Advice please regarding investments!

benfilan

:mad:

Ok, this is for my dad, who has been bamboozled a bit by the Halifax.

Over a year ago he sold my grandfathers house and got £150,000 for it. he has been self employed his whole life, so has no pension plan or anything, and decided to talk to the bank about the best way to save and make a bit of money.

He got an investment plan over 5 years - but so far it hasn't made any money, in fact, he's lost 13,000. Now I don't know much about investments, so this might be totally normal. the guy at the halifax said that this was fine and it would 'bounce back'.

Ideally my dad wants to save it somewhere it'll make a few quid and he can take some of the interest each month to his current account to supplement his income.

I've had a look around here and some other places and it seems to me he'd be best putting it into a high interest savings account and debiting some interest from it each month?

I'm not confident handing out advice like that, so i thought i'd put it to the forum!

thanks guys

jamesd

Your advice would probably be wrong. He wouldn't have a reasonable prospect of making money above inflation while still taking a reasonable income over the long term.

13,000 down on a 150,000 investment is fine over the last year, during which the UK market has dropped by nearly 30%, while he's down only 8.5% after starting at almost the worst possible time. Ups and downs of 25%+ on a five year timescale are completely routine for stock market investments, so it looks as though he doesn't have pure stock market investment at the moment.

Using the Halifax was probably a mistake since he has more than enough money there to merit using a proper IFA (all three letters - FA alone is another word for salesperson, often, almost always if it's in a bank). However, using an IFA would probably still have seen about the same performance over the last year.

What sort of monthly income does your father want? Something between 3-5% isn't unreasonable from investments, after allowing for inflation (note that bank accounts would be 1-2% after allowing for inflation - it's why you use investments instead of savings accounts).

At 3% he could reasonably take 375 a month in income and might usefully keep about 12 months of that in a savings account that makes regular payments to his current account, while the savings account is topped up from the investments. This split keeps the monthly income predictable even during variations in investment performance - that 12 months buffer is enough to cover even several years of reduced performance with lower payments going into the savings account.

What exactly is the Halifax investment? The exact name of the product and the exact name of any investments held within it. Then it'll be possible to say more about whether it was suitable for his needs at the time it was sold to him.

Did the Halifax also say that he should use his full ISA contribution, all 7,000 of it?

How old is your father? Roughly what level of income now and roughly how much more does he need? Is he a higher rate tax payer? Is he making any pension contributions?

There are a very wide range of possible ways of handing this money and the questions will give some idea of which general directions might be most suitable.

dunstonh

Your father not only has no pensions as you say but being self employed, it means he doesnt get the full state pensions either. Just the basic. So, there is scope to utilise pensions so when he does call it a day he uses his personal allowance to the full.

Cant really add more than james has said above.

benfilan

jamesd wrote: »

Your advice would probably be wrong. He wouldn't have a reasonable prospect of making money above inflation while still taking a reasonable income over the long term.

.........

There are a very wide range of possible ways of handing this money and the questions will give some idea of which general directions might be most suitable.

This is great advice, thanks
as i said, i don't know enough o give him any decent advice, and I was worried he was being given biased advice from the halifax.

I'll show him your response and get him to think it over.