Intelligent Money - your investment questions answered
Discussion
Tresco said:
Thank you for the full reply Julian, food for thought.
No problem whatsoever.Reading my reply back I just wanted to say that I wasn't trying to knock your idea (and I hope it didn't come across that way), just giving some responsible feedback on the inherent risks and highlighting other options to achieve what you are looking for.
If you would like a managed AIM listed portfolio for your ISA we will work with you in achieving this.
Cheers
A question re costs - why a percentage fee? I've gravitated to brokers with fixed fees per deal as I can't see the justification for charging more to buy/sell £10k worth of shares than to buy/sell £1k of shares.
So what's the justification for percentage of asset fees? Isn't the work the same no matter how much is involved?
So what's the justification for percentage of asset fees? Isn't the work the same no matter how much is involved?
pteron said:
A question re costs - why a percentage fee? I've gravitated to brokers with fixed fees per deal as I can't see the justification for charging more to buy/sell £10k worth of shares than to buy/sell £1k of shares.
So what's the justification for percentage of asset fees? Isn't the work the same no matter how much is involved?
Good question, I'll explain.So what's the justification for percentage of asset fees? Isn't the work the same no matter how much is involved?
If you are using a broker to buy shares you certainly should be paying a fixed fee for the deal.
We, however are not brokers placing a deal for you. We are investment managers, pension/SIPP providers and ISA plan managers.
Most of our costs are linked to the size of the asset we run. The underlying tracker funds, our Capital Adequacy requirements, Professional Indemnity insurance, FCS fees and FSCS levies are all linked to the value of the money we run.
Therefore, like every other investment manager our fees are also linked to the value of this money.
Equally these costs increase the more successful we are with providing strong investment returns, regardless of any other factors.
Of course, the reality is the larger we grow the greater the staffing and general overhead becomes.
The work is also not necessarily the same no matter how much is involved.
Someone putting a few hundred pounds a month into a Junior ISA or Pension still has 12 Direct Debit transactions and HMRC reporting each year, but this is certainly less work than us running the investments of the parents who may have complex planning, taxation, IHT mitigation requirements and may want our assistance with otther financial matters out side of the investments we run or work on commercial property holdings.
These are all things we make no charge for.
Setting those things aside though and only focusing on the large costs we have that are linked to the size of the asset, the more successful we are in growing this asset for our clients the great these cost become to us.
On a fixed fee basis this would eventually result in us losing more money the better our performance was. This is obviously not a logical or sensible financial model!
So, as you can see, an execution-only broker offering fixed fees per trade is not doing anything close to what we are doing and the two pricing models cannot be compared, just as the two different service levels cannot.
I hope I have been able to answer your question openly and honestly in a clear and transparent manner.
Cheers
Julian
Thanks for that.
I can see that the underlying funds pass on their percentage fees, but aren't these significantly lower than 0.87%? VWRL for instance is 0.25%, VUKE is 0.09%, VGOV is 0.12% etc. I don't pay a platform fee, just a fixed holding fee per year.
I appreciate you add value, but on a £500k pot you'd be taking £4350 per annum vs £1250 (max depending on mix) plus £100 p.a. fixed charge (it's capped at £25 per quarter). I invest through regular investments so pay £1.50 per trade (5 trades per month, so £7.50 x 12 = £90).
£4350 vs £1440.
OK if I had a lot of activity then I'd be charged more by my provider, but until I actually want to drawdown or the like, my money just sits there growing. What do I get that's worth the loss of almost £3k per year every year, compounded?
FWIW I follow a portfolio like the Golden Butterly which has similar properties to your managed portfolio - it returns most of the gains from the stock market but with much lower volatility - https://portfoliocharts.com/portfolio/golden-butte...
I can see that the underlying funds pass on their percentage fees, but aren't these significantly lower than 0.87%? VWRL for instance is 0.25%, VUKE is 0.09%, VGOV is 0.12% etc. I don't pay a platform fee, just a fixed holding fee per year.
I appreciate you add value, but on a £500k pot you'd be taking £4350 per annum vs £1250 (max depending on mix) plus £100 p.a. fixed charge (it's capped at £25 per quarter). I invest through regular investments so pay £1.50 per trade (5 trades per month, so £7.50 x 12 = £90).
£4350 vs £1440.
OK if I had a lot of activity then I'd be charged more by my provider, but until I actually want to drawdown or the like, my money just sits there growing. What do I get that's worth the loss of almost £3k per year every year, compounded?
