Advice re lump sum investment please

[Kinnairdy]

:confused: Hello,
Have sold house (BTL). Will have approx £60,000 to 'invest'.
Looked at many options on internet but still :confused:
Looking for best interest rate savings account, ISA etc.
Do not need Instant Access to money.
Husband 59, disabled, non tax payer
Me 49, non tax payer after April 2007 when final accounts for BTL are submitted to I.R.
Will not invest in stock market, tried that, withdrew investments on 08 Sept, lost £13.500 and Twin Towers Attack happened 4 day's later, lucky move on my part but too risky to try again.
Any advice/suggestions would be very welcome in my quest to unravel the mysteries of different accounts and ISA's.
Many Thank's :smiley:

[dunstonh]

Will not invest in stock market, tried that, withdrew investments on 08 Sept, lost £13.500 and Twin Towers Attack happened 4 day's later, lucky move on my part but too risky to try again.

Strange. All my 2001/2002 investments are well in surplus. Most in excess of 10% p.a. How you managed to make a loss before the crash is the surprising part. One assumes that it was only short term and you invested way above your risk rating.

Like most inexperienced investors you have assumed that the only two options are deposit accounts and stockmarket. There is a large range in between and stockmarket isnt just one level of risk either.

You need to clarify some things. You say you have 60k to invest but then say you dont want to invest. Which is it? You also say you dont want stockmarket investments but what about all the other non stockmarket linked investments that exist? Or do you just want deposit based savings acccounts?

[Kinnairdy]

Strange. All my 2001/2002 investments are well in surplus. Most in excess of 10% p.a. How you managed to make a loss before the crash is the surprising part. One assumes that it was only short term and you invested way above your risk rating.

That I cannot tell you, we were 'advised' by our Lloyds TSB Bank manager to talk to their 'financial advisor'. This was all new to us so we went along with his 'suggestions' as to the best way to invest our capital, he quoted figures and returns on 5 & 10 year projections and made it sound very simple, we assumed (wrongly, I know) that we were getting the best advice.

Like most inexperienced investors you have assumed that the only two options are deposit accounts and stockmarket. There is a large range in between and stockmarket isnt just one level of risk either.

We accepted the advice of what we thought was a professional who 'forgot' to tell us his choice of investment was a high level risk and he 'forgot' he was charging a whopping great fee for his services, we only discovered that bit when the paper work came through, that was about the only bit of it I did understand.

You need to clarify some things. You say you have 60k to invest but then say you dont want to invest. Which is it? You also say you dont want stockmarket investments but what about all the other non stockmarket linked investments that exist? Or do you just want deposit based savings acccount

Apologies if I have used the word 'invest' erroneously, I am afraid I know nothing about non stock market linked investments, what are they?.
I have looked at Deposit based savings accounts but am still non the wiser as to which would be most beneficial.
At present we have a Current Account but I would like to put the money in one that would earn a reasonable rate of interest until we find out more about what is available to us.
Any form of 'investment' would have to pay back at the very least the initial deposit so I presume it would be 'low level' if that makes sense.

It is not an easy area to get to grips with for the novice :-)
My thank's for your reply.

[dunstonh]

That I cannot tell you, we were 'advised' by our Lloyds TSB Bank manager to talk to their 'financial advisor'. This was all new to us so we went along with his 'suggestions' as to the best way to invest our capital, he quoted figures and returns on 5 & 10 year projections and made it sound very simple, we assumed (wrongly, I know) that we were getting the best advice.

Tied agents are not allowed to give portfolio investment advice. They are not giving best advice. They are giving best advice from what is available in their 8-15 product range.

We accepted the advice of what we thought was a professional who 'forgot' to tell us his choice of investment was a high level risk and he 'forgot' he was charging a whopping great fee for his services, we only discovered that bit when the paper work came through, that was about the only bit of it I did understand.

Basically you went to the wrong place for professional advice. You got advice from a limited range salesforce from a low knowledge adviser. You are not alone. Many make the mistake every day.

Apologies if I have used the word 'invest' erroneously, I am afraid I know nothing about non stock market linked investments, what are they?.


Gilts, fixed interest, corporate bonds, commercial property (bricks and mortar) to name a few.

Any form of 'investment' would have to pay back at the very least the initial deposit so I presume it would be 'low level' if that makes sense.

When does it have to pay it back? You can get portfolio investments which have a capital guarantee on death. So, if this is to provide an income for life, you could have a proper investment spread with the knowledge that on death, the spouse would be paid the original value (also a locked in value of that option exists) or the fund value, whichever is higher.

To put all your money into investments would be foolish. Equally putting all your money into savings accounts is also foolish when looking at the long term.

