Should we be worried about our investment?

LongTermLurker

Purch - last few months haven't been overly good. I hold funds rather than shares and don't juggle them too much, but I've a feeling they'll bounce back. I think many would agree that a 2% loss this year is good going overall.

Pinky - I wouldn't class a 6% pre-tax gain as very good - as you say, you can do better than that (certainly at the moment) in savings. I see where you're coming from with the new fees in 3 months time. I must have lost track of time because when I said "wait while August" I didn't realise it was so close - must be still waiting for summer to set my body clock!

debbie42

purch wrote: »

You must have low expectations then !!!!

My investments overall have lost more than 2%, so I'd be happy if they'd only lost 2%. That's not an "expectation" at all, low or otherwise, it's just a fact based on the past eight months perfomance.

My long term expectations of my portfolio are not that they will lose, or I might as well cash them all in now.

pinky13_2

LongTermLurker wrote: »

quote: "and we pay NOT LESS THAN 1%... (to each of them" - er, do you mean you pay a performance fee? i.e if things go really well you would pay a higher fee?

No. We pay them 1% regardless of whether our shares do really badly or really well.

jem16

pinky13 wrote: »

Thanks for your replies so far;

LongTimeLurker: We have been invested since September 2007. The FA are supposed to be actively advising us on things like when to sell shares or invest in different accounts. They are very lax at replying to emails or answering the phones and last time we were told our email had gone into their spam filter so we had to wait 3 weeks for a reply.

September 2007 is only 9 months ago and it was a bad time to start investing. However you need to view this as long term and forget what it is doing at the moment. If it worries you now then perhaps you have invested above your risk profile or things have not been explained properly. In a 5 year cycle you would expect a bad year, a not-much-happens year and 3 good years. Your bad year has come at the start of this 5 year cycle.

Rebalancing your portfolio would be more than likely yearly so it's probably too soon to see any changes happening. However you should be able to get replies from them.

earlgrey:Yes, they call themselves Financial Advisors. They work with a company who hold our portfolio and we pay not less than 1% annually to both them and the portfolio holding company. We were recommended this system by them as it is easier to view and move money and shares around. Some of the stocks/shares have been transfered to ISA's so we do not pay tax on that but the bulk of our investment is not in ISA's so we also have to pay tax on top of the fees and market losses.

That sounds fairly normal. My IFA has just moved some of my investments into an ISA for this year. He will do that each year.

Purch: As of today's date only 3 of the investments are in the postive. All the rest are making losses. The only other interest we have made is on the cash amount which we would have made interest on if we had invested privately in a savings account anyway. The cash is just invested in a savings account which makes about the same amount as any high street bank savings account.

Fairly similar to my portfolio started in February 2006 but added to in May 2007.

Our investment was low risk according to the FA.

The fact that it has gone down around 1% by the time you allow for fees would suggest it is low risk.

If your £1800 was your initial fee then you have only paid 2% which isn't too bad - average is around 1.8%. Annual management fees of any funds are usually 1.5% of which 0.5% usually goes to the adviser. You seem to be paying 2% overall which is a little higher than normal but not too much. Are you sure you are understanding the fees?

Who is the portfolio holding company that you talk about? Cofunds or Transact perhaps?

Is your FA an Independent Financial Adviser?

To be honest there seems nothing much wrong with this investment other than you not understanding what is happening. That is where a good IFA to explain what is happening is good to have.

pinky13_2

jem16 wrote: »

Who is the portfolio holding company that you talk about? Cofunds or Transact perhaps?

Is your FA an Independent Financial Adviser?

Thanks for your reply. It is Transact. Yes, they are an IFA.

earlgrey_3

Pinky, one of the ironies about getting financial advice is that you need to have a little knowledge to know how good the advice you get is. It's boring but it might be worth getting hold of one of the basic financial advice books published either by Which? or by the Financial Times. I'm told "Which? How to be Your Own Financial Adviser" is good as is "The Financial Times Guide to Investing" - £11 on Amazon.

If all your investments are in shares you can compare how they've done overall, after buying costs, by looking at the FTSE Allshare chart for exactly the same period at http://finance.google.co.uk/finance?cid=9721590. If your shares have done less well than that then you need an explanation of the reason.

If they've put all your investments in UK shares then it sounds, as Purch has pointed out, as if they may have exposed you to more risk than you'd like or expected. Investing in shares should give better returns in the long term but it's unpredictable and there could be some big bumps on the way. It's not normally a good idea to put all your investments into a single stock market though they may have used Investment Trusts to diversify - in which case you'll be paying three layers of fees instead of those two.

If you are paying high fees you need to be 100% certain they're justified. You may need to talk to someone, perhaps another adviser, to give you a view on that. They may exist, but I've never met anyone whose advice is worth 2% p.a. on top of trading costs.

payless

they still took their 2% upfront and ongoing fees on the cash element ! - could you have got better in a normal account for that element

jem16

pinky13 wrote: »

Thanks for your reply. It is Transact. Yes, they are an IFA.

Transact is a wrap platform usually most suited to portfolios with larger values. However it does do the job very well albeit at a higher charge. The same kind of portfolio could be built usinga funds supermarket like Fidelity or Cofunds which are the two commonly used by IFAs.

What you need to clarify are your yearly fees. The natural yearly fees of funds are usually 1.5%. Out of that 1.5% your IFA gets normal trail commission of 0.5% paid to him by the provider.

Now are you being charged 2% altogether or 2% on top of that 1.5%? If it's 2% on top of the normal 1.5% then yes it's more expensive than an IFA using a funds supermarket and taking the natural 0.5% trail commission from the fund provider's annual management charge.

What funds are inside your portfolio?

pinky13_2

jem16 wrote: »

What you need to clarify are your yearly fees. The natural yearly fees of funds are usually 1.5%. Out of that 1.5% your IFA gets normal trail commission of 0.5% paid to him by the provider.

Now are you being charged 2% altogether or 2% on top of that 1.5%? If it's 2% on top of the normal 1.5% then yes it's more expensive than an IFA using a funds supermarket and taking the natural 0.5% trail commission from the fund provider's annual management charge.

What funds are inside your portfolio?

Transact charge for our portfolio is:

0.60 % annual charge on investment +
0.45 % annual charge on cash
so overall annual charge of 1.05%

Our IFA is charging us 1% yearly on our whole portfolio (including cash) so we are paying 1.05% + 1.00 % yearly.

LongTermLurker

pinky13 wrote: »

Transact charge for our portfolio is:

0.60 % annual charge on investment +
0.45 % annual charge on cash
so overall annual charge of 1.05%

Our IFA is charging us 1% yearly on our whole portfolio (including cash) so we are paying 1.05% + 1.00 % yearly.

That's not right: 1.05% of £90k would be £945, but you said you had £40k in cash.

Therefore, cash fee = £180pa and shares fee = £300pa = £480 fee = 0.5333'% of the original £90k.

Then your IFA charges 1% of the £90k, so that is £900.00
£900 + £480 = £1380 = 1.5333'% combined fee.