What will a financial adviser do for me?

I am reading Smarter Investing by Tim Hale. I coped up until chapter 7 where I found it difficult. 8 was harder and 9 doesn't make any sense at all to me (I am in NO way blaming the book here!!).

The book makes a rational case for spreading your investments between (high quality, shorter term) bonds and equity (including emerging markets and lower value and risky companies) depending on what you want your holdings to do.

I don't know where to start. If you said to me 'Go and buy a UK Governmenr bond' I wouldn't know what to do. If you said to me 'Invest in a fund that replicates the FTSE All Share Index', likewise.

Would I be able to sit down with an adviser and say something like:

1. I am nearing 40
2. I have no pension or other assets
3. I want to invest a fair-sized 5 figure sum so that it grows steadily to provide for when I'm retired
4. But it needs to be liquid in case I ever need cash for an emergency
5. This should be split between around 20% in bonds and 80% equities spread like this according to this book( the table 7.9 for anyone who has the book)

Can you use my money to buy funds to represent this mix?

Also would those fund managers reinvest the income from the fund back into or does my adviser decide where to invest it?

What sort of fees will the adviser charge, a flat fee or a percentage of any gains?

I can imagine some jaws hitting the floor with some of the basic Qs I've asked here!:D
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Comments

  • BLB53
    BLB53 Posts: 1,583 Forumite
    Read the book again, you do not need to pay ££ to an adviser. Just keep a % of your total in cash in a building soc. account and invest the rest in Vanguard Lifestrategy 80.
  • 5t3ve
    5t3ve Posts: 51 Forumite
    ^what he/she said ;)
  • justme111
    justme111 Posts: 3,508
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    I understand you I think . You know what you want to do , just do not know how. No worries. I do not know how to buy bonds either !(sheepishly looking around:D)
    But - it would be easy to google if I needed to
    -you can use cash instead of a bond (that is what I
    am doing as my numbers are small)
    - As said above if you buy some fund that includes
    bonds you do not need to bother with them
    separately .
    The next question is how to buy a fund - quick search on this site will bring up a couple of recommended names. Then quick search of investment platforms will bring up a few names as well. Read about them(they have different charging structures, different facilities), chosen which one you think is best, go on their website, open account, move money there, pick the fund of your choice.
    On a separate note think about either pension or ISA wrapper for that money and arrange it all accordingly.
    That is a dummy's guide to investment shorthand:D
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • tacpot12
    tacpot12 Posts: 7,893
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    My advice would also be to buy Vanguard Lifestrategy 80. Hold the units in an ISA if you trust yourself not to draw on the money before you retire except for the direst of emergencies, otherwise hold them in a pension where broth your not anyone else can access them until you are 55. :-)
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • jdw2000
    jdw2000 Posts: 418
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    Ask not what a financial adviser can do for you, but what you can do for a financial adviser.
  • Malthusian
    Malthusian Posts: 10,898
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    If you have already risk-profiled yourself to the extent you know you want 80% in equities and 20% in bonds, and are already confident that this meets your objectives (which you haven't stated) and that you are happy for your money to drop by 40-50% at times, then most IFAs would tell you that you've already done most of their job.

    However I am intrigued by the fact that you have got that far in determining how you want to invest without learning how to buy a tracker fund. Either you are reading that book in a weird order or it's written in one.

    As with anything in life there are two options: DIY or get a professional to do it. DIYing it well is slightly better than using a professional, because you save money, but DIYing it badly is considerably worse because you will lose much more money than you stood to save. You weigh up how confident you are in your own ability and take your choice.

    People on this forum say things like "just put it in Vanguard LifeStrategy 80/20" because Vanguard 80/20 is a decent option for anyone who can tolerate a normal level of stockmarket volatility, and will probably work out OK 80%-90% of the time. We don't need to worry about the 10-20% who buy it, panic in the next stockmarket crash and cash it in, as they can't sue us. IFAs however have to recommend the best option for your circumstances as they are responsible for the advice and if they get it wrong they have to pay redress.
  • Linton
    Linton Posts: 17,061
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    Some of the sort of questions I hope an advisor would be able to discuss with you should you go to one.

