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Do I need my IFA?

MuddyBoots
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Re: Do I need my IFA?

#706658

Postby MuddyBoots » January 17th, 2025, 7:07 pm

scrumpyjack wrote:Using a financial adviser did not work out well for Sven-Goran Eriksson!

https://news.sky.com/story/sven-goran-e ... mpensation.

As long as you have the basic structure of your finances sorted out, I can't see that any sensible person needs to be paying an annual percentage to an IFA. I certainly would not let them decide what to invest in. The views of one IFA will be much much risker than just putting the equity element in a global tracker and doing nothing!

It was a long time ago that I used an IFA, when I was very new to investing and had received an inheritance but I was given a choice of either paying fees by an annual percentage for them to manage my investments for me; or a one-off fee for advice only with no ongoing charges or management. I chose the latter and after my money was invested in some funds I looked after them going forward. The advice also included paying extra into the DB pension scheme I belonged to at the time which had no connection with my adviser so he was fully independent as far as I could tell. The fee did seem a bit expensive at the time (I was only in a junior job) but was soon recovered by the funds' performance; one of them was commercial property which I hadn't considered but did well for several years until I had a chance to educate myself and take on the job of choosing my own portfolio.

vand
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Re: Do I need my IFA?

#707703

Postby vand » January 24th, 2025, 2:43 pm

I mean, obviously you should ditch your IFA.

Imagine you've done all the research and then choose to retire using the well-respected 4% rule... and then immediately gave half your income directly to your advisor.. well that's what you're effectively doing.

GeoffF100
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Re: Do I need my IFA?

#707813

Postby GeoffF100 » January 25th, 2025, 9:56 am

vand wrote:Imagine you've done all the research and then choose to retire using the well-respected 4% rule...

I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.

scrumpyjack
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Re: Do I need my IFA?

#707819

Postby scrumpyjack » January 25th, 2025, 10:30 am

GeoffF100 wrote:
vand wrote:Imagine you've done all the research and then choose to retire using the well-respected 4% rule...

I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.


It depends at what age you start drawing your pension. I've just started at 76 and at that age 4% seems fairly prudent!

Still I agree it is crazy to give any percentage annually to an IFA.

vand
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Re: Do I need my IFA?

#707828

Postby vand » January 25th, 2025, 11:01 am

GeoffF100 wrote:
vand wrote:Imagine you've done all the research and then choose to retire using the well-respected 4% rule...

I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.


It was the best stab and turned out to be a pretty good one given what Bengen & Trinity had to work with back when they were doing their research. Nothing researched or lived through since has substantially invalidated it if you just consider it for what it is.

Personally my view is that it is actually too conservative if we go back to first principles and widen our universe of assets beyond just stocks & bond, which is easily done today.

Would urge people to fully listen to the Pensioncraft interview with PortfolioCharts's Tyler which does an excellent breakdown of..

https://many-happy-returns.captivate.fm ... -portfolio

DrFfybes
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Re: Do I need my IFA?

#707830

Postby DrFfybes » January 25th, 2025, 11:12 am

GeoffF100 wrote:
vand wrote:Imagine you've done all the research and then choose to retire using the well-respected 4% rule...

I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.


I thought it was conservative. But really it depends if you retire at the start of a bull or bear market so flexibility and a cash buffer are probably best.

Paul

vand
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Re: Do I need my IFA?

#707835

Postby vand » January 25th, 2025, 11:36 am

DrFfybes wrote:
GeoffF100 wrote:I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.


I thought it was conservative. But really it depends if you retire at the start of a bull or bear market so flexibility and a cash buffer are probably best.

Paul


- A SWR is designed to be conservative in almost all scenarios, including bull market tops - that's the point of a SWR. While the future can always be worse than the historic worst case, you are sort of betting that you aren't retiring at what turns out to be the worst case in history up to now.

- Cash buffer is a bit simplistic and doesn't really do much. There's research that a bond tent may help if you are only considering stock/bond mixes as it derisks the portfolio at the startof the drawdown period, but in a practical situation you never know exactly how long you need your portfolio to last. Better to just go back to first principles and find an asset mix that better supports a higher SWR under all backtests

GeoffF100
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Re: Do I need my IFA?

