Intelligent Money - your investment questions answered
Discussion
Derek Chevalier said:
Ach groak, yer bum's oot the windae. This is a typical question (IMO) asked by someone with a tilt towards property investing (I've had similar before and it's very hard not to answer with a flippant response).
1. You shouldn't be investing in the markets if your time horizon is a year (and you know this
).
2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)
You beat me to it! 1. You shouldn't be investing in the markets if your time horizon is a year (and you know this
).2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)
A lame wizened ill-smelling old pensioner arrives at your plush Nottingham office having travelled 100's of miles from Wick thru unspeakably inclement weather on the back of his long suffering mangy tired donkey. Clutched in his claw is a tatty leather bag stuffed with the coin he has assembled thru a lifetime of grafting and conniving. But it's finished now. Age and hard work have taken their toll and he now needs to spend what time and energy he has left attending to his and his tubercular hag of a wife's simple survival needs. He has heard tell that you are Investors! That you take people's money and make more out of it than they gave you!
He wants you to do this for him. And he wants to live on the "more" bit. He has retained enough to survive for a year, but after that he would require to withdraw the "more" bit and leave you the original amount to do the same with the following year. And the following, and the following, until both he and the toothless hag are no more!
You say that this is impossible!
Well, back in Wick, Young Donal told him that if he gives him some of the bag o' coin to buy pigs with, then every Michaelmas, Lent, and Christmas he will have a pig for himself plus two loaves of bread!! And Big Fergus has said he'll do something similar with his crops.
Seems you might need an introduction to Young Donal and Big Fergus!!
He wants you to do this for him. And he wants to live on the "more" bit. He has retained enough to survive for a year, but after that he would require to withdraw the "more" bit and leave you the original amount to do the same with the following year. And the following, and the following, until both he and the toothless hag are no more!
You say that this is impossible!
Well, back in Wick, Young Donal told him that if he gives him some of the bag o' coin to buy pigs with, then every Michaelmas, Lent, and Christmas he will have a pig for himself plus two loaves of bread!! And Big Fergus has said he'll do something similar with his crops.
Seems you might need an introduction to Young Donal and Big Fergus!!
Edited by selmahoose on Saturday 12th January 14:26
selmahoose said:
Derek Chevalier said:
Ach groak, yer bum's oot the windae. This is a typical question (IMO) asked by someone with a tilt towards property investing (I've had similar before and it's very hard not to answer with a flippant response).
1. You shouldn't be investing in the markets if your time horizon is a year (and you know this).
2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)
Regarding '1)', some people definitely invest in the markets for income and this isn't done with any horizon. It's done to generate an earner to live on. So IMO it's perfectly reasonable to want an idea of how much of a living the investment will provide.1. You shouldn't be investing in the markets if your time horizon is a year (and you know this
).2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)
2) Well assuming Nik/IM agrees then as I said that's one possible direct answer. ie there is no answer, and this type of investment has no accurately predictable outcome. And I accept that.
But in this case it doesn't depend on my risk appetite because my question involved dumping the money on Nik and leaving it to him to decide what to invest in. Leaving it to the expert, as it were.
As to "flippant responses", apart from 'I saaay, Rupert' efforts at music hall Scottish accents (it's 'bile yer heid', btw) I'd love to see you try to do 'flippant'. Come on! Geez yir a-gemme staun-up ya bammy fanny!
BTW, I am not an investment manager, I'm a Private Client account manager. I liaise between my clients and all other team members involved in running their account(s). So more like a private banker who knows you by name, rather than you having to explain the same things to different people all the time. I'm also a level 4 (Dip) qualified financial adviser (though I don't give or charge for financial advice - I just help my clients achieve their financial planning goals and act as their personal contact).
selmahoose said:
Intelligent Money said:
Regarding 1) They do, but not for 12 months, that is madness!
Wot, like 1 year fixed rate bonds? How's that madness?Having a 12 month horizon for stock market investing was the 'madness' bit!
"Our Private Client services offers fully managed ISAs and Pensions (with SIPP commercial property functionality) without the added expense of platform and adviser fees"
Hi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
Hi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
Intelligent Money said:
I don't give or charge for financial advice - I just help my clients achieve their financial planning goals and act as their personal contact.
When Selmahoose punts his £100k in your direction there will be an initial charge of 1.5% - what does he get for his £1,500? And then the ongoing charge of 0.87% p.a. is double some other firms.Bear in mind he could buy one-off allocation advice elsewhere and then invest in L&G trackers on a low cost platform for relative peanuts. You would have to "outperform" by 0.5% p.a. just to keep up with him.
selmahoose said:
as an investor for income I think it's quite reasonable to ask how much income I should expect from an investment.