FWIW I follow a portfolio like the Golden Butterly which has similar properties to your managed portfolio - it returns most of the gains from the stock market but with much lower volatility - https://portfoliocharts.com/portfolio/golden-butte...
pteron said:
Thanks for that.
I can see that the underlying funds pass on their percentage fees, but aren't these significantly lower than 0.87%? VWRL for instance is 0.25%, VUKE is 0.09%, VGOV is 0.12% etc. I don't pay a platform fee, just a fixed holding fee per year.
I appreciate you add value, but on a £500k pot you'd be taking £4350 per annum vs £1250 (max depending on mix) plus £100 p.a. fixed charge (it's capped at £25 per quarter). I invest through regular investments so pay £1.50 per trade (5 trades per month, so £7.50 x 12 = £90).
£4350 vs £1440.
OK if I had a lot of activity then I'd be charged more by my provider, but until I actually want to drawdown or the like, my money just sits there growing. What do I get that's worth the loss of almost £3k per year every year, compounded?
FWIW I follow a portfolio like the Golden Butterly which has similar properties to your managed portfolio - it returns most of the gains from the stock market but with much lower volatility - https://portfoliocharts.com/portfolio/golden-butte...
No problem! I can see that the underlying funds pass on their percentage fees, but aren't these significantly lower than 0.87%? VWRL for instance is 0.25%, VUKE is 0.09%, VGOV is 0.12% etc. I don't pay a platform fee, just a fixed holding fee per year.
I appreciate you add value, but on a £500k pot you'd be taking £4350 per annum vs £1250 (max depending on mix) plus £100 p.a. fixed charge (it's capped at £25 per quarter). I invest through regular investments so pay £1.50 per trade (5 trades per month, so £7.50 x 12 = £90).
£4350 vs £1440.
OK if I had a lot of activity then I'd be charged more by my provider, but until I actually want to drawdown or the like, my money just sits there growing. What do I get that's worth the loss of almost £3k per year every year, compounded?
FWIW I follow a portfolio like the Golden Butterly which has similar properties to your managed portfolio - it returns most of the gains from the stock market but with much lower volatility - https://portfoliocharts.com/portfolio/golden-butte...
Of course the underlying funds are significantly lower than 0.87%, but then we have all the other costs involved!
Obviously you are investing in funds that also have percentage based annual charges, so you are not in a purely fixed cost position buying lines of stock from a broker (as I originally considered).
Your fixed cost relates only to the platform fee (which is included in our costs). The lion's share (nearly 90%) is percentage based costs (and I am not sure you have factored in fund - not platform - dealing fees within these)
Take away the active management element when we launch IM Index and we fall to 0.57% (which is still more than you are paying, but you are not getting any financial planning, tax (including IHT) mitigation or any of the other services we offer.
These, however, may be things you don't need or want. Fair enough if that is the case.
The link you gave me showed 40% equities, 40% bonds and 20% gold.
I would not want to be holding 20% in gold and you are missing out on index linked gilts, FWIW.
Not knowing your age, investment horizon and ultimate aim for this capital I can't really comment on this, but the portfolio breakdown you gave me would suggest you are getting closer to wanting to access this money and are not looking at drawing a long term income from it.
You are paying c. 0.29% in total which is a great overall fee if you are happy to do all the research and run everything yourself without someone doing all of this for you (and a named Private Client Manager to assist you with this and any other financial matters whenever you want them).
This is great and as I have said many times before I think it is brilliant when people feel comfortable in running their investments on their own.
We are designed to appeal to people who want that additional value, support and service level, but who don't want to pay 2 or 3 times more than our charges for a financial adviser (or much more than this when we launch IM Index) though.
What we offer is probably not right for you right now, just like it would not appeal to people who don't understand the impact of financial advice fees.
If you understand exactly why you hold the assets you do in the weightings that you do then you may be best staying exactly as you are.
However, if you do not then it may be worth you having a chat with Nik and just get a sense check/use him as a sounding board to make sure you are indeed where you should be.
This is free to all PHers, even if you have no intention of becoming a Private Client.
Cheers
Julian
I thought may be as good a place as any to ask:
I am currently a member of a SSAS - this scheme has a number of investments one of which is a woodland.
For various reasons I may wish to move this woodland from the SSAS to a seperate SIPP.
It will be under the Stamp Duty threshold. (more or less bang on £100K)
Firstly am I able to do this and secondly if I am then what would the associated set up and annual costs be?
Thanks in advance
I am currently a member of a SSAS - this scheme has a number of investments one of which is a woodland.
For various reasons I may wish to move this woodland from the SSAS to a seperate SIPP.
