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

dunstonh · 12 May 2018 at 3:10PM

greatkingrat wrote: »

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.

Those percentages are not by product or event. They are a percentage of the total holdings. As that is the only bond, you would expect smaller allocations when comparing it to an overall portfolio (unless the bond value was higher than the ISAs/unwrapped but it looks like it was a about a third of the total value.)

bostonerimus · 12 May 2018 at 3:20PM

dunstonh wrote: »

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%

My point was not about performance, it's the 1% allocation that I think is "having a laugh". Outside the "Life Bond" I could also mention the Jupiter UK. But as you point out I would not have invested in a highly focused actively managed European fund, instead my stock allocation of a broad US equity tracker and a broad International tracker is up 275% since 2009. Apples to oranges I know, but if the OPs IFA had any type of plan I don't think we'd see the present pretty ridiculous portfolio. It looks like all the IFA did was to take the money and invest it in whatever fund was popular at that time.

The Life Bond worries me a bit too. I hope that the OP is "high net worth" and is reaping significant tax and/or estate planning advantages and has maximized other tax advantaged ways of investing like pensions and ISAs first.

dunstonh · 12 May 2018 at 4:08PM

My point was not about performance, it's the 1% allocation that I think is "having a laugh". Outside the "Life Bond"

I don't have an issue with that because the bond is a tax wrapper in isolation of the other tax wrappers/unwrapped holdings. So, its more like 3% of the wrapper. I don't have a problem with that. Indeed, our European weighting doesn't get to 5% until risk 6 (out of 10) and is typically just over half the US weighting.

People will always have different opinions of investing. Especially when you consider there are tens of thousands of things you are investing in. Differences of opinion are inevitable.

However, there is nothing actually wrong in the selection and calling it ridiculous is unfair.

instead my stock allocation of a broad US equity tracker and a broad International tracker is up 275% since 2009

A period when the US did very well. If the 9 year period prior to that had been selected, it would have not have done well because the US went through a sustained period where it underperformed the global markets significantly (when investing in Sterling). A period when Europe did better than both Global and North America. Picking a sector alone and going heavy in that has risks. It looks good when that sector does well but it looks awful when that sector does badly.

bostonerimus · 12 May 2018 at 4:51PM

dunstonh wrote: »

I don't have an issue with that because the bond is a tax wrapper in isolation of the other tax wrappers/unwrapped holdings. So, its more like 3% of the wrapper. I don't have a problem with that. Indeed, our European weighting doesn't get to 5% until risk 6 (out of 10) and is typically just over half the US weighting.

People will always have different opinions of investing. Especially when you consider there are tens of thousands of things you are investing in. Differences of opinion are inevitable.

However, there is nothing actually wrong in the selection and calling it ridiculous is unfair.

Yes I have an aversion to slicing and dicing at the portfolio level, but there is an argument for it that we both know. However, little, or no, thought seems to have gone into the OPs portfolio as different funds were added each year. I feel pretty good about defending my description of this particular portfolio as "ridiculous".

A period when the US did very well. If the 9 year period prior to that had been selected, it would have not have done well because the US went through a sustained period where it underperformed the global markets significantly (when investing in Sterling). A period when Europe did better than both Global and North America. Picking a sector alone and going heavy in that has risks. It looks good when that sector does well but it looks awful when that sector does badly.

Keeping up the theme, my comparison of return was also ridiculous, as I believe the "look mine's bigger" school of performance generally tends to be. I have no idea of the overall performance of the OPs portfolio, it might be fantastic, but I still have an issue with the asset allocation of 82% equities for a retiree (unless there is significant other income or the OP is fabulously wealthy and has well known outgoings) and the Life Bond. The lack of apparent work done to produce a sensible portfolio and then a Life Bond being sold in 2010 probably with a nice commission raises some alarm bells. I could be wrong and maybe if the OP indicates the size of this portfolio, their pension/ISA levels and the function of the Life Bond we might get a bit more insight. If the Insurance policy was used because the OP had maxed out all other tax wrappers then I can see it's purpose.

dunstonh · 12 May 2018 at 5:07PM

I still have an issue with the asset allocation of 82% equities for a retiree (unless there is significant other income or the OP is fabulously wealthy and has well known outgoings) and the Life Bond.

