Worth using a Discretionary Fund Manager?

truescot

Looking for a bit of advice as a total newbie to investment other than simple savings accounts. Recently got a bit of inheritance so, after putting some in easy access savings, looking to put 40k elsewhere. Currently in 2 Cash ISAs (this years allowance, one mine, one my wife's), but during a free pension webinar and follow up call through my employer (NHS), I had an appointment with "My Wealth at Work" yesterday. Very nice and helpful guy who has suggested I put the 40k in 2 stocks and shares ISA funds. I would describe myself as very cautious just now, but still looking for the best potential growth that I am comfortable with, so would like to CONSIDER this option.

My question is whether this is just as easy to do myself, and avoid the 2%(+VAT) set up fee and 1.5%(+VAT?) ongoing management fee, yearly meetings etc. He described them as discretionary fund managers and explained what that means. Does come with the perk of ongoing free financial advice, but not sure how much I would sue that.

Are there significant advantages of paying a DFM when simply wanting 2 ISAs to grow?

Sorry if this is a really basic question. Be gentle...

dunstonh

Worth using a Discretionary Fund Manager?

Depends on what you mean by that as there are effectively three levels of DFMs

a)  Full DFM service
b) DFM MPS
c) DFM within a multi-asset fund.

Full DFM is expensive and often bespoke.   You have access to the DFM.  In my opinion, its a waste of money as rarely do they make up for their additional cost and only really liked by the type that likes bragging down the pub.  

DFM MPS has some very attractive options and some damn expensive ones.  For example, IFAs can use Vanguard's MPS which comes in a version without home bias and with home bias.     HSBC also offers its range in MPS form.   And the popular Timeline Tracker MPS range which undercuts both of those in price and has outperformed them.    However, there are some very expensive fully active MPS as well.  I am not keen on those.

Many here will recognise DFM within a multi-asset fund.  Vanguard Lifestrategy, AJ Bells range, or HSBC GS Balanced are effectively DFM offerings within an OEIC.   Simple options that can do the job.  Returns tend to be a little lower than the equivalent MPS but there is no need for an adviser firm for ongoing servicing with the multi-asset fund in the same way there is with the MPS.

 I had an appointment with "My Wealth at Work" yesterday. Very nice and helpful guy who has suggested I put the 40k in 2 stocks and shares ISA funds.

Generally, it is recommended that you either use an IFA or you DIY.  Not use an FA (sales agent of their employer/company).   W@W are FAs.  

According to their website, they use an in-house MPS.   On their website they claim it is the same as an IFA but its not. An IFA can chose the MPS to use from the marketplace.   They only have their own branded one.

My question is whether this is just as easy to do myself, and avoid the 2%(+VAT) set up fee and 1.5%(+VAT?)

You cannot access an MPS without an adviser.  A small number of DFMs offer a full DFM service without an adviser but don't go there.

There should be no VAT on advice or DFMs.  There have been multiple threads saying W@W are charging VAT but they are wrong to do so.   

 He described them as discretionary fund managers and explained what that means. Does come with the perk of ongoing free financial advice, but not sure how much I would sue that.

Typical sales rep spin.  Financial advice is not free.  They bundle the cost of providing it into the product/DFM charges.     You say they are charging 1.5% plus VAT.  So, that is 1.8%.      I am just on a tea break from doing a top up for a client who is on a DFM MPS.  The charges are: Platform 0.15%, DFM (MPS version) 0.09% and portfolio 0.08%, IFA 0.5% = 0.82% total.   No VAT because VAT doesn't apply and no initial charges as its an ongoing servicing client.    So, for 1.8% you say they give you  "free advice" but you can shop around for an IFA and get the whole package much cheaper.   

Also, in reality, £40k isn't worth having ongoing servicing for.  You can't get the MPS, but you could get the Multi-asset fund version.  Either DIY or via an IFA. 

I would wager that by the end of this thread, you will decide to DIY and it will be a multi-asset fund that will be most talked about.

LHW99

If you have already opened 2 x £20k ISAs this financial year, you can't open any sort until after April 2025

eskbanker

LHW99 said:

If you have already opened 2 x £20k ISAs this financial year, you can't open any sort until after April 2025

I think OP is effectively suggesting transferring the £40K from cash ISAs into S&S ISAs, which would be fine.

Alexland

Wealth at Work should be treated with caution as they are basically sales people masquerading as an employee benefit so you might think you are getting a perk and feel flattered you are considered wealthy but it's just something that would not sell very well on it's own merits.

I suspect they give employers some form of payment for making employees available to charge high fees.

As per dunstonh's comments above you would probably find holding a multi-asset fund on a DIY platform would be similar at much lower cost.

However if you are 'very cautious' you might find the asset mix that would be suitable would be similar return to cash savings rates anyway.

