Investment plans

Indigohen

After my free financial planning sesh - through MSE - the IFA is suggesting, as one option, an investment plan with a company such as Prudential for example.


Drawback - IFA is looking for a 3% fee.


Plus - dosh you can get your hands on when you like without penalty or having to die as with fixed rate bonds (FRB). Among the schemes on offer are cautious funds, showing returns of around 6% pa over the last 5 years or so.


So, in theory the first year should pay the IFA's fee, plus I get a better return on my investment than FRB's. Usual warning that value can go down as well as up.


I'd be very interest to hear other's views about this investment vehicle, and anyone else's experience of investing this way.


Thank you.

Archi_Bald

Without knowing things like how old you are, what your risk acceptance level is, whether you have an emergency fund, whether you have debts, whether you have family commitments, how long you can invest for etc it is quite impossible to comment in a really meaningful way. Presumably the IFA has asked you all those questions, before they came up with their recommendation?

Are you sure you actually saw an IFA, not just an FA? How did MSE get involved in setting up that session?

dunstonh

the IFA is suggesting, as one option, an investment plan with a company such as Prudential for example.

That concerns me. The Pru investment bond is a perfectly acceptable investment. However, it comes in the pecking order after ISA. So, I would expect ISA upto the max allowed and then the rest in Pru.

Drawback - IFA is looking for a 3% fee.

3% is relative to the amount being invested. Once the monetary amount on investments starts getting above £1500-£2000 then you are entering the point of paying more than you need to.

Rollinghome

Indigohen wrote: »

After my free financial planning sesh - through MSE - the IFA is suggesting, as one option, an investment plan with a company such as Prudential for example.

Insurance bonds tend to be sold rather than bought. If someone is trying to sell you one you should ask for a detailed explanation, preferably in writing, of why it would be suitable for you rather than using straightforward unit trusts and investment trusts.

Links to articles on Which? and Candidmoney on why insurance bonds aren't a good choice for many people.

As Which? says: "For most people, these are almost certainly not the right investment option".

Indigohen

No debts. Emergency fund in place. No commitments. looking for longer term investment to try to swerve these awful interest rates.
Isa'd up to the eyeballs. Other investments in FRBs which both are, and will be when they mature losing money in real terms.
Yes, saw an IFA - it was a voucher for a free sesh on offer via Martin's newsletter. I checked up on the IFA in all the recommended
places.
May I ask dunstonh - do you mean 1.5k - 2k investment amount, or 1.5k -2k as the amount I end up paying the IFA.
Thanks to you all for taking the trouble to read and reply in such a helpful way to my query.

dunstonh

Yes, saw an IFA - it was a voucher for a free sesh on offer via Martin's newsletter.

All IFAs give a free initial consultation. It is a requirement to be listed on unbiased website and that has about 99% coverage. It must have been a quiet week for Martin's newsletter

May I ask dunstonh - do you mean 1.5k - 2k investment amount, or 1.5k -2k as the amount I end up paying the IFA.

1.5k-3k as the adviser fee. It isnt worth using an IFA for investing 1.5-2k as an amount nowadays (unless it is with a family IFA)

3% of £30,000 is £900. That is very good. 3% of £300,000 is £9000. That is extremely greedy. So, knowing that the percentage equates to in monetary terms helps.

jamesd

Roughly how old are you? Anywhere near 55? Do you have a mortgage? What are your retirement plans? Want to retire early? I'm asking because pension contributions might be useful, depending on your situation.

Though I notice that you want access, which you won't get for all of it with a pension even after 55 unless you have at least £20,000 of workplace, annuity or state pensions combined in payment at the time.

What is the money for? What sort of thing might cause you to want it all out in less than twenty years?

What's the chance that you will want access to more than 5% a year, that can be accumulated if not used? The investment bond products can sometimes be quite expensive if there's a need to get at a lot of the capital in the early years.

Use caution with cautions funds that are based on gilts and corporate bonds. The last five years have been an unusually good time for them and there's reason to think that some are likely to suffer drops when quantitative easing ends and when interest rates return to normal. If the IFA is selecting the investments ask about this since it's possible to avoid or reduce the risk using commercial property investments and short-dated or strategic bond funds that are invested in ways that protect against it.