Significant money to invest.

KPLpard

Hi All,

I am 30 years old and have £170k to invest for the future and I have been beating myself up over the best way to do this. I realise this is a nice 'problem' to have and I know I am in a fortunate position but I want to make sure I make the most of being in this position.

In my head, I always thought I would use an IFA. I was introduced to someone at SJP but have been put off by their high fees (I have read lots about this on the forum already). I was also introduced to another IFA who wanted around 1.6% per annum (inclusive of platform and fund charges) and 2% fee on the initial capital. This coupled with the the fact I wasnt convinced he could do a better job than me also put me off.

I have been doing a lot of reading about funds and various other investments that I have access to myself via a platform such as HL. In fact, I already have my annual ISA allowance in 3 funds through this platform.

My worry is that my knowledge only comes from what I read on websites such as Investors Chronicle. Whether this be share tips or fund tips or perhaps a structured product that tracks the FTSE 100 level. This makes it quite hard for me to pull the trigger as I feel like I am playing with my families future (the money is not to be touched now but instead used for things such as private education fees later in life). It may be that in a few years I may want some of the cash to assist with moving up the property ladder so I dont want to tie it all up for long periods of time.

In summary, I want to invest this myself to avoid seeming high and unecessary IFA or SJP charges but I dont know if I can make a success of this just by reading websites like the telegraph and Investors Chronicle!

Help much appreciated.

Thanks

ChopperST

You need to work out how long till you need the cash.

Short term < 5 years keep in cash
Santander 123, TSB Current Plus, Nationwide Flex Direct et al.

Longer term look at investing to achieve capital growth. Both Monevator and Boggleheads (US but principles are identical) are great resources.

http://monevator.com/category/investing/passive-investing-investing/

http://www.bogleheads.org/wiki/Bogleheads'_Guide_To_Investing

KPLpard

Thank you ChopperST.

I would imagine that it will be someone close to 5 years until I need the cash and ideally I dont want to hold the cash as I feel like that will give me minimum returns. I'll take a look at those two websites, thanks a lot.

One product that grabbed me is a kick-out FTSE tracker. Max 6 years but if after 2 years it is at or above starting level it pasy ~8%. Capital only at risk if level goes beneath 50% of starting value (something that didnt even happen in 2008)

Your_Hero

There are benefits in DIY'ing just like in any walk of life. One main benefit is saving money. The obvious drawback is the amount of time required to do it properly and a small mistake can be costly. Is this something you are happy to take on yourself?

Paying a professional to do it would save you time and hassle. You could even use an IFA for the earlier years until you brush up your knowledge and then take over yourself if you feel more comfortable. Advisers normally have years of experience and have built up good knowledge about investments.

PS: SJP are a restricted salesforce (not IFAs). They can only sell you SJP products only - they aren't there to 'advise' you as such. E.g. It may be best advice to use another product in the market, due to cost/fund choice etc., but SJP cannot 'advise' you to go somewhere else. IFAs are different because they are not paid based on which product/provider they go for, it makes no difference to them, i.e. unbiased.

Otherwise, there is no easy way round it. You have to read and read, keep up to date with regulations and choose the platform/investment funds etc. yourself.

KPLpard

Thanks Your Hero. This does make sense. Do you think that an initital 2% on capital and further charges of 1.6% / annum sound reasonable (these are broken down by 0.5% annual mgmt fee, 0.35% platform charge and 0.75% fund manager charge).

Your_Hero

KPLpard wrote: »

Thanks Your Hero. This does make sense. Do you think that an initital 2% on capital and further charges of 1.6% / annum sound reasonable (these are broken down by 0.5% annual mgmt fee, 0.35% platform charge and 0.75% fund manager charge).

It depends what actually needs doing and how much work is involved both initially and on an ongoing basis. We weren't in the meeting so we don't know what's involved.

