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What are your annual costs?
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From looking at the investments they picked for her, it looks almost like the goal was to make the portfolio (and by definitaion the advisor) "look" clever and complicated, possibly in order to justify the fees. But then I can be cynical like this, but I can't help feeling that the results the have delivered speak for themselves.The FCA do not allow that as a reason. The portfolio has to be structured.
One of the biggest issues with discretionary portfolios is liquidity and constraints put on the portfolio by the fund houses. Lets say the portfolio range has £4bn AUM. Fund houses will be nervous of having large inflows and outflows. So, they may place a limit on the amount that can be invested. So, the portfolio manager has to go to another fund house to get the rest (and possibly multiple fund houses). This increases the fund count.
Whereas a DIY investor is small fry and doesn't have to worry about a fund house capping them.
Also, there are many different ways to build a portfolio. A yielding portfolio, for example, will often hold funds that can even out the yield over months even when funds themselves may pay quarterly, half yearly or yearly. Or a portfolio may be built with an industry focus or a regional focus. Whatever the structure is, documentation supporting it will exist. The quality and availability of that documentation would have improved significantly over the last year (and still ongoing) as the Consumer Duty requirements are being met and then improved upon.
There are portfolios out there that would appear to have too many funds on face value. I know one that has over 40. However, its target market is multi-million pound investors. Not £100k investors. So, it needs the larger range. However, it doesn't stop smaller investors going in there. It just looks a bit daft if they do. In this day and age of no initial or exit charges, the number of funds is a non-issue. The structure and process is the key thing.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.5 -
dunstonh said:From looking at the investments they picked for her, it looks almost like the goal was to make the portfolio (and by definitaion the advisor) "look" clever and complicated, possibly in order to justify the fees. But then I can be cynical like this, but I can't help feeling that the results the have delivered speak for themselves.The FCA do not allow that as a reason. The portfolio has to be structured.
One of the biggest issues with discretionary portfolios is liquidity and constraints put on the portfolio by the fund houses. Lets say the portfolio range has £4bn AUM. Fund houses will be nervous of having large inflows and outflows. So, they may place a limit on the amount that can be invested. So, the portfolio manager has to go to another fund house to get the rest (and possibly multiple fund houses). This increases the fund count.
Whereas a DIY investor is small fry and doesn't have to worry about a fund house capping them.
Also, there are many different ways to build a portfolio. A yielding portfolio, for example, will often hold funds that can even out the yield over months even when funds themselves may pay quarterly, half yearly or yearly. Or a portfolio may be built with an industry focus or a regional focus. Whatever the structure is, documentation supporting it will exist. The quality and availability of that documentation would have improved significantly over the last year (and still ongoing) as the Consumer Duty requirements are being met and then improved upon.
There are portfolios out there that would appear to have too many funds on face value. I know one that has over 40. However, its target market is multi-million pound investors. Not £100k investors. So, it needs the larger range. However, it doesn't stop smaller investors going in there. It just looks a bit daft if they do. In this day and age of no initial or exit charges, the number of funds is a non-issue. The structure and process is the key thing.
Good to know that documentation will exist and should have got better. This is another thing she can ask to see.
I've seen her portfolio from the info she sent me over which consists of 22 funds in total with no obvious structure to my admittedly very amateur mind. What I can't understand however is that most of the funds seem to have perfomed well in their own right. I have no idea how a large amount of decent returns has ended up giving such a low overall performance. Maybe I would need to plug everything into Trustnet with the correct weightings or something to find out just out of morbid curiosity!• The rich buy assets.
• The poor only have expenses.
• The middle class buy liabilities they think are assets.
Robert T. Kiyosaki0 -
Thanks dunstonh for the great reply. She does have the option for an annual review meeting with them, so I have already provided a few questions that she could ask during the meeting. This firm certainly won't have billions under management, and from what I understand, this portfolio has been tailored to her (or at least they claim it is), so I would imagine that the inflows / outflows from a fund perspective would be relatively insignificant.If its an IFA, then they may have an advisory portfolio and typically those do not have caps or issues. However, if they are using a discretionary portfolio then its the the total assets under management across any IFA firm using that discretionary portfolio provider. In some cases, they may be "off the shelf" discretionary portfolios or they may be an adviser firm's own portfolio but use the software and governance of the discretionary manager. The fund house measures assets under management at the discretionary manager level. e.g. if 500 IFAs have in-house portfolios using that discretionary manager and 300 of those portfolios have the same investment fund, the fund house would treat those 300 IFAs as one entity under that discretionary manager. i.e. its not the IFA but the discretionary manager that matters.
