Do I Need a New IFA?

[Spydaman]

I retired last year after having a bowel cancer scare. It turned out not to be cancer but Mrs Spydaman has also been diagnosed and treated for breast cancer this year. We are both fully fit now and starting to enjoy our retirement. However, we are just coming up to our first annual review with the IFA and I dont feel the we've done very well even given the current climate. We've taken an annual income of £35k from our pension pot which is all good but is our pension pot is now over £85k lighter. How should I approach the meeting with the IFA?

[Halitosis]

Difficult to know if your £85k loss represents a 10% fall (not too bad) or a 30% fall. Also depends on your risk tolerance and portfolio spread, so the only reasonably measure would be against equivalent indexes and ask your IFA to explain any differences.
Also wouldn't be unreasonable to ask for a reduced fee rate to reflect their poor start (if it actually was relatively poor)

[alscar]

Firstly sorry to hear about your last 12 months health issues and hope you both continue to be both fit and enjoying retirement.
That’s the easy part of the reply.
I think without more detail it’s a bit difficult to proactively comment - for instance percentage reduction of pot relative to total ( ignoring drawdown amount ) and how currently invested etc.
Given overall stock market over past 12 months you can at least then make a comparison in percentage terms.
I would suggest most pots are down ytd - it’s just if yours appears “ excessively “ so is the point.
I guess also depends on your existing relationship with your IFA and how long you have been clients.

[Tye Green]

what purpose is the IFA used for - just managing the pot or taxation advice etc?
whats are his fees?
how big is the pot?
specifically, what has he invested the pot in - funds? which funds etc
far more info required

[PositronicRay]

I'm about to bin ours. The old one has sold out to a bigger outfit and retired, I'm just not convinced they're now offering VFM.

[Spydaman]

According to my maths and excluding what weve taken as income our pot is down about 7.5%. I guess that taking into account the current climate post Brexit Covid and UKR thats not too bad. Hopefully things will pick up next year and before we run out of money.

[alscar]

Doesn't sound too bad given markets and doubt much different to most - actual pot still in quantum terms more than the average perhaps.
If you continue to drawdown at that 5% rate and the pot literally doesn't change from now either up or down ( somewhat unlikely ) your pot would last for another 16 years and that's ignoring the reduction you would take when the State Pension kicks in.
I believe I'm right in saying that usual dd percentage is around 4% as accepted sensible amount.
Obviously I'm just random chap off the Internet and certainly not an expert or FA and I can only go on what you have said ( with lots of unanswered questions ) but I don't think you are bad shape.
I would certainly be putting this to your FA although bit disappointing that he hasn't already had a conversation with you although perhaps annually suits some.
Lastly there is another thread running ( Started by GT3 ) on enjoying retirement which is a good natured one and worth looking at.

[Derek Chevalier]

Spydaman, sorry to hear what you've been through.

Spydaman said:

How should I approach the meeting with the IFA?

If you are paying an adviser for ongoing retirement planning/advice, a large part of what you are getting should be peace of mind/encouragement to spend your money and not worry about what the markets are doing (or at least not until something needs to be done, which is unlikely to be the case today).

Part of that peace of mind should be the reassurance that market volatility is unavoidable. This will hopefully have been done as part of the initial retirement planning process and also on an ongoing basis (sometimes known as lifeboat drills - e.g, your portfolio has the potential to fall by 30% in one year, are you sure you can cope with that?).

Much like a flyer that is nervous of turbulence and feels more settled after watching what a plane can endure

https://www.youtube.com/watch?v=6wHrfBs82Tk

an appreciation of what a robust retirement portfolio has been designed to cope with (Great Depression, World Wars, 1970s etc) tends to put the retiree's mind at ease and more happy to deal with periodic turbulence as we are experiencing today.

So with the caveat that your portfolio has fallen in line with a typical portfolio (i.e, your adviser hasn't selected something that has taken a real beating) then I think you need to push for continued reassurance.

[Derek Chevalier]

Halitosis said:

Also wouldn't be unreasonable to ask for a reduced fee rate to reflect their poor start (if it actually was relatively poor)

It would imply a relationship that is based on investment returns - it's questionable how much value there is there (see the other IFA thread).

[Derek Chevalier]

alscar said:

I would certainly be putting this to your FA although bit disappointing that he hasn't already had a conversation with you although perhaps annually suits some.

It's a tricky one to get the right balance.