It will be under the Stamp Duty threshold. (more or less bang on £100K)
Firstly am I able to do this and secondly if I am then what would the associated set up and annual costs be?
Thanks in advance
Hi Stephen
Firstly, is this an area of land you own outright. If not is it a shared interest that you can prove title to?
Costs - After any legal costs (which are obviously not our costs) it would be £750 a year and that is fully inclusive.
If you had a further £100k invested in our portfolios then the land would be included for free (so no charge whatsoever for holding it within your SIPP).
Please PM me, get in touch with Nik or post further here if you would like to find out more. We are always happy to help!
Cheers
Julian
Firstly, is this an area of land you own outright. If not is it a shared interest that you can prove title to?
Costs - After any legal costs (which are obviously not our costs) it would be £750 a year and that is fully inclusive.
If you had a further £100k invested in our portfolios then the land would be included for free (so no charge whatsoever for holding it within your SIPP).
Please PM me, get in touch with Nik or post further here if you would like to find out more. We are always happy to help!
Cheers
Julian
Thanks for the reply.
The land is owned outright by the current SSAS.
There are 5 trustees on the SSAS of which I am one, and it agree it's agreed that as an asset it is allocated to me and can hived off.
Useful info for me thanks and I'll follow up with a PM if it looks like it is happening.
The land is owned outright by the current SSAS.
There are 5 trustees on the SSAS of which I am one, and it agree it's agreed that as an asset it is allocated to me and can hived off.
Useful info for me thanks and I'll follow up with a PM if it looks like it is happening.
JulianPH said:
Sorry, I missed this yesterday.
Again, a really good point and a hangover from the adviser focused original system design when the client view was info only.
All the tech has long been in place and we just need to drag it into the Private Client screen, so this will be included in the next update.
Cheers
Julian
Great. I have another feature request for the web interface.Again, a really good point and a hangover from the adviser focused original system design when the client view was info only.
All the tech has long been in place and we just need to drag it into the Private Client screen, so this will be included in the next update.
Cheers
Julian
Could the documents section show the contract note (or similar) of each purchase so you can track how each purchase has done over time rather than you have paid in X and it’s now worth Y.
More to satisfy my spreadsheet fetish than anything else
KTF said:
JulianPH said:
Sorry, I missed this yesterday.
Again, a really good point and a hangover from the adviser focused original system design when the client view was info only.
All the tech has long been in place and we just need to drag it into the Private Client screen, so this will be included in the next update.
Cheers
Julian
Great. I have another feature request for the web interface.Again, a really good point and a hangover from the adviser focused original system design when the client view was info only.
All the tech has long been in place and we just need to drag it into the Private Client screen, so this will be included in the next update.
Cheers
Julian
Could the documents section show the contract note (or similar) of each purchase so you can track how each purchase has done over time rather than you have paid in X and it’s now worth Y.
More to satisfy my spreadsheet fetish than anything else
There are no contract notes as such as were are not a broker making a purchase for you, but I get the gist and believe the next update will give you what you are looking for.
Cheers!
desolate said:
Thanks for the reply.
The land is owned outright by the current SSAS.
There are 5 trustees on the SSAS of which I am one, and it agree it's agreed that as an asset it is allocated to me and can hived off.
Useful info for me thanks and I'll follow up with a PM if it looks like it is happening.
No problem, please feel free to get in touch if this is something you decide to do or you just have any further questions.The land is owned outright by the current SSAS.
There are 5 trustees on the SSAS of which I am one, and it agree it's agreed that as an asset it is allocated to me and can hived off.
Useful info for me thanks and I'll follow up with a PM if it looks like it is happening.
We have a dedicated commercial property (including land) team who work on just this.
Cheers
Julian
river_rat said:
How quickly does cash get invested into equities on the IM Global growth ISA?
Are there set days/dates of the month it get invested?
For example I put some cash into mine on 6th August and it is still showing as 'cash' under holdings and not in the fund yet.
Hi mate, sorry I was tied up yesterday.Are there set days/dates of the month it get invested?
For example I put some cash into mine on 6th August and it is still showing as 'cash' under holdings and not in the fund yet.
Money is usually invested when it is cleared with us, but when markets are wobbling we may keep you in cash for a short period and move over to equities when events have stabled out. This is just applying common sense really.
This is exactly what what has happened since your cash was cleared with us. Markets started falling a few days earlier and so we held on to putting you in until they had stabilised.
After developments over the last week (including the news that Trump is now delaying some of the tariffs on Chinese imports) we now feel that has sufficiently brought that short run on markets to an end.