The portfolio you link to appears to be discretionary as there are institutional share classes in there. That means there will be structure and process and documentation on how it is built.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
phlebas192 said:AlanP_2 said:So a total annual cost of 0.13%
That is very low if it includes the OCF of the ITs as well as platform and personal trading costs.No, it doesn't include the OCF which I really don't pay any attention to with ITs. That measure makes a lot of sense when considering index trackers or comparing otherwise essentially equal funds but I don't consider it a useful measure for ITs. ITs are companies and should be treated as such - operating costs are a factor in their performance but not the main driver.
I use a mixture of ITs, an active fund, index funds and a RL managed portfolio across our accounts. If I wanted to come up with the fees as a percentage both fund, platform and any trading fees would need to be included to get to the total cost.
Adding to that, does anyone treat Stamp Duty as a cost they factor into their overall calculation when that has been charged?1 -
My workplace pension default fund charges 0.64% and my Sipp charges are about the same. As another poster has said, these are probably higher than what some others pay but it is what it is. The fund in my Sipp I am happy with along with the provider.
my workplace default is the lowest charging fund available to us so cannot do anything about that.0 -
AlanP_2 said:Fair enough, but you can't make a valid comparison against the SJP 1.78% unless you do surely?
I use a mixture of ITs, an active fund, index funds and a RL managed portfolio across our accounts. If I wanted to come up with the fees as a percentage both fund, platform and any trading fees would need to be included to get to the total cost.
Adding to that, does anyone treat Stamp Duty as a cost they factor into their overall calculation when that has been charged?I presume that SJP wouldn't even consider ITs so in some ways it is a valid comparison - yes, ITs do have costs but so does any business. We don't see people saying that BP has operating costs of 25% (or whatever they actually are) do we? I can see arguments for including costs for ITs that hold similar assets to general funds although the IT costs are not directly comparable since the rules say they have to include borrowing costs (which funds cannot even do) and such ITs can typically be bought at a discount which compensates for the costs. But where you have ITs that invest in private equity, infrastructure, etc the costs are simply the inevitable fact of doing business just like with BP etc.Yes, I do include stamp duty (and PTM levy) in my transaction costs.0 -
phlebas192 said:I presume that SJP wouldn't even consider ITs so in some ways it is a valid comparison - yes, ITs do have costs but so does any business.
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We have 2 x diy ISAs split between iWeb and II, mostly passive global trackers and mmfsplatform and trading charges = 0.0003%
fund charges = 0.18%
Compares very favourably vs the charges we were paying with our IFA which were about 1.4%…we’re saving about £7k a year and our pf is performing significantly better than the old IFA one0 -
I'm in the US so my expenses aren't a particularly good guide, but my total costs are 0.06%. That's for the fund fees. I don't pay any transaction costs and I DIY.And so we beat on, boats against the current, borne back ceaselessly into the past.0
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Compares very favourably vs the charges we were paying with our IFA which were about 1.4%…we’re saving about £7k a year and our pf is performing significantly better than the old IFA oneHow do you know its performing significantly better unless you have the two portfolios still running side by side?
I once had someone boast that they moved their pension to a better performing one and how the old one was really bad. It turned out that they had a FTSE tracker in both the old one and the new one and the only difference was one went through a crash and the other went through the recovery.That's for the fund fees. I don't pay any transaction costs and I DIY.Transaction costs are an implicit synthetic charge which came about in the EU directive MiFIDII. The US is not subject to EU regulations and doesn't suffer its extreme over regulation and daft rules. Transaction costs can add up to 0.40% to the charges disclosure platforms and advisers have to give yet the investor does not actually pay those charges explicitly and they are just a synthetic estimate that can be calculated using different methods with each method giving a different outcome.
Take the index tracker iShares Pacific ex Japan Equity Index (UK). An OCF of 0.12% which is ballpark for a tracker but has TC of 0.09% which means anyone with that fund gets a cost disclosure saying it is 0.21%
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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