Bad pension advice on funds?

MiserlyMartin

My IFA advised I do the following funds split after telling him my attitude to risk is medium:

Armetis UK Special Situations 30%
BGI Cautious Index 30%
Newton Income 20%
FP Property Fund 20%

Obviously the FP property fund has dived and I can't switch out. I've transferred in all my old pensions so I have a sizeable fund there all resting on his advice.

Now he is advising a new transfer into these 3 funds:

First state global emerging markets 40%
Invesco perpetual high income 30%
Armetis european growth 30%

Given that I am cautious to risk generally is this good advice? Should he even have advised me to be in the property fund in the first place? My fears are that the emerging markets wil be the next sectors to be hit in the downturn and really I'm not positive about having money in the stockmarket at the moment, quite possibly this could be the start of the mother of all recessions after having it all so good for so long.

I told him at the time of his advice to use property funds that I was of the opinion that property will crash in the next 2 years. He said not to worry because if there was a crash it would not effect commericial property only residential! Look whats happened. Was I misold? It makes we wary of his new advice when he got the property fund so wrong or am I worrying pointlessly?

Can anyone comment/advise please?

purch

after telling him my attitude to risk is medium

:eek:

Given that I am cautious to risk

:eek:


No wonder your poor I.F.A. is confuzzled !!!!!

You appear to be .............. and we certainly are :rolleyes:

MiserlyMartin

Ok lets clarify. I worded that wrong. I always told him I was cautious. But he put me down as 'medium risk' on my intial review which is where I got the medium bit from. I am especially more cautious in todays climate. Surely the latest fund recommendations are classed as high risk anyhow?

dunstonh

My IFA advised I do the following funds split after telling him my attitude to risk is medium:

Armetis UK Special Situations 30%
BGI Cautious Index 30%
Newton Income 20%
FP Property Fund 20%

50% cautious, 20% medium, 30% medium/high. Overall a medium risk spread.

First state global emerging markets 40%
Invesco perpetual high income 30%
Armetis european growth 30%

Given that I am cautious to risk generally is this good advice?

Obivously the one that sticks out there is the 40% into emerging markets. Certainly not consistent with cautious but are you cautious or medium? The other two are just about medium.

Should he even have advised me to be in the property fund in the first place?

16 years or so of double digit returns, then one bad year (2007) and 2008 is expected to end in the positive. Had you been in the stockmarket with that 20% you would have lost more so you do need to put it in perspective.

My fears are that the emerging markets wil be the next sectors to be hit in the downturn

They already have had a downturn with the rest of the worlds stockmarkets.

and really I'm not positive about having money in the stockmarket at the moment

Why? are you using real research or listening to the media?

quite possibly this could be the start of the mother of all recessions after having it all so good for so long.

We had a good run and now we are roughly back to April 2006 prices. So, the fall back has been quite severe. There has been a lot of scaremongering and fears but it is possible that the markets have overreacted (which is normal in both directions) and that things are not as bad as being reported.

I told him at the time of his advice to use property funds that I was of the opinion that property will crash in the next 2 years. He said not to worry because if there was a crash it would not effect commericial property only residential! Look whats happened. Was I misold?

He is correct in that residential and commercial are not linked. A crash in one doesnt impact on the other. The main reason commercial property funds dropped is that the rental yields were no longer attractive and property growth and demand was felt to have topped out.

Unless you expect your adviser to have a crystal ball you cannot complain and a complaint will not be upheld because of a short term drop in value when investing for such a long term.

It makes we wary of his new advice when he got the property fund so wrong or am I worrying pointlessly?

Just today New Star (one of the high profile property funds) has signalled it thinks property is now value and has started buying up property shares. Maybe they are right, maybe they are wrong. However, they are not alone.

The worst thing you can do on a long term investment is try to micromanage it and analyse it to the nth degree. You also need to put it in perspective. The FP property fund dropped 17.79% between best and worst point and is now thought to have more or less bottomed out (or not far from). The FTSE100 dropped 45% at the turn of the decade. Which would you prefer to suffer?

As a very rough guide you can take a typical 5 year period and it will have 3 good years, 1 bad year and 1 nothing year. Nobody know what order they will come in or when they will occur. If you are investing for retirement, then you could be in there anything upto 50 years. So 6-12 month drops arent really a big deal in the scheme of things.

