Comments on IFA Fund Selection Please

Liz_the_Whizz

Hi Guys/Gals,

My DH is transferring his pension and we met with an IFA (pension specialist) last night to go through his recommendations.

Current pensions are with Equitable Life and Standard Life (total fund value c. £100k).

IFA suggests transferring both into Scottish Widows Retirement Account. On the basis of questionnaires completed on attitude to risk etc, IFA has recommended the following:

M&G Gilt & Fixed Int 10%
Jupiter Corporate Bond 5%
Invesco Perpetual Corp Bond 10%
Jupiter Income 5%
Invesco Perpetual Euro High Yield Bond 10%
Neptune Global Alpha 5%
Midas Income & Growth 15%
L&G UK 100 Index Tracker 7.5%
SW Cash 2.5%
Neptune European Opps 10%
L&G Property 5%
Jupiter Ecology 5%

The sector breakdown is roughly:

UK Equity 25%
Overseas Equity 20%
Bonds 35%
Gilts 10%
Property 5%
Cash 2.5%
Other 2.5%

IFA has left the report with us and is awaiting our feedback. Being New Model Advisor type, a fee of 3% has been suggested for our agreement.

Has anyone got any comments/suggestions about the funds suggested, sector allocations, fee etc?

Thanks!

dunstonh

Obviously Liz we are only privy to partial information so anything we say is limited.

IFA suggests transferring both into Scottish Widows Retirement Account

Good modern product which is better suited for larger values at present. Fits the views of the FSA of a clean contract where the costs and charges are much clearer. My SW rep reckons this will be their only pension product long term (with stakeholder not likely to survive after the NPSS comes in 2012 and there is too much overlap with the PPP). You have unit trust fund access as well as the scot Wid internal pension funds access at the internal price.

So contract is fine.

Has anyone got any comments/suggestions about the funds suggested, sector allocations, fee etc?

The spread appears to have been built with a strategy/structure and not just a random selection or picking fashionable funds. That is always a good sign.

The fee at 3% seems a tad high. Especially for an NMA (where the focus is usually on building fund based trail with lower up front). However, we dont know the costs involved for this IFA over others. A city location is more expensive than village or market town and there may be prestige or even a target market priced in here.

So, if you are happy with the risk profiling, the product choice and the way the portfolio has been built then it just comes down to whether you feel the 3% is acceptable value or not (effectively going DIY will cost you the same on an annual basis so its just this initial bit that differs).

Retired_I.F.A.

Does the Widows plan allow drawdown?

EDIT.. just googled and seen it does.

EdInvestor

Rather a conservative investment profile, how old is DH?

Gatser

Is Scottish Widows Retirement Account better
than the pension offered by Skandia?
(which has previously been mentioned as a good product)

dunstonh

Gatser wrote: »

Is Scottish Widows Retirement Account better
than the pension offered by Skandia?
(which has previously been mentioned as a good product)

Whilst Skandia and Selestia are getting in bed with each other its probably better to refer to it as Selestia still. The old Skandia pensions (which are not as good as Selestia) are still available.

I have done illustrations on both SWs retirement account and Selestia's collective retirement account and seen both come out best depending on circumstances. Usually there is not much in it.

Rather a conservative investment profile, how old is DH?

Maybe so but its not our place to impose our risk profiles on someone else. Also, the spread has been built after a risk analysis and profiling.

whiteflag_3

Liz_the_Whizz wrote: »

Hi Guys/Gals,

My DH is transferring his pension and we met with an IFA (pension specialist) last night to go through his recommendations.

Current pensions are with Equitable Life and Standard Life (total fund value c. £100k).

IFA suggests transferring both into Scottish Widows Retirement Account. On the basis of questionnaires completed on attitude to risk etc, IFA has recommended the following:

M&G Gilt & Fixed Int 10%
Jupiter Corporate Bond 5%
Invesco Perpetual Corp Bond 10%
Jupiter Income 5%
Invesco Perpetual Euro High Yield Bond 10%
Neptune Global Alpha 5%
Midas Income & Growth 15%
L&G UK 100 Index Tracker 7.5%
SW Cash 2.5%
Neptune European Opps 10%
L&G Property 5%
Jupiter Ecology 5%

The sector breakdown is roughly:

UK Equity 25%
Overseas Equity 20%
Bonds 35%
Gilts 10%
Property 5%
Cash 2.5%
Other 2.5%

IFA has left the report with us and is awaiting our feedback. Being New Model Advisor type, a fee of 3% has been suggested for our agreement.

