First time investment in stocks and shares - advice required

Sarfaraz

Hi there,

A close relative of mine has an account with the Halifax. She was invited for a personal finance review and took me along as her English is not that good.

It transpired that the money she has been saving has only been attracting a rate of 1.6%!

At the moment she has in the region of £45k saved up. She does not access the account that regularly and as such the Halifax rep advised the possibility of investing a set amount into stocks and shares. Although he was reluctant to suggest a figure, he ended up saying that he would invest £20k in S&S and the remainder into a high interest paying account (which we have now done thankfully!)

So, my question: is £20k a wise amount to invest in S&S? My relative would be unlikely to touch this money for the foreseeable future (pretty much in line with her use of the account over the past few years)

Your advice is greatfully welcome!

Sarfaraz

jem16

Please please do not invest in S&S with the Halifax or any other bank. Halifax's investments are particularly poor - no doubt the full £20k was to be invested in Halifax's Cautious Managed Fund?

I have just been answering a thread with someone wishing to move out of such a fund.
http://forums.moneysavingexpert.com/showthread.html?t=1085109

How is this money to be invested - was an ISA mentioned? Any investment should be for a minimum of 5 years - is this intended?

Sarfaraz

Hi Jem,

Thanks for your advice.

At the moment things stand as follows:
circa £45k sitting in a savings account (passbook based) paying approx 1.6% interest and approx £650 going into the account every month.

Given my relative's reluctance to let go of the passbook feature, the man from the Halifax suggested the following:
£20,000 to go into S&S
£3,600 to go into a cash ISA
£300 per month (from the £650 coming in) to go into a S&S ISA
£20,000 to go into the Halifax Guaranteed Saver Reward (6.25%) account with regular sweeps of the other £300 coming in to the 1.6% account moved into the HGSR.
A small sum to stay in the low paying passbook account which can be dipped into now and again.

The rep did say that any investments would go into a broad range of blue chip companies.

We would be looking to make any investment in S&S over a long period of time (5-10 years) and would not be looking to touch it (well, unless there is an emergency)

Many thanks.

jem16

The general advice seems not too bad - any reason not to use the whole £7200 for S&S ISA? Is a cash ISA already being used?

If your relative is serious about investing please see an Independent Financial Adviser who will offer advice from the whole of the market and not just Halifax's poor quality funds.

Do a search on here about Halifax Investments and I'm sure you will see the reasons to avoid them.

dwileflunker

jem16 wrote: »

The general advice seems not too bad - any reason not to use the whole £7200 for S&S ISA? Is a cash ISA already being used?

If your relative is serious about investing please see an Independent Financial Adviser who will offer advice from the whole of the market and not just Halifax's poor quality funds.

Do a search on here about Halifax Investments and I'm sure you will see the reasons to avoid them.

I agree, go and see an IFA. Halifax have only one interest in all this. Their own.

chesky369

Sarfaraz - remember the man from the Halifax is a SALESMAN not a financial adviser - his job is to get sufficient people to invest something with the Halifax and not let them escape to any other banking or investing establishment. He is NOT working for your relative or on her behalf.

If she is wedded to her passbook, ask if she will allow at least SOME of her savings - say £5 or £10k - to be put into other types of saving. Hopefully, over the next year or so, she will then see how much better those savings are doing. It might also boost her confidence in this area if she becomes more computer-savvy, so you might introduce her to the delights of surfing the web in general by finding out what she might be interested in on-line. It would then open her up to the long-term possibility of on-line banking.

dunstonh

Halifax also are generally the worst of all the banks when it comes to investments. Nobody should see a sales rep to get advice. From next year the FSA have proposed that sales reps wont be able to give advice any more but will still be able to present their options under a sales process.

runciblespoon

jem16 wrote: »

The general advice seems not too bad - any reason not to use the whole £7200 for S&S ISA? Is a cash ISA already being used?

I think telling them to use the cash ISA component is more sensible than £7200 S&S ISA. The OP's relative would then put £3600 more S&S outside the ISA. It'll be liable to CGT, but if they don't sell everything in one go then it will probably come under their CGT allowance. Meanwhile, cash outside the ISA will be liable to income tax if they are a taxpayer. I'd say having the ISA as cash would be more useful than as S&S, as the interest on a cash ISA won't be liable for income tax.

In any case, CGT is 18% and income tax is 20%. So if you have to pay one, opt for CGT!

As and when ISA allowance becomes available they can always move some S&S into the ISA, if there's likely to come a time when they're going to sell the whole lot in one go.

If part of the investment is bonds, it might make sense to put those in the S&S ISA for the tax relief, but I'm no expert in this area (not that I'm an expert in any other investment area )

fatrat1

Any direct share investment at present is not advisable , none of the analysts can agree on wht will happen. Best to have the whole lot on the highest rate of interest for 1 or 2 years if she doesn't want to access it. isa is good use the allowance but to advise someone who's risk profile would indicate a cautious investor this smacks of opportunism. Ask to see the manager and insist that s a cautious investor he sale into shares should be retracted and if they won't tell them you feel that bad advice was given.

fatrat1

Contd . Tell them you will go to the F.S.A. and take it further, they will soon do what you want.

dunstonh

I'd say having the ISA as cash would be more useful than as S&S, as the interest on a cash ISA won't be liable for income tax.
...snip...
If part of the investment is bonds, it might make sense to put those in the S&S ISA

If the ISA utilised the allocation for fixed interest funds then it would be more useful in the S&S side than the cash side at the moment as many of the yields on the fixed interest funds are close to or are in double digits.

So, its not quite as clear cut as saying one is better than the other. It depends on where you place the investments.

Any direct share investment at present is not advisable , none of the analysts can agree on wht will happen.

They never can at any time. It could be a good time, it could be bad in the short term. However, you shouldn't assume that investing means stockmarket. There are other options as well.

Ask to see the manager and insist that s a cautious investor he sale into shares should be retracted and if they won't tell them you feel that bad advice was given. Tell them you will go to the F.S.A. and take it further, they will soon do what you want.

Cautious can have upto around 40% in equities (subject to fine tuning).

The FSA don't handle complaints so threatening them with the FSA wont bother them in the slightest.