We will now move you into equities and you will be buying more of them at a lower price because of this.
I hope that is a clear explanation, but please just give me a shout if there is anything else.
Cheers
Julian
Afternoon all, I'm looking for some advice from the collective wisdom of the PH finance gurus.
I've come to realise that I have severely neglected pension planning, and saving in general, through an all too common lack of interest/disposable income that I was prepared to part with.
I'm now 35, and spurred on by the introduction of workplace pensions (which I think are a great idea), I'm conscious that at the end of the day at the level of my current contributions it isn't going to get me very far.
Current situation is that I'm earning £27k p.a. with pension contributions from that at 5% from myself, and 3% from my employer - this amounts to £180 p.m. going into a workplace pension scheme. I've transferred two previous pension pots from previous employers into this, and the pot stands at a pitiful £2,500.
I've not long opened a SIPP, my contributions to that currently are £100 p.m. Pot size at the moment is tiny. I've been working on the basis of trying to tuck away half my age as a percentage of my earnings, the thought was I would supplement this with part of the dividends detailed below.
I have a S&S ISA, with approximately £6,000 currently in it, with a regular monthly investment of £100, which I am looking to increase in the coming months to circa £300 p.m. I've enjoyed this process, but realise that I probably do not have enough knowledge to confidently pick funds to weather any storms. This comment is probably even more relevant to my pension planning!
On the plus side though, I have about £125k that my father put into funds for me some time ago (I don't know exactly when). This is split across three funds, and gives about £2k p.a. from the various dividends. In the past I've used this extra income as a nice bonus, but in the last year have realised it would be better off re-invested, and has gone into the S&S ISA.
Recently I have been considering whether it might be a good idea to hive off some of the £125k to kick-start my pension pot, and get the remainder really working for me. I don't have any need at the moment to liquidate any of it, and realistically probably wouldn't need to for another five years at least (if I did at all). I'm also not sure on any CGT liabilities that might incur.
Would be interested to hear thoughts as to what the best approach might be in this position.
James
I've come to realise that I have severely neglected pension planning, and saving in general, through an all too common lack of interest/disposable income that I was prepared to part with.
I'm now 35, and spurred on by the introduction of workplace pensions (which I think are a great idea), I'm conscious that at the end of the day at the level of my current contributions it isn't going to get me very far.
Current situation is that I'm earning £27k p.a. with pension contributions from that at 5% from myself, and 3% from my employer - this amounts to £180 p.m. going into a workplace pension scheme. I've transferred two previous pension pots from previous employers into this, and the pot stands at a pitiful £2,500.
I've not long opened a SIPP, my contributions to that currently are £100 p.m. Pot size at the moment is tiny. I've been working on the basis of trying to tuck away half my age as a percentage of my earnings, the thought was I would supplement this with part of the dividends detailed below.
I have a S&S ISA, with approximately £6,000 currently in it, with a regular monthly investment of £100, which I am looking to increase in the coming months to circa £300 p.m. I've enjoyed this process, but realise that I probably do not have enough knowledge to confidently pick funds to weather any storms. This comment is probably even more relevant to my pension planning!
On the plus side though, I have about £125k that my father put into funds for me some time ago (I don't know exactly when). This is split across three funds, and gives about £2k p.a. from the various dividends. In the past I've used this extra income as a nice bonus, but in the last year have realised it would be better off re-invested, and has gone into the S&S ISA.
Recently I have been considering whether it might be a good idea to hive off some of the £125k to kick-start my pension pot, and get the remainder really working for me. I don't have any need at the moment to liquidate any of it, and realistically probably wouldn't need to for another five years at least (if I did at all). I'm also not sure on any CGT liabilities that might incur.
Would be interested to hear thoughts as to what the best approach might be in this position.
James
Hi James - a lot to go at here!
Firstly, at 35 you are in a rather enviable position compared to most people your age. You have £133,500 in investments and are about to up your monthly contributions to £580 a month.
Assuming an average 7% annual return, then in 20 years time this would be worth £812.638. Even after an average rate of inflation this would be worth (in today's money) £533,281 20 years from now.
Initial comments:
It would be worth checking to see if your company would offer employer contributions on anything you set aside (in your workplace pension) in excess of the auto-enrolment minimum rates. Whilst most won't, it is still worth checking as this is giving you additional "free" money into your pension.
Whilst you are a basic rate taxpayer then there is no real logic in moving the funds your father gave you into a pension. Moving them into an ISA does make sense though.
You do not mention if you are married, have kids or a mortgage. These are quite important factors in you decision making.
