Vanguard 2030 Vs IFA?

dunstonh

AlanP_2 said:

@dunstonh - quick question if you don't mind:


I've seen you refer to MPS a few times and wondered what it meant please?


Thanks

MPS = model portfolio service.      

You are aware of the OEICs like VLS or HSBC GS, which we see often mentioned.   i.e. a fund of funds where the investor holds one fund but underlying there are 10-18 funds.   Typically, we would refer to those as fund of funds or just multi-asset funds.  However, it is discretionary managed but within a single fund.  An MPS within a fund.

You can get MPS using platform software. In this case, the investor holds the underlying funds. So, if you had VLS60 in the MPS form and logged on to see your valuation, you would see the 17 or so funds, each having its own unit count and price. When the discretionary manager (DFM) wants to rebalance or adjust, they log on to a range of platforms, key in the changes, and apply them.

Both the HSBC GS range and the VLS range are available in MPS and OEIC form.    The main differences are less frequent reblancing.  Effectively, the OEIC form is rebalanced daily through inflows and outflows.   The MPS versions typically rebalance on a schedule (quarterly is frequent but my preferred one uses 10% drift from target).  Rebalancing keeps you within a risk range, but it also reduces the returns.  So, the less frequently you rebalance, the greater the return will be over the long term.    However, failing to rebalance will soon see the portfolio drift too far and go outside the comfort range of the individual.     So, ideally, yearly or 18 months (in many periods, it's around 18 months when you get  that 10% drift)

Many MPS portfolios also use the institutional share class, which can reduce the price a bit. Vanguard institutional share classes are often around 0.05% cheaper than their clean share class. Ironically, Vanguard does not use institutional share classes in its MPS, but my preferred one has 3 Vanguard institutional funds. 

Vanguard do multiple MPS versions.   VLS with home bias, VLS without home bias.  Some lifestyle versions and some have a bit of active investing.  I believe there is an ESG version as well.

DIY investors cannot get the MPS versions as the IFA must carry out due diligence and is responsible for any investment changes.  The IFA is classified as the agent of the client.      Basically, it is a way for the fund houses to give IFAs something.  if a client wants to end the IFA service, they must come off the MPS.  So, the IFA can say that it's fine that you want to end, but you need to move to a different portfolio/fund(a) and if you select the one for DIY investors, its return has been lower (and lower by more than our charge).  It may give some a cause to change their mind.

Ibrahim5

Sounds like a good reason to make sure that an IFA never gets near your investments.

AlanP_2

Thanks @dunstonh for the clear explanation 👍

wjr4

Ibrahim5 said:

Sounds like a good reason to make sure that an IFA never gets near your investments.

Have you noticed that everyone ignores you now? 

cfw1994

hodd said:

^^ Thanks, Dunstonh.

In this adviser’s defence, he did briefly state there was a difference between an IFA and a Quilter adviser. It’s my error to use the term IFA.

I think the conclusion of the above is it pays to shop around. For those fees, I’d be after an IFA.

It’s also a small thing, but in life in general we may get judged by minor comments. He had a lot to get through, and he chose to point out the £24175 (with advice) Vs £17168 (without advice) section in his brochure without any sort of explanation which was disappointing. 

Disappointing?
You are master of the understatement!
It is nothing more than a giant sales ploy & a massive red flag for you to avoid this FA like the plague 👀

You finished your initial post with:

The question

The only option I can see for the IFA would be to re-invest the current SIPP elsewhere. Am I missing something here? I can’t see what the IFA can do for me.

Yes, any FA/IFA will want control of your funds - unless you find a rare beast who will give *advice* for a payment, they will take their share of your money, typically as a % on investment and an annual % to continue.

My feeling here, as just a person on a forum, is for you to continue as you are.  You sound pretty capable.   Maybe investigate tax advice for ex-pats on other forums?

You could seek an IFA, and might just get lucky with them making you a little more….but you should probably focus on speaking with your accountant to discuss tax strategies to fund your future lifestyle, given a pot that you can manage.

It always feels to me that many IFAs are heading towards retirement: not sure if there are some stats to back that up,  but investing is certainly becoming something of a commodity through the likes of Vanguard and much more widespread information than existed 20 or 30 years ago.  

When they do retire, the sad fact is that they will invariably pass you on to a company, usually not independent, to help ‘feather their nest’.  As the Fred Schwed book puts it: “where are the customer’s yachts?” 👀

🤷‍♂️

Good luck!

Ibrahim5

wjr4 said:

Ibrahim5 said:

Sounds like a good reason to make sure that an IFA never gets near your investments.

Have you noticed that everyone ignores you now? 

They don't. If an IFA invests in a fund that you can't transfer out to another platform, it's just another indication that IFAs only do things that's beneficial to them, not the customer. They are locking you in with an exit fee, just like SJP. You can leave the IFA but you will lose out because the IFA has designed it that way. Nice.

zagfles

dunstonh said:

AlanP_2 said:

@dunstonh - quick question if you don't mind:


I've seen you refer to MPS a few times and wondered what it meant please?


Thanks

MPS = model portfolio service.      

