Question
I discovered your site last year and I have been meaning to congratulate you on what I find to be an incredibly informative, knowledgeable and comprehensive financial site. Please keep the articles coming, especially those that give the inside view on financial advisers and products.
Your article on financial adviser funds was of particular interest to me, as I have ISA funds in Bestinvest's Growth Portfolio. Better value may be found if I switched to other funds. The problem is which ones to choose? I know that a spread of funds around the world is the right way to go and that time in a fund, rather than timing, is essential.
Comments on selecting an alternative way forward would be much appreciated, though I realise you cannot give individuals specific financial advice.Answer
Thanks for the kind words and glad you're enjoying the site.
The Bestinvest Growth Portfolio has total annual charges (as measured by the 'total expense ratio' - 'TER') of 2.33% - this includes Bestinvest's 1.5% annual fee plus underlying fund charges. If you invest more than £50,000 in the fund Bestinvest's annual fee falls to 1%, cutting the TER to 1.83%.
If you're paying 2.33% that's rather steep, although 1.83% is not unreasonable for a fund of funds. Either way, charges are likely to be higher than Bestinvest's standard investment advisory service, which provides 'free' advice on portfolios of £50,000+ in exchange for the fund trail commission (typically 0.5% a year), where TERs are likely to average around 1.6% or less. And the Bestinvest Managed Portfolio route is a lot more expensive than using a discount broker that rebates all trail commissions (like Cavendish Online), where the effective TER will be around 1% a year on typical managed funds.
However, charges are only half the picture, performance being the other. If a fund of funds manager performs well you might still end up better off overall versus doing the job yourself.
This is a harder to gauge, as the only real basis for guessing the future success or failure of a fund of funds manager is to look at the past, which isn't particularly reliable, and form an opinion on their current fund holdings - not easy.
If we look at Bestinvest Growth Portfolio fund manager Graham Frost's track record to date it's mixed, essentially one good year, one bad and one indifferent. His track record across all the Bestinvest Portfolio funds is reasonable and he scores a respectable 79.4% on Bestinvest's Manager Record Index (MRI) measure (which estimates the likelihood a manager has added value due to skill rather than luck). Nevertheless, Growth Portfolio performance is hardly anything to write home about.
If you're comfortable choosing your own funds then buying via the cheapest discount brokers (list in our guide to ISA discounts) might see you end up better off than staying put, but this will obviously depend on how skilful/lucky you are at choosing funds.
Alternatively you might try your luck with another fund of funds manager with a better long term track record, the Jupiter Merlin fund range springs to mind (although they're expensive with TERs of around 2.5%).
Or, you could stay with Bestinvest but consider moving across to their investment advisory service if you have more than £50,000 invested. This should reduce costs and, provided the service you receive is good, your portfolio shouldn't end up looking too different to the Bestinvest funds of funds.
I discovered your site last year and I have been meaning to congratulate you on what I find to be an incredibly informative, knowledgeable and comprehensive financial site. Please keep the articles coming, especially those that give the inside view on financial advisers and products.
Your article on financial adviser funds was of particular interest to me, as I have ISA funds in Bestinvest's Growth Portfolio. Better value may be found if I switched to other funds. The problem is which ones to choose? I know that a spread of funds around the world is the right way to go and that time in a fund, rather than timing, is essential.
Comments on selecting an alternative way forward would be much appreciated, though I realise you cannot give individuals specific financial advice.Answer
Thanks for the kind words and glad you're enjoying the site.
The Bestinvest Growth Portfolio has total annual charges (as measured by the 'total expense ratio' - 'TER') of 2.33% - this includes Bestinvest's 1.5% annual fee plus underlying fund charges. If you invest more than £50,000 in the fund Bestinvest's annual fee falls to 1%, cutting the TER to 1.83%.
If you're paying 2.33% that's rather steep, although 1.83% is not unreasonable for a fund of funds. Either way, charges are likely to be higher than Bestinvest's standard investment advisory service, which provides 'free' advice on portfolios of £50,000+ in exchange for the fund trail commission (typically 0.5% a year), where TERs are likely to average around 1.6% or less. And the Bestinvest Managed Portfolio route is a lot more expensive than using a discount broker that rebates all trail commissions (like Cavendish Online), where the effective TER will be around 1% a year on typical managed funds.
However, charges are only half the picture, performance being the other. If a fund of funds manager performs well you might still end up better off overall versus doing the job yourself.
This is a harder to gauge, as the only real basis for guessing the future success or failure of a fund of funds manager is to look at the past, which isn't particularly reliable, and form an opinion on their current fund holdings - not easy.
If we look at Bestinvest Growth Portfolio fund manager Graham Frost's track record to date it's mixed, essentially one good year, one bad and one indifferent. His track record across all the Bestinvest Portfolio funds is reasonable and he scores a respectable 79.4% on Bestinvest's Manager Record Index (MRI) measure (which estimates the likelihood a manager has added value due to skill rather than luck). Nevertheless, Growth Portfolio performance is hardly anything to write home about.
If you're comfortable choosing your own funds then buying via the cheapest discount brokers (list in our guide to ISA discounts) might see you end up better off than staying put, but this will obviously depend on how skilful/lucky you are at choosing funds.
Alternatively you might try your luck with another fund of funds manager with a better long term track record, the Jupiter Merlin fund range springs to mind (although they're expensive with TERs of around 2.5%).
Or, you could stay with Bestinvest but consider moving across to their investment advisory service if you have more than £50,000 invested. This should reduce costs and, provided the service you receive is good, your portfolio shouldn't end up looking too different to the Bestinvest funds of funds.
Read this Q and A at http://www.candidmoney.com/questions/question496.aspx
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