The concepts of "income" and "capital" are IMO a bit old-fashioned. For a market investor they are both just "making money" and, particularly in an ISA or SIPP, it doesn't much matter which is which. What does matter is your total return.On the other hand a real estate investor whose "capital" is in large lumps bolted to the ground will be far more dependent upon his income yield. He has no other convenient way to access cash.
For most investors any distinction between income and capital only matters if and when the TaxMan says it matters!
selmahoose said:
A lame wizened ill-smelling old pensioner arrives at your plush Nottingham office having travelled 100's of miles from Wick thru unspeakably inclement weather on the back of his long suffering mangy tired donkey. Clutched in his claw is a tatty leather bag stuffed with the coin he has assembled thru a lifetime of grafting and conniving. But it's finished now. Age and hard work have taken their toll and he now needs to spend what time and energy he has left attending to his and his tubercular hag of a wife's simple survival needs. He has heard tell that you are Investors! That you take people's money and make more out of it than they gave you!
He wants you to do this for him. And he wants to live on the "more" bit. He has retained enough to survive for a year, but after that he would require to withdraw the "more" bit and leave you the original amount to do the same with the following year. And the following, and the following, until both he and the toothless hag are no more!
You say that this is impossible!
Well, back in Wick, Young Donal told him that if he gives him some of the bag o' coin to buy pigs with, then every Michaelmas, Lent, and Christmas he will have a pig for himself plus two loaves of bread!! And Big Fergus has said he'll do something similar with his crops.
Seems you might need an introduction to Young Donal and Big Fergus!!
As luck happens, I stay (live) in Scotland too (though not as far north as you), so I could lessen your journey! He wants you to do this for him. And he wants to live on the "more" bit. He has retained enough to survive for a year, but after that he would require to withdraw the "more" bit and leave you the original amount to do the same with the following year. And the following, and the following, until both he and the toothless hag are no more!
You say that this is impossible!
Well, back in Wick, Young Donal told him that if he gives him some of the bag o' coin to buy pigs with, then every Michaelmas, Lent, and Christmas he will have a pig for himself plus two loaves of bread!! And Big Fergus has said he'll do something similar with his crops.
Seems you might need an introduction to Young Donal and Big Fergus!!
Edited by selmahoose on Saturday 12th January 14:26
You could have many more pigs with such a saving.
FredClogs said:
"Our Private Client services offers fully managed ISAs and Pensions (with SIPP commercial property functionality) without the added expense of platform and adviser fees"
Hi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
Hi FredHi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
We offer managed ISA's and pensions with SIPP property functionality, not a SIPP whereby you can pick and choose from multiple investment types yourself.
If you are looking to self select/invest then HL have a great service track record, Fidelity are a giant having another go in the UK, ii have a fixed fee offering (if you want to simply buy and hold this works, if you want to trade regularly it doesn't).
Our full SIPPs are only available through regulated financial advisers.
Our total annual charge for a fully managed ISA/Pension (with SIPP commercial property functionality) is is 0.87%. This includes of all costs.
A platform would typically cost between 0.25% to 0.45% and adviser fees are typically 1% a year..
So without these fees you are already up to 1.45% ahead every year.
Intelligent Money said:
So without these fees you are already up to 1.45% ahead every year.
Think we need to be very clear we are comparing apples with apples, unlike our friends at HLhttps://citywire.co.uk/new-model-adviser/news/were...
According to this, on a 250k SIPP, advice is 87bps, platform 28bps and you can get a global portfolio for 20bps, so around 135bps if you were happy with a passive approach.
https://citywire.co.uk/new-model-adviser/news/advi...
Of course, that's looking at raw numbers, and if you look at various studies (and this is apparent in the real world), an adviser (if they are half decent working with the right clients) should be able to cover his 87bps several times over, per year. Tangibles AND intangibles, in both accumulation and decumulation.
Derek Chevalier said:
Intelligent Money said:
So without these fees you are already up to 1.45% ahead every year.
Think we need to be very clear we are comparing apples with apples, unlike our friends at HLhttps://citywire.co.uk/new-model-adviser/news/were...
According to this, on a 250k SIPP, advice is 87bps, platform 28bps and you can get a global portfolio for 20bps, so around 135bps if you were happy with a passive approach.
https://citywire.co.uk/new-model-adviser/news/advi...
Of course, that's looking at raw numbers, and if you look at various studies (and this is apparent in the real world), an adviser (if they are half decent working with the right clients) should be able to cover his 87bps several times over, per year. Tangibles AND intangibles, in both accumulation and decumulation.
I've not seen any evidence that supports this.
The second article you link to makes very interesting reading:
Citywire said:
Exclusive New Model Adviser® research has found the average ongoing advice fee is going up. The average fee charged by New Model Adviser® Top 100 firms is 87 basis points (bps), a marked increase from the typical 50 bps advisers say was being charged at the time of the retail distribution review (RDR).