There is nothing in the thread that gives any indication of what sort of weightings should exist. A retired person could be 60 with another 30 or so years to live. Or 85 and counting days. There could be £10k cash (in which case 80% equities may be high) or there could be £200k cash (in which case, 80% equities could be low). We lack the information to decide that.

he lack of apparent work done to produce a sensible portfolio and then a Life Bond being sold in 2010 probably with a nice commission raises some alarm bells.

There is nothing to suggest anything wrong with the initial work done. There is plenty to suggest "ongoing" work was lacking (and would continue to be if employed after SJP). However, pre-RDR (2013) required no ongoing work unless there was a contract to provide it. After 2013, only if there was a disturbance event would an ongoing work commitment be needed (or the trail turned off). He seems to have avoided creating a disturbance event.

could be wrong and maybe if the OP indicates the size of this portfolio, their pension/ISA levels and the function of the Life Bond we might get a bit more insight. If the Insurance policy was used because the OP had maxed out all other tax wrappers then I can see it's purpose.

In 2010 the taxation on a bond could be better than UTs. We can see that the OP did ISA, unwrapped and bond in 2010. So, in the pecking order, that would quite easily make sense. ISA was obviously best but the difference between unwrapped and bond was small. Sometimes the charges were lower as well. I used to use Aviva and Clerical Medical bonds back then. Aviva could actually give you a negative reduction in yield over 5 years in some cases (i.e. negative charges as the allocation was more than the annual charge). The CM bond was another that was good value at the time. Although we always did a tax comparison using software to see what came out best. Plus we annually do bed & ISA and leave enough in the unwrapped to see the ISA through for x number of years. It doesnt look like any bed & ISA was done in this scenario. But that would be a disturbance event.

As I said, I dont see the initial set up being an issue. The ongoing or lack of ongoing (as is the real case) is the issue for me. But I think we agree that continuing to use this guy would be a bad move.

bostonerimus · 12 May 2018 at 5:16PM

dunstonh wrote: »

As I said, I dont see the initial set up being an issue. The ongoing or lack of ongoing (as is the real case) is the issue for me. But I think we agree that continuing to use this guy would be a bad move.

Agreed.....but I'll push back on the 1997 asset allocation. It needs to be taken in context so I'd like to see what decided the choice of funds as it looks strange in isolation. The apparent lack of ongoing management as the OP approached retirement is very worrying as nothing has been mentioned about drawdown levels. Even for a 30 year retirement 82% equities is a little risky for most retirees, I'm planning for a 45 year retirement and I'm at 70% equities and I probably won't go north of 80% and that's with significant income coming from other sources than drawdown. If the OP has those too then I can see an argument for the allocation.

dunstonh · 12 May 2018 at 6:52PM

.but I'll push back on the 1997 asset allocation.

I have semi ignored it because it was 1997. Back to the pink papers days where you relied mainly on a monthly publication and there was virtually no due diligence as there were no real research companies available then.

Even for a 30 year retirement 82% equities is a little risky for most retirees,

I would put most between 40-60%. Indeed, most pre-retirement investors dont go above 60-70%

dc_learning · 14 May 2018 at 4:00PM

Been out for a few days - hence delay in replying, as well as reviewing above and checking a few things like: 'what is a 'disruptive event' and the portfolio listing.

Apologies also for a 'mistake' in original post and maybe not providing additional context:

- Listing Ignis Argonaut European Alpha was a mistake - it was part of original portfolio but was replaced by European Select relatively early.

- as dunstonh mentions - the %s above are not original allocations, they are value of fund as % of total portfolio value at a point in latter 2017.

- The total equities content has grown over recent years by about 6% and the fixed income/bonds portion declined (purely my own analysis to determine this) - hence the conclusion about considering rebalancing as a standalone portfolio, as 80% greater than our individual/joint profiles at present ( but were comfortable with high equities when starting out)

- No clear decision/strategy/goal clarified just yet for above point - however - recognise that any new investments could be used as a means to 're-balance'.

- This is not a 'retirement fund' - it is a joint husband/wife portfolio built up over the years

- I am 63 - with a reasonable/adequate DB pension which is our main/only income - and funds will be used in future years as/when required for variable uses. I have developed a detailed future cash flow model with various assumptions. Am most definitely not wealthy - hence my interest in getting better handle on investment management and portfolio analysis and risk and areas for improvement

- after some further checking - some funds have annual 'advisor fees' which potentially can be stopped/re-directed while others have commission embedded within annual charge and can only be stopped by disruptive event (I think) or switching to a 'clean share' class as I understand it. Have not checked every fund just a couple to understand situation/options.

