When to transfer investments to discretionary managed investment service

jennieshrew

I am trying to advise my elderly grandfather on the best time to transfer all of his actively managed share portfolios to a discretionary stockbroker who would then manage all of his transactions and make investment decisions on his behalf.

I understand that the benefits of this would be that upon his death the transfer of his share portfolio to my grandmother would be much easier (less admin for her to do at a difficult time). He has spent a life time investing as a hobby and enjoys doing so but is concerned that he is getting too old to do it or that if something happened to his mental state he might make bad decisions. He is an experienced shareholder and currently completely sound of mind (!) but recent stock market crash in the banking sector seems to have caused him to have a bit of a rethink.

Are there any other benefits to transferring to a discretionary fund? Are there any alternatives. He doesnt seem interested in a halfway house where he maintains a veto on decisions. All of his friends transferred theirs years ago to a discretionary fund.

As I am an accountant he has asked me to advise him but I think its more a personal decision about giving up your hobby in order to gain financial security but if there are any purely financial concerns I ought to raise or if anyone has any advice then it would be gratefully received.

Nosht

Beware of giving control to any other person.
If stockbrokers were so successful then why are they still in business?
Ideally, gain for yourself an Enduring Power of Attorney before his health deteriorates as he must be mentally sound to do this & you will then be able to administer his affairs if it becomes necessary.
You could investigate financial & trading matters if interested or not but this way maintains family control & mitigates extra expense as the brokers fees are fairly hefty.

Regards,


N.

dunstonh

If stockbrokers were so successful then why are they still in business?

Because they are not going to turn down £100k or more a year for doing their job.

as the brokers fees are fairly hefty.

Some are. Some are not. At the end of the day if you pay someone to do the job then it is more expensive than DIY but at least you get it done with consumer protection and with knowledge you may not have.

jennieshrew

He does have the knowledge to do the trading himself. Its just to mitigate the risk of him losing that I suppose. And to make things easier if he died.

I dont think he would hand over power of attorney to a relative. My mother is a bit mad so she wouldnt be reliable enough :rolleyes:. As grandchild I expect he would think that it wasnt appropriate to skip a generation.

jennieshrew

Could anybody advise me on the downside of an Inheritance Tax Portfolio Service? They seem to transfer assets into assets which fall outside the Inheritance Tax system after two years. The funds seem to perform well and you can draw on the money at any point. This might be a more sensible option that he might want to investigate.

robefc

jennieshrew wrote: »

Could anybody advise me on the downside of an Inheritance Tax Portfolio Service? They seem to transfer assets into assets which fall outside the Inheritance Tax system after two years. The funds seem to perform well and you can draw on the money at any point. This might be a more sensible option that he might want to investigate.

I'm assuming this a service that invests in AIM shares which means the portfolio is extremely high risk.

whiteflag_3

Never!

in my opinon stockbrokers are useless and a complete waste of money. Ive yet find any that add value.

jennieshrew

The advice I have been getting from the investment managers themselves seems to be that he should convert all of his share certificates into nominee shareholdings held electronically by them. He could then open an actively managed account which would reduce the administrative burden of trasferring the investments into another name if needed.

He should then make a seperate decision, perhaps at a later date as to whether to actively manage the portfolio or convert it to a discretionary portfolio where all decisions would be made by the investment manager at a later date. There is always the option to reverse the decision if he did not think the investment manager was making the best decisions.

I think he likes to hold the actual certificates but I will advise him that its really not the best decision and that it would be safer and easier and cheaper to convert to nominee.

EdInvestor

Is your grandfather internet-savvy? How does he trade at the moment? How often does he trade at the moment?

Does he hold other assets apart from individual shares?

jennieshrew

EdInvestor wrote: »

Is your grandfather internet-savvy? How does he trade at the moment? How often does he trade at the moment?

Does he hold other assets apart from individual shares?

He hasnt got a computer and isnt interested so he would have to do deals via the telephone.

He currently has a stockbroker who has always been his stockbroker and who advises him. In the main he makes his own decisions. Before some recent shares crashed his stockbrokers told him to take up the full rights issue - he took up half of his allowance so in effect limited the damage to a greater extent than his SB would have done!

Im not sure how often he trades but he often tells me he has sold or bought some so fairly frequent.

The majority of his money is tied up in shares. He has property and antiques as well.

kennyboy66_2

jennieshrew wrote: »

I am trying to advise my elderly grandfather on the best time to transfer all of his actively managed share portfolios to a discretionary stockbroker who would then manage all of his transactions and make investment decisions on his behalf.

I'd look at it this way.

Investing and studying the FT has been a lifetime hobby for him, and it probably keeps his mind young. What other hobby will he replace this with ?

Would you advise him to stop stamp-collecting or playing the piano, just because he is old ?

I'd tell him that he recently made a decision that was better than what the stock-brokers advised - keep it up.

There was a lovely obituary recently about an investor in New York, who was still going to his office 3 days a week to work at the age of 106.