Married Couple - 2 x Financial advice fees

[Armitage.Shanks]

When I retired nearly 7yrs ago I took the max lump sum out of my pension given I am on a index linked final salary scheme but didn't really have an immediate need for all of it so decided to invest £150k in a S&S ISA split between me and my wife. So an immediate annual ISA was taken for each of us and the remainder held jointly in the same fund.

As the years progressed each year money was taken out and added to our individual ISAs. Financial advice was provided with us both selecting a 'cautious' fund with the intention of meeting or achieving better than the annual inflation figure. As part of the 'service' we have an annual financial review albeit I've not added to it beyond the initial investment. In addition I have several other S&S PEPs that I've held for +30yrs and look after these myself (if a cursory review of a 6-month statement counts) along with several fixed interest bonds so, in effect, any annual financial advice seems inconsequential.

All this started through a company called Standard Life using a 'Wrap Account', it was then seemingly taken over by Abrbn (Tatton Investment Management) and its now (advice?) just moved to My Pension Expert. The latter's letter has prompted this query about whether we should be charged one fee or a fee each especially as the letter informs me the annual advice fee is going up from 0.75% to 1.10%. So based on its current value £172k thats near £1,000 each! It's probably been like this from the outset and I've missed it.

Is this current practice given only an individual can hold an ISA despite the fact for advice we are a married couple? And is a growth of £22k over 6yrs (Tatton Core) reasonable? I'm of a mind to just transfer it to either M&G or Perpetual with whom I hold PEP funds and leave it there.

[xeny]

Cautious will mean lots of bonds which did poorly in '23, so the returns are plausible.

IMO, low risk long term investments with high fees tend to be unsatisfying as the fees eat so much of a small return, yet you still suffer from some risk.

If you are each paying a %age fee on half the value, then that wouldn't strike me as an unreasonable structure. I would be considerably less happy if that is each charged on the full value.

With regard to the fee, what annual advice are you receiving for it?

[Simpo Two]

Armitage.Shanks said:

Is this current practice given only an individual can hold an ISA despite the fact for advice we are a married couple? And is a growth of £22k over 6yrs (Tatton Core) reasonable? I'm of a mind to just transfer it to either M&G or Perpetual with whom I hold PEP funds and leave it there.

The low growth is not because you have an S&S ISA or even where it is, but because (1) it's invested in cautious products and (2) an IFA is taking fees from it. There will be other charges too, like fund managerment.

£22K return on £150K is 14.7% gain. Over seven years that's 2.1%, which is frankly dreadful. A building society could do better. It's very likely charges have taken away 1/3 of the growth. But one thing's for sure - if you want to improve matters you'll need to start pulling some levers.

[alscar]

The Funds are in separate names so the charges will have been applied separately but as a couple they end up being the same £ total as if all had just been in your name.
Whether the “advice “ has been worth the total ( or even half of the total ) fee quantum is obviously debatable.

[bitchstewie]

Do you know the exact fund?

If you're getting a 3-4% return and paying 1.1% in fees you're only keeping 60% of your returns.

[Simpo Two]

alscar said:

Whether the “advice “ has been worth the total ( or even half of the total ) fee quantum is obviously debatable.

Given that it led to worse performance than a simple deposit account, which would have given c.4% gain for 0% risk, and the markets have done well, yes.

OP, I would dig through all the paperwork and see if you can discover all the charges between you and your money.

[xeny]

Even without excessive charges, a conservative portfolio has produced near zero return over the past 5 years. Here's the value graph for a 20 Equity, 80% bond fund over that period

https://www.hl.co.uk/funds/fund-discounts,-prices-...

Through in a couple of years of ~5% returns before that and you get the kind of results the OP is reporting.

[Armitage.Shanks]

Simpo Two said:

£22K return on £150K is 14.7% gain. Over seven years that's 2.1%, which is frankly dreadful. A building society could do better. It's very likely charges have taken away 1/3 of the growth. But one thing's for sure - if you want to improve matters you'll need to start pulling some levers.

That's my assessment - the 'fund' is Tatton Core a 'hybrid mix of passive and active funds'.

When I look up Tatton products it seems to get a good review with Money Marketing albeit that is their 'Active' fund.

Up until I retired I never bothered investing in S&S for 25yrs but decided to stick part of the lump sum somewhere. The last times were PEPs in the 90s where over two years in one fund I invested £11k and 30yrs on that's now just over £100k. Now whether that's any good over the time period I've no idea.

Given I've no call on this money as yet (and can't really forsee when I'll need it) I should have gone for a higher risk.

In terms of 'advice', the adviser is on call but I leave it to a F2F or Teams annual review. He's only managing this investment, all the other stuff I've done myself.

[bitchstewie]

Tatton Core looks like a range of funds similar to LifeStrategy or other ranges.

So whether the returns you've had are acceptable will depend on exactly which fund(s) you're invested in

[Simpo Two]

Ongoing charges (OCF) are 0.36%. Hopefully you were made aware of that before you invested.

Armitage.Shanks said:

In terms of 'advice', the adviser is on call but I leave it to a F2F or Teams annual review. He's only managing this investment, all the other stuff I've done myself.

What do you think he does to 'manage' the investment? I'll tell you - nothing.

If you don't ever feel the need to ring him them then do you actually need an advised service? You could of course ring him tomorrow and say 'My investments that you sold me have performed diabolically so give me advice on how to make them better'.

[Armitage.Shanks]

Simpo Two said:

What do you think he does to 'manage' the investment? I'll tell you - nothing.

