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Johan De Silva
Posted: 15 January 2023 18:25:15(UTC)
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Logic Prophets;253900 wrote:
As well as your own portfolio and the regular trading that you partake in Mr GL, unless you are bored and don’t have a day job… this is far too much and for what?…. to try and beat the index by a couple of points each year?
All of them individual bets on fund managers…trying to second guess who will do well this year… the re-balancing… the trading costs… the time spent when you could be doing other things (even condensing your own sprawling portfolio of investments) etc.

If it was me… I would keep the gilts (pointless to sell them now) and plough the rest into a balanced low cost fund like Lifestrategy (or similar) and accept the predicted 6-7% growth over the next five years (L60).


It's more than a few points a year by being nimble with smaller holdings. I get it. I have 3 years of positive double-digit returns in a row. If he has the time let him do it as it has worked for others here. I only worry that his own portfolio will suffer.... I mean it has to suffer right Mr GL?

I can't see the cap-weighted index's outperforming for a while as they still hold yesterdays winners. Thats why everything else beats it recently including value, high divi, small caps, mid caps, equal weight, mid-cap, momentum and probably by the end of the year bonds and REITs.
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Logic Prophets on 16/01/2023(UTC), Mr GL on 16/01/2023(UTC)
Rory Barr
Posted: 15 January 2023 19:12:05(UTC)
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My thoughts, as you request in the title, is that it's your old man's portfolio, not yours.

It doesn't look like that though.
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3 users thanked Rory Barr for this post.
bill xxxx on 15/01/2023(UTC), Guest on 16/01/2023(UTC), Mr GL on 16/01/2023(UTC)
SSJ
Posted: 15 January 2023 20:41:29(UTC)
#28

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Mr GL;253771 wrote:

He is 80 years old and lives in a care home (dementia means he can't make decisions re his finances and via a dysfunctional sibling relationship I am doing this all on my own...) I am doing this under a power of attorney - and my main responsibility as a fiduciary is to ensure he has enough funds available to meet his future needs and I need to make sure i manage this responsibly and not allow through action or inaction his assets to dwindle / lose their purchasing power etc, not take inappropriate risks etc..

A "dysfunctional sibling relationship" sounds ominous - if that was a polite way to put "vindictive - lawyers at the ready" then the EM, PE, Tech sound dangerous in this respect (particularly given the cold, hard stats on life expectancy in care homes). In contrast, the cash, Gilts and WP sound safe/beyond reproach in this respect.

Given that you will have no control of the timing of the final reckoning, is the full-on equity sub-portfolio really worth the risks that an inconvenient downturn might bring? You could always maintain these in a virtual portfolio so that you can say "look at what you could have won if you weren't such a..." :)
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Mr GL
Posted: 16 January 2023 09:05:53(UTC)
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Jimmy Page;253808 wrote:

Has an annuity been discounted?
Rates of ieo 7% on an escalating annuity - escalating at 3% per annum - would more than cover his care home fees and other costs? There would be more than enough excess to cover any large increases in care costs?

Or, if I'm assuming something like 3.5% annual drawdown from the pot is currently ok, then maybe half in an annuity, the rest invested for excessive care inflation and/ or inheritance purposes etc?
With half producing a guaranteed return, and probably more than covering costs, it rather takes some pressure off investment decisions. A fair trade for what may be a reduced inheritance for others? You're not investing for them, after all. Can be tricky, I know.


I think the issue with annuities is they in effect outsource responsibility to generate a suitable return to someone else + if he were to die suddenly then his beneficiaries would end up with nothing (as far as I know if you buy an annuity then the assets leave your estate and are are not part of the estate on death?)

his current annual needs equate to 3.4% of his total AUM... the short dated nominal gilts are paying that - however this takes no account of inflation hence the short dated inflation linked and the wealth preserver portfolio (which have targets to achieve inflation + returns with low volatility..
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Logic Prophets on 16/01/2023(UTC)
Tim D
Posted: 16 January 2023 09:16:16(UTC)
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Mr GL;253940 wrote:
I think the issue with annuities is they in effect outsource responsibility to generate a suitable return to someone else + if he were to die suddenly then his beneficiaries would end up with nothing (as far as I know if you buy an annuity then the assets leave your estate and are are not part of the estate on death?)


Don't know much about them but there are "capital protected annuities" (aka "value protected annuities") where there are some guarantees that you get some capital back if the annuitant died "too soon" and the policy seemed like it'd been a rip-off with hindsight. Probably quite expensive... it's presumably much the same insurance calculation as taking out an ordinary annuity plus a life-insurance policy.