You are aware of the OEICs like VLS or HSBC GS, which we see often mentioned.   i.e. a fund of funds where the investor holds one fund but underlying there are 10-18 funds.   Typically, we would refer to those as fund of funds or just multi-asset funds.  However, it is discretionary managed but within a single fund.  An MPS within a fund.

You can get MPS using platform software. In this case, the investor holds the underlying funds. So, if you had VLS60 in the MPS form and logged on to see your valuation, you would see the 17 or so funds, each having its own unit count and price. When the discretionary manager (DFM) wants to rebalance or adjust, they log on to a range of platforms, key in the changes, and apply them.

Both the HSBC GS range and the VLS range are available in MPS and OEIC form.    The main differences are less frequent reblancing.  Effectively, the OEIC form is rebalanced daily through inflows and outflows.   The MPS versions typically rebalance on a schedule (quarterly is frequent but my preferred one uses 10% drift from target).  Rebalancing keeps you within a risk range, but it also reduces the returns.  So, the less frequently you rebalance, the greater the return will be over the long term.    However, failing to rebalance will soon see the portfolio drift too far and go outside the comfort range of the individual.     So, ideally, yearly or 18 months (in many periods, it's around 18 months when you get  that 10% drift)

I see. So basically the MPS increases risk by effectively turning VLS 60 etc into something like VLS 65 prior to rebalancing, assuming equities outperform bonds. You may as well argue VLS 80 outperforms VLS 60 because that takes more risk. The supposed better performance just comes from taking more risk. At least with VLS60 or VLS80  the punter knows what the equity/bond ratio is going to be.

Many MPS portfolios also use the institutional share class, which can reduce the price a bit. Vanguard institutional share classes are often around 0.05% cheaper than their clean share class. Ironically, Vanguard does not use institutional share classes in its MPS, but my preferred one has 3 Vanguard institutional funds. 

Vanguard do multiple MPS versions.   VLS with home bias, VLS without home bias.  Some lifestyle versions and some have a bit of active investing.  I believe there is an ESG version as well.

DIY investors cannot get the MPS versions as the IFA must carry out due diligence and is responsible for any investment changes.  The IFA is classified as the agent of the client.      Basically, it is a way for the fund houses to give IFAs something.  if a client wants to end the IFA service, they must come off the MPS.  So, the IFA can say that it's fine that you want to end, but you need to move to a different portfolio/fund(a) and if you select the one for DIY investors, its return has been lower (and lower by more than our charge).  It may give some a cause to change their mind.

And they really buy that  If they want VLS65 they could just buy a combination of VLS 60 and VLS 80. Or they could just buy the underlying funds and rebalance themselves every 18 months. Or leave it 2 or 3 years, that'll get even better performance, right 

hodd

^ Thanks, cfw. 🙂 An understatement perhaps, but I didn’t want to sound too negative. We shouldn’t be driven by personalities, but I didn’t feel I was any the wiser after an hour.

I must admit, having now looked at example IFA fees online, they’d be a substantial part of my pot. I saw an example of £5k a year for my £300k pot. That’s less than 2%, but it seems a lot to me.

Now it might be worth paying that if I ended up better off, but I’m struggling to understand what an IFA can do for me, and that was my initial question. 

Noted - your comment on speaking to my accountant. They’re much more clued in to how a contractor/limited company director works. That’s now on my list. Thanks 🙂

Albermarle

I must admit, having now looked at example IFA fees online, they’d be a substantial part of my pot. I saw an example of £5k a year for my £300k pot. That’s less than 2%, but it seems a lot to me.

Just to be clear, this ongoing charge of £5K probably includes 3 or 4 items. eg, platform cost, investment fund costs, advisor costs etc . Although there would be an initial charge as well, which could also be around £5K. 

When you DIY there are also ongoing charges ( but no initial charge)  There will at least be a platform cost and an investment fund cost. For £300K if you very focused on charges, you could get this down below £1K, but more typically it would be say £1.5K . If you were on the most well known investment platform and invested in one of their managed funds, you would be paying more than £5K.

DT2001

hodd said:

DT2001 said:

If you are planning to retire to Asia what are the tax implications. Maybe you need to talk to your accountant first especially if you will continue to work part time when overseas/non resident? Are you better leaving funds in the company or putting into your pension?

I’m a contractor and have no employees. It suits me to work through a limited company as the taxes/NI are lower than the alternative. Isn’t one of the few advantages left of a limited company the fact it can be used to pay into a pension and save on corporation tax?

I don’t usually keep much in my limited company bank account. I pay myself a low salary and withdraw the expenses that I can. It’s costly in accounting fees to have a limited company, and I’ll be happy to close it when I retire. 

But it sounds like you’re suggesting keeping money in the business as an alternative to putting it into a pension. Surely the money won’t grow in a business account? Could you expand on this, please?

I have a friend who has quite a large reserve as he takes up to the higher tax threshold but you’ve just explained that you hold little in the account. Will you continue to run the company when in Asia?
I was suggesting asking your accountant what happens when you move to Asia - just run your plans past him/her as they may have some suggestions.
My OH has an accountant and I make sure he knows what we are planning so he considers our overall situation when giving tax advice.