How best to put £255k in savings

oldvicar

Meeper wrote: »

It COULD be. But would you rather take advice fro 10 people who have never studied the subject, or one individual with 10 years experience in advising, numerous technical examination passes and sufficient knowledge to be able to offer REAL advice which is backed by consumer protection legislation.

Taking the DIY approach is ok with small sums. When you are talking about £255k (or anything over £50k really), it can be a massive amount to take a risk with. At least in using an adviser you have the various protection schemes in place if something goes wrong. Don't fancy your chances of getting a complaint upheld by the ombudsman because the advice you received from MSE Forums didn't work out.

On something this important I would rather rely on my own judgement. Consumer protection is no substitute for getting it right.

I disagree that £50K is anything like sufficient to warrant taking (chargeable) advice. I agree with an earlier poster that the OP, by asking a question about his mum's £255k, is showing enough interest to follow a DIY approach unless he has some particular interest in esoteric schemes.

Rollinghome

Meeper wrote: »

It COULD be. But would you rather take advice fro 10 people who have never studied the subject, or one individual with 10 years experience in advising, numerous technical examination passes and sufficient knowledge to be able to offer REAL advice which is backed by consumer protection legislation.

It's always sensible to get advice if you don't know. If you know nothing of computers then by all means ask the salesman in Currys. But don't ever make the mistake of thinking that the interests of the adviser are the same as your own. Far better is to do your own research before buying services or products. To do otherwise can be costly.

You aren't pretending I hope that the school level vocational qualification, and no educational requirement, currently required to be an IFA is evidence of extensive financial knowledge. Certainly many will be better qualified but we also know that a high proportion of current IFAs will be unable to continue after 2013 because they can't achieve even the still basic new QCF level four qualification that will be required from then.

Many of those unable to continue giving advice have been merrily doing so for the last 20 years and have protested noisily because their school level piece of paper will no longer be enough. The idea that advisers must be well qualified is nonsense. The primary requirement for success is the ability to sell.

gadgetmind

Meeper wrote: »

they are EXACTLY the same remuneration levels.

Yes, but are the underlying investments the same? Might it be that in one case (fee based) they are chosen for return, and in the other (commission) they are chosen for different reasons?

oldvicar

Posted by Froggitt
The problem is that theres no guarantee that an IFA will turn 5% into 6.5%.

Meeper wrote: »

But the chances are increased.

Probably by exposing the client to greater risk on the downside too.

gadgetmind

oldvicar wrote: »

Probably by exposing the client to greater risk on the downside too.

Unlikely IMO unless they go massively OTT on equities and are lax with asset balancing, which is unlikely.

Meeper

I give up.

We are two sides to an opposing argument, and whilst I will not accept your arguments any more than you wil accept mine, there is no point continuing the debate.

I will simply make a short statement.

Just like in everything, using the appropriate financial adviser is key. I am pretty far from being at "school level" with no educational qualifications. I am, in fact, shortly to become a Chartered Financial Planner with many years of experience. I advise clients on a number of non-commission-paying investments such as the ones you mentioned and I also advise clients on some investments which DO pay commissions, if that is the clients' agreed form for remuneration.

My point of view is that my skills, qualifications and experience will equate to a more appropriate risk-profiled portfolio for a client and the chances of that out-performing a DIY option are greater, because this is my profession. Sure, you might get lucky and out-perform my choice a few times in a hundred, but this will more likely be through luck rather than good management. My recommendations look at investment ratios like the Sharpe, beta and information ratios in order to compare funds with sometimes complex calculations and comparisons made.

And so on and so forth.

I just get annoyed when all advisers on here are tarred with a "not to be trusted" brush.

oldvicar

gadgetmind wrote: »

Unlikely IMO unless they go massively OTT on equities and are lax with asset balancing, which is unlikely.

I know what you mean about asset balancing etc, and that maybe the downside risk can be made less than the upside ... but not eliminated.

Extreme example: I can get the example 5% (or could over the past year or so) from National Savings (virtually risk free). The only way to promise the prospect of a better return would have been to diversify with, for example, some shares. That has increased my downside risk (coincidentally the downside came true this past year, but it could just as easily have been profitable).

gadgetmind

Meeper wrote: »

We are two sides to an opposing argument

Yes, but I also have the FSA on my side, and soon written regulations.

My recommendations look at investment ratios like the Sharpe, beta and information ratios in order to compare funds with sometimes complex calculations and comparisons made.

I'd jolly well hope that you would do such basic yet essential stuff, and I'd absolutely insist you did if you were working for me. And I'd also insist on paying a fee so that there wasn't the slightest risk that commissions would ever cloud your judgment.

gadgetmind

oldvicar wrote: »

The only way to promise the prospect of a better return would have been to diversify with, for example, some shares. That has increased my downside risk (coincidentally the downside came true this past year, but it could just as easily have been profitable).

Yes, and over the long term, with rebalancing and more importantly cost averaging, equities will provide a greater return at the risk of high volatility.

I'm currently 25% in cash (ILSCs, term accounts and instant access) and the rest is mostly in equities, though some of my ITs hold bonds and gold. I probably came out of bonds too early, but I just haven't been able to resist some of the bargains that the last month of so has thrown up.

oldvicar

Meeper wrote: »

I give up.

I just get annoyed when all advisers on here are tarred with a "not to be trusted" brush.

Have enjoyed the debate (so far). Thank you Meeper. Just to reiterate it is not personal. And not all IFAs on here are tarred ... for example I have a great respect for the words of dunstonh, and I do respect the knowledge some IFAs have.

Its frustrating though that those on the inside (the IFA's) don't see the systemic weaknesses in their industry as readily as those on the outside. As gadgetmind has been saying its not that IFAs are untrustworthy people, but that they are incentivised by the system to recommend commissioned products.

It happens elsewhere. Take this week's Panorama report asserting that hospitals perform unnecessary and painful tests because of revenue incentives rather than clinical need. Nobody suggested that the Doctors didn't care about their patients wellbeing though.