Financial advice needed

jem16

pukkapie wrote: »

Is there any reasoning/evidence to say that the banks would be poor quality?

Lots of evidence on here with threads from people who have invested through banks.

As Dunstonh says the bank will have around 5 - 15 funds and possible only 2 or 3 in each risk profile. They won't portfolio plan - it will be documented that you chose the funds yourself. They will take maximum commission and all funds will be from one fund house.

Contrast that with over 2000 funds that the IFA can choose from from all different fund houses.

dunstonh

i assume a meeting with the bank would be free?

No. Its paid for in increased product charges.

Is there any reasoning/evidence to say that the banks would be poor quality?

IFAs account for just 4% of complaints at the FOS despite handling the majority of transactions. Banks account for over half the complaints (yet their distribution is only around 15-20%)

Banks operate as a salesforce. Targets, bonuses, incentives, sales managers putting pressure on and the sack if the sales rep doesnt perform. Not the ideal scenario for giving advice.

The bank will have access to about 10 products and 15 funds if you are lucky. IFAs have whole of market access (including many of the bank products) which is something in the tens of thousands range. (with unit trusts there are just over 2000 available. IFAs can access the vast majority of those (around 1900) so compare that to the 5-15 a the bank).

Tied agents at banks also cant portfolio plan as their remit usually doesnt allow it. This is why you see so much single fund investing at banks rather than portfolio planning.

pukkapie

great advice people. I will defo book an appointment with a birmingham IFA. Final thing, I am right to put my cash savings into an ISA and buy normal unit trusts instead of putting my cash in a normal savings account and my investment in stocks and shares ISA.

thanks

Aegis

pukkapie wrote: »

great advice people. I will defo book an appointment with a birmingham IFA. Final thing, I am right to put my cash savings into an ISA and buy normal unit trusts instead of putting my cash in a normal savings account and my investment in stocks and shares ISA.

thanks

I think it's worth using the stocks and shares ISA for the "just in case" factor. If you find yourself holding on to this investment for many years and find that it's grown by 100% at some point, that will put you over the capital gains limit and will mean that you're unable to dispose of all your assets in a single year. Remember as well that with the removal of indexation and taper relief, the nominal value of the investments is used to calculate capital gains rather than the real value. This means that inflation will effectively be taxed for you if you get to the point where capital gains tax becomes applicable.

The stocks and shares ISA is usually going to be free for unit trusts and OEICs, so if you use your allowance each year (with a bed and ISA move) you'll maximise your tax-efficient holdings and will protect yourself from future higher rate income tax in case you start earning a lot more in future.

pukkapie

I think it's worth using the stocks and shares ISA for the "just in case" factor. If you find yourself holding on to this investment for many years and find that it's grown by 100% at some point, that will put you over the capital gains limit and will mean that you're unable to dispose of all your assets in a single year. Remember as well that with the removal of indexation and taper relief, the nominal value of the investments is used to calculate capital gains rather than the real value. This means that inflation will effectively be taxed for you if you get to the point where capital gains tax becomes applicable.

The stocks and shares ISA is usually going to be free for unit trusts and OEICs, so if you use your allowance each year (with a bed and ISA move) you'll maximise your tax-efficient holdings and will protect yourself from future higher rate income tax in case you start earning a lot more in future.

Are you saying it is better to do savings account and stocks and shares ISA instead of cash ISA and unit trusts (also making use of £3600 in S&S ISA)?

Aegis

pukkapie wrote: »

Are you saying it is better to do savings account and stocks and shares ISA instead of cash ISA and unit trusts (also making use of £3600 in S&S ISA)?

That's very much a personal choice. This year I'm tempted to do it that way round, but previously I've been using the maximum cash allowance and the rest in stocks and shares.

jem16

pukkapie wrote: »

Are you saying it is better to do savings account and stocks and shares ISA instead of cash ISA and unit trusts (also making use of £3600 in S&S ISA)?

No he's saying to put £3600 in a cash ISA (assuming you do want cash) and £3600 in a S&S ISA. Or you can put £7200 in a S&S ISA and have no cash ISA at all.

After you have utilised the ISA allowances then put any remaining money in normal savings accounts and unit trusts, OEICs.

Each year you can then transfer some of the OEICS, unit trusts over into a S&S ISA (it's called Bed and ISA).

jamesd

The ISA allowance only lets you put 3600 into cash so you should definitely also use the other 3600 that you can only use in a S&S ISA. The S&S ISA gains you:

1. Less administration. No need to track sale and disposal times and prices for CGT calculations. You get to completely ignore it, instead of having to calculate it to see if there is a gain you have to pay CGT on.
2. No chance of CGT, so if you do well you don't need to be concerned about moving investments around just in case the sale causes some CGT liability.
3. The tax benefit you mentioned, so if you want corporate or government bonds as part of your mixture, those should get placed into an S&S ISA instead of held outside it, so you don't pay the tax on their income.

The CGT limit is only about a 25% gain on the amount you have. Easy to get that in a couple of years then find you have CGT to pay if you sell or swap all of the investments. Any part you put in the ISA lets you reduce the chance that you'll eventually have a CGT bill.

If you did want only two investments you might consider something like Invesco Perpetual Income and Neptune Global Equity. The trouble is, that's a grossly inadequate selection for the amount of money you have. Both funds are good, they just don't cover a sufficient range. You'd expect to have varied percentages of at least:

UK equity income
UK large cap
UK mid cap
UK small cap
European (and possible large/small/mid split there also. Maybe also emerging Europe)
US
Japan
Asia excluding Japan
Emerging markets (and possibly some single country fund or a BRIC fund to concentrate some money on those four countries)
UK corporate bonds
UK government bonds
International corporate bonds
International government bonds
UK property
International property

Also more specialist funds for various purposes, like funds concentrating on raw materials supplies or infrastructure investment.

An IFA would ask you questions to sort out your overall tolerance to up and down variations in value and then allocate appropriate amounts to a range of categories like the ones above. And would, if you asked for it as part of the service, move money around once a year to keep the percentage split the same, a technique that is known to improve overall returns.