Help with financial advisor's recommendation

[victorianlady]

Looking for insights on this proposal our bank manager gave us. For context, we're a 32-year old couple with a child due later in the year.

The total amount to be invested would be around EUR 800,000. We don't have debts and don't currently need the money, but we will likely want to buy a house in about 2 years. Any help is appreciated!

AT0000774484 - Amundi Ethik Fd Evolution (A)

AT000B129242 - 3,24% Wandelschuldverschreibungen

IE00B4L5Y983 - iShares Core MSCI World ETF (T)

IE00B5BMR087 - iShares Core S&P 500 UCITS ETF

LU0425487740 - SISF € Corp Bond (A)

LU0714179727 - JPM GBL DIVID.A (div) EUR (A)

LU1437017350 - Amundi Index MSCI EM MA (T) ETF

LU1479563717 - ALLIANZ THEMATICA (A)

XS2688851299 - GS F.C.INTL 24/28 MTN

 

[janetmal]

@victorianlady This is a complete hodgepodge of a portfolio with horrible fees for most of the products and that doesn't seem to match your goals. What are the allocations to each ETF/fund? Let's look at the fees (as far as I could tell and in the same order your posted them):

AT0000774484: 1.6% yearly.

AT000B129242: 2% entry fee, couldn't tell if there's a yearly fee. These are 10-year bonds it seems, which is not matched to your 2-year horizon, at least for the house purchase.

IE00B4L5Y983: 0.20% yearly, this one's fine.

IE00B5BMR087: 0.07% yearly, also fine.

LU0425487740: 1.03% yearly with an entry fee of 3%.

LU0714179727: 1.50% yearly with an entry fee of 5% and and exit fee of 0.5% (this one's the worst so far).

LU1437017350: 0.20%, this one's fine.

LU1479563717: 1.95% yearly with an entry fee of 5% (JESUS, even worse than LU0714179727).

XS2688851299: This seems to be a standalone corporate bond from Goldman Sachs with maturity in about 4 years. I have no idea what this is doing in your portfolio.

I would stay as far away as I could.

 

[nathanh83]

@janetmal Yes seems that the advisor firstly thought about themselves.

 

[crazysis]

@nathanh83 It's not surprising, people almost always think about themselves first, you always need to do you own research.

 

[crazysis]

@janetmal Excellent addition, only one remark: even if OP would invest into a 2Y duration ETF they could lose money in case of an increasing interest rate environment. The manager doesn't hold anything till maturity (cause the duration is constant 2Y) bur rather roll over the positions technically every day.

 

[soag]

@victorianlady This is why you never ask financial advisor for advice

 

[greenhill]

@victorianlady In my opinion having two years time horizon and plan to buy a house (for EUR 800 000 +) you should use bank deposits, HYSA and money market ETFs/funds not stock ETFs/funds.

 

[evietheturtle]

@greenhill I assume they don't want to buy it in Cash, but still get a Mortgage. So the stock market volatility shouldn't be an issue.

 

[sixinthemorning]

@victorianlady Your bank manager is looking for a way to buy their own house with your money.

If have planned to buy a house in the next 2-5 years just park the money in a few bonds maybe with a bit of diversification just in case.

 

[anon1212]

@victorianlady Unless you are ready to postpone your house purchase for 5+ more years you should not invest in anything more risky than money market fund

 

[crazysis]

@victorianlady I believe they are expensive. If you need the money in 2 years, I'd buy a money market ETF with low TER. I have LU1190417599 with 0.05% TER. You don't need the bank, better to do at a cheap broker, I use IBKR. You can earn 4% - TER in EUR at this moment. In 2 years you will safely earn the overnight return, around 3% expectedly, that is 48,720 EUR. You need to calculate the costs too, I expect it to be 1000 EUR (TER + broker commission).

If you need the money, you might consider markets are around all time high and central banks' total assets are decreasing. It's a pretty high risk, but anyway if you are in equity, you always need to be comfortable with a 30%+ decrease short and mid term. The question is if you can afford it in your situation: planning to buy a house.

 

[crazysis]

BTW, I think the bank recommended you pretty high cost ETFs. Allianz Thematica has the entry cost of 5% and an annual 1.95% fee. On 800k, you would pay 55,600 EUR costs only in the first year! Okay a bit less, if they lose you money, but I don't think it would make you happy. In other words: if they deliver a 6.95% return, your are at 0. They need to deliver 10% to have the same as a simple "risk-free" money market ETF. In the last 3 years, they delivered a massive 1.9% annual return on average. It was a bit better if you look at the last 5 years: 8.9% on average. Still far to even out the costs. These fees also seem to be enough to pay your advisor a fat commission.

 

[evietheturtle]

@victorianlady The only thing you could trust about their "consultation" is maybe the risk-assesment.

So basically you should first find out what % is Stocks and what is Bonds. The Stocks part you definitely put in "Vanguard FTSE All-World" or "SPDR MSCI ACWI IMI".

The bonds (or safe) part is a bit more tricky. I definitely would NOT invest it on those 2 random bonds that they recommended though.

 

[oliverab]

@victorianlady Feels like too much work, making it more complex than it should be. I just stick to either world or S&P, and same with the bonds. It is the allocation % that is also important.

So max 5 ETF if you include a high yield account

 

[nathanh83]

@victorianlady ow much money do you need for the down payment? --> put tat in a savings account or a short term bond.

What is the goal of the rest of the money? Do you need to pay the monthly house payments? Is there another goal ? What is the horizon of this goal ?

 

[john5]

@victorianlady 1st meetings with independent FA’s are usually free. Like if you were getting a new bathroom, get at least 3 quotes…