Having to self manage funds within an ISA
Discussion
Ginge R said:
By way of an illustration, I had lunch with two clients today. This (fot) forms a small part of each's portfolio and movement within one part of the portfolio over the past few months. It was acceptable for one of the two clients, but not (rightly so) the other, and not just because of asset allocation.
Monthly portfolio adjustments, wow. What did he do to get that service?Simpo Two said:
Monthly portfolio adjustments, wow. What did he do to get that service?
That is his service! It is often called a Managed Portfolio Service. With Ginge R you have your portfolio rebalanced to the original risk/reward profile you agreed upon and then have regular reviews to adapt that profile as time goes on.With Intelligent Money your risk/reward profile is automatically adapted as time goes on in line with your end requirement.
Both are good approaches, there is no right or wrong approach, it is down to personal preference.
The ironic thing is that both of these are normally cheaper than doing it yourself!!!
Intelligent Money is only available through an adviser though, whereas you can go direct to Ginge R (fiveraday.co.uk).
JulianPH said:
That is his service! It is often called a Managed Portfolio Service. With Ginge R you have your portfolio rebalanced to the original risk/reward profile you agreed upon and then have regular reviews to adapt that profile as time goes on.
Good advertising, but what does Ginge R think? I must have signed up to a different service.Simpo Two said:
JulianPH said:
That is his service! It is often called a Managed Portfolio Service. With Ginge R you have your portfolio rebalanced to the original risk/reward profile you agreed upon and then have regular reviews to adapt that profile as time goes on.
Good advertising, but what does Ginge R think? I must have signed up to a different service.On face value I personally think what he is offering is good. If you have a different experience you should (within PH rules) share it to everyone's benefit (including mine).
Perhaps his service has evolved since you joined. Perhaps it hasn't and he is over selling his service. I can only take things at face value and fine tune my opinion based upon any personal interaction I have with the provider.
I've a great mate who runs a competitor, but if I mention them I always put a disclaimer up. Don't jump to wrong conclusions so quickly.
Simpo Two said:
Monthly portfolio adjustments, wow. What did he do to get that service?
What did he do? Simple - have a personal pension with the right provider. Adjustments can be monthly, quarterly or every six months. Not all pensions work in a similar way - this one is particularly modern, functional, well priced and transparent. As Julian mentions, a good modern personal pension is invariably much cheaper and effective than a SIPP, and pegged to a clients attitude, capacity etc for risk/loss. It's dialled in on a pre programmed profile, culminating in a preset age at retirement. As a pension is no longer a whole of life wrapper though, you can't accept the established norms.
As an IFA, I'm supposed to use the whole market, and do. Usually though, it's an exercise in semantics - you usually know instinctively quite early on, what's likely to work best. I revisited a client this evening, and their inclination for risk had soared over the past month or so. Media chatter sways many clients far too often.
Financial planners usually focus on the big picture these days, they work out the strategy, the tactics and the contingencies. Fund picking, or the minutiae, unless you're a geek (mea culpa), is outsourced. I like the nuance of defensive portfolios - which, at the moment, can look back on a strong period of performance.
By contrast to the above, this is an example of an active portfolio I put together in 2012, a defensive one, which needs constant management. It's one of mine that I use for me and it's many permutations allow me to model scenarios and do reverse engineering.
Now though, fund switching has become so onerous and demanding (in a regulatory sense), it's best left to a discretionary manager if that sort of dynamic management and service appeals. I use it for Fiver a Day which is a new service, and financially impossible even a few years ago.
Edited by Ginge R on Wednesday 27th July 22:26
Ginge R said:
Simpo Two said:
Monthly portfolio adjustments, wow. What did he do to get that service?
What did he do? Simple - have a personal pension with the right provider. Adjustments can be monthly, quarterly or every six months.Ginge R said:
That one, the fund manager.
Ah right. I thought you had done that work.The fund manager seems to have a lot of asset classes under his fingertips - equities, corporate bonds, index-linked bonds, global high yield bonds, government bonds, cash... What kind of fund is that?
If I had one client only, then I, in fact many advisers, could. I enjoy it, but it's impractical.
That's just a bog standard personal pension with bog standard funds. However, it has overlaid onto it, layers of quite sophisticated management functionality. It's by a company called Royal London which is a company that is only accessible to IFA. Cue howls of protest at rancid advisers choosing RL over anyone else due to opaque rebates and dodgy backhanded deals etc. There aren't any, it's just a damned good company (IMHO).