The average for the 54 firms was 87 bps for ongoing advice, with 21 of the advisers charging 100 bps. The average platform fee meanwhile was 28 bps and the average fund management charge was 63 bps, bringing the total average annual cost to clients to 178 bps.
‘The evidence is that advice fees are consistently going up. As much as we on the inside say they will come down, there is no evidence that this is happening at the moment. The normal metric of supply and demand suggests that is not going to carry on further forward. All the metrics suggest advice fees, if anything, could go higher.’
So whilst advisers could recommend a global portfolio for 20bps, the average fund charge was 63bps (0.63%) bringing the total average charge up to 1.78%.The average for the 54 firms was 87 bps for ongoing advice, with 21 of the advisers charging 100 bps. The average platform fee meanwhile was 28 bps and the average fund management charge was 63 bps, bringing the total average annual cost to clients to 178 bps.
‘The evidence is that advice fees are consistently going up. As much as we on the inside say they will come down, there is no evidence that this is happening at the moment. The normal metric of supply and demand suggests that is not going to carry on further forward. All the metrics suggest advice fees, if anything, could go higher.’
In our experience this is still far lower than the average real word charges we see from advisers.
However, as a former financial adviser myself until I moved to IM, I am not in any way knocking the role an adviser plays.
Whilst clients are prepared to pay financial advisers for advice then they must be providing a valuable service, this stands to reason.
Equally, there are many people who don't want to pay for such advice (and/or do not trust financial advisers) and who are happy to save money by doing everything themselves. Fantastic.
What we offer is a middle ground. Everything is fully managed and you have access to a qualified and experienced account manager, yet at half the price of the average adviser solution in the article you linked to above.
This ideal for others.
So there is no right or wrong approach, just different approaches that suit different people.
Intelligent Money said:
Saying that a half decent adviser should be able to cover his 87bps (0.87%) fees several time over ever year is a very bold statement indeed!
I've not seen any evidence that supports this.
If you look at Vanguard Adviser Alpha study they attempt to put some hard numbers against the areas where a (decent) adviser adds value. See also Royal London's "The value of financial advice", and while you could take these studies with a pinch of salt, in the real world it holds true (as I mentioned, for the right client (which is a whole new discussion!)).I've not seen any evidence that supports this.
It is a shame (although understandable) that a large percentage of people don't trust advisers.
Intelligent Money said:
What we offer is a middle ground. Everything is fully managed and you have access to a qualified and experienced account manager, yet at half the price of the average adviser solution in the article you linked to above.
1. To clarify this question of costs, please illustrate the total charges paid by a new client who brings £100k to your firm with a 10 year investment horizon. If advice or anything else is an additional charge please make that clear and give an indication of cost. (This question is not about total charges levied by your firm, it's about total charges borne by the client, so includes fund management fees, any separate platform costs etc.)2. If someone brings you £100k what do you use as the starting point to measure and report their investment return,
A. £100k?
or
B. £9,850k? (i.e. after your 1.5% initial charge)
Derek Chevalier said:
Intelligent Money said:
Saying that a half decent adviser should be able to cover his 87bps (0.87%) fees several time over ever year is a very bold statement indeed!
I've not seen any evidence that supports this.
If you look at Vanguard Adviser Alpha study they attempt to put some hard numbers against the areas where a (decent) adviser adds value. See also Royal London's "The value of financial advice", and while you could take these studies with a pinch of salt, in the real world it holds true (as I mentioned, for the right client (which is a whole new discussion!)).I've not seen any evidence that supports this.
It is a shame (although understandable) that a large percentage of people don't trust advisers.
I think we both know that good advisers (and I agree, with the right client) can add value, unfortunately it is often the case that they don't - and these are not the minority either.
I like to believe I did when I was practising and I am sure you do too.
We work with financial advisers every day and can see the disparity between the good and the bad quite clearly (and often depressingly). The bad drag down the good, to put it simply.
That is why we decide to launch Private Clients, as a viable alternative to advice at one end and DIY platforms at the other.
But as I have said, there is a place for each approach.
Regards
Nik
rockin said:
Intelligent Money said:
What we offer is a middle ground. Everything is fully managed and you have access to a qualified and experienced account manager, yet at half the price of the average adviser solution in the article you linked to above.
1. To clarify this question of costs, please illustrate the total charges paid by a new client who brings £100k to your firm with a 10 year investment horizon. If advice or anything else is an additional charge please make that clear and give an indication of cost. (This question is not about total charges levied by your firm, it's about total charges borne by the client, so includes fund management fees, any separate platform costs etc.)2. If someone brings you £100k what do you use as the starting point to measure and report their investment return,
A. £100k?
or
B. £9,850k? (i.e. after your 1.5% initial charge)
1. The 0.87% annual charge is inclusive of everything the client will pay. So (using round numbers) the cost in year 1 would be £870 and if the funds rise by an average of 7% a year then the total cost will rise by the same level.