The IFA fees quoted are generally fairly competitive and aren't excessive by any measure in the advice world. If the initial work is not too complex, you can probably negotiate a lower initial fee, but I can't see the ongoing fee (0.5% to the IFA) being any lower.

If you want to, you could ask the IFA to use passive funds instead to reduce the 0.75% fund manager fees by about a half or more. But beware that cheap does not mean better.

Hope this helps.

dunstonh

In my head, I always thought I would use an IFA. I was introduced to someone at SJP but have been put off by their high fees (I have read lots about this on the forum already). I was also introduced to another IFA who wanted around 1.6% per annum (inclusive of platform and fund charges) and 2% fee on the initial capital. This coupled with the the fact I wasnt convinced he could do a better job than me also put me off.

SJP would be a bad move given their limited tied options. An IFA makes more sense and 1.6% p.a. inclusive is fine. 2% is a bit high on the initial amount. You could get that down easily.

I have been doing a lot of reading about funds and various other investments that I have access to myself via a platform such as HL. In fact, I already have my annual ISA allowance in 3 funds through this platform.

HL is a good DIY platform but its quite high cost.

My worry is that my knowledge only comes from what I read on websites such as Investors Chronicle. Whether this be share tips or fund tips or perhaps a structured product that tracks the FTSE 100 level.

A very bad way to DIY.

In summary, I want to invest this myself to avoid seeming high and unecessary IFA or SJP charges but I dont know if I can make a success of this just by reading websites like the telegraph and Investors Chronicle!

You dont buy investments though media articles. That is a recipe for disaster. You would end up investing above your risk profile and fashion investing.

Whilst an IFA will cost money, DIY if done incorrectly will cost you more. Like any job you can DIY, if you do it well, you can save money. if you do it wrong it can work out a costly mistake. Only you can decide whether you want to DIY or get someone to do it for you.

Do you think that an initital 2% on capital and further charges of 1.6% / annum sound reasonable (these are broken down by 0.5% annual mgmt fee, 0.35% platform charge and 0.75% fund manager charge).

The annual is exactly what you would expect. The initial is at the higher end but in the ballpark assuming no special tax requirements are being made (i.e. ISA and GIA with annual bed & ISA planned)

KPLpard

Thanks so much dunstonh for your very thorough answers.

I think that my initial work is not so complicated to warrant the whole 2%. I have some opinions about where I may put some of the money (perhaps a single country EM fund such as India) but the IFA mentioned an Old Mutual fund (Spectrum 5 I believe) as being an option to look at. Perhaps I will start with him and as I begin to read and learn more I can start to do more myself.

colsten

Monevator, as already linked by ChopperST, has some great suggestions on how you create a portfolio that suits your risk profile. They even have half a dozen or so model portfolios that you could investigate in more detail.

moxter

With that amount of money, you've got a lot of things to consider. That money could all go towards one thing (a house, say) or it could be split up. You've already mentioned you have a family so that complicates matters further. For example, you might want to split it into several different buckets: emergency fund/house deposit/saving up for school fees/other expensive purchases such as car or home improvements/pension. All of those have different timescales and hence would need to be handled differently. There are also tax implications to think about. It might end up being split into lots of different pots and getting quite messy - sounds like a job for a professional to me. The pro might cost a few thousand but that's nothing like you'll lose if you put money for your pension into a current account, or put money for your emergency fund into shares which crash.

If your needs are simple (50% for house deposit, 50% for pension) then you can probably do it on your own with a bit of reading, anything more complex (you might have other special circumstances) and it could end up being something where you spend more time worrying "have I done the right thing?" than is healthy. Of course you might do that with professional help, but at least you've got a bit more peace of mind.

KPLpard

Thanks All.

I must admit, I expected that the answers would be very much in the mould of 'Why would you pay someone to do something you can do yourself'. However, I appreciate that whilst it may cost me a few thousand to use an IFA, in the long term I may well benefit more from the professional help that I get with an IFA.