See e.g https://www.drewberryins...-value-protected-annuity
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Mr GL on 16/01/2023(UTC), Logic Prophets on 16/01/2023(UTC)
Mr GL
Posted: 16 January 2023 09:20:44(UTC)
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countrymum;253814 wrote:
Mr GL;253771 wrote:
He has 2+ years needs as cash, then 8 years needs across Gilts (vanilla and index linked), then 9 years needs across wealth preservers and diversified property and lastly 11 years across a range of mainly equities... for annoying legacy reasons he has no ISA savings to shelter from tax

thoughts / criticisms / observations / feedback appreciated...

Cash and gilts take him to age 90
WPs to age 99
So why treat the SIPP as his at all - surely that is the part of his estate that is n/a for IHT and therefore * could * be viewed as investable with the ultimate beneficiaries in mind?

Or does that fly against the rules of being a trustee?

On the IHT, are you still using his current SIPP allowances?


So as his attorney I only have responsibility to invest with his best interest in mind - and this doesn't need to be how he would have done it if he were still able to manage it himself.

As to the interests of his potential beneficiaries I need to be somewhat blind to their priorities (despite being a potential beneficiary myself - I am one of four kids - and the estate is a 1/4 share to each of us)... For example as he has substantial assets we (I share the health and welfare poor of attorney with a more reasonable sibling) have put him in an outstanding care home and this costs a huge amount of money every year - IF we were focused on preserving his estate for his beneficiaries we could have shoved him in the cheapest / crappiest place available ... in fact he is is the most expensive place we saw and he is happy and well cared for there.

The reason for investing the SIPP in a greater proportion of equity risk is due to its long term profile (as part of his overall AUM), any capital gains achieved are able to be realised without incurring capital gains tax - as I have no idea how long he may live I need to assume he will live for a very long time and so invest accordingly. Over the long term equities are the best long term investment - over short term time periods the risk is that funds are needed when prices are low - hence having 11 years needs as cash and short dated gilts and the next 9 years as wealth preservers... 20 years before needing to touch the equity risk funds allows for time to overcome any temporary lulls in valuations...
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countrymum on 16/01/2023(UTC)
Logic Prophets
Posted: 16 January 2023 09:45:04(UTC)
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Mr GL;253944 wrote:
countrymum;253814 wrote:
Mr GL;253771 wrote:
He has 2+ years needs as cash, then 8 years needs across Gilts (vanilla and index linked), then 9 years needs across wealth preservers and diversified property and lastly 11 years across a range of mainly equities... for annoying legacy reasons he has no ISA savings to shelter from tax

thoughts / criticisms / observations / feedback appreciated...

Cash and gilts take him to age 90
WPs to age 99
So why treat the SIPP as his at all - surely that is the part of his estate that is n/a for IHT and therefore * could * be viewed as investable with the ultimate beneficiaries in mind?

Or does that fly against the rules of being a trustee?

On the IHT, are you still using his current SIPP allowances?


As to the interests of his potential beneficiaries I need to be somewhat blind to their priorities (despite being a potential beneficiary myself - I am one of four kids - and the estate is a 1/4 share to each of us)... For example as he has substantial assets we (I share the health and welfare poor of attorney with a more reasonable sibling) have put him in an outstanding care home and this costs a huge amount of money every year -
...


Mr GL. Generally you are very confident in your ability to invest and trade etc and you have built up a substantial pot yourself so no one on here that follows your posts would doubt that you know what you are doing.

Now for the big ‘however’! What you have probably never experienced is relationships within whole families being irreversibly wrecked when it comes to parents dying and inheritance. Emotions run wild and acrimony can be rife and I have seen this with two close friends recently when they and their families have had to deal with the inevitable.
It even happened within one of my parents families. Very close relationships all the way through life and then.. bang! My mother and some of her siblings are sadly no longer with us after spending their remaining 20 years of their lives not talking to each other.

The best advice I can give is for you to lump the whole lot into a ‘balanced’ Lifestrategy type fund. If the pot is substantial, I would even mitigate the minuscule platform risk further by spreading it across a few different providers.

This way everything is transparent and easy for all four siblings to see on a regular basis or whenever they want to see it. Any other way and you risk setting yourself (and you family) up for a lot of stress and anxiety further down the line.

P.s. I highlighted your comment “a more reasonable sibling”! That’s a warning flag all on its own.
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Mr GL
Posted: 16 January 2023 09:58:06(UTC)
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[quote=Newbie;253856]
So long as the OP has reasonable answers which demonstrate that all the decisions are being made for the benefit (different from the "wishes") of the grantor and them alone then it is fine.[/quote

some history - it might make for fun reading...

Original there were two of us (2 out of 4 beneficiaries) who shared jointly and severally the PoA responsibility.