    - When will you want to retire. State Pension Age? Earlier ? Later?
    - How much income at current prices are you going to need from your investment when you retire? Is your "fair sized" sum sufficient to provide it?
    - Do you plan to invest more in the future? If so how much more? How much more will you need to invest to meet your income and retirement date requirement? Regularly? Pension vs ISA?
    -You say you want your investment to grow steadily between now and then. It wont. Some years it will make a significant loss. Can you cope with this?
    - You want 20% in bonds. At the moment safe bonds are returning more or less 0%. What about going for riskier bonds or keeping some money in cash instead which could also meet the emergency cash need?
    - What is your tax position? How can you optimise it?
    - Do you have a family? If so how can you best protect/benefit them in the future?
    - Are you employed? If so why arent you making best use of your employers pension?

    It's these sort of questions that you may need help to think about. However if you know the answer is 80% in equities and 20% in bonds allocated in a specified way then I dont think an IFA can help you. Cheaper and better for you to find out the mechanics of investing for yourself.

    Whether it is worthwhile using an IFA will depend to some extent on how big "fair sized" is. £100K and above, with your current level of knowledge I would suggest almost certainly. Below £50K more likely not.
  • Jon_W
    Jon_W Posts: 108 Forumite
    Thanks for your advice all. I am finding all this fascinating as well as bewildering. I also now wish I'd have done some economics/business/finance qualifications at some level. I am even wondering whether an economics A level or GCSE would help me to at least understand the basics. I have the time, what do you think?

    Also regarding Vanguard 80: is it risky putting all £ in on product provider in case it does a Lehmann?

    And I didn't know I could hold funds in an ISA and select the funds myself. I thought a stocks and shares ISA selected them for me. This is something else I have no idea how to do so would need an advisor for. I assume that I am taxed on income from a stocks/shares/funds ISA for gains which are a result of investing more than £15k a year (unless the Chancellor alters this tomorrow)?

    Smarter Investing says thatportfolio assets should be spread across, according to my aims and age:

    Equities:
    1.Global - market (developed) - which I think means a developed nations all-market tracker? 36%
    2. Global - value (developed) - which is cheaper priced, poorer performing companies across developed markets 12%
    3. Global - smaller companies (developed) 12%
    4. Emerging markets - trackers of indexes of the whole emerging market countries 8%
    5. Emerging markets - value and small - worse performing and smaller companies in emerging markets 4%
    6. Global commercial real estate 8%

    Bonds:
    1. AA short dated 0-5 years - 10%
    2. Inflation-linked bonds AA short dated 0-5 years 10%

    Will Vanguard lifestyle 80 cover this?

    Or am I realistically looking at investing in a separate fund for each asset class, which stacks-up the management fees?
  • Jon_W
    Jon_W Posts: 108 Forumite
    jdw2000 wrote: »
    Ask not what a financial adviser can do for you, but what you can do for a financial adviser.

    Yeah, that's what worries me!! ;)
  • Jon_W
    Jon_W Posts: 108 Forumite
    Malthusian wrote: »
    If you have already risk-profiled yourself to the extent you know you want 80% in equities and 20% in bonds, and are already confident that this meets your objectives (which you haven't stated) and that you are happy for your money to drop by 40-50% at times, then most IFAs would tell you that you've already done most of their job.

    However I am intrigued by the fact that you have got that far in determining how you want to invest without learning how to buy a tracker fund. Either you are reading that book in a weird order or it's written in one.

    As with anything in life there are two options: DIY or get a professional to do it. DIYing it well is slightly better than using a professional, because you save money, but DIYing it badly is considerably worse because you will lose much more money than you stood to save. You weigh up how confident you are in your own ability and take your choice.

    People on this forum say things like "just put it in Vanguard LifeStrategy 80/20" because Vanguard 80/20 is a decent option for anyone who can tolerate a normal level of stockmarket volatility, and will probably work out OK 80%-90% of the time. We don't need to worry about the 10-20% who buy it, panic in the next stockmarket crash and cash it in, as they can't sue us. IFAs however have to recommend the best option for your circumstances as they are responsible for the advice and if they get it wrong they have to pay redress.

    Yes, honestly, this is the order the book goes in! I am persevering but not really getting much out of these latter stages as it's way above my ken.

    Investing Demystified by Lars Kroijer is next up. It looks a lot more manageable. Smarter Investing takes quite a bit of a leap from Chapter 8 onwards in complexity, as least to a complete novice.
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