When you research a pension, you take into account many things, not just fund performance. A client's circumstances may change - what was good for them in 2006 might not be suitable in 2016. Technology, pricing, functionality.. they all evolve (and very quickly at times). If anyone has a personal pension, and has had one for a while, they might be served having a chat with an adviser about its suitability.
On the downside (and I mean from the perspective of ungainly expediency only), it has become a far more rigorous process. That should mean, though not always, the client gets a higher quality service when he/she looks at the viability of their retirement saving. We have rolling news, 24 hour shopping, so we have an expectancy of froth, churn and burn and dice and slice. But sometimes, something like financial planning needs to be looked at from afar.
Get rich slowly.
That's just a bog standard personal pension with bog standard funds. However, it has overlaid onto it, layers of quite sophisticated management functionality. It's by a company called Royal London which is a company that is only accessible to IFA. Cue howls of protest at rancid advisers choosing RL over anyone else due to opaque rebates and dodgy backhanded deals etc. There aren't any, it's just a damned good company (IMHO).
When you research a pension, you take into account many things, not just fund performance. A client's circumstances may change - what was good for them in 2006 might not be suitable in 2016. Technology, pricing, functionality.. they all evolve (and very quickly at times). If anyone has a personal pension, and has had one for a while, they might be served having a chat with an adviser about its suitability.
On the downside (and I mean from the perspective of ungainly expediency only), it has become a far more rigorous process. That should mean, though not always, the client gets a higher quality service when he/she looks at the viability of their retirement saving. We have rolling news, 24 hour shopping, so we have an expectancy of froth, churn and burn and dice and slice. But sometimes, something like financial planning needs to be looked at from afar.
Get rich slowly.
Ginge R said:
As Julian mentions, a good modern personal pension is invariably much cheaper and effective than a SIPP, and pegged to a clients attitude, capacity etc for risk/loss.
In all fairness Al, I have never said this as I don't believe it to be the case.Most good, modern personal pensions are nothing more than SIPPs with restricted investment choice. These pensions have followed the lead of low cost platform SIPPs.
They do however restrict the investment options for your clients to those of the provider in almost every case and it is the revenue the provider receives from this that subsidises the cost of the 'free' Pension/SIPP.
There is nothing whatsoever wrong with this at all, but these modern pensions are not "much cheaper" and are certainly not more "effective" than a SIPP as you are restricting a client's investment options and they are paying for the SIPP/pension somewhere down the line anyway.
If you have a client who is happy with these restrictions and only wants the services of one platform or DFM that happens to chuck the SIPP/pension in for free than that is great. But for may people it is better to keep their investment options fully open to save having to switch everything in the future if their needs change.
Given a £100,000 portfolio is likely to have cost between £1,000 (min) to £3,000 a year (when you factor in all the platform/DFM/underlying investment costs/dealing/stamp duty/adviser fees) then paying £150 a year on top of this for complete investment freedom both initially and in the future sounds like a pretty good deal to me.
So, whilst I am not suggesting that these are bad products in any way whatsoever (for certain clients they could be the best) I don't think it is any way fair to say they are better, cheaper or more effective.
Mea Culpa. Firstly, you're correct, I apologise. I read it briefly and then posted a bit later - intellect dilution. You said this, I simply had in mind that most people here used a self directing SIPP (no excuses):
<<The ironic thing is that both of these are normally cheaper than doing it yourself!!!>>
The recent trend is for low cost SIPP - after all, we had the so called 'SIPP lite' flurry a few years ago. A PP is a SIPP in all but name, and, as you say, with restricted choice. That though, in the interests of scale, effective distribution and out of fairness to clients (most of whom don't want or need, or can handle effectively, the investment side of things).
A half decent PP with someone such as Royal London is 0.4% all in. For many other SIPP providers, that's unreachable. As you say, a PP isn't for everyone and some will want more investment control. But, for many, it's like having a Porsche to nip down to the corner shop to buy a pint of milk when all you need to do, is jump on your cheap mountain bike.
I think there's a fine line between giving someone the freedom to make decisions and giving them the freedom to make mistakes. It wasn't out of coincidence that HL experienced (I think I'm right in saying) their busiest trading weekend in the ones just before and after Brexit. All that churn comes at a cost financially (in dealing) and in sequential terms.