We had discussed his asset allocation during late 2019 when I was nervous about stock markets and wanted the majority of his risk assets to be put in cash + PNL/CGT/RICA... The other attorney was keen to invest (to insure somewhat against inflation risks) and proposed a 'growth portfolio' (made up of SMT, FCSS, Fundsmith, HGT, WWH, SOI, SEC) I felt that this was a v risky portfolio - however as there were two of us - the other attorney had operational control - we reached a compromise for only ~15% of AUM to be invested in a purely risk equity sub portfolio...

Then COVID kicked off - the market crashed (I hadn't predicted COVID be I had felt equities were overvalued in 2019). We started to fall out during the 2020 crash as I wanted to then move more of his AUM (which at the time was approx 75% in virtually zero interest paying cash) into equities taking advantage of the low prices on offer. His 'growth' portfolio at one point was down double figures in terms of percentage and I wrote a number of emails (starting on the 17th march) arguing for a greater risk allocation now that prices had fallen so much. At this point the other attorney took unilateral control (they already had full operational control) - ignored and dismissed all my requests / reasoned arguments to increase the risky allocation etc and then watched the prices rally significantly before acting at all and then only to add more wealth preservers (after their prices had also risen) - I was - understandably - very upset about this and eventually received a 'resignation' letter from the other attorney's solicitor in oct 2020 leaving all the responsibility to me. I then rebalanced the risk portfolio - reducing overweights in growth and added more value - during November. My timing was very fortunate as the portfolio was better positioned for the value rally / catch up of late 2020 early 2021...

The only one of my siblings who I consider likely or willing to get litigious is the attorney who resigned - after they had done a poor job and - arguably - abused their authority.

In terms of 'performance' since I have taken over sole control my fathers risky AUM are 19% higher than they would have been if I had kept the legacy portfolio that was handed over to me by the ex-attorney (who consistently argued that we should follow a buy/hold and then do nothing for 5 years policy). My management so far has exceeded the returns that would have been found via a long only VWRL type investment, and his total AUM has matched CPI over the last 3 years... so overall a pretty unambiguously decent performance.

I have restructured now - making a significant use of gilts - in order to reduce risk (counterparties) and increase diversity whilst targeting reasonable risk adjusted returns for a physically very healthy person. As I have no idea how long my father will live I have simply structured a portfolio that should be reasonably balanced between low risk and higher risk when looking at his total AUM, how expected annual spending needs etc. I expect that IF index linked bonds were to crash further - and then offer sensible real returns - I could see me moving more into a maturity ladder of inflation linked gilts.
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Mr GL
Posted: 16 January 2023 10:09:01(UTC)
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SSJ;253914 wrote:
Mr GL;253771 wrote:

He is 80 years old and lives in a care home (dementia means he can't make decisions re his finances and via a dysfunctional sibling relationship I am doing this all on my own...) I am doing this under a power of attorney - and my main responsibility as a fiduciary is to ensure he has enough funds available to meet his future needs and I need to make sure i manage this responsibly and not allow through action or inaction his assets to dwindle / lose their purchasing power etc, not take inappropriate risks etc..

A "dysfunctional sibling relationship" sounds ominous - if that was a polite way to put "vindictive - lawyers at the ready" then the EM, PE, Tech sound dangerous in this respect (particularly given the cold, hard stats on life expectancy in care homes). In contrast, the cash, Gilts and WP sound safe/beyond reproach in this respect.

Given that you will have no control of the timing of the final reckoning, is the full-on equity sub-portfolio really worth the risks that an inconvenient downturn might bring? You could always maintain these in a virtual portfolio so that you can say "look at what you could have won if you weren't such a..." :)



see longer response above - but in short the "dysfunctional sibling relationship" is the one who originally put him into EM, PE and tech... so it would be hard for them to now argue that I have been reckless - particularly as my subsequent actions have resulted in a more diversified portfolio which has produced significantly better returns relative to VWRL / UK inflation / VLS etc.

as I understand it in civil law for someone to sue me they would need to 'show me the loss' - my actions to date have generated excess positive returns... so I think it is hard to sue someone when they have done a better job than expected / average from a more diversified portfolio.

For comparison Vanguard Life strategy 40% equity is basically flat over the three years since start of 2020 (when the power of attorney was able to come into effect) - my father's risk assets are up 33% and his total AUM is probably 16% better off... overall not too shabby... and in my opinion not sue-able ...
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Dexi
Posted: 16 January 2023 13:20:42(UTC)
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I wouldn`t worry too much about being sued - they would have to prove negligence , just incompetence would not be good enough .
If it was a crime to be useless at their job , half the country would be in jail : )
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Mr GL on 16/01/2023(UTC), D Bergman on 16/01/2023(UTC)
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