You should to be willing to accept volatility and have a long-term outlook to make investments.

Learning more tends to help people understand and accept risks.

Eyeful

1. When it comes to money "nothing is free" someone has to pay & businesses make sure its not going to be them.
With the "free stuff" some customers just have not figured how they are being charged for it. 

2. With money there is always risk, its just that the type and size of the risk changes.

3. When it comes to financial advisers there are basically just two types:-
(a) Independent Financial Advisors (IFA) that can cover the whole of the market.
     If you saw one, I am sure they would have stated clearly that they are an IFA.
(b) Financial Advisors. These go by a number of different fancy names. 
The key point is that they can only advise you on the products their company has to offer.
This might mean offering you the worst and costly products on the market. Off course they would not tell you this. Think of them as sales persons.

4. Yes you can easily do your own investing. I suggest you first watch this video:-  https://www.kroijer.com/

5. If you want a buy and forget approach, I suggest buying a simply low cost passive Global Multi Asset Index Fund or ETF.
    Read this article:-   https://monevator.com/passive-fund-of-funds-the-rivals/

6. Fees and Charges are important, do not let anyone tell you different. They all come out of your pocket. 

7. This may be of interest to you:-  https://monevator.com/find-the-best-online-broker/

Alexland

Eyeful said:

5. If you want a buy and forget approach, I suggest buying a simply low cost passive Global Multi Asset Index Fund or ETF.
    Read this article:-   https://monevator.com/passive-fund-of-funds-the-rivals/

I'm unsure a 100% equities fund/etf would be suitable for someone who describers themselves as 'very cautious' as such an investment has downside potential of around 50% in bad market crashes and there is the risk they might sell and crystalise a loss.

I think their next step should be learning more and reflecting on how they would feel seeing a £20k paper loss even if it was left alone to eventually recover however many years that might take.

On £40k could anyone really 'forget' and resist the urge to peek at it's valuation when they hear about a stock market crash? Maybe if it was a workplace pension that they hadn't had much involvement in specifying but someone on an MSE forum who had personally setup the account?

A multi asset fund with a mix of equities and bonds would likely be more suitable and may even offer higher returns in the next few years. Or they may decide they prefer to stick with cash savings as rates are above inflation for now.

It's also worth the OP thinking about how/when the money is likely to be spent as that might influence what level of risk they are willing to take. For example if this is going to be an emergency fund then that would favour cash, etc.

truescot

eskbanker said:

LHW99 said:

If you have already opened 2 x £20k ISAs this financial year, you can't open any sort until after April 2025

I think OP is effectively suggesting transferring the £40K from cash ISAs into S&S ISAs, which would be fine.

Yes I should have clarified I would be transferring my existing ISAs into the new funds IF I went down that route,

Thanks for the comments so far. From what I have alrady gathered, going with Wealth at Work is not necessary in my siutuation. I appreciate realise that keeping it in cash ISA for now may be just as good, although I have no intention of cashing in for at least 5-10 years and am definitely willing to learn and already getting a pretty good grasp on things.

If I do go DIY for a multi-asset fund, what are the best online platforms to start with in my position?

ChilliBob

For a cheap and no frills platform I'd say iweb might be good - £100 to open but nothing extra per year. Dealing costs are £5. So whilst year one cost may seem steep when averaged out over subsequent years it's very cost effective.

I'd say the time horizon is interesting 5-10 years.. At the 5 year end you'd get mixed views as to investing in equities, for example, of sticking to cash. At the 10 year end more people would advocate equities over cash. Obviously it depends on risk profiles, situation eg etc so very general thought really.

Essentially ask yourself could I do without this cash for 5 years or 10+ years?

I the 5 year horizon you'd hope to have more than you started with, but it's not certain, in the 10 year horizon, again not certain but considerably more likely. This assumes your investment is into something fairly standard like a global index fund, not say a handful of stocks of one country or something. 

eskbanker

ChilliBob said:

For a cheap and no frills platform I'd say iweb might be good - £100 to open but nothing extra per year. Dealing costs are £5. So whilst year one cost may seem steep when averaged out over subsequent years it's very cost effective.

No opening charges for quite a while now:

Open a new account with IWeb between 1 September 2023 and 31 December 2024 and you’ll pay no account opening charge, that’s a saving of £100. Offer terms apply

https://www.iweb-sharedealing.co.uk/

Beddie

"I would describe myself as very cautious just now"

That probably means you are not really suitable for stock market investments. But if you would like to dabble, maybe move £5/10k into an S&S ISA yourself. I wouldn't use that adviser company personally. Some would, as they value the support, but if you can go it alone it'll be much cheaper.

As mentioned above, iweb is cheap and part of Lloyds Bank, so a reliable choice.

Something like HSBC Global strategy might be suitable, as you can choose differing risk levels:

https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/

You can hold these funds in iweb.