Investing 300k GBP in active GIA

InvestSquirrel

Hi there,

I'm new to the forum but I was reading with interest,  some of the feedback on fees that everyone is paying for their investment ( DIY or managed).

As per the title, I have about 300k GBP lump sum that I'm looking at investing in a GIA account with active management. I'm looking at tax efficient ways of getting this invested and have reached out to my bank and 3-4 independent financial advisors. I'm happy for the money to be invested primarily in equities and I have a 10-15 year horizon and I have cash savings separate to this as a rainy day fund. My objective is for this money to be invested and transferred into an ISA in a way which reduces my overall tax implication whilst giving me exposure to equity growth. My long term horizon potentially gives me room to time my exit in the future. I understand pensions are a good tool to reduce my tax implications whilst giving my exposure to equities , but I'll be maxing out my pension contributions separate to this and hence is not an option available to me. 

From what I can see the fees are in the range of 2-3% but that includes investment cost and transaction costs. This obviously feels high but I don't have the time for actively managing my funds and most of the advice I've received includes some sort of bespoke active discretionary managed account. What are some of you doing with your investments? ( especially those who are not DIYing this). I potentially have the skills to invest on my own but I don't have the time to actively manage it and hence I don't mind paying someone( albeit a reasonable amount) for this to be managed for me. Happy to hear your thoughts and views! 

El_Torro

It seems you’ve made up your mind that you want advice, which is fine. Make sure you use an Independent Financial Advisor, not a Financial Advisor.

With £300k to invest you should be looking at paying about 1% a year including all fees. 2-3% is way too high and is easily beaten. 

tacpot12

I appreciate your dilema. I manage my own retirement pension in as much as I selected a range of active and passive funds to invest in, but did so with the clear intention that they would not need day-to-day management. 

My feeling is that there are funds out there that would allow you to invest and would not need anything other than an annual review (that you can do), and for the most part, you are better off not touching the investments if they are performing in line with the market. Some IFAs joke that their best clients are the dead ones, as the don't interfere with their investments. 

masonic

Is the hope that actively managing the investments will achieve something over and above holding the same investments for the long term?

dunstonh

From what I can see the fees are in the range of 2-3% but that includes investment cost and transaction costs.

For £300k, ongoing should be in the 1.xx% ballpark (lower end of it as well).   You may even get to 0.8x% range with a bit of shopping around.

 and most of the advice I've received includes some sort of bespoke active discretionary managed account.

Discretionary fund management does involve their cost but it can range from 0.09% to 0.50%.   Obviously, the lower end is better.   Plus, many DFMs use institutional share classes which knocks about 0.04% off the retail share class.

In a GIA, you don't want a DFM.  Or at least, you don't want a DFM where the adviser cannot control the disposals.

InvestSquirrel

El_Torro said:

It seems you’ve made up your mind that you want advice, which is fine. Make sure you use an Independent Financial Advisor, not a Financial Advisor.

With £300k to invest you should be looking at paying about 1% a year including all fees. 2-3% is way too high and is easily beaten. 

Thanks for you message. I'm open to suggestions and nothing is set in stone. IFA as the first port of call felt like the most logical option.

And for the fees I have 3 quotes so far and all of them  have a mix of one time fee ranging between 2.3% to 2.75% and ongoing fees ranging from 0.9% to 1.5%. I went through unbiased and comparewealthmanagers.com. Happy to get suggestions on ideas for getting closer to 1% for all in fees because I haven't found those options yet. I'll keep looking as you've suggested. Thanks! 

InvestSquirrel

masonic said:

Is the hope that actively managing the investments will achieve something over and above holding the same investments for the long term?

That's a good point. I think it's more a case of rebalancing a portfolio periodically to ensure sufficient and timely exposure to thematic investment opportunities( like AI right now or biotech around COVID time). Holding the same investments long term could work as well but my thought process is that if I'm going to pay the kind of fees I'm being quoted, I'd rather it be actively managed. Hope that makes sense. But I completely get your point that passive management could result in similar yield ,perhaps even better than active management. 

InvestSquirrel

dunstonh said:

From what I can see the fees are in the range of 2-3% but that includes investment cost and transaction costs.

For £300k, ongoing should be in the 1.xx% ballpark (lower end of it as well).   You may even get to 0.8x% range with a bit of shopping around.

 and most of the advice I've received includes some sort of bespoke active discretionary managed account.

Discretionary fund management does involve their cost but it can range from 0.09% to 0.50%.   Obviously, the lower end is better.   Plus, many DFMs use institutional share classes which knocks about 0.04% off the retail share class.

In a GIA, you don't want a DFM.  Or at least, you don't want a DFM where the adviser cannot control the disposals.

Yeah, I was hoping that was the case as well but in my limited research so far I haven't been able to get anywhere close to those kind of costs. Do you have any suggestions or recommendations of IFA or even DFM who charge fees around the ballpark suggested here?

And you're right the quotes so far I have are for indeed for bespoke funds which are discretionarily managed and the portfolio manager controls acquisition or disposal of shares and there's a periodic yearly review to assess if changes ned to be made ( or at least that's the proposal). I assumed it'll be under a GIA and every year funds would be shifted to an ISA( upto 20k) to continue making it tax efficient, but I'm not sure about the mechanics of whether that sits under a GIA or just as a separate managed account. But either way your point is taken. Thanks! 

Bostonerimus1

Put it in a low cost global equity fund and move 20k each year into an ISA. No need for active management.

Bostonerimus1

InvestSquirrel said:

masonic said:

Is the hope that actively managing the investments will achieve something over and above holding the same investments for the long term?

That's a good point. I think it's more a case of rebalancing a portfolio periodically to ensure sufficient and timely exposure to thematic investment opportunities( like AI right now or biotech around COVID time). Holding the same investments long term could work as well but my thought process is that if I'm going to pay the kind of fees I'm being quoted, I'd rather it be actively managed. Hope that makes sense. But I completely get your point that passive management could result in similar yield ,perhaps even better than active management. 

Sorry, but to me that makes very little sense. You very probably won't outperform a simple indexing strategy, especially after you've paid those fees you are being quoted.

Alexland

For a beginner it's usually best to use a mix of passive index funds or simply a multi asset fund. Once you know enough to fully appreciate active thematic investing you will probably be very glad that you didn't take that path.
There's no need to pay high fees for others to gamble with your money. Spend the time learning about tax efficient wrappers, low cost accounts and passive investing. Once you have mastered that then you might want to do some naughty active investing with some of your money to prove to yourself that you (or others) are unlikely to outperform over the long term.