I guess, when I wrote that, I had in mind 'invariably' when making my distinction. And I stand by that. Cheapest certainly isn't always best, but I'm mindful always of the insidious nature and impact of costs - especially those you don't consider. You need to see my letter to Old Mutual this week!
I'm not anti SIPP, prescriptively - I intend to offer an all in SIPP with Parmenion and Fiver very soon that'll come in at £200 per annum below the bottom (fund size of £100,000) estimate that you refer to. That will have a full DFM functionality. Again, I'm conscious that democratisation of access to a really decent product is nothing without scrupulous oversight, hence my prevarication.
Finally, once more, apologies. You made your point more than well enough without my (unintentional) b
disation of it.
<<The ironic thing is that both of these are normally cheaper than doing it yourself!!!>>
The recent trend is for low cost SIPP - after all, we had the so called 'SIPP lite' flurry a few years ago. A PP is a SIPP in all but name, and, as you say, with restricted choice. That though, in the interests of scale, effective distribution and out of fairness to clients (most of whom don't want or need, or can handle effectively, the investment side of things).
A half decent PP with someone such as Royal London is 0.4% all in. For many other SIPP providers, that's unreachable. As you say, a PP isn't for everyone and some will want more investment control. But, for many, it's like having a Porsche to nip down to the corner shop to buy a pint of milk when all you need to do, is jump on your cheap mountain bike.
I think there's a fine line between giving someone the freedom to make decisions and giving them the freedom to make mistakes. It wasn't out of coincidence that HL experienced (I think I'm right in saying) their busiest trading weekend in the ones just before and after Brexit. All that churn comes at a cost financially (in dealing) and in sequential terms.
I guess, when I wrote that, I had in mind 'invariably' when making my distinction. And I stand by that. Cheapest certainly isn't always best, but I'm mindful always of the insidious nature and impact of costs - especially those you don't consider. You need to see my letter to Old Mutual this week!
I'm not anti SIPP, prescriptively - I intend to offer an all in SIPP with Parmenion and Fiver very soon that'll come in at £200 per annum below the bottom (fund size of £100,000) estimate that you refer to. That will have a full DFM functionality. Again, I'm conscious that democratisation of access to a really decent product is nothing without scrupulous oversight, hence my prevarication.
Finally, once more, apologies. You made your point more than well enough without my (unintentional) b
disation of it.Hi Al, Thanks for your response - no worries! 
Yes, all I was saying that 'self-selecting' in a SIPP or otherwise, can (now days) be more expensive than paying for a managed service - yet the general perception is that it is still cheaper.
Also (in line with the OP's title to this thread) self-selecting means self-managing. People just don't seem to get that.
Unless you hold an unshakeable belief that you, as an individual with access to the internet, can outperform a professional investment manager - by which I mean a Chartered Fellow of The Chartered Institute for Securities & Investment and a Chartered Wealth Manager - with decades of experience and the resources of a multi-million pound company behind them, then why on earth are you paying more to only have to do the majority of the work yourself (or not even understand what work needs doing and so only finding out what has happened when it is to late.
I suppose it is the same mindset of drivers who believe they could beat a pro if you give them a car to race next to them in.
My main message is self-select if that is your thing, but remember that also means self-managing all risk and asset allocation and monitoring and revising this along side market changes and personal factors (not just picking some stocks and/or funds and thinking the job is done). You also have no comeback if you bugger things up yourself, whereas you do if a regulated professional does something stupid.
Yes, all I was saying that 'self-selecting' in a SIPP or otherwise, can (now days) be more expensive than paying for a managed service - yet the general perception is that it is still cheaper.
Also (in line with the OP's title to this thread) self-selecting means self-managing. People just don't seem to get that.
Unless you hold an unshakeable belief that you, as an individual with access to the internet, can outperform a professional investment manager - by which I mean a Chartered Fellow of The Chartered Institute for Securities & Investment and a Chartered Wealth Manager - with decades of experience and the resources of a multi-million pound company behind them, then why on earth are you paying more to only have to do the majority of the work yourself (or not even understand what work needs doing and so only finding out what has happened when it is to late.
I suppose it is the same mindset of drivers who believe they could beat a pro if you give them a car to race next to them in.
My main message is self-select if that is your thing, but remember that also means self-managing all risk and asset allocation and monitoring and revising this along side market changes and personal factors (not just picking some stocks and/or funds and thinking the job is done). You also have no comeback if you bugger things up yourself, whereas you do if a regulated professional does something stupid.
