Excessive or reasonable charges for managed SIPP?

I’m genuinely curious:
Only 40% equity?
I’m clearly more risky than most, although my spread is perhaps more global than some (perhaps more US biased, but then much tech growth etc has been from there). It does feel like IFAs ought to be able to help produce decent returns for their customers.

Yes. The average consumer doesnt like negative periods and low/medium risk is typically where you find most of them. Forget the upside. No-one is unhappy when things go up. However, when things go down, that is when people get nervous and are more prone to making mistakes.

And with the MIFID II requirement of quarterly statements, people are going to see the negative periods far more frequently.

Given the choice, I’d personally chose a fund that is consistently in the top 1st or 2nd quartile to one languishing in 4th or 3rd. Why would the latter be better?

The sector in question has funds covering risk profiles 3 to 8 on 1-10 scale. If you were a cautious investor, you wouldnt be able to handle the volatility of the higher equity funds in that sector. Those funds would be at the top end on performance after a growth period. The lower equity funds would be below average on performance.

There is no point investing in the top performing fund in that sector if you cannot handle the volatility that goes with it. So, a cautious investor would be better with a lower risk fund that would appear to have lower returns in a period that has been mostly growth.

Remember that those funds at the top of the charts at the moment will be at the bottom in negative periods.

Finally: when did funds last drop by 35-40%? and how long did they take to recover?

2008/9 was last one and then 2001 to 2003 before that. Around 4-5 years was the recovery period.

e.g Q4 2018 was pretty bad

Actually, it wasn't. It wasn't even classed as crash. On average, it was around 16%. That is quite mild.

It is one thing saying you will accept it. Especially when you only see the statement once a year. Its another when it actually happens and you have online access and look at the balances frequently or you get a quarterly statement.

For example, pre MIFID, a 6 monthly statement in October and April would have almost completely seen that Q4 2018 drop missed by those that only loook at statements. However, now they are quarterly, they got a statement in December just a few days after the lowest point.

People who have gone through much bigger negative periods but didn't necessarily see them are now seeing the worst of the smaller drops and getting nervous and making bad decisions.

No. One can and should look at the performance of indices which VLS funds represent. It goes way back. And beats the vast majority of active funds over any decent period of time.

That would be far too much work for the average individual.

Deleted_User wrote: »

In 2018 most markets dipped into the bear market territory - a 20% drop from the peak. It’s just that they did it over more than one quarter.

Looking at the performance of index funds vs active funds is easy. The work has been done. Reading books and googling are the only skills needed. Also, a bit of common sense will tell you that anyone paying a huge chunk of expected market returns in charges is going to underperform the market over any decent period of time. Even active portfolios with less crazy charges underperform in most cases

Here is Vanguards White Paper providing some statistics.
h t t p s://personal.vanguard.com/pdf/ISGIDX.pdf[/url]

And another one
h t t p s://d9l6g2vjiqrcr.cloudfront.net/documents/BMT-PS_Whitepaper.pdf

These documents should be read and absorbed by all, great find! Thanks.

I feel MSE has been invaded by Reddit users recently.

- OP, you should ignore all the Vanguard and Index Fund information for now. This is further along the line.

- You first need to work out what you want. I take a great deal of interest in my investments and financial instruments. I do not take an interest in my car, heating or electrics. I pay for these. I pay over the odds for these. I know I do, but frankly I'd rather pay over the odds for someone to do the job (and have made errors in judgements with tradesman!) than try and do it myself and make a hash out of it.

- Learn your risk profile, what your aims are and how these fit in with what investment decisions you want to make. For example, are you near retirement? Maybe you want to avoid direct shares and 100% equity portfolio.

- Decide whether you want to pick your own funds and whether any funds fit your risk profile. Or if you want to just go for generic index trackers.

- Work out whether you feel the fees are worth the fund. A lot of people on this thread are telling you to go for index trackers. Personally I have a hybrid. For large cap (you need to know what I mean by this if you want to DIY), I tend to go for index trackers. But for small cap or specialist (including emerging markets) I tend to go for active fund management. This has worked out for me and for the past 3 years I have beaten an index tracking portfolio each year. (one fund has failed in the last 6 months though, massively behind its index)

- I saw a post in this thread saying you only need to spend 4 hours looking at your portfolio a year. This is bordering on ridiculous. You do not need to spend 4 hours a week, but you do need to spend at least a couple of days (a weekend) reviewing your portfolio each year. Rebalancing (again, you need to know what this is).

- I saw another post recommending 3-4 ETFs for a portfolio. I wouldn't recommend this, if you want to limit the number of investments, then multi asset ones would be a good start. I currently have 7 and would increase to 8 or 9 to get some exposure to other asset classes.


I think it's great taking an interest in your affairs and whether you are getting value for money. Personally, I think the 1% fee from their end is too expensive, I would be getting that down nearer to 0.5%, but as they are a wealth manager you may find they won't move from that. The platform fee should be cheaper than 0.35% as well (my SIPP platform is fixed fee and is currently 0.24% of my current fund value, my workplace pension is 0.15% fee).

I would question whether you need a wealth management service.