Management & Advice for "legacy" investments when an IFA joins SJP?

dc_learning · 11 May 2018 at 12:40PM

Hello - would appreciate thoughts and perspectives on this subject please and assessment outlined below.

Our IFA has recently become a partner with SJP and I'm trying to understand and assess the longer term implications for ongoing management and advice for our funds which are still held outside of SJP. My assessment and understanding of this new situation is as follows:

When joining SJP - the (ex-IFA) SJP Partner is no longer regulated to offer existing clients advice or recommendations on non-SJP products

As part of the new relationships arrangement - our 'legacy funds' have been transferred to a company called Policy Services for on-going administration management while the SJP Partner is still our client facing 'advisor'

All our investments still include trail commissions - and it is my understanding/assumption that this is now shared between Policy Services and SJP Partner for on-going client relationships. Policy Services provide our SJP partner with updated valuation reports for review conversations.

My understanding/assumption is that trail commissions are payments for on-going portfolio reviews and advice/recommendations that are in best interests of the client

It seems to me that when an IFA joins SJP - clients like us are put into what feels like a very ambiguous situation, for example:

- Our advisor is no longer able to give any specific advice or recommendations on our portfolio
- There is no direct contact between us and Policy Services
- Our default position is to continue to have advisor reviews based on Policy Services valuation reports stating past/current value of investments - while our advisor is effectively constrained and not able to make/suggest any changes should they be appropriate now or in the future
- The on-going charge to investments for trail commission continues - yet there is now a perceived/real reduction in client service under these new relationships
- This is the new status quo arrangement - indefinitely - unless we make appropriate interventions

Am guessing there may be others out there in a similar situation.

Would appreciate any observations / challenges / suggestions on the above.

dunstonh · 11 May 2018 at 1:02PM

Management & Advice for "legacy" investments when an IFA joins SJP?

A sell out who is interested in his own pocket.

SJP is the most expensive distribution channel in the UK. Its products/funds are not that great. Although they do create some very glossy material that looks more professional than a IFA could do on their office printer.

When joining SJP - the (ex-IFA) SJP Partner is no longer regulated to offer existing clients advice or recommendations on non-SJP products

So, how on earth are they able to continue charging for ongoing advice services when they are not able to give ongoing advice.

Do you like paying fees for nothing?

All our investments still include trail commissions

Unit Trust/OEICs had commission removed from them in 2013. In its place, explicit charging was used. So, its not commission any more. It is an actual fee that can be turned on or off. Life funds and some pension funds may have legacy renewal commission.

Would appreciate any observations / challenges / suggestions on the above.

Time for you to dump the now Sales Representative. No point paying fees for a sales rep who cant give advice on other products/funds and almost certainly will be looking to churn existing products into SJP products (which usually have a 5% initial charge).

Aegis · 11 May 2018 at 1:11PM

dunstonh wrote: »

So, how on earth are they able to continue charging for ongoing advice services when they are not able to give ongoing advice.

Do you like paying fees for nothing?

Taking it a step further, I think this is a completely unethical move, i.e. to transfer agency to a company that won't provide advice but to continue taking fees that were initially established for the sole purpose of paying for advice. How they get away with it is beyond me.

dc_learning · 11 May 2018 at 7:46PM

Thanks for points above - and I have a couple of further questions to get a better understanding and would appreciate the 'education/guidance'.

Unit Trust/OEICs had commission removed from them in 2013. In its place, explicit charging was used. So, its not commission any more. It is an actual fee that can be turned on or off. Life funds and some pension funds may have legacy renewal commission.

Re the above point - we have a mix of unit trusts, OEICs and life assurance policy/investment bonds.
If a decision was made to turn off charges for OEICs and unit trusts - how would this be done and by whom?

What is legacy renewal commission and how would we know if it is/has been applied post 2013 - assuming it was a requirement post 2013. Does the same principle of being able to turn off apply - or is it maybe a contractual obligation?

I've also read about migrating to 'clean class' share types post RDR but not sure if this is appropriate or relevant - we have some funds that have particular share class types - one for example: Aberdeen Emerging Markets Equity Fund A share OEIC. How does someone determine whether it is relevant to them?

Thanks.

bostonerimus · 11 May 2018 at 8:52PM

I would take this as an opportunity to move your portfolio to another IFA, or better still learn enough to DIY. Unfortunately having the IFA middleman between you and your money seems to make this into a non-trivial process.

dunstonh · 11 May 2018 at 11:56PM

Re the above point - we have a mix of unit trusts, OEICs and life assurance policy/investment bonds.
If a decision was made to turn off charges for OEICs and unit trusts - how would this be done and by whom?

The investment bond commission was not required to be turned off. There may not be any. Investment bonds gave the choice to take an up front figure or pay it on drip. Typically the charges were the same to the policyholder either way. The initial documentation will confirm this. As would the suitability report.

In respect of unit trust/OEICS, it was a regulatory change on ISAs, SIPPs and unwrapped holdings (not PPPs) held with platforms. If the adviser was providing an ongoing service they could ask you to sign a fee agreement and turn a fee on instead. However, it must be for a specific service. This is why its important that you dont end up paying for something you are not going to get.

I've also read about migrating to 'clean class' share types post RDR but not sure if this is appropriate or relevant - we have some funds that have particular share class types - one for example: Aberdeen Emerging Markets Equity Fund A share OEIC. How does someone determine whether it is relevant to them?