My advice to you is not to tell us your concerns but tell your IFA. Your IFA will build the portfolio around the information they have learned from you. If you are not communicating then the IFA doesnt have a chance of getting it right.

EdInvestor

The reason why investment is supposed to be on a long term ( 5 year minimum ) basis is to allow time for this kind of market volatility.

The main identifying characteristic of the mug punter is that he buys high and sells low.

You might do a lot better to stick with the original funds.Perhaps you would like to ask your IFA if he thinks that's a sensible approach.It's hard for IFAs to make that kind of recommendation when inexperienced investors are screaming about short term losses.

But in fact where you have a diversified portfolio like this, it's usually best to do nothing, but rather wait for the recovery.

MrMicawber_2

Can anyone help me with a question which is whether 4 funds is too few for a largeish portfolio. I would have thought that a bit more diversification would make sense so you are not reliant one fund / manager / company.

After all most funds of funds have many funds making up the overall investment.

Is this an area where it comes down to personal choice how many funds you have?

dunstonh

On 100k I would typically look for 10-13 funds. Although risk profile will dictate the quantity (higher risk funds need greater diversification. i.e. JPM Natural Resources, Premier Pan Euro Property. Both in the same sector. Both high risk but totally different types of investment).

MiserlyMartin

Hi, thanks to Dunston and all for the replies. I finally got an appointment with the IFA. Told him my concerns and current attitudes to risk. Now he is advising this split:

50% First state global emerging
20% Invessco perpetual high income
30% Artemtis european growth

So only 3 funds now. I've looked over my last statements and am quite annoyed that I did a substantial transfer from another 2 old pensions in late 2006 so I really bought into the property fund near the top. This has left me about 20% down.

I am so disillusioned with the stock market currently I don't really know what to do. What do you do when you don't trust the market and your IFA? I feel we are going into dark times, a possible depression and I wish I could take my money out of the pension and put it somewhere safe for 5 years or so.

Those ideas are not based on my media readings, its my own opinion that we have had the mother of all booms and now I think its time for a long overdue correction, so i want to save my pension fund somehow if its at all possible.

Perhaps it isn't?

MiserlyMartin

EdInvestor wrote: »

The reason why investment is supposed to be on a long term ( 5 year minimum ) basis is to allow time for this kind of market volatility.

The main identifying characteristic of the mug punter is that he buys high and sells low.

You might do a lot better to stick with the original funds.Perhaps you would like to ask your IFA if he thinks that's a sensible approach.It's hard for IFAs to make that kind of recommendation when inexperienced investors are screaming about short term losses.

But in fact where you have a diversified portfolio like this, it's usually best to do nothing, but rather wait for the recovery.

I see your point but what I am trying to do is buy low and sell high. So annoyed I didn't get out the of the property fund when i could the signs were there for ages. I also find it hard to respect an IFA who is a property market bull.

purch

Now he is advising this split:

The guy is clearly an idiot, and is playing games with your money !!!

He put you into a Fund spread beyond your risk tolerance, and is now desperately trying to recoup ground by advising a spread that is waaay beyond your risk tolerance.

dunstonh

What do you do when you don't trust the market and your IFA?

Get another IFA.

Those revised choices are high risk. Inv Perp High Income is med/high as is Art european. First state is very high risk.

This guy is a peanut. (had to use a word the board didnt filter )

Those ideas are not based on my media readings, its my own opinion that we have had the mother of all booms and now I think its time for a long overdue correction, so i want to save my pension fund somehow if its at all possible.

Perhaps it isn't?

Yes it is. Trying to time the market is never a good thing. You can have a go at tweaking here and there but in the long run it doesnt really make a lot of difference. That said, you are cautious and there things may not be that bad right now on the cautious front. Yields on fixed interest funds havent been as good as they are now for ages. Whilst the unit price has still be dropping a little on many, the yield has been making up for it. You should be heavy in fixed interest funds given your risk profile. There is also an argument for moving back into commercial property bricks and mortar funds. They are still on slight declines at the moment but the big drops caused by outflows have ceased. Long term, they could look attractive although may still suffer a little in the short term. We are probably some months away from the optimum time but that will depend on many external factors that no-one can tell.

And of course there are cash funds you can utilise which would allow you to phase your investment back into the markets over the coming year or two (or basically when its felt the time is right. Again trying to time which may end up being wrong but at least it fits in with your risk profile).

Sack the adviser. Its as simple as that. Then its a case of deciding whether you want to give another one a go or do it yourself