Investments for father

GPK10

Hi,

My dad is in his 70's and has roughly £30k invested through Fidelity, half of that in an ISA. I have suggested he sells the funds and transfers the ISA element to Iweb as the charges seem high and he wants to hold funds and not trade. We will also transfer some previous years cash ISA money so that approximately the same total is tax free

Is this a good idea and if so which fund or funds should he choose? He presently has some fidelity branded funds, doesn't need an income and is probably looking to invest for about 10 years. I would say he is looking for low to moderate risk funds

Thanks in advance

xylophone

Would the Vanguard ISA suit?

https://monevator.com/using-vanguard-lifestrategy-funds-life/



https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa?cmpgn=PS0617UKPABIS0002&gclid=EAIaIQobChMIy4D86Pyy5AIVxrTtCh1ETQRgEAAYASAAEgIm9fD_BwE&gclsrc=aw.ds

Alexland

xylophone wrote: »

Would the Vanguard ISA suit?

Why not iWeb as the OP suggested? If there is minimal trading activity then over 10 years it will work out cheaper than paying a percentage custody fee on that amount.

In terms of fund choice a mixed asset fund series such as Vanguard LifeStrategy 60 or HSBC Global Strategy Balanced might be of interest. They are both available on iWeb and obviously use the accumulation version if he doesn't intend to take income. In a market crash they might drop around 25%. If he wants lower risk then rather than get too heavily into bonds (which carry their own risk) perhaps keep some cash in savings account(s). It's always good to keep some cash for unexpected events.

It's also worth considering if there might be tax advantages from contributing some of the money into a pension at £2880 per tax year (assuming he is not earning to support a higher contribution) until age 75.

Alex

GPK10

Thanks both, I should have said he has plenty in cash (needs a new home when Tesco saver rates fall) and also a large holding of Commonwealth Bank of Australia shares which use up most of his £2k dividend allowance.

I have also gained the impression that Vanguard might be weighted to UK investments and we are looking for some more diversified?

One of the reasons I asked is that there are lots of questions on here from people investing for retirement but not so many from those already retired

Thanks again

DrSyn

GPK10 wrote: »

I have also gained the impression that Vanguard might be weighted to UK investments and we are looking for some more diversified?

Thanks again

HSBC Global Strategy Balanced has already been suggested to you as an alternative to the VLS 60/40.

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/#balanced

For this fund UK less than 4%.
The VLS60/40 is about 25%

Also as I understand it:-

VLS 60/40 will re-balance the funds to maintain this share/bond split you have chosen. You have to except the market risk that goes with is this split.

HSBC Global Strategy Balanced will re-balance the fund in order to try and maintain market risk at the risk level you have chosen.

Malthusian

GPK10 wrote: »

Thanks both, I should have said he has plenty in cash (needs a new home when Tesco saver rates fall) and also a large holding of Commonwealth Bank of Australia shares which use up most of his £2k dividend allowance.

That suggests something under £36k in CBA based on the current yield. Which means over 50% of his portfolio is in a single share that could do a Northern Rock, or not go bust but still lose a large part of its value and never recover.

Which means "looking for low to moderate risk" does not compute.

Why not sell the individual shares and reinvest in something more diversified and less risky?

Alexland

Yes seems inconsistent to worry about the lack of diversity in a VLS fund while holding a large amount in a single company share. As above if the UK bias is undesirable (but removing it will increase the US weighting) then consider a mix of the HSBC GS Balanced fund and cash.

Alex

xylophone

I have also gained the impression that Vanguard might be weighted to UK investments and we are looking for some more diversified?

Below may be worth a read

https://monevator.com/low-cost-index-trackers/

And I've nothing against i-web - I hold my S&S Isa with them!

GPK10

Thanks for the replies. I completely agree that it doesn't make sense but let me give some context - this has all been held for 15-20 years but I gave only became fully aware and have been asked to help in the last few weeks.

I absolutely take the points made about CBA shares, it was blindingly obvious, except to me! He received them "free" as a result of holding a some sort of financial product when in a teaching career. I haven't discussed these in detail with him, but suspect he views them as just providing two dividend cheques a year rather than as really being part of his portfolio. As such persuading him to sell may prove more difficult.

I really appreciate the replies, I am new to this myself and it really helps (I will save dissection of my financial affairs for another time!)

Alexland

GPK10 wrote: »

I absolutely take the points made about CBA shares, it was blindingly obvious, except to me! He received them "free" as a result of holding a some sort of financial product when in a teaching career. I haven't discussed these in detail with him, but suspect he views them as just providing two dividend cheques a year rather than as really being part of his portfolio. As such persuading him to sell may prove more difficult.

Even if he is not consciously aware of the capital value how would he feel if the dividend cheques stopped or were substantially reduced going forwards? As seen in the last financial crisis that would have happened if he held Lehmans, AIG, etc. The fact they were free or discounted is irrelevant to the decision on if to hold them going forwards.

Alex

Malthusian

Does he have Lasting Powers of Attorney in place?

People do tend to get dewy-eyed about shares that they have held for a long time but it is irrational. Emotion is for things like poetry and music, not a boring piece of paper representing a few billionths of a foreign bank. If he had £70k-odd in cash today, would he decide to invest half of it in CBA? If not it makes no sense to retain it. There is literally no difference in the decision (apart from irrelevant dealing costs).