If you don't ever feel the need to ring him them then do you actually need an advised service? You could of course ring him tomorrow and say 'My investments that you sold me have performed diabolically so give me advice on how to make them better'.

Exactly and that's where I'm at with it.

The time to have ongoing financial advice would have been better 30yrs ago before I retired then I could have actually been more adventurous but I wasn't 'in the game' then and my financial planning involved reading the Money section of the Sunday Times when I pumped money into PEPs with M&G, Invesco and others which is where it has stayed. Sure some 6-monthly statements I've seen 'drops' of £5k in a fund but I've played the long game and they've so far come back. Whilst some will actively monitor their S&S weekly/monthly and dabble in shares I don't as that would cause a degree of consternation I'd rather do without and if I'm up, ideally above inflation then I'm OK with it and it's all tax free.

The only 'useful' advice I've received is draw down on the cash reserves first before dipping into S&S funds given the cash on deposit is eroded by inflation

Ideally I'd want someone to manage my investments and tell me this fund is doing poorly and I recommend switching etc but so far I've not had that and question what I (we) actually get for £2kpa when it's in a fund 'managed' by a third party.

Going back to the comment 2.1% annual growth on the fund is dismal it was over a time that you'd be lucky to get more than 1% on a cash deposit fixed rate bond over the period. A few years back I was lucky to get 0.89% fixed!

I'm going to look at this Trafford Core performance after I've challenged the FA over it's poor performance over the period then I don't see why I can't take it over myself or failing that transfer it into existing PEP/ISA funds or look at another with a big hitter?

[okgo]

You need to work out your appetite for risk and involvement. That’s what’s done you in so far, once you have that clear in your mind then a decision probably can be made.

[bitchstewie]

Poor performance compared to what?

You still haven't said what you're invested in.

For all anyone knows the performance could be absolutely in line with similar funds from other providers and entirely in line with the goals and appetite for risk you agreed with your advisor.

[xeny]

That's why I looked up the figures for LS20, which seems a reasonable "cautious" benchmark.

Over the past 7 years, that has returned ~10% .

https://webfund6.financialexpress.net/clients/Harg... .

Pay any level of advice on that and you have achieved return free risk, but if the OP originally asked for "cautious" it would have been an appropriate fund choice.

[Simpo Two]

Armitage.Shanks said:

Ideally I'd want someone to manage my investments and tell me this fund is doing poorly and I recommend switching etc but so far I've not had that and question what I (we) actually get for £2kpa when it's in a fund 'managed' by a third party.

Post the answer when you get it.

Armitage.Shanks said:

II'm going to look at this Trafford Core performance after I've challenged the FA over it's poor performance over the period then I don't see why I can't take it over myself or failing that transfer it into existing PEP/ISA funds or look at another with a big hitter?

He will say 'It's a long term investment' and tell you the benefits of a cautious fund. He fulfilled the original brief and collects the rent. They do other things, useful things, but actively managing investments isn't one of them.

You should certainly be able to take control of your money, but Tatton (not Trafford) Core might only work with IFAs, ie won't take instructions from you. Might be worth a call to discuss a way forward.

You could put all your money into active funds and then it would be managed - but only within the remit of the fund. They're not going to stick 20% into Tesla on a whim, or sell the lot to cash when the next pandemic looms. I believe - but stand to be corrected - that trackers do just as well because the charges are lower.

The only person who really decides what money goes where is you. You're at that place where what you have isn't working, you're carrying a passenger and you know there must be a better way, but the way forward isn't clear. Hopefully it will be

[xeny]

Simpo Two said:

I believe - but stand to be corrected - that trackers do just as well because the charges are lower.

I'd argue on average that trackers do better because the charges are lower. Picking a manager that will outperform the market on an ongoing basis is as if not more challenging than picking an investment that will outperform the market on an ongoing basis.

[Armitage.Shanks]

Thanks for the feedback. Other than this particular fund I'm more or less happy where the rest of my investments are and I know that with what's going on in the world investments have not performed at their best along with very low rates of cash on deposit interest rates due to low inflation.

However by way of comparison I switched a ISA M&G Fund to their Managed Growth Fund 2018 which was £51k in. Today that stands at £79k so has performed a lot better, but checking that is rated '5' where '7' is the highest level or risk/reward. M&G I got into 30yrs ago making my own choice of where to invest the then annual PEP allowance.

As Tatton Core is cautious the feedback suggests it has performed similar to other cautious funds. And whilst I'm aware a IFA can do other stuff I'm not sure I'm the ideal client to need £2k worth of advice (based on fund size) given that my pension for example is not dictated by investment performance. I'll discuss in the new year and may transfer it.

[ooid]

Simpo Two said:

£22K return on £150K is 14.7% gain. Over seven years that's 2.1%, which is frankly dreadful. .

It is a bit lower actually, his portfolio had 1.97% CAGR.

[bitchstewie]

If it's Tatton Core Cautious it looks like it's about 55/45 with 45% in equities.

Looks to have returned around 20% over five years.

For comparison LifeStrategy 40 has returned 13% and LifeStrategy 40 has returned 27% over five years.

So it's probably not massively far off.

I'd look at the total you've been paying in fees and make sure you fully understand them as I suspect those may have been a significant headwind if there are fund and platform fees on top of the advice fees.

Respectfully if you don't understand this stuff say so or just ask too - we're still guessing which fund it is

[ooid]

Yup, looking at also LS20 annual returns since 2017, his portfolio would have been 2.03% until now. LS100 would have given him 8.44%.