How best to put £255k in savings

Meeper

gadgetmind wrote: »

Because a commission is an attempt to hide something that should be out in the open.

Sometimes, by unscrupulous brokers, perhaps. But when explained in the manner that I outlined above, what is the problem with a commission rather than a fee? When the client signs documentation to say that he understands the amount will be taken from his investment and is quite comfortable with the amount, where's the harm. I'm not trying to hide anything, the remuneration is exactly the same either way.

There are also cases where the fee comes from funds already in a pension or ISA, and where the limits of what you can put into those per year mean that paying directly for advice is the best approach.

Of course. But your blanket statement was that you should only go to an adviser who works on a fee basis. I was stating that a commission basis is not always the evil that people makr it out to be. Personally, I work on both (probably about 60% fee based) depending on what is the most appropriate for each individual clients' circumstances.

I'd much rather have to pay *all* fees and costs associated with my pensions and ISAs from unwrapped funds as it would let me trickle more into them.

Good for you. Your circumstances are different to mine and everyone else's. Just because you want the remuneration ato be on a certain basis and you are comfortable doing more of the management yourself, doesn't mean everyone is in the same boat. Pushing everyone into the "you must pay a fee" bracket will be to the detriment of advice and the profit of the high street.

gadgetmind

Meeper wrote: »

Pushing everyone into the "you must pay a fee" bracket will be to the detriment of advice and the profit of the high street.

I tend to agree with the FSA, who say "Commission creates a risk of product bias, provider bias and churn".

My attitude to such risks is to avoid them. Yes, I've been bitten, yes, I'm now shy, but can you blame me?

oldvicar

I sense that a difference of opinion is that some financial advisers think they can manage money better than their potential clients, and Meeper is faced with comments from several possibly financially savvy and fairly wealthy people on here who think the exact opposite.

Both may have words of wisdom for the financially naive. But only one charges and has professional cover. One would hope that those seeking opinions (advice) understand the difference.

In general I would personally rather have the opinions of the 100s people on here than advice from just one paid professional. 'Crowd Theory' * suggests that this could actually provide better advice. But I would also take responsibility for making my own judgements on people's opinions, and above all try to understand what I invest in. Having said that, some of the wisest comments posted on here have been from people who make their living as IFA's ... so I'd be happy to have plenty of them in the crowd!

* http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds

Aegis

GeorgeHowell wrote: »

I would not bother with an advisor for this sort of matter -- if they're that good why aren't they following their own advice and living the life of Riley in the Bahamas ?

Because it's investing, not a get rich quick scheme. As such, you can only invest what you already have. An IFA early in their career on a total remuneration package of £50k a year might be able to put aside £10-20k a year into savings, pensions, etc, which isn't enough to sustain a life of Riley in the Bahamas any time soon!

A professional may end up able to retire there in later life if they want, but only by following the same sort of plan they recommend for clients. This sort of financial planning is all about the long game, not the short term gratification a lot of people think investing is all about.

oldvicar

Thanks for the following Aegis

Golden Rules:
Do your own research
Hot tips are usually hot air
Don't gamble/invest what you can't afford to lose

Aegis

oldvicar wrote: »

Thanks for the following Aegis

Golden Rules:
Do your own research
Hot tips are usually hot air
Don't gamble/invest what you can't afford to lose

No problem, they've served me fairly well in the past.

B_Blank

GeorgeHowell wrote: »

Gold is arguably at or close to the top of the market and market experts will almost unanimously say the way to play them is contrarian -- ie buy at low price, sell at high. The largest financial establishments on earth have teams of highly paid full time experts studying markets and trends. They will have some intelligence as to when to sell their gold and other commodities. The average punter will not.

The stock market has declined in absolute value since 1999.

The way to play it, as others have suggested, is to diversify it. With that amount for a more mature person perhaps something like :- 10% instant access e-accounts, 60% fixed rate/term bonds over periods ranging from 1-5 years, 20% various managed and/or tracker equity funds, corporate bond funds and gilts funds, and 10% property funds and/or commodity funds. That won't make a killing but it's the best option out there at the moment without taking a massive gamble with the capital. If the risk profile is highly cautious rather than moderately cautious, reduce the funds content to 15% in total and increase the cash savings bonds accordingly.

I would not bother with an advisor for this sort of matter -- if they're that good why aren't they following their own advice and living the life of Riley in the Bahamas ? The many financial advice websites and comparison tables can give good indication as to which accounts and funds are 'best buy'.

Actually gold is reknowned for getting more expensive because it is getting more expensive. All before an inevitable contraction of course.

GeorgeHowell

B_Blank wrote: »

Actually gold is reknowned for getting more expensive because it is getting more expensive. All before an inevitable contraction of course.

Very true. But that of course has also been true of other types of investment such as e-technology shares, and notably domestic property. The greed and fear that drives markets causes periodic bubbles -- greed to get in on the action; fear of missing out. I would like to say that financial institutions understand this better than punters. But after the experience of the credit crunch -- driven largely by apparent belief in an ever-expanding bubble in house prices -- that may not be true any more ... or have they learnt the lesson ... ?

GeorgeHowell

Aegis wrote: »

No problem, they've served me fairly well in the past.

You could add :-

If it seems to good to be true, it is too good to be true.

Rollinghome

Meeper wrote: »

Please explain to me why a commission is inherently a "bad" thing in this case?

I should be very wary of any financial adviser, as you claim to be, who doesn't understand, or pretends not to understand, the problem of commission, i.e. the commission offered by product providers to sell their products.

For one thing many of the most cost-effective investments, most obviously investment trusts and ETFs, don't pay commission.

A further problem is that some investments that do pay commission pay more than others - such as the Arch Cru funds before they were forced to close. Were the advisers who sold those funds just extremely stupid or simply greedy? Why would anyone sell such dodgy investments other than for the unusually high rates of commission? Investors who were sold those funds may still have to wait years to be compensated http://www.thisismoney.co.uk/money/investing/article-2033334/Arch-Cru-victims-face-delay-compensation.html

It makes no sense whatsoever to be restricted only to retail products that need to pay the "adviser" sales commission to be sold - to use the old saying 'Good wine needs no bush".

The FSA is forcing the ending sales of commission by 2013 for very good reasons. It is also insisting on better qualifications than the extraordinarily basic qualifications IFAs currently require - equivalent to a McDonalds shift manager's diploma as Financial Secretary to the Treasury Mark Hoban famously pointed out. http://www.moneymarketing.co.uk/regulation/fsa-joins-mcdonalds-rdr-row/1020673.article The intention is to increase the emphasis on advice rather than just on selling.

Any adviser who still claims not to understand the problem with commission is certainly one to avoid.