a number of funds. Therefore I’m concluding that 100% in an all world tracker fund, either HSBC All World or Vanguard Global All Cap, or possibly 90% in one of those plus 10% in L&G Global100 might work best for me.'

Your inclination is justification enough for your conclusion which is sensible. But I disagree that you need knowledge of global markets or economics to manage a portfolio like you currently have. 

I think your words are wise John and give food for thought. I think that monitoring EM, Small Caps, Property etc occasionally just to keep track isnt particularly onerous. It’s more if and when there is a downturn (or upturn) in one or more sectors that I may not trust myself to rebalance properly. The last few days have shown that I tend to read and research so much I tie myself in knots. 

The L&G100 was primarily to increase US exposure back to levels nearer to what I currently have and instead of the L&G Global Tech I currently have, I thought I can still boost my holdings in big tech but also across other sectors and geographically too. I realise those 100 will already be in the two trackers so of course it does nothing to decrease the risk or offer the chance to meaningfully boost returns so why muck with that 10% at all?

Anyway, my first objective is to lose IFA cost and reduce other costs so getting our ISAs liquidated and transferred should be the focus. Once in the new platforms I can buy the funds. I am certain of the two core funds I will use, HSBC All World and Vanguard Global All Cap. If all I do is put everything into those for now, I can choose anything additional at my leisure. Progress has definitely been made.

thunderroad88

Ok, conversation with IFA has been had and I’ve now got to open new s&s ISAs to carry on with the transfer of my wife’s and my Nucleus ISAs. For financial protection cover, I’m thinking of how to split our money across different platforms and fund providers. Is it overkill to open two ISAs for my wife with, purely for example, AJ Bell and HL and split her transfer equally to both (150k into each). I’d ideally then like to put £150k into HSBC All World in AJBell isa and £150k into Vanguard Global All Cap in her HL isa. Then repeat for myself with two different platforms like say iWeb and II (and even possibly different funds from different providers). Am I worrying too much about the worst case scenarios by spreading around too many platforms and providers? Is it actually even ok to have multiple s&s isas as long as only £20k in total across all of them is invested per tax year?

Thanks again in advance for any thoughts. Getting there slowly.

Albermarle

 Am I worrying too much about the worst case scenarios by spreading around too many platforms and providers? 

If a platform goes bust ( very unlikely if you stick to mainstream ones like the ones you mention) your money is in the funds not in the platform.
If Vanguard or HSBC go bust then probably we will be in the middle of some Armageddon event and you will not be worrying about your ISA !
Having a couple of platforms/funds is not a bad idea though in case of some IT meltdown, such as affected TSB.

dunstonh

For financial protection cover, I’m thinking of how to split our money across different platforms and fund providers.

What protection are you referring to?   Remember that investment FSCS protection differs from deposits, and the issues that exist with deposits are different to investments.

 Is it overkill to open two ISAs for my wife with, purely for example, AJ Bell and HL and split her transfer equally to both (150k into each). I’d ideally then like to put £150k into HSBC All World in AJBell isa and £150k into Vanguard Global All Cap in her HL isa.

Yes it is.

 Am I worrying too much about the worst case scenarios by spreading around too many platforms and providers?

In a nuclear war are you going to be worried about accessing cash?  If you are unlucky enough to still be alive and not facing a slow death from radiation, starvation or raiders, then bartering will be the currency of the day.

JG1A

thunderroad88 said:

Ok, conversation with IFA has been had and I’ve now got to open new s&s ISAs to carry on with the transfer of my wife’s and my Nucleus ISAs. For financial protection cover, I’m thinking of how to split our money across different platforms and fund providers. Is it overkill to open two ISAs for my wife with, purely for example, AJ Bell and HL and split her transfer equally to both (150k into each). I’d ideally then like to put £150k into HSBC All World in AJBell isa and £150k into Vanguard Global All Cap in her HL isa. Then repeat for myself with two different platforms like say iWeb and II (and even possibly different funds from different providers). Am I worrying too much about the worst case scenarios by spreading around too many platforms and providers? Is it actually even ok to have multiple s&s isas as long as only £20k in total across all of them is invested per tax year?

Thanks again in advance for any thoughts. Getting there slowly.

Now you need to do some research regarding platform charges, for example the £150k into Vanguard Global All Cap in her HL isa, is going to cost £675 pa in platform charges. However if you choose a ETF such as VWRL you would pay about £12 up front to buy it and £45 pa platfom charge. Then buy Vanguard Global All Cap on a platform thats cheaper to hold funds eg IWeb.

Bostonerimus1

As long as you stick with mainstream platforms and funds I would not worry about things going bust. You should prioritize low fees and convenience. Additionally Vanguard is uniquely structured so that the funds are separate legal entities and they own Vanguard…so it’s a bit like a co-operative society. The only way you’ll every lose money is if the value of a fund’s investments goes down.

thunderroad88

JG1A said:

Now you need to do some research regarding platform charges, for example the £150k into Vanguard Global All Cap in her HL isa, is going to cost £675 pa in platform charges. However if you choose a ETF such as VWRL you would pay about £12 up front to buy it and £45 pa platfom charge. Then buy Vanguard Global All Cap on a platform thats cheaper to hold funds eg IWeb.

As I said, the platforms named were purely for example. Believe me, I’m not putting myself through this to pay HL platform fee of 0.45% which would be even more than I was paying before. I take your point about VG ETFs on their own platform though. I think we’re just sticking to funds, and as it seems that spreading beyond two platforms is not necessary, I’m thinking of using II for her isa and IWeb for mine (as I have an account with them already from doing some trading in the past). 

thunderroad88

Just to bookend this thread for future readers, this is what I finally settled on. I am using II for my wife’s isa and iWeb for mine, so very low platform costs and minimal trading fees. Our pf splits are these

HSBC FTSE All World C                   37%
Fidelity Index World P                      32%
HSBC Global Strategy Balanced.    19%
VG LS80                                            6%                      
VG Small Cap Index                          6%

Total fund charges 0.147%

IFA charges £0

Yes this possibly could have been an even simpler pf but it’s pretty set and forget I think. Decided to add in small level of bond representation (about 8%) in the end which can be increased in future as required. Savings on charges will be approx £7k per annum versus previous ifa pf. Thanks again for all contributions which did help my thinking immensely.