The 0.87% includes:
- Investment management
- Underlying funds
- Dealing fees
- Custody
- Rebalancing
- ISA wrapper
- Pension wrapper
- Taking tax free cash from your pension
- Income drawdown from your pension
- Purchasing and holding a commercial property doesn't even carry an additional charge
- Unlimited access to me and my Private Client team is also included
We don't provide advice, so there are no additional advice fees (unless you decide to appoint a third party adviser), we provide information, guidance and support to enable you to come to your own professionally informed decisions.
There is no platform fee either.
The 0.87% includes everything our Private Clients pay.
2. The starting point for investment returns on a £100,000 investment would be £98,500 for a general client and £100,000 for PHers.
I hope this fully answers your question.
Regards
Nik
BTW, for those that do not know, Intelligent Money is owned by a quite active PHer, hence the special terms for other PHers.
FredClogs said:
"Our Private Client services offers fully managed ISAs and Pensions (with SIPP commercial property functionality) without the added expense of platform and adviser fees"
Hi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
Hi FredHi Nic,
Can you explain this, I have a sipp if I transfer my sipp investments to you are you saying they'll be no platform fees? How do you get paid?
I've just been going back through posts and don't think I quite addressed your question properly (and also missed a couple of others that I'll answer below).
If you transfer your SIPP investment to us we will then manage them on your behalf based upon your required approach. We charge a fully inclusive 0.87% a year for this and our other services.
There are no platform fees for our managed portfolios, or any other fees for that matter.
If you have a commercial property within your SIPP you can transfer this across too. There is no fee for this or the ongoing management of your commercial property/properties providing you have a minimum of £100k invested in our portfolios.
We get paid by our margin on your investment portfolios.
I hope this better addresses your question, please get back to me if there is anything else.
Regards
Nik
Sorry Steve, I missed these:
Bear in mind he could buy one-off allocation advice elsewhere and then invest in L&G trackers on a low cost platform for relative peanuts. You would have to "outperform" by 0.5% p.a. just to keep up with him.Firstly, there wouldn't be any initial charge as Selmahoose is a PHer.
He could certainly buy trackers for peanuts but he would have to manage his asset allocation and rebalance this himself.
Alternatively he could pick a global tracker - if he is happy to have his holding blindly mirror their market capitalisation with no discretion to take into account economic, political or market sentiment at the time. We evaluate this daily.
Our Private Client proposition is basically saying pay a bit more than the absolute cheapest option (or a lot less than an advised option) for a fully managed service with full support.
As I have said before, it is not right or wrong, it is just an alternative to the advised/DIY models.
You have summed up a conversation I regularly have with clients.
Regards
Nik
rockin said:
Intelligent Money said:
I don't give or charge for financial advice - I just help my clients achieve their financial planning goals and act as their personal contact.
When Selmahoose punts his £100k in your direction there will be an initial charge of 1.5% - what does he get for his £1,500? And then the ongoing charge of 0.87% p.a. is double some other firms.Bear in mind he could buy one-off allocation advice elsewhere and then invest in L&G trackers on a low cost platform for relative peanuts. You would have to "outperform" by 0.5% p.a. just to keep up with him.
He could certainly buy trackers for peanuts but he would have to manage his asset allocation and rebalance this himself.
Alternatively he could pick a global tracker - if he is happy to have his holding blindly mirror their market capitalisation with no discretion to take into account economic, political or market sentiment at the time. We evaluate this daily.
Our Private Client proposition is basically saying pay a bit more than the absolute cheapest option (or a lot less than an advised option) for a fully managed service with full support.
As I have said before, it is not right or wrong, it is just an alternative to the advised/DIY models.
rockin said:
The concepts of "income" and "capital" are IMO a bit old-fashioned. For a market investor they are both just "making money" and, particularly in an ISA or SIPP, it doesn't much matter which is which. What does matter is your total return.
On the other hand a real estate investor whose "capital" is in large lumps bolted to the ground will be far more dependent upon his income yield. He has no other convenient way to access cash.
For most investors any distinction between income and capital only matters if and when the TaxMan says it matters!
We agree completely. We invest for 'returns'. How you choose to treat them is the only thing that defines whether it is growth or income.On the other hand a real estate investor whose "capital" is in large lumps bolted to the ground will be far more dependent upon his income yield. He has no other convenient way to access cash.
For most investors any distinction between income and capital only matters if and when the TaxMan says it matters!
You have summed up a conversation I regularly have with clients.
Regards
Nik
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