You should almost certainly be reinvesting any divided income at this stage in your life, in any event.
I'm quite happy to go over all your options (and the pros and cons of each) here so that others in a similar position can benefit. Alternatively please feel free to PM me or get in touch with Nik (nik.burrows@intelligentmoney.com) if there are things you would like to keep private.
In any event, I hope this has been the start of some helpful information.
Cheers
Julian
Firstly, at 35 you are in a rather enviable position compared to most people your age. You have £133,500 in investments and are about to up your monthly contributions to £580 a month.
Assuming an average 7% annual return, then in 20 years time this would be worth £812.638. Even after an average rate of inflation this would be worth (in today's money) £533,281 20 years from now.
Initial comments:
It would be worth checking to see if your company would offer employer contributions on anything you set aside (in your workplace pension) in excess of the auto-enrolment minimum rates. Whilst most won't, it is still worth checking as this is giving you additional "free" money into your pension.
Whilst you are a basic rate taxpayer then there is no real logic in moving the funds your father gave you into a pension. Moving them into an ISA does make sense though.
You do not mention if you are married, have kids or a mortgage. These are quite important factors in you decision making.
You should almost certainly be reinvesting any divided income at this stage in your life, in any event.
I'm quite happy to go over all your options (and the pros and cons of each) here so that others in a similar position can benefit. Alternatively please feel free to PM me or get in touch with Nik (nik.burrows@intelligentmoney.com) if there are things you would like to keep private.
In any event, I hope this has been the start of some helpful information.
Cheers
Julian
Julian,
Many thanks, definitely some things to chew on there, and I do agree, the situation could be a lot worse, so for that I am thankful! Happy to cover the options here, as you say it might help someone else as ignorant as me!
Re: the other questions you raised, I am not married (yet) and no kids (yet) - I'm sure both of these will come along in the next five years or so though. I have a mortgage with my partner, which started last September on a 30-something year term (off the top of my head I would say 32 years remaining).
Interesting comments with regards to the additional employer contributions - I don't imagine this is something they would do, however is there any benefit in it for them?
The pension vs. ISA was one of the things that I couldn't quite get my head around, although it sounds like I might have had it about right. As a basic rate tax-payer I would obviously pay no tax on growth in an ISA; my rationale though was that by contributing to a pension I would be gaining by the additional 20% top-up from HMRC, giving a larger pot to grow? I appreciate I would then pay the tax back when I came to take the income later in life, but thought that this would be in effect somewhat mitigated by having had the benefit of the additional 20% compounding over the years. Is that just bad maths? Given that, is there any point at all in me paying into a pension outside of my workplace one, or would I be better off solely using my ISA?
I'd be happy to move the other funds over into an ISA, as I say I think they could be doing better for me. They would obviously need to be drip-fed in over the next 7 years or so, unless the rules change... How easy/difficult is it to do this, would they need to be sold and then re-invested, or can the holding be transferred into an ISA, then the money spread about appropriately?
More questions I'm afraid, as you can may be able to tell, this isn't my specialist subject! Thanks for your help thus far though.
James
Many thanks, definitely some things to chew on there, and I do agree, the situation could be a lot worse, so for that I am thankful! Happy to cover the options here, as you say it might help someone else as ignorant as me!
Re: the other questions you raised, I am not married (yet) and no kids (yet) - I'm sure both of these will come along in the next five years or so though. I have a mortgage with my partner, which started last September on a 30-something year term (off the top of my head I would say 32 years remaining).
Interesting comments with regards to the additional employer contributions - I don't imagine this is something they would do, however is there any benefit in it for them?
The pension vs. ISA was one of the things that I couldn't quite get my head around, although it sounds like I might have had it about right. As a basic rate tax-payer I would obviously pay no tax on growth in an ISA; my rationale though was that by contributing to a pension I would be gaining by the additional 20% top-up from HMRC, giving a larger pot to grow? I appreciate I would then pay the tax back when I came to take the income later in life, but thought that this would be in effect somewhat mitigated by having had the benefit of the additional 20% compounding over the years. Is that just bad maths? Given that, is there any point at all in me paying into a pension outside of my workplace one, or would I be better off solely using my ISA?
I'd be happy to move the other funds over into an ISA, as I say I think they could be doing better for me. They would obviously need to be drip-fed in over the next 7 years or so, unless the rules change... How easy/difficult is it to do this, would they need to be sold and then re-invested, or can the holding be transferred into an ISA, then the money spread about appropriately?
More questions I'm afraid, as you can may be able to tell, this isn't my specialist subject! Thanks for your help thus far though.
James
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