Pension Funds v Direct Shares

Chris_Mac · 27 May 2018 at 2:18PM

I currently use an IFA to manage my pension. Recently I met with a salesman from a company whose main selling point seems to be that instead of investing in a selection of funds they invest directly into shares. Their argument was that since most funds invest in shares from a relatively small (1,500ish) companies across the globe, there is always duplication and the IFAs aren't even sure of what companies are actually being invested in. For example they said that if my pension consisted of 10 funds, then each would be investing in about 100 companies, and that an IFA could not answer a straightforward question such as, 'how much of my portfolio is invested in UK companies'? Additionally, they questioned, given the last statement, what value an IFA can actually give if they do not know where the cash is invested?

The negatives seem to be the increased charges, but I was surprised when the salesman said that they are the only company that invests pensions in this manner; I don't believe him.

Can anyone help me understand this investment approach, and if possible highlight the disadvantages and companies offering such a service.

Any help greatly appreciated.

Regards,

Chris

Keep_pedalling · 27 May 2018 at 3:11PM

Do not be tempted to buy the salesmans magic beans. I am sure your IFA can easily debunk his BS.

tacpot12 · 27 May 2018 at 3:29PM

Beware the salesman's BS. Your IFA can determine the holdings of any particular fund, and there are tools like Morningstar's X-ray that will look across a portfolio of funds to identify common holdings.

With a regulated fund, you can look at the funds history and see if the fund manager has demonstrated their ability over a long period. With a company that just picks individual shares, what evidence do you have that they are reliable at picking the best shares?

Dox · 27 May 2018 at 3:30PM

The word you're looking for is 'rhubarb' (or at least that's the printable version). Could you name the company and you'll find someone on this site will know about them and can comment from a standpoint of knowing what they're commenting on.

bostonerimus · 27 May 2018 at 3:46PM

Your salesman is a slug that has crawled out from underneath a nasty wet stone....sorry that gives slugs a bad name. He is talking rubbish and you MUST NOT talk to him again.

mark55man · 27 May 2018 at 4:12PM

There are (at least two risks) here

Generally that your pension fund benefits from the diversification of funds which will typically have no more than 5% in any one company. And if your man is replicating this, then he is in effect just creating another fund

Secondly, the funds (excepting perhaps the most adventurous or specifically labelled) will be investing in large solid companies, whereas your man may (at best) be investing in smaller or riskier companies and, (at worst) will be investing in his best mates dodgy aim based ramptastic stock - which will go bust transferring your savings into his pocket

there isn't in principal anything wrong in having a proportion of your shares in companies (even in risky/smaller companies, I do myself), but its like 10% of my total funds - and it feels like you are talking about a lot more

Pensions are about getting comfortable slowly, not about getting rich quick. + You should always look to minimise charges so I would avoid bigly

coyrls · 27 May 2018 at 5:42PM

You've already identified the problem; do you want to deal with a salesman or an IFA?

HappyHarry · 27 May 2018 at 5:52PM

Chris_Mac wrote: »

an IFA could not answer a straightforward question such as, 'how much of my portfolio is invested in UK companies'? Additionally, they questioned, given the last statement, what value an IFA can actually give if they do not know where the cash is invested

Chris

You're speaking either to an idiot or a liar. Neither of those sound like a promising source to take pension advice from.

You could ask your IFA to answer the question. I'll bet you will get a very accurate answer.

(To be fair, if your IFA can't answer the question, you probably need a new IFA. It's unlikely though.)

jamesd · 27 May 2018 at 9:05PM

Chris_Mac wrote: »

I currently use an IFA to manage my pension. Recently I met with a salesman

You're being lied to. Ignore the salesman.

Funds are required to regularly publish all of their investments and tools which analyse this by country and in other ways are readily available to both consumers and professionals.

Chris_Mac · 27 May 2018 at 9:09PM

Thanks for all of your replies; especially those that actually explain why the salesman seems to be talking rubbish. I have not named the company because the question is more about the claimed 'value add' rather than whether it is a good or bad company. You seem to be telling me that IFAs do know the specific holdings of funds, which surprises me because that would mean that others could easily replicate them? Am I missing something here?

Chris

Chris_Mac · 27 May 2018 at 9:11PM

Do you know how 'regularly' funds are required to publish their holdings, and is it all of them, or just the top 10 (or so) holdings?

Many thanks for your help.

Chris

Pension Funds v Direct Shares

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free