A retiree that doesn't often check their balances might be unnecessarily unnerved if their adviser phones to tell them every time there is some volatility in the market.

Conversely, a worrier might feel they aren't getting value for money if their adviser doesn't phone them every time the Negative Events World Service tells them the FTSE has fallen.

[alscar]

Yup agree hard to get right balance although no contact for 12 months doesn't feel right to me.
As with some of the other unanswered questions might be interesting to learn what their charges were given you might just get what you pay for or not !

[Spydaman]

I do get regular emails throughout the year and I have spoken to him a couple of times, mostly saying don’t panic, sit tight, your plan allows for significant losses and gains etc. plus I bump into him in town from time to time. He charges us 0.4% I think but that’s taken at source so we don’t actually get a bill.

[Spydaman]

So myself and Mrs Spydaman had our annual review with the IFA and as expected our pension pots and S+S ISAs have lost about 9%. We need a 20% pay rise to allow for inflation last year and next year. His solution is to stop withdrawing from the pension pot for the next 1 to 3 years and live off cash savings. We can do this but would pretty much clean us out of savings after 3 years. Does this sound like a sensible strategy?

[bitchstewie]

I'm not an IFA and I don't work in finance but that's pretty much one of the reasons for keeping a suitably sized cash buffer.

What are you invested in?

[alscar]

I had a catch up with my FA yesterday.Our total pot with him including Pension savings ytd is down 11% - the average return pa for the preceeding 6 years is +8% - for the Pension pot per se I have asked him to do some further numbers to show how long the pot would last assuming growth of 1% pa , inflation of 2.50% pa ( I'm basing this on Personal not Country inflation ) and keeping exactly the same draw-down amount as now.
Personally I had always planned to use the Pension Pot before then going into other money and from what I can see have currently no reason to change this thought process but its a personal call so not advice !
Just as switching Advisors etc - I have no desire to sell / Transfer any of our Funds when at their ( perceived ) lowest or low levels.

[WayOutWest]

Spydaman said:

So myself and Mrs Spydaman had our annual review with the IFA and as expected our pension pots and S+S ISAs have lost about 9%. We need a 20% pay rise to allow for inflation last year and next year. His solution is to stop withdrawing from the pension pot for the next 1 to 3 years and live off cash savings. We can do this but would pretty much clean us out of savings after 3 years. Does this sound like a sensible strategy?

The average bear market is about a year. A particularly bad bear market may last for 3 years. That doesn't mean you will recover all the "losses" from the previous peak after that time, but it will at least have bottomed and be on the way up again.
So having cash reserves to draw upon for a minimum of 1 year or preferably 2 to 3 years is not a terrible strategy. You could then gradually replenish your cash reserves when the markets are higher.
By drawing on cash or short dated bonds now you are not crystallising losses in your riskier assets.

Regarding inflation, do you really NEED to increase by 20% or are there feasible cutbacks you can make? Not suggesting you huddle around a candle fired flowerpot heater, but there may be some luxuries you can ease up on.
It is easy to criticise IFAs, and I don't use one, but it has been a tough year for portfolios with both bonds and equities dropping in tandem due to the rising interest rate environment and unwinding of QE. Being a single figure % down YTD at this stage isn't too bad.

It's worrying you are having to ask a bunch of strangers on a car forum about this, but there are some highly intelligent, and often powerfully built, individuals here who can sometimes help. Or make matters worse.

[xeny]

Spydaman said:

So myself and Mrs Spydaman had our annual review with the IFA and as expected our pension pots and S+S ISAs have lost about 9%. We need a 20% pay rise to allow for inflation last year and next year. His solution is to stop withdrawing from the pension pot for the next 1 to 3 years and live off cash savings. We can do this but would pretty much clean us out of savings after 3 years. Does this sound like a sensible strategy?

List some other possible strategies given the assets you have - are they more or less sensible?

The normal argument for having a cash buffer is to use it when the market is down. If you're not going to use it in a down market, when are you going to use it?

[Simpo Two]

Spydaman said:

So myself and Mrs Spydaman had our annual review with the IFA and as expected our pension pots and S+S ISAs have lost about 9%. We need a 20% pay rise to allow for inflation last year and next year.

You mean a 10% pay rise I think (based on inflation at 10%). It may be two years but it's still 10%

xeny said:

The normal argument for having a cash buffer is to use it when the market is down. If you're not going to use it in a down market, when are you going to use it?

To take an investment opportunity, amongst other things.