#707925

Postby GeoffF100 » January 26th, 2025, 9:09 am

vand wrote:
GeoffF100 wrote:I thought that pretty much everyone thought that the 4% rule was too optimistic starting from here. Nobody knows what is realistic though. If you want certainty (or as near certainty as you can get), buy an index linked annuity.


It was the best stab and turned out to be a pretty good one given what Bengen & Trinity had to work with back when they were doing their research. Nothing researched or lived through since has substantially invalidated it if you just consider it for what it is.

Personally my view is that it is actually too conservative if we go back to first principles and widen our universe of assets beyond just stocks & bond, which is easily done today.

Would urge people to fully listen to the Pensioncraft interview with PortfolioCharts's Tyler which does an excellent breakdown of..

https://many-happy-returns.captivate.fm ... -portfolio

I have seen plenty of articles that say the 4% SWR is too optimistic in current circumstances. I do not have an opinion or an axe to grind here. I am now too old and too wealthy for it to matter a jot for me. What I do know is that I see wishful thinking all around me.

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Re: Do I need my IFA?

#707932

Postby DrFfybes » January 26th, 2025, 10:06 am

GeoffF100 wrote:I have seen plenty of articles that say the 4% SWR is too optimistic in current circumstances. I do not have an opinion or an axe to grind here. I am now too old and too wealthy for it to matter a jot for me. What I do know is that I see wishful thinking all around me.


I've just persudaed MrsF we should liquidate 5% of our assets each year, on top of our DB. If investments go up, we have more, if they drop we have less :)

However in our case the 5% vastly exceeds our need, so at the end of the year the surplus (which will already be in a savings account) will largely be gifted. The hope is to stop our assets increasing to a level where later (in)action will lead to a large IHT bill.

We are 59 and 64, and back to the OP, do not have an IFA but did use one to look at our assets and provide suggestions on how to invest and use them.

As I have said elsewhere, his suggestions were obvious in hindsight, but we had become a bit blinkered. The changes I made following his suggestions have covered his fee probably about 30-50 fold.

Paul

vand
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Re: Do I need my IFA?

#707933

Postby vand » January 26th, 2025, 10:06 am

GeoffF100 wrote:
vand wrote:
It was the best stab and turned out to be a pretty good one given what Bengen & Trinity had to work with back when they were doing their research. Nothing researched or lived through since has substantially invalidated it if you just consider it for what it is.

Personally my view is that it is actually too conservative if we go back to first principles and widen our universe of assets beyond just stocks & bond, which is easily done today.

Would urge people to fully listen to the Pensioncraft interview with PortfolioCharts's Tyler which does an excellent breakdown of..

https://many-happy-returns.captivate.fm ... -portfolio

I have seen plenty of articles that say the 4% SWR is too optimistic in current circumstances. I do not have an opinion or an axe to grind here. I am now too old and too wealthy for it to matter a jot for me. What I do know is that I see wishful thinking all around me.


People are always claiming crap that very probably isn't true because, hey, human nature.

JohnB
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Re: Do I need my IFA?

#707942

Postby JohnB » January 26th, 2025, 11:03 am

Of course a 4% SWR for American stocks is very different when your starting point is now or a few years ago before their value surged. Looking over a 30 year timespan smooths out intervening bull and bear markets, but you need to consider where you are in the current cycle to assess what is "enough"

GeoffF100
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Re: Do I need my IFA?

#707961

Postby GeoffF100 » January 26th, 2025, 12:08 pm

JohnB wrote:Of course a 4% SWR for American stocks is very different when your starting point is now or a few years ago before their value surged. Looking over a 30 year timespan smooths out intervening bull and bear markets, but you need to consider where you are in the current cycle to assess what is "enough"

The capital value just recovered in Japan. Perhaps Japan was in a bigger bubble than the global markets are now. On the other hand, nothing particularly nasty happened in Japan to trigger the crash, apart from the over valuation. Perhaps something really nasty is coming up. Perhaps not, but we really do not know. Not having enough money is a big problem. Having too much is not a particular advantage.