Class A is commission paying. If its held direct with Aberdeen then it wouldnt have been changed to non-commission paying. Its unusual for an IFA to have holdings direct with the fund house nowadays unless its small holdings (such children/grandchildren where small premium stuff is still an option). Most serious investor holdings are held on platforms as part of a portfolio of funds from different fund houses. e.g. you wouldnt have aberdeen emerging markets by itself. It may form x% of your portfolio with other funds filling the other sectors.

dc_learning · 12 May 2018 at 10:50AM

It is my understanding there are on-going advisor fees on all funds - including bonds(based on original documentation). They all had an initial charge plus on-going advisor 0.5% - normal practice at the time I think as this spans 1997-2010.

I do not believe the funds are held on any platform that I am aware of. They were all setup individually at different times spanning past 20 years.

I've been spending a lot of time trying to get better understanding of overall portfolio ( performance over past horizon, asset allocation and diversification etc) which I have found very useful/educational. I retired recently and having this understanding as well as getting right oversight on 'legacy' portfolio is important as these funds are a very significant amount of our total assets. I have also very recently started to go down the DIY route with some new funds in the belief that an appropriate blend of passive/active is a best/appropriate strategy for the future.

The overall 'legacy' portfolio has evolved and grown over time - its current content and % each fund represents based on a most recent valuation - is listed below. It is my assessment also that the overall equities content across total portfolio is approximately 82%, predominantly large-cap and reasonably well diversified while UK centric ( I played around with the Morningstar x-ray tool).

The thoughts and questions triggered by above analysis and research include: taking holistic portfolio review, are improvements possible and if so what kind/type, consider potential need for risk re-balance recognising time has moved on, changing personal circumstances and risk tolerance, importance of both asset preservation, managing costs while having adequate/reasonable levels of future growth and so on.

The key issue is therefore defining an appropriate/right course of action recognising current context and relationships - so any further suggestions/challenges to formulate thinking appreciated.

TOTAL PORTFOLIO OVERVIEW - established over 20 years - with % each fund represents of total portfolio valuation
Invesco Perpetual Pacific 4%
Jupiter European Fund 10%
Invesco Perpetual Global Equity 3%
Fidelity Global Special Situations 4%
Jupiter UK Growth 1%
With Profits Life Bond 6%

Jupiter UK Smaller companies 12%
AXA Framlington Health Fund 4%
Fidelity Multi Asset Open Growth 3%

Fidelity South East Asia 3%
Aberdeen Emerging Markets 4%
Neptune China Fund 2%

Jupiter Global Emerging Markets 3%
M&G Recovery 3%

Neptune US Opportunities 6%
Ignis Argonaut Euro Alpha EU Select 1%
Schroder Global Cities Real Estate 4%
Schroder Income Maximiser 7%
Blackrock Special Sits 4%
AXA Framlington UK Select Opps 4%
M&G Strategic Corporate Bond 4%
M&G Gilt & Fixed Interest Income 3%
M&G Global Basics Income 3%
Ignis UK Property 3%

dunstonh · 12 May 2018 at 12:44PM

I do not believe the funds are held on any platform that I am aware of. They were all setup individually at different times spanning past 20 years.

You would know if you had a platform as the statements come from them as a consolidated statement of the holdings on platform. If you were direct with fund house then you would still be on the old share classes and commission still being paid.

The key issue is therefore defining an appropriate/right course of action recognising current context and relationships - so any further suggestions/challenges to formulate thinking appreciated.

There really is just two viable options here. Either DIY and take it to a DIY platform or get an IFA.

SJP should be off the table as an option given their high costs and lack of servicing and advice you will get an pre SJP assets. That was before you gave us the new information which indicates no rebalancing has taken place apart from perhaps when the new money was added.

bostonerimus · 12 May 2018 at 2:09PM

I think this is a blessing as it has made you evaluate the portfolio yourself.

You say you are retired, don't mention any DB pensions and have a portfolio that is 82% equities. That is a very aggressive allocation for someone in retirement. Also I think you have at least 2 or 3 times too many funds in your portfolio.....24 is a bit ridiculous....any IFA that develops a portfolio with "Ignis Argonaut Euro Alpha EU Select 1%" in it is having a bit of a laugh.

dunstonh · 12 May 2018 at 2:24PM

ny IFA that develops a portfolio with "Ignis Argonaut Euro Alpha EU Select 1%" in it is having a bit of a laugh.

since launch 286.29%
MSCI Europe ex UK TR 182.55%.

So, its done much better.

Since July 2009 when vanguard launched their tracker (which we know are your preferred options)

argonaut 183.37%
Vanguard 157.58%
Benchmark 148.48%

And finally from May 2010 to date

Argonaut 109.93%
Vanguard 104.78%
Benchmark 97.98%

Whilst the Argunaut fund is not a fund I would want now and the way the ex adviser has run the portfolio (or rather hasnt run it at all) is not ideal, the selection of that fund was not a bad one. It has beaten what would you have done. is that what you mean by having a laugh? He should have stuck with his 1997 fund selection for Europe but life funds tend to have a limited fund selection.

greatkingrat · 12 May 2018 at 2:38PM

I think the point is that an allocation of 1% is too small to be worth bothering with, regardless of the merits or otherwise of the fund itself.

Management & Advice for "legacy" investments when an IFA joins SJP?

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