Appropriate % cash in portfolio

Albermarle

You /your Mum should look at her total financial position and not just a S&S ISA in isolation .
For example if she has a good level of cash savings outside the ISA , it makes less sense to keep cash in the ISA and to have more investments ( which is what it is designed for )
Often the IFA remit is limited to investment type products , although they should take into account the wider picture , such as any pensