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Vanguard Offers Financial Advice

Index tracking funds and ETFs
GeoffF100
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Vanguard Offers Financial Advice

#405032

Postby GeoffF100 » April 18th, 2021, 7:28 am

Vanguard is going to offer a financial advice service:

https://www.thisismoney.co.uk/money/inv ... dvice.html

Vanguard will charge 0.79% a year for financial advice, which includes the cost of the investment funds and platform fee. The financial advice appears to be restricted in its scope. The Vanguard website has nothing to say about this:

https://www.vanguardinvestor.co.uk/need ... ial-advice

Can you provide me with financial advice?

No, if you feel you need advice before making an investment decision you can find an independent financial adviser near you using the Personal Finance Society.

The article mentions Bancroft Wealth:

https://bancroftwealth.co.uk/

A flat fee of £500 for advice with a wider scope looks more interesting for those with large assets.

GeoffF100
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Re: Vanguard Offers Financial Advice

#405086

Postby GeoffF100 » April 18th, 2021, 11:32 am

Here is the corresponding service in the US:

https://investor.vanguard.com/advice/financial-advisor/

It is fair to say that the service is not aimed at the more experienced people here.

GeoffF100
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Re: Vanguard Offers Financial Advice

#405464

Postby GeoffF100 » April 19th, 2021, 8:48 pm

This has appeared on the Vanguard website:

https://www.vanguardinvestor.co.uk/financial-advice

I have to say that it does appear to be a lot of money for not very much. They could buy a Vanguard Target Retirement Fund:

https://www.vanguardinvestor.co.uk/inve ... ment-funds

Progressively moving into bonds as retirement approaches is commonly recommended. As far as I can see, the expected return and the variability of that return should be the same if the exact opposite was done. Nonetheless, if you consider that you have made enough money before you retire, reducing your risk would make sense. Perhaps using Vanguard LifeStrategy would make more sense. They could then adjust their risk profile as they please. If they have trouble in deciding what their risk tolerance is and choosing an appropriate bond allocation, they could use a robo advisor:

https://pensioncraft.com/cheapest-robo-advisor-uk/

I expect that they could game the percentage fees by opening the minimum sized account.

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Re: Vanguard Offers Financial Advice

#405470

Postby GeoffF100 » April 19th, 2021, 9:23 pm

Gradually reducing the equity allocation as retirement approaches may make sense in some circumstances if the plan is to buy an annuity. If the plan is to go into drawdown, tapering down to 25% equities does not appear to make any sense. The 60/40 portfolio appears to have been the most reliable in drawdown historically (for the US market IIRC). Buying an annuity may be the most sensible option, but the rates are currently miserable. There are plenty who are willing to gamble on drawdown.

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Re: Vanguard Offers Financial Advice

#405517

Postby GeoffF100 » April 20th, 2021, 8:26 am

GeoffF100 wrote:Gradually reducing the equity allocation as retirement approaches may make sense in some circumstances if the plan is to buy an annuity. If the plan is to go into drawdown, tapering down to 25% equities does not appear to make any sense. The 60/40 portfolio appears to have been the most reliable in drawdown historically (for the US market IIRC). Buying an annuity may be the most sensible option, but the rates are currently miserable. There are plenty who are willing to gamble on drawdown.

Looking more closely at the graph suggests that the Vanguard Target Retirement funds taper down to 30% equities rather than 25%.

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Re: Vanguard Offers Financial Advice

#405541

Postby scrumpyjack » April 20th, 2021, 9:58 am

Given that you could easily be in retirement for over 30 years, and having seen what inflation does to the real purchasing power of money, I have chosen to have no fixed interest at all though I do keep several years cash buffer. I can't see having any fixed interest ever in my retirement.
I prefer to have most of it in ITs and trackers, heavily weighted to overseas.

But you need to do whatever you are comfortable with.

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Re: Vanguard Offers Financial Advice

#406657

Postby Hariseldon58 » April 24th, 2021, 3:00 pm

scrumpyjack wrote:Given that you could easily be in retirement for over 30 years, and having seen what inflation does to the real purchasing power of money, I have chosen to have no fixed interest at all though I do keep several years cash buffer. I can't see having any fixed interest ever in my retirement.
I prefer to have most of it in ITs and trackers, heavily weighted to overseas.

But you need to do whatever you are comfortable with.


I am sympathetic to the no bonds position but never ?.... a diversified portfolio always means holding difficult positions, it’s surprising how quickly events occur that make absolute statements unwise :)

(Through gritted teeth I hold a diversified collection of bond trackers and cash)

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Re: Vanguard Offers Financial Advice

#406661

Postby scrumpyjack » April 24th, 2021, 3:16 pm

Hariseldon58 wrote:
scrumpyjack wrote:Given that you could easily be in retirement for over 30 years, and having seen what inflation does to the real purchasing power of money, I have chosen to have no fixed interest at all though I do keep several years cash buffer. I can't see having any fixed interest ever in my retirement.
I prefer to have most of it in ITs and trackers, heavily weighted to overseas.

But you need to do whatever you are comfortable with.


I am sympathetic to the no bonds position but never ?.... a diversified portfolio always means holding difficult positions, it’s surprising how quickly events occur that make absolute statements unwise :)

(Through gritted teeth I hold a diversified collection of bond trackers and cash)


If index linked gilts were offering a positive real return, however small, i would hold some of those for security (and did a few decades ago), but otherwise I prefer to keep a number of years expenditure in cash (incl. premium bonds and cash deposits) but no fixed interest. I think there is a high risk of higher rates and inflation which could devastate long dated bonds and the return on short dated ones is so low you might as well hold cash.

I prefer to hold the lower risk element of my portfolio in stocks like RCP which have a good record of avoiding most of the downside of bear markets.

Partly I think it is a question of how substantial your assets are and so how exposed you would be in a market fall, and also your evaluation of what the risks are. Monetary assets have very substantial risks in real terms which are often overlooked by financial advisers who did not live through the '70s (or live in Zimbabwe or Venezuela more recently!).

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Re: Vanguard Offers Financial Advice

#407337

Postby GeoffF100 » April 27th, 2021, 11:46 am

scrumpyjack wrote:If index linked gilts were offering a positive real return, however small, i would hold some of those for security (and did a few decades ago), but otherwise I prefer to keep a number of years expenditure in cash (incl. premium bonds and cash deposits) but no fixed interest. I think there is a high risk of higher rates and inflation which could devastate long dated bonds and the return on short dated ones is so low you might as well hold cash.

I prefer to hold the lower risk element of my portfolio in stocks like RCP which have a good record of avoiding most of the downside of bear markets.

Partly I think it is a question of how substantial your assets are and so how exposed you would be in a market fall, and also your evaluation of what the risks are. Monetary assets have very substantial risks in real terms which are often overlooked by financial advisers who did not live through the '70s (or live in Zimbabwe or Venezuela more recently!).

You favour keeping a number of years in cash. It is not clear how much cash/bonds you wish to hold as a percentage.

Why not short dated bonds where you will generally get more interest? Why not riskier bonds (that are still much less risky than equities) where you get even more interest?

Unlike in the '70s, Zimbabwe or Venezuela, we have an independent central bank. It is their job to control inflation by setting interest rates. That could be overridden. Our present Prime Minister shows signs of wanting to be a dictator, but I expect that there would be warning of such drastic action.

In the short term, equities are hit harder than bonds by high inflation. The bonds are there to provide income when the dividends are slashed and the capital value has tanked. Later on, the maturing bonds are replaced by bonds paying more interest and the equities recover. That is the theory anyway.

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Re: Vanguard Offers Financial Advice

#407347

Postby scrumpyjack » April 27th, 2021, 12:20 pm

GeoffF100 wrote:
scrumpyjack wrote:If index linked gilts were offering a positive real return, however small, i would hold some of those for security (and did a few decades ago), but otherwise I prefer to keep a number of years expenditure in cash (incl. premium bonds and cash deposits) but no fixed interest. I think there is a high risk of higher rates and inflation which could devastate long dated bonds and the return on short dated ones is so low you might as well hold cash.

I prefer to hold the lower risk element of my portfolio in stocks like RCP which have a good record of avoiding most of the downside of bear markets.

Partly I think it is a question of how substantial your assets are and so how exposed you would be in a market fall, and also your evaluation of what the risks are. Monetary assets have very substantial risks in real terms which are often overlooked by financial advisers who did not live through the '70s (or live in Zimbabwe or Venezuela more recently!).

You favour keeping a number of years in cash. It is not clear how much cash/bonds you wish to hold as a percentage.

Why not short dated bonds where you will generally get more interest? Why not riskier bonds (that are still much less risky than equities) where you get even more interest?

Unlike in the '70s, Zimbabwe or Venezuela, we have an independent central bank. It is their job to control inflation by setting interest rates. That could be overridden. Our present Prime Minister shows signs of wanting to be a dictator, but I expect that there would be warning of such drastic action.

In the short term, equities are hit harder than bonds by high inflation. The bonds are there to provide income when the dividends are slashed and the capital value has tanked. Later on, the maturing bonds are replaced by bonds paying more interest and the equities recover. That is the theory anyway.


I’m not sure the cash percentage on its own is meaningful. To take an extreme example what percentage would you suggest Bill Gates should keep in cash? So the cash reserve will depend on the individuals risk tolerance, extent of wealth, level of guaranteed income, future plans for spending, for gifting etc etc. I don’t think a one size fits all percentage makes sense.

Given that interest rates are so trivial and that I would pay a high rate of tax on any interest, I really can’t be bothered with short dated bonds. I’m happy to leave the max in premium bonds, and the rest of the cash in bank deposits. I do find the Hargreaves Lansdown Active Savings facility useful.
Possibly it would be advisable to put a chunk of the cash into a more reliable currency than GBP (eg Swiss Francs). Inflation in the UK once hit 27% in my memory so whilst in theory we have an independent central bank, I wouldn’t bet the farm on its reliability. Andrew Bailey does not inspire confidence and I dread to think who Corbyn might have put in charge!

As for equities being harder hit it depends entirely what the individual company does. Eg if you had shares in a company that mainly invested in US indexed linked bonds, its shares would do well! An equity is simply a wrapper for the activities of the individual business.

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Re: Vanguard Offers Financial Advice

#407358

Postby GeoffF100 » April 27th, 2021, 1:09 pm

scrumpyjack wrote:I’m not sure the cash percentage on its own is meaningful. To take an extreme example what percentage would you suggest Bill Gates should keep in cash? So the cash reserve will depend on the individuals risk tolerance, extent of wealth, level of guaranteed income, future plans for spending, for gifting etc etc. I don’t think a one size fits all percentage makes sense.

Vanguard wants to charge you £££ to determine your personal magic bond percentage. I am paying tax on my bonds. They are bank term accounts with a little Treasury Index Linked 1/8% 2009. I am moving as much of my equities as I can into my ISA and SIPP.
scrumpyjack wrote:As for equities being harder hit it depends entirely what the individual company does. Eg if you had shares in a company that mainly invested in US indexed linked bonds, its shares would do well! An equity is simply a wrapper for the activities of the individual business.

We are talking Vanguard here, so think global equity tracker or some variation on that theme.

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Re: Vanguard Offers Financial Advice

#416904

Postby GeoffF100 » June 2nd, 2021, 7:43 pm

Vanguard has published the T&Cs for its advisory service. The restrictions are eye watering. They say it is not a robo-advisor, but it may as well be. Vanguard US does offer a robo-advisor:

https://investor.vanguard.com/advice/digital-advisor/

Needless, to say that is much cheaper than what is on offer in the UK.


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