What do you think of this advice please

Savvy_amateur

Hi Everyone.

I posted a few weeks ago regarding a sum of money i recently inherited and was advised to see a FA. I have done that and he determined that i am a low risk investor (3/4 out of 10) on the questionaire he did with me. He is suggesting I invest £65k out of the £85k I have on a capital back guaranteed 5 year investment. (He is coming back Tuesday to tell me what he comes up with) He seems like a genuine guy, but I have a few questions.

I know I won't lose my capital, but I keep seeing companies folding and share prices plummiting and keep thinking of the extra money I could potentially make on a buy to let, shared with my daughter, she would borrow her share and I wouldn't need to borrow. I mentioned this to the FA and he said he had seen it work very well for some people and very badly for others and he pointed out that it is risky and I have said I want low risk investment. But I guess if he suggested buy to let I wouldn't need his services.

My husband retires in 5 years and I retire in 10 years and neither of us has much of a pension to look forward to, but we have no debts either.

What do you guys think?

Should I get a second FA's opinon?

Should I pay him by commission or cash?

Any other ideas?

gozomark

it depends on the terms of the capital guaranteed investment - whats it linked to, what is the upside capped at, what is the participation in a rising market. By buying such a product, your capital is guaranteed (but question guaranteed by whom), but you are foregoing 5 years interest - lets call it 15-20%, so the guarantee doesn't come free

Savvy_amateur

Thank for that! I am a total amateur at all this. So what do I ask then? How do i know if it's a good investment? This is really scary for me, how do i make the right decision?

jem16

helcor wrote: »

I know I won't lose my capital, but I keep seeing companies folding and share prices plummiting and keep thinking of the extra money I could potentially make on a buy to let, shared with my daughter, she would borrow her share and I wouldn't need to borrow. I mentioned this to the FA and he said he had seen it work very well for some people and very badly for others and he pointed out that it is risky and I have said I want low risk investment. But I guess if he suggested buy to let I wouldn't need his services.

The FA was quite right to point out that BTL can be very risky - nothing to do with whether or not you used his services. I would be more concerned if he did not point this out to you.

Should I get a second FA's opinon?

Is this an IFA or an FA you are seeing?

Should I pay him by commission or cash?

That all depends on the terms you are being offered. Commission can be better on smaller amounts and fees better on larger amounts. There is also the hybrid fee option where you agree an amount and it can be paid from either commission or a fee depending on which works out best.

So what do I ask then? How do i know if it's a good investment?

Ask to see the research so that you can see what planning went into the decision.

What was the plan for the other £20k?

Stavros_3

If he's any good at his job, he will show you the company's past performance. There is no reason why you shouldn't get a second oppinion BUT please make sure that he is truly an independant advisor and not one tied to a bank/building society. There is a register/list somewher on the net that shows you your local IFA''s - good luck

Stavros_3

Here is the link to finding an Independent Financial Advisor

http://www.unbiased.co.uk/find-an-independent-financial-adviser/

Savvy_amateur

Thanks Jem 16 and stavros

He is an INDEPENDENT financial Advisor, not linked to any bank etc and the other £20k? Well I am doing a bit of work on the house, but the rest is just to fall back on in an emergency, the IFA said it was best to keep some back, but as yet we haven't discussed where to put it. Any Ideas?

thor

helcor wrote: »

Thank for that! I am a total amateur at all this. So what do I ask then? How do i know if it's a good investment? This is really scary for me, how do i make the right decision?

You won't know if it is a good investment nd neither will any IFA. It could have a good past history but go t*ts up next year. It's all a gamble I'm afraid and these days it is even hard to quantify the risks attached to it.

dunstonh

keep thinking of the extra money I could potentially make on a buy to let

Or you could think of the extra money you could potentially lose on a buy to let. Especially if its a morgtaged buy to let which is probable with the amounts you suggest. Mortgaged buy to lets are typically high risk because of the consequences if its goes wrong. That doesnt seem to match your risk profile.

but I keep seeing companies folding and share prices plummiting

Did you stop looking after October? The markets are up around 13% since then but you keep seeing them drop. How is that?

£65k should be cheaper on an agreed fee basis than commission.

liebe911

Markets will recover soon may be in a span of 2 years or so.