Hope I'm not overcomplicating this - I did a very detailed analysis of portfolio purely to improve my own understanding and education - as a standalone portfolio in its own right - before deciding how best to add some additional investments. It was the analysis of the portfolio that led me to the view that an holistic review and 're-balancing' is potentially appropriate' as a standalone portfolio - and this just comes full circle to who is appropriate person to review/challenge my own analysis and advise/suggest any options - recognising the original post about change in circumstances/advisor relationships.

Previous responses have been helpful in triggering further thinking and understanding - so thanks for that.

Appreciate points about historical build-up - which is valid consideration - my main driver now is to find best way to navigate to what is best strategy and approach going forward - and as mentioned by 'bostonerimus' - potentially 'a non-trivial process'.

bostonerimus · 14 May 2018 at 6:49PM

dc_learning wrote: »

- after some further checking - some funds have annual 'advisor fees' which potentially can be stopped/re-directed while others have commission embedded within annual charge and can only be stopped by disruptive event (I think) or switching to a 'clean share' class as I understand it. Have not checked every fund just a couple to understand situation/options.

Hope I'm not overcomplicating this - I did a very detailed analysis of portfolio purely to improve my own understanding and education - as a standalone portfolio in its own right - before deciding how best to add some additional investments.

Do you have any documentation on how this portfolio has performed and the level of the fees?

I'd be eliminating funds rather than adding to them. As you don't need the portfolio for retirement income you have some freedom to take more risk than most....or you could look at it form the opposite perspective and say you have the luxury of not needing to take as much risk as most people. Right now you are in the first situation.

For once dunstonh and I are in happy agreement that you need to get away from SJP and your current adviser. That's an easy decision, what you do next will be more difficult. As an example, I'm in a similar situation to you; retired with a DB pension and a portfolio of investments that I don't need to touch. I have a simple portfolio that is basically 30% cash and bonds and 70% equities. My portfolio mainly consists of 3 large tracker funds.....I'm at the simplicity extreme as I am convinced it gives me the best change of a good return and with 24 funds in some pretty focused markets you are at the other extreme. Maybe there's a happy medium for you to find.

Finally I'd look closely at your Life Bonds, those sort of insurance products are notorious for high fees. You might be locked in, but it's best to know exactly what you have.

PS I just looked at the returns of a few of your larger percentage funds and they are awesome......some have increased by 7x. If you bought and held you'll be in good shape.

dc_learning · 14 May 2018 at 9:30PM

Having looked over KIIDs I've estimated charges ranging between 0.66% and maybe a couple of funds approaching 2%. For my own estimating I assumed worst case 2.2% including management fees, commissions/advisor charges and transactional costs.

There is some complication in determining overall performance - as there have been fund withdrawals over the years to fund various things/events/children etc - so I've calculated performance (maybe simplistically) at two levels (1) original investment and latest valuation and (2) original versus latest valuation (including withdrawals within latest value).Recognise it may not make logical sense to do (2) but it seemed interesting at the time.

Have also calculated compounded average growth rate at individual fund level (assuming my excel formula was correct) as well as time-horizon level.

There have only been withdrawals from individual funds since their inception - no additional moneys added to an already existing fund over the years, just new fund additions.

At a portfolio level over the entire horizon I estimate the following:

Total Portfolio analysis
- grown by 79% (excluding withdrawals - latest portfolio value as a % of original investment)
- grown by 99% ( if earlier withdrawals were added to the latest valuation)

CAGR Analysis over time horizons
1997 funds - 6.2%
1999 funds - 8.1% (driven by the 'star performer' Jupiter Smaller companies)
2004 fund - 5.7% (the Fidelity multi-asset is this single 2004 fund (but I listed it above as 1999)
2010 funds - 3.7%

At individual fund level CAGR ranges from 1.5% to 11.8% - which highlighted some interesting insights for me (assuming my logic is on track) - for example:

Jupiter UK Smaller companies has CAGR 11.8% over 18 years ( admittedly it stated from a relatively low initial value ) and as you can see above - it has grown to now represent 12% of total portfolio value. This is a +9% change.

It was this analysis that prompted me to consider an holistic review and if there was opportunity for improvement and where, cost analysis and so on.

Can share this analysis if you think it may trigger further views/perspective.

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

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