CryptoPlankton
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Re: Do I need my IFA?

#707966

Postby CryptoPlankton » January 26th, 2025, 12:29 pm

On the subject of SWR, "Beyond the 4% Rule", by Abraham Okusanya, is a pretty good source of data and analysis for UK investors comparing decumulation approaches (essentially "probability-based" vs "safety first").

Personally, given the swathe of unknowns, I think it really just boils down to common sense - for me, that is having a decent "ring-fenced" reserve (in whatever form) and being flexible enough to adapt my approach if and when circumstances demand.

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Re: Do I need my IFA?

#707988

Postby monabri » January 26th, 2025, 1:54 pm

The OP said

"Pru Growth Fund series E. This I'm lead to believe is a pretty safe, nothing spectacular fund?"

https://www.mandg.com/dam/pru/shared/do ... 108705.pdf

Image

Safe..?
38% in equities
Real Estate?
Fixed interest (level of safety depends on who is the money loaned to, risk of default)
Alternative..sounds.. more risky!

I'd agree with " not spectacular " and add the comment ,"relatively expensive" ....but the flash offices don't pay for themselves!

38% Equities (a very heavy UK percentage..have a look at the % held in a World Tracker for comparison).
14% Real Estate ...you'd have to investigate further.
28% Fixed Interest?
18% Alternative....?


I'd suggest a dive down into the M&G Pru reports to assess what they actually own...you might find they are holding Vanguard's or Blackrock ETFS.

https://www.fundslibrary.co.uk/FundsLib ... essentials


Image

Comparison with Vanguard Global Tracker ( accumulation version) over last 5 years.

https://www.fundslibrary.co.uk/FundsLib ... erformance
Image

Swapping to DIY

(1) 40% Vanguard VWRP would give you the equities side ...0.22% ongoing cost ..HSBC might be cheaper still.

Or

(2) There's a range of Vanguard funds that would allow you to allocate funds in whatever percentage you like.
Example
VUSA gives exposure to the US S& P 500.
VUKE: UK FTSE100
VEUR : Europe
VFEM : Emerging markets
VMID : UK FTSE250
VEVE: developed markets

There are similar funds available from Blackrock via iShares.


Fixed Interest...don't know what this is without diving in but there are likely to be more cost effective ways.

If they mean government bonds then there are cheap ETFs from Vanguard /iShares / others.




Noting " There is a 28 day delay for switches out of the PruFund Fund. Please refer to the relevant product Key Features Document for further details"

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Re: Do I need my IFA?

#708085

Postby EviesDad » January 27th, 2025, 10:04 am

The pdf in the below link gives a more detailed breakdown as to how the Pru Growth fund is invested. Sadly the last update I can find is for September 2024 but it will at least give a guide.

https://www.mandg.com/dam/pru/shared/documents/en/tio271201.pdf

Apologies, but not sure how to make the pdf appear on screen as 'monabri' did.

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Re: Do I need my IFA?

#709721

Postby lchris21 » February 4th, 2025, 3:31 pm

...quick update on this posting. I can see its gone off topic in some areas.... :)
Anyway, Ive had my meeting (nearly 2 hrs), and Im quite happy that the IFA is independent.
Pru ISAs are in the process of being transferred (by me :) ) and joining my existing funds in Vanguard. He's happy to advise on the funds I've got and whether or not to change them if there are better ones. Im happy to take advise at the moment as I'm still learning, and he's not charging for this part. So no IFA fees and no ongoing commission on this bit as soon as they are all together in Vanguard
We agreed to look at an alternative home for the Pru pensions ASAP, and he's now working on an alternative an home for the pensions. We discussed some alternatives, again nothing has been signed yet so we will see what transpires. Its should be a painless / costless transfer as well. Our circumstances have changed in the last 2 years since our first meetings, so he's suggested quarterly meetings to discuss (FOC)
He's happy to advise my on a one off/hourly basis going forward, no pressure or sales angle. Again Im happy to take this as myself take baby steps into my investing career.
So all in all, Im quite happy Im not being taken for a ride, the PRU option suited us at the time, although other more experienced investors might not thinks so, but I want to walk before I can run, but I see myself being fully in charge of the entire pension with a bit more of an idea what Im doing in the next 12-18months.
Thanks again for the input....

vand
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Re: Do I need my IFA?

