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IFA merging, proposed move to new platform and funds

Including Financial Independence and Retiring Early (FIRE)
BennGunn
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IFA merging, proposed move to new platform and funds

#301295

Postby BennGunn » April 17th, 2020, 11:29 am

I'd appreciate your perspective on a proposal that's been made to me.

I retired about 18 months ago and have used the services of an IFA to create a diversified portfolio that fits with the return I require and risk level I'm comfortable with, going forward I don't expect to change the asset allocation or funds and thus think it fits into a passive SIPP (neither myself or the IFA is proposing change to the fund selection or investment proportion)

I currently pay 1.5% in fees split as follows:

IFA: 1%
Platform (Novia): 0.3%
Investment Funds: 0.2%

The IFA is proposing to move to a new platform/provider with the following split (Total 1.7%):

IFA: 0.5%
Platform (True Potential): 0.8%
Investment Funds: 0.4%

Currently, as this is a passive investment, I think fees are too high thus I'm thinking of:

1. Relinquishing the services of the IFA
2. Staying with the current platform and funds

The question that I haven't solved is how to manage the relationship with Novia without the services of an IFA

Many thanks for your help


For reference these are the funds I'm invested in:

Baillie Gifford Gbl Discovery B Acc
Baillie Gifford Inv Grd Bd B Inc
Dimensional Gbl Sht Date Bd Acc
Dimensional Intl Core Eq I Acc
Dimensional Intl Value Acc
Dimensional UK Smll Cos Acc
Dimensional UK Value Acc
iShares CIF UK Glt AlStIdx D Acc
Vangd FTSE D Wld ex-U.K.Eqty Ind Acc
Vanguard FTSE UK AllShrIdx Acc
Vanguard Gbl Bd Index Hdg A
Vanguard UK Infla Lkd Glt Id Acc

Dod101
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Re: IFA merging, proposed move to new platform and funds

#301311

Postby Dod101 » April 17th, 2020, 12:10 pm

I would never use platforms which charge on an ad valorem basis. Flat charges are the way to go. Why in any case does the IFA want to change platforms?

Unless you have a contract for a fixed period with the IFA, I would recommend that you ditch him and save his fees at least. I know nothing of Novia but they look as if the are a so called wealth manager acting through IFAs. Do you need what they have to offer? If not find a platform which charges flat fees. If as you say you look at the funds as a passive investment then you just want a platform to handle the admin including collecting dividends etc. in a SIPP.

You can certainly research a decent platform on these forums. Do your current ones charge an exit fee?

Dod

Alaric
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Re: IFA merging, proposed move to new platform and funds

#301315

Postby Alaric » April 17th, 2020, 12:29 pm

BennGunn wrote:The question that I haven't solved is how to manage the relationship with Novia without the services of an IFA


You probably won't be allowed to. The question to ask is what do you get from the platform you are on that you wouldn't get from one of the several mainstream direct to consumer platforms and what price are you prepared to pay for any additional services?

As regards fund choice, it shouldn't matter if any fund you currently hold is only on the Novia platform as with passive funds there's invariably another with a near identical mandate.

BennGunn
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Re: IFA merging, proposed move to new platform and funds

#301346

Postby BennGunn » April 17th, 2020, 1:58 pm

Many thanks for the responses

@Dod - to answer your question - there are no exit fees associated with my current pension (though I would be concerned with being "out of market" as a result in the typical time delays associated with a transfer

dspp
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Re: IFA merging, proposed move to new platform and funds

#301349

Postby dspp » April 17th, 2020, 2:08 pm

BennGunn wrote:Many thanks for the responses

@Dod - to answer your question - there are no exit fees associated with my current pension (though I would be concerned with being "out of market" as a result in the typical time delays associated with a transfer


If you can give a % holding for each fund that may assist folk to comment.

The reason I say this is that, although you may wish to remain in all those funds, you may not be able to do so directly. Therefore people may need to suggest substitutes in order to enable consideration of other platforms. Hence materiality is a consideration.

regards, dspp

Alaric
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Re: IFA merging, proposed move to new platform and funds

#301351

Postby Alaric » April 17th, 2020, 2:16 pm

BennGunn wrote: (though I would be concerned with being "out of market" as a result in the typical time delays associated with a transfer


Properly organised, it should be possible to transfer "in specie". That's where it's the shares/units that are transferred rather than cash. The proposal from your IFA would transfer from one platform to another, so the issue arises anyway.

BennGunn
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Re: IFA merging, proposed move to new platform and funds

#301373

Postby BennGunn » April 17th, 2020, 4:00 pm

I'm grateful for any guidance here, please see below the funds with proportions:


Baillie Gifford Gbl Discovery B Acc 7.67%
Baillie Gifford Inv Grd Bd B Inc 3.00%
Dimensional Gbl Sht Date Bd Acc 18.78%
Dimensional Intl Core Eq I Acc 10.38%
Dimensional Intl Value Acc 7.67%
Dimensional UK Smll Cos Acc 2.49%
Dimensional UK Value Acc 2.49%
iShares CIF UK Glt AlStIdx D Acc 7.41%
Vangd FTSE D Wld ex-U.K.Eqty Ind Acc 10.55%
Vanguard FTSE UK AllShrIdx Acc 7.51%
Vanguard Gbl Bd Index Hdg A 18.78%
Vanguard UK Infla Lkd Glt Id Acc 3.27%

Hariseldon58
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Re: IFA merging, proposed move to new platform and funds

#301378

Postby Hariseldon58 » April 17th, 2020, 4:22 pm

I'd go with the thought of the lowest possible fees !

If your IFA is going to charge 1.7% in total that is an enormous mountain to climb over time to get any performance improvement, over a simple option of say a Vanguard LifeStrategy fund, .22% pa and your choice of platform, that charges a fixed fee for handling funds.

(I have a mixture of passive ETFs and some Investment trusts, my brokerage charges are around .05% and fund fees are around .17% for a total of .22%.)

Does the IFA offer 1.7% of value ? You have 40%+ in bonds where the yield is likely to be below the total level of fees of 1.7%....ie a zero return on an ongoing basis.

(for a taxable account NS&I Income Bonds charge zero and give a 1.16%)

Vanguard LifeStrategy (60% Equities) is a simple benchmark to compare the IFA against, over a 10 year period with 1.7% fees , I'd be amazed if the IFA could show a gain over the simplest approach.

Aminatidi
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Re: IFA merging, proposed move to new platform and funds

#301481

Postby Aminatidi » April 18th, 2020, 9:00 am

BennGunn wrote:I'm grateful for any guidance here, please see below the funds with proportions:


Baillie Gifford Gbl Discovery B Acc 7.67%
Baillie Gifford Inv Grd Bd B Inc 3.00%
Dimensional Gbl Sht Date Bd Acc 18.78%
Dimensional Intl Core Eq I Acc 10.38%
Dimensional Intl Value Acc 7.67%
Dimensional UK Smll Cos Acc 2.49%
Dimensional UK Value Acc 2.49%
iShares CIF UK Glt AlStIdx D Acc 7.41%
Vangd FTSE D Wld ex-U.K.Eqty Ind Acc 10.55%
Vanguard FTSE UK AllShrIdx Acc 7.51%
Vanguard Gbl Bd Index Hdg A 18.78%
Vanguard UK Infla Lkd Glt Id Acc 3.27%


First thoughts are that looks pretty complicated and I'd want to be sure that level of complexity for 1.7% a year in costs was worth it versus a single multi-asset or a simpler mix of "off the shelf" funds or trusts.

If you look at what a difference of 1.3% in fees compounds at on a large pot you'll most likely be startled.

Better to have that in your pocket than an IFA.

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Re: IFA merging, proposed move to new platform and funds

#301512

Postby Shaker » April 18th, 2020, 11:15 am

If you ditch using an IFA, you won't be able to buy the Dimensional funds anywhere else. There will be alternatives available which do a similar job.

The whole point of an IFA is to guide you through life events so that your investments are a good fit for your circumstances e.g. divorce, job loss, critical illness, retirement etc. Then if your investments aren't a good fit, you can at least hold someone accountable. You don't get that through recommendations on an internet forum!

Your IFA appears to be moving from "independent" to "restricted" i.e. can only recommend the TP platform and their portfolios. You could consider the option of asking other IFAs in the area who will consider taking you on for 0.5% p.a., that way you can keep what is already a low cost portfolio but still retain the services/accountability that you are currently getting.

BennGunn
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Re: IFA merging, proposed move to new platform and funds

#301920

Postby BennGunn » April 20th, 2020, 11:58 am

Many thanks to all of you who have responded to this thread, I've let the IFA know that I do not want to move onto the new platform and as a general principle want to minimise fees.

I've asked them to outline options but having undertaken my own research I've determined that, for example, the Vanguard 40% Equity Lifestyle fund https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000MLUN has achieved an annualised yield of 4.67% (5 years) whereas my portfolio has achieved 3.96% then I am looking to move to a fixed fee approach.

Will update as I progress

Aminatidi
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Re: IFA merging, proposed move to new platform and funds

#301927

Postby Aminatidi » April 20th, 2020, 12:11 pm

BennGunn wrote:Many thanks to all of you who have responded to this thread, I've let the IFA know that I do not want to move onto the new platform and as a general principle want to minimise fees.

I've asked them to outline options but having undertaken my own research I've determined that, for example, the Vanguard 40% Equity Lifestyle fund https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000MLUN has achieved an annualised yield of 4.67% (5 years) whereas my portfolio has achieved 3.96% then I am looking to move to a fixed fee approach.

Will update as I progress


For what it's worth LS40 is the fund my mum moved her money into when she left her IFA.

Probably a smaller pot but the fees were really digging into the returns under the IFA as she was in cautious funds.

Good luck :)

xxd09
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Re: IFA merging, proposed move to new platform and funds

#301947

Postby xxd09 » April 20th, 2020, 1:45 pm

You’ve got quite a problem
You are retired so depend on this portfolio for income-cannot get it wrong!
You are moving from an IFA guided situation to doing it yourself-big step-are you confident in your own investing prowess?
You are thinking of changing platforms which is a big step at any time-and especially in these volatile times -if you are out of the market for any length of time -you could lose big( or gain) !
I would do some reading and wait for more stable times
Build a large cash position 2-3 years living expenses so you can survive if delays occur during transfers between platforms( which they will)
It is the right thing to do -especially if you are a young retiree-reducing expenses(and complexity) is always a good idea
xxd09

xeny
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Re: IFA merging, proposed move to new platform and funds

#302000

Postby xeny » April 20th, 2020, 4:34 pm

BennGunn wrote: I've asked them to outline options but having undertaken my own research I've determined that, for example, the Vanguard 40% Equity Lifestyle fund https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000MLUN has achieved an annualised yield of 4.67% (5 years) whereas my portfolio has achieved 3.96% then I am looking to move to a fixed fee approach.



That 4.67% figure for LS40 is pretty much up to date (I think as of Friday?) including the recent coronavirus unpleasantness. Is the 3.96% to a comparable date? With volatility as high as it is at present, getting comparable data needs care.

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Re: IFA merging, proposed move to new platform and funds

#302314

Postby Snakey » April 21st, 2020, 7:22 pm

I recall Novia heavily discount platform fees if you go via IFAs who they have a deal with. This means that the percentage fee you list in your original post might not be what you would pay if you stayed there sans IFA. Check that before making any decision.

BennGunn
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Re: IFA merging, proposed move to new platform and funds

#302635

Postby BennGunn » April 23rd, 2020, 10:49 am

Thought I'd post a follow up as it might inform others undertaking a similar process.

As other contributors to this thread have stated there is considerable risk of making a move and being "out of the market" during these volatile times and there is a need to build a cash buffer.

I didn't state this in my original post but am fortunate to currently have approx 4 years of cash reserves so there is no need to act with haste

With these two things in mind I've spoken to the IFA and agreed that I will come out of his tracking program which will save 1% of the 1.5% of fees (for the avoidance of doubt I will then pay 0.5% on my portfolio) for 6 months, at which point we will review the situation. My hope is that by then the markets will be more stable and it gives me time to undertake further research

Dod101
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Re: IFA merging, proposed move to new platform and funds

#302651

Postby Dod101 » April 23rd, 2020, 11:35 am

That sounds like a good outcome. I would use the six months available to research flat fee platforms and check that you can move in specie as that will avoid the risk of being out of the market. Or maybe just leave things as they now are.

Dod

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Re: IFA merging, proposed move to new platform and funds

#302671

Postby xxd09 » April 23rd, 2020, 12:31 pm

You could eventually aim for a two fund portfolio ie a Global Equities Index Tracker Fund and a Global Bond Index Tracker Fund hedged to the Pound with your age in Bonds % of the Portfolio
Might be something to try for -simple cheap easy to follow
Research.Monevator.com,John Bogles books and Lars Kroijer website and book “ Investing Demystified “
xxd09

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Re: IFA merging, proposed move to new platform and funds

#303017

Postby Hariseldon58 » April 24th, 2020, 6:43 pm

@xxd09

Your suggestion of a Global Index Fund and Global Bond Fund hedged to the pound is at the heart of the Vanguard Life Strategy approach , except that has a third component of additional exposure to UK Equities and UK bonds, to create a modest home bias.

It clearly has much merit but at present with low interest rates I have removed my bond component and gone for a heavy exposure to NS&I Income Bonds, pretty much instant access and 1.16% yield, better than gilts but of equal security.

The Global Hedged Bond Index funds have yields to worst ( similar to yield to maturity but assumes worst for any convertibles etc) of 1.17% for Vanguard Global Aggregate Hedged ETF, does make one think if one is after a secure element of the portfolio you have the same yield, security of HM Government and ultra short duration.

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Re: IFA merging, proposed move to new platform and funds

#303059

Postby xxd09 » April 24th, 2020, 11:07 pm

Vanguard Global Bond Index Fund hedged to the Pound (VIGBBD) averaged 3.5% return pa over the last 10 years
That fact along with what a Bond fund is supposed to do in a Portfolio -ie decrease volatility and make a reasonable return
Does it for me
xxd09


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