£60,000 put in a bank account 10 years ago with interest paid out to live on would have the spending power of £42,600. The income would have gone down in effect as well as there is no growth on that capital value.

So, whilst you have concerns over investment risk, you shouldnt ignore inflation risk. You just have to look at fuel costs and council tax today compared with 10 years ago to see what happens to the cost of living.

A sensible balance between having some on a savings account and some invested but in a very cautious portfolio (with perhaps death guarantees if they are important to you) would at least give you some potential to beat inflation. A defensive portfolio of investments would have seen no loss in 2001/2002 when the crash came because it wouldnt have had much stockmarket content at all. Yet over the last 5 years you would have averaged around 11% p.a. Whilst past performance is no indication of future returns, it is nice to see how these things perform during stockmarket crashes and times or poor performance.

Dont let the poor investments sales process of the bank put you off investing.

[EdInvestor]

I would suggest some of the money into property funds

list here (http://www.trustnet.com/ut/funds/perf.asp?sort=5&ss=0&txtS=&txtSS=&columns=&page=0&booIMA=0&reg=uk&sec=pty&ima=all&unit=all&type=all&gobutton=Go)

and the rest into high interest internet type savings accounts.

You can put property funds into an ISA now (7k a year) so if you took out one each for two years that would tax protect the property funds. Choose one through a discount broker so the initial charges are rebated back to you.

Make sure you choose the ones which invest in actual buildings,not property shares, as the latter have higher volatility.

[Kinnairdy]

My thanks to both Dunstonh & Edinvestor, your kind assistance and explanations are very much appreciated.
Yes we certainly did go to the wrong place for advice, that's what happens when you have a combinaton of naiveity v Bank's. If only I had known then what I know now, sounds like a song title.
No death guarantees are not a major consideration, pay back could be anywhere from 10 -15 years although if property prices fall considerably during that time we would consider buying a house for our retirement, present home goes with my P/T job you see. I will certainly need to talk to an Independant Financial Advisor or Discount Broker and get it right this time, would you be so kind as to advise me what I should look for and what I should ask when choosing one, a flick through the Yellow Pages would be like taking walking off a cliff in the dark in my case. Many thanks once again for your time and kindness. :-)

[dunstonh]

Finding the right IFA to deal with is no different to finding someone who is good in any profession.

You can help increasing your chances of finding a good adviser by looking for the following:
1 - avoid salesforces. National/regional salesforces have a sales mentality and remuneration is heavily based on targets being achieved. Salesforces shouldnt be confused with networks (such as Sesame, Personal Touch etc) where members of the network will usually advertise together in the networks box in yellow pages.
2 - look for new model advisers. This is quite a new business model for IFAs and we are in a minority at this stage. However, the cost benefits of using a new model adviser are great. New Model Advisers (NMA) have no commission bias as any commission above a fixed amount is automatically paid to you. The cost of advice is lower because of the amounts being rebated (commission may mean that you dont pay any money but the providers charge you on the expectation of paying that commission. If the commission is rebated or used to lower those charges, then you are getting money back). For example, on 60k, you could be better off by around £1800 by seeing a NMA IFA rather than one that keeps all commission.
3 - Ask a questions on how the investment portfolio is to be built and how many funds and areas it is being invested in. Novice or low experience advisers will often come back with 1-3 funds. Typically, investment specialist advisers would come back with 8-15. You can also learn a lot from how they work out your attitude to investment risk. If the way of finding out your risk profile is "pick a number between 1 and 5 to indicate your risk" (or similar to that effect) then walk away. Having a 1-5 scale is normal but there needs to be more to it than "pick where you are". Inevitably, people go for the middle one on that basis which wouldnt suit you based on what you have said.
4 - Ask friends and relatives if they have an IFA. Most wont but you may find one that does.
5 - Small local firms rely on reputation and word of mouth. Especially in villages or small towns. Picking a small firm could result in better quality service.

[Chrismaths]

Excellent summary. That post should be made a sticky.

[EdInvestor]

... pay back could be anywhere from 10 -15 years although if property prices fall considerably during that time we would consider buying a house for our retirement, present home goes with my P/T job...

This suggests to me that you should allot only a minority of the sum to equities so as to reduce risk,say 20%. A lower risk type of equity investment are the UK "Equity income" funds, which concentrate more on the big blue chip companies which pay good dividends. The top rated ones will be listed under the category name on this site:

www.citywire.co.uk/Funds/Home.aspx

Good discount ISA suppliers include www.hargreaveslansdown.co.uk and www.chartwell.co.uk , both of whom will rebate charges.

[cheerfulcat]

Anyone looking for an IFA should also be aware that many of the bigger firms are part or wholly owned by insurance companies.