#709936

Postby vand » February 5th, 2025, 3:27 pm

Personally I am fairly convinced that the world has basically "got it wrong" when it recommends a stock/bond portfolio with the assumption that bonds are the best asset to diversify a stock portfolio - although they're good option if you are still accumulating, they become one of the worst option if you are in decumulation and living off your portfolio.

I've posted extensively about this on the MMM forum (which is often like trying to swim uphill, but I try nonethess):

https://forum.mrmoneymustache.com/inves ... msg3302251


In further testing with PortfolioCharts I came up with 45/25/30 stocks/gold/reits as the optimum asset allocation which improved the 30yr SWR from 3.8% baseline to 6.4%. Adding bonds in did nothing but worsen this:

https://forum.mrmoneymustache.com/inves ... msg3334949

GeoffF100
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Re: Do I need my IFA?

#710067

Postby GeoffF100 » February 6th, 2025, 9:45 am

vand wrote:Personally I am fairly convinced that the world has basically "got it wrong" when it recommends a stock/bond portfolio with the assumption that bonds are the best asset to diversify a stock portfolio

The market clearly believes that the relative prices of stocks and bonds are correct. If the market thought that stocks were more desirable than bonds, the price of stocks would rise relative to the price of bonds. Bonds are clearly safer than stocks, because bond holders are higher up the list of creditors than stock holders. Which asset class does better depends on how bad things get. Nobody knows what will happen.

Some investors need their money to pay their bills, and others can afford to gamble. Some are frightened of poverty. Others dismiss it from their minds. Some want to have enough money. Others want to be rich.

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Re: Do I need my IFA?

#710112

Postby vand » February 6th, 2025, 12:18 pm

GeoffF100 wrote:
vand wrote:Personally I am fairly convinced that the world has basically "got it wrong" when it recommends a stock/bond portfolio with the assumption that bonds are the best asset to diversify a stock portfolio

The market clearly believes that the relative prices of stocks and bonds are correct. If the market thought that stocks were more desirable than bonds, the price of stocks would rise relative to the price of bonds. Bonds are clearly safer than stocks, because bond holders are higher up the list of creditors than stock holders. Which asset class does better depends on how bad things get. Nobody knows what will happen.

Some investors need their money to pay their bills, and others can afford to gamble. Some are frightened of poverty. Others dismiss it from their minds. Some want to have enough money. Others want to be rich.


You've totally missed my point. I'm talking about what assets complement each other the best to create an efficient portfolio, not if the S&P should be 4000 or 700 or if Interest rates should be 3% or 5%.

GeoffF100
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Re: Do I need my IFA?

#710121

Postby GeoffF100 » February 6th, 2025, 12:52 pm

vand wrote:
GeoffF100 wrote:The market clearly believes that the relative prices of stocks and bonds are correct. If the market thought that stocks were more desirable than bonds, the price of stocks would rise relative to the price of bonds. Bonds are clearly safer than stocks, because bond holders are higher up the list of creditors than stock holders. Which asset class does better depends on how bad things get. Nobody knows what will happen.

Some investors need their money to pay their bills, and others can afford to gamble. Some are frightened of poverty. Others dismiss it from their minds. Some want to have enough money. Others want to be rich.

You've totally missed my point. I'm talking about what assets complement each other the best to create an efficient portfolio, not if the S&P should be 4000 or 700 or if Interest rates should be 3% or 5%.

The theoretical answer is the market portfolio. That depends on lots of assumptions, but they should be valid enough for publicly quoted stocks and bonds, with the exception that not all investors have the same objectives. Some are more risk tolerant than others and some are able to absorb more risk than others.


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