Has anyone got any comments/suggestions about the funds suggested, sector allocations, fee etc?

Thanks!

How often is is your IFA going to rebalance the portfolio and how much is he going to charge for it?

What basis is he recommending the funds - is it past performance?

I personally think it far to wide a spread, seems like there is little conviction - scatter gun approach.

EdInvestor

dunstonh wrote: »

Maybe so but its not our place to impose our risk profiles on someone else. Also, the spread has been built after a risk analysis and profiling.

But that would assume the advisor has got it right.You only have to look at the endowment misselling scandal to see that the basis of most of the complaints is the incorrect matching of the product to the client's attitude to risk, so the advisors quite often get it wrong..

In those cases the investments were too high risk.This one has an investment split which is below the normal limit for a standard cautious profile, never mind balanced or adventurous.This might be OK if he is quite close to retirement.

But if he isn't, he could find the portfolio shows a comparatively low growth rate after charges and will not deliver adequate pension income, because it is invested too conservatively.

Of course if the advisor has explained all this, that's fine.

dunstonh

But that would assume the advisor has got it right.

Seeing as Liz has said that she has been risk profiled thats a fair assumption to make.

You only have to look at the endowment misselling scandal to see that the basis of most of the complaints is the incorrect matching of the product to the client's attitude to risk, so the advisors quite often get it wrong..

You are looking at historical risk questions which were simplistic and often badly recorded. Mostly by tied sales rep with a "pick a number between 1 and 5" approach.

However, you are correct in that most complaints do come back down to risk and in virtually all cases its about people who have been recommended investments above their risk profile. The opposite what you are suggesting here.

In those cases the investments were too high risk.This one has an investment split which is below the normal limit for a standard cautious profile,

It depends on what you class as cautious. Its still 45% equity so its hardly defensive. Its at the lower end of the scale but still within 10-20% p.a. loss potential.

Liz_the_Whizz

Thanks for all the comments - DH is 15 years (maybe less) off retirement, and risk profile of 10-20% pa loss is about right.

Personally, I would have liked to see a bit more zip in it for the first 5 years or so, then heading more cautious. I was slightly surprised to see a tracker in there - is this a bit lazy? Also L&G tracker has relatively high charges, as does Neptune Global Alpha - is it worth the extra over Neptune Global Equity?

Initial 3% is a bit ouch, think the IFA deals primarily with small company pensions, certainly knows his stuff but I would feel happier at nearer 2%.

IFA is offering annual rebalancing using 0.5% trail commission.

So we're not a million miles away, happy with the product recommendation, and several of the funds. We would ideally like to get on with it as there is a concern that Eq Life might bung up their exit charges.

But should we seek a second opinion from another IFA?

jamesd

So at 100k invested the adviser is going to be charging 500 a year for rebalancing, plus whatever growth does to that. Unless there's more work there than looking at the percentages and doing some buying and selling to match the original percentages that seems like a significant ongoing cost for modest ongoing work.

At this size of investment it's worth comparing the costs with the Hargreaves Lansdown SIPP, since it'll be close to break even between the two (HL would probably be cheaper below 100k).

For more zip without high risk the BlackRock UK Absolute Alpha fund is worth considering to replace some of the bonds but it appears not to be offered in the Scottish Widows Retirement Account. It is available in the HL product and might be available in the SWRA by now, though BlackRock Gold and General is also shown as not available and that's been around for a long time.

I don't see any sign of use of other alternative investment classes in other ways either. No hedge fund, commodity, forestry, currency and such yet those are useful ways to reduce volatility and I hope to see them used in low volatility plans. It's a bit new to use right now but Skandia Alternative Investments fund is one possible way to use. This is still an area with limited cover from unit trusts and OEICs, though.

Is there any prospect of wanting to use anything other than unit trusts, OEICs, SICAVs and SW's own pension funds? If not then there are probably more cost-effective options available. The SW one supports lots of extra investment types but it seems that they aren't needed here.