Newbie Investor - Questions on IFA and P2P

TrickyDicky

Hi All

After years of putting extra away in bank accounts we are now looking into investing to get any decent return. We have been going through our plans and finance goals and think we have a handle on how much we need and when over the next 5-10+ years. Our rough ideas are something like this:

Cash in hand/rainy day etc: ~10k cash spread around various current accounts and regular savers. Earning between 3-5%

Short Term Future: P2P lending. The plan would be to turn off re-investing in the run up to a big item (new bathroom, car etc). Use the cash in hand to pay for the item and then return the cash as the loans mature.

Med-long term - open S&S ISA and have a mix of Med/High risk growth funds to cover 5 year goals and 10+ year goals

On top of the 10k cash in hand, we have about 15k ready to invest, and then will have about £1500/month to drip into various pots.

We do have a morgage, and up until recently we were doing some overpayments when we had no room left in bank accounts. But our thoughts now are "As long as we get an overall return that is higher than the mortgage interest, we're happy." Mortgage currently 1.34% until sept, then 1.89% fixed for 5 years.

My questions are: When looking at the big 3 P2P lenders, are there any real big differences? From my understanding Zopa and Ratesetter are a mix of personal and business loans, while funding circle is all business. Does this make funding circle any riskier? With ratesetter and Zopa maxing out at 4.6 and 5% (estimated), why wouldnt you go and get the "balanced" option from funding circle that has an average return of 7.2% (I understand there is more bad debt with this option, but nothing I read makes me think it is all about to collapse). In a downturn, I can see that business are likely to be hit first, but is this all a question of attitude to risk?

With Regards IFA: What advice would they give us, over and above a plan similar to above? I understand they would also recommend specific funds/platforms and then offer to manage it all (for another fee) but is there really any more benefit they provide? We are happy to manage these things ourselves.

Alexland

Sorry it doesn't really answer your question but have you considered if additional pension contributions (or S&S Lifetime ISA if under 40) may be more efficient than S&S ISA for your very long term investments? I doubt an IFA would help you much on your P2P stuff and for the values you describe it may be uneconomical against the fees for their time.

TrickyDicky

Pension already covered, we have 16% and 20% of pay going in. The long term goals are really to pay the mortgage off early, childrens uni fund etc, so putting it into pension wouldnt be accessible for that. Similar with a LISAs. Its not something we had considered, but we are likely to want money from it before we reach 60, so this is probably not an option either due to the penaltie for early withdrawal.

dunstonh

If you are going to DIY then there is no point using an IFA. The choice is usually to either DIY or use an IFA. Not do both.

Your value at this time is at the lower end and many IFAs will either not offer services or would price you higher because of the low value.

Alexland

TrickyDicky wrote: »

The long term goals are really to pay the mortgage off early

It is worth reconsidering if this really is the best use of the money. Once a high enough proportion of the property is paid then it's usually better to drag out the remainder of the mortgage (aiming for it to complete repayment at your target retirement date) and make greater pension contributions to benefit from tax advantage and investment growth.

Our mortgage is down to circa 20% of the property value and I intend to drag that loan out for 20 years until early retirement when we could have otherwise completed it in the next couple of years. No point overpaying anymore when we can make advantageous pension and LISA contributions.

Alex.