Significant money to invest.

kidmugsy

jamesd wrote: »

For those reasons I'm not currently keen on buying this style of fund.

So what are you currently keen on?

jamesd

The sort of thing that I described in the post before that one, plus alternative investments like P2P that are not well correlated with equity or bond prices.

jamesd

KPLpard wrote: »

(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.

Given your objectives, pension investing is unsuitable because you will not be able to get at any of the money until you are at least 55 year sold and that looks likely to increase to 57 by the time you get there. Since even 55 is 25 years older than you are not it is likely that all of most of your children will already have left school before you can get at pension money.

The same applies to your potential property use, again the delay of access to pension money mean that you must eliminate pension use as an option.

This leaves investing within and outside ISA as the preferred tax wrapper, with unwrapped investments used as required until you get the money into the ISA.

You cannot use child ISAs in the names of the children because the money is locked up until after you need it and when that tends they get the choice of how to use it, not you, so it is not committed to your education goal. So you must eliminate this option also.

I've already written about conventional investments. In addition to those you might usefully consider up to 25% in P2P lending, no more than 10% via one P2P firm, better 5%, and definitely no more than 5% for any firm that has been operating or less than a year.

P2P offers a range of investment types including unsecured loans to individuals and loans secured on moveable property like planes and industrial equipment (Ablrate, a relatively new entrant that I like, and others), and residential and commercial property development. Choose a variety of provider and underlying investment types for diversification.

P2P completely lacks FSCS protection and that is one reason for the caps I suggest. However it meets some of your other objectives:

1. Accessibility. The money comes in from repayments with interest over time. That matches the spread over time need for school fees very well. Many of the P2P places also have resale markets that allow exiting form a high part of the investment relatively quickly, usually at some modest cost. Defaulted loans often can't be redeemed in this way so some money would be tied up where that limit applies.

2. Risk. P2P in general is unlikely to perform like equity markets and also only to a limited degree with bond markets. So P2P can be a useful tool to reduce the overall volatility of your investment mixture.

I also suggest that you avoid the most well-known P2P names, notably Zopa and Ratesetter, because investment return are related in part to how much money they can attract and the best known places have suffered reduced investment returns for investors as a result.

p2pindependentforum is a good source of information on P2P.

So that's my effectively final suggestion to you: significant P2P for uncorrelated assets and reasonable access ability, and the range of investments described in my earlier post.

Longer term I expect the higher returns of P2P to vanish as they go more mainstream, particularly as institutional investors and conventional investment funds start to use them and flood the markets with borrowed money supply. This will be something of an ethical challenge to the platforms : will they take the new money or will they stick to the disintermediation focus consumers lending to borrowers principles on which many were founded.

Ryan_Futuristics

If you want the best shot at outperformance, you should probably look to investment trusts ... In UK equities, especially, investment trusts have far outperformed their benchmarks and active fund equivalents over 1, 3, 5 and 10 year periods

Most open-ended funds are basically designed to track an index - they might be limited to Large Cap UK equities; no more than 5% in any one company, so they're going to look very similar to an index funds ... Where a good manager can shine is in protecting capital and, in more nimble funds, adjusting to market conditions

(Look at Liontrust special situations - they were well positioned to benefit from big gains in small and mid-caps since 2009 - outperforming the FTSE 250 - and now they're well positioned with more defensive Large Caps)

Another thing to remember with the UK is we've been pretty flat since about 1999 - the S&P 500 has been a better place to be for capital growth (making trackers good performers) - but who knows how the US will perform in the future? Right now, the US market is looking over-valued by most markers (by my own calculations, money invested in the US today may be returning on average -5% annually)


I've got the UK returning around 4-6% annually, while China could be up around 12% (over the longer-term) ... My own asset allocation is 40% UK, 20% global investment trusts (such as Murray International), 20% Asia Pacific, 10% Emerging, 10% low CAPE European ... I'm focusing 80% on income payers (with £170k, the 4-5% yields from Newton Asian and Emerging Income could look very attractive), and I'm favouring increasing my allocation to emerging markets

I'd just say avoid the US, avoid small and mid-caps until their value's normalised, and avoid bond funds while interest rates loom ... I'd be at least 50% equities ... Trickle money in ... Make your mistakes while your portfolio's not going to lose you much more than the price of 2 nights in Malaga ... With active funds and investment trusts quite competitively priced at the moment (my Woodford fund only costs me 0.3% more than my Vanguard UK Income tracker) and uncertain market conditions ahead, trackers are only a very small part of my portfolio right now

KPLpard

Hi All,

Thanks for the fantastic advice, it has all been read and I have taken all opinions on board. After much back and forth, I have made the decision to use an IFA as I am just not comfortable with the scenario of making a costly mistake. My view is that in the short term, whilst I work long hours and have a young family, I dont have the time to dedicate to this that I would like.

That being said, I am not going to use SJP but rather the other IFA that I mentioned. He will charge 0.5 % / annum along with a 0.35% platform fee and any other fund manager charges I may encounter along the way (~0.65% seems to be the going rate).

In addition that he wanted a 2% upfront fee on the initial capital. I managed to get him down to 1.5% which although still a little high, I am happy to pay for the tax advice and 'arm around my shoulder' I will receive. I am still going to be reading up on things and talking through all ideas and thoughts with him. They supply an annual review but I will make it my business to catch up with him .

Thanks again for all the advice
Ryan

bowlhead99

Though I don't use an IFA myself I genuinely don't think 1.5% is a huge amount of fee for the initial guidance. Others may disagree but assuming you're aiming for 6%+ in the long long term that initial one-off fee only eats the first quarter's returns of your next X years activities. As long as you don't frequently change to a new adviser it will not work out as very much per year.

No doubt you could have been doing something else with £2500 of cold hard cash but you would then need to dedicate a bigger chunk of your life to research and learning which can be very valuable but is not for everyone and you might well value your own spare time and peace of mind more highly than an IFA's hourly rate.

What you might find is that if you take an interest in all this then you become well equipped to use concepts of tax planning and portfolio rebalancing over time, meaning that the 0 5% annual servicing fee can fall away as you start to DIY further down the line. Good luck with it and thanks for updating us on your decision. And congrats for avoiding SJP

bowlhead99

beancurd wrote: »

Have you considered the risk that this decision may actually be the costly mistake?

Doing something may be a mistake. Not doing something may be a mistake. Life is filled with opportunities to make mistakes in all walks of life.

I don't see that giving up a quarter of a year's potential returns to receive professionally regulated advice on how to deploy your family's assets appropriately and tax efficiently in an effort to access those returns without screwing it all up, is a particularly costly mistake for which anyone could criticize you. I say this as someone who is not an IFA and has never used one because at the moment I feel I've got it covered.

At some point depending how my life goes, I may one day choose to outsource, but would not generally worry about it perhaps being a mistake, because there's no point beating yourself up over taking a rational decision that turned out to be unlucky.

kidmugsy

jamesd wrote: »

Given your objectives, pension investing is unsuitable because you will not be able to get at any of the money until you are at least 55 year sold and that looks likely to increase to 57 by the time you get there.

Ah but pension investing currently attracts a 40% tax rebate for the OP. Perhaps it won't under the next government. In which case, taking the tax break now might be very efficient, and reducing/stopping contributions later would free income for other purposes.

My experience with tax breaks and government schemes is "seize the day!".

jamesd

Yes, it's possible that using the pension tax break now might be of use if it reduces the amount used for pension contributions out of income in the future, paying for education or the property out of income instead of investments.