Issue isn't one of either being better or worse; rather, more or less suitable to a particular person.
If you're a hands on, highly informed private investor, you're more likely to get more value and benefit out of a full on SIPP than you may do a PP. On the other hand, if you don't really know what you're doing, a SIPP, on the basis that a little knowledge is a dangerous thing, could reduce your retirement savings over than, for instance, a PP.
In the middle, with a bandwidth of c.15%, there might be competent folk who get it right some of the time with reasonably well informed choices. They could do better with a SIPP.. if it's as cheap as they need, and not some bloated one that sucks out as much wealth as possible for the fund manager or platform owner.
If you're a hands on, highly informed private investor, you're more likely to get more value and benefit out of a full on SIPP than you may do a PP. On the other hand, if you don't really know what you're doing, a SIPP, on the basis that a little knowledge is a dangerous thing, could reduce your retirement savings over than, for instance, a PP.
In the middle, with a bandwidth of c.15%, there might be competent folk who get it right some of the time with reasonably well informed choices. They could do better with a SIPP.. if it's as cheap as they need, and not some bloated one that sucks out as much wealth as possible for the fund manager or platform owner.
Ozzie Osmond said:
Can someone please explain the difference between a Personal Pension and a SIPP and why one is better than the other?
These days, nothing whatsoever.Back in the day Person Pensions (the PP from SIPP) gave you no investment options. You were simply in the 'With Profits Fund' of an insurance company that covered the cost of the pension from the eye-watering fees of the 'With Profits Fund' you were paying for (whether you knew the level of fees or not). It was the same with Endowment Policies.
There was basically no option for you or your adviser to Self Invest (the SI part of a SIPP), that is to select the investment(s) you want in your pension yourselves.
Today every pension you can open allows you (or your adviser) to self select the investment(s) to be held within in it.
A full SIPP will give you access to anything HMRC allow. A 'lite' SIPP will give you access to every investment from a provider's platform or DFM propositions. This is the same for all modern pensions - they allow you to select what ever you like (albeit from a very restricted list in most cases)
So there really is no difference any more and it is semantics. SI = Self invested, which in turn = you have a choice. PP = Personal Pension.
When all personal pensions allow you a choice of investments they are all enabling self selection. It is just to what degree.
It has nothing whatsoever to do with whether you are making the investment decisions yourself (though companies like Hargreaves Lansdown, etc.) or if you have an adviser/DFM doing this for you. This is something that gets confused all the time.
Neither a PP or an SIPP is better than the other. It all depends on what you want to do investment wise. Put you investment requirements first and then select the best SIPP or PP to go with it.
There is an old phrase; Don't let the tax tail wag the investment dog... Or something like that! The SIPP is a tax wrapper - anything you put inside it (or a PP) will get exactly the same tax advantages. It is the investments within that make the difference. If you are happy with a limited choice then you could save a small amount of money going with that provider. If you want full choice and functionality then it does not cost much at all for a proper SIPP provider (but not the old ones that charge a fortune whether you want everything or not!).
That is a good point Old SIPPs and old PPs were both not great. Modern SIPPs and modern PPs are both good!
God, that took longer than I thought - sorry!
Good analysis.
I've lost count of the times I have heard folk say "Pensions are sh*t". They're not.. the principle of using the wrapper is right or it isn't, the specific pension you have got is either a well priced, efficient, well run and suitable one or it isn't, and the investments that you hold are either good/suitable or they're not.
But pensions, per se, are not sh*t. They're a highly efficient vehicle for retirement saving, if that's the most suitable vehicle for you. Agree completely about the tax analogy too. It's not what you make, it's what you keep. Although the 54 year old guy I saw the other night was very happy with his instant £13500 uplift!
I've lost count of the times I have heard folk say "Pensions are sh*t". They're not.. the principle of using the wrapper is right or it isn't, the specific pension you have got is either a well priced, efficient, well run and suitable one or it isn't, and the investments that you hold are either good/suitable or they're not.
But pensions, per se, are not sh*t. They're a highly efficient vehicle for retirement saving, if that's the most suitable vehicle for you. Agree completely about the tax analogy too. It's not what you make, it's what you keep. Although the 54 year old guy I saw the other night was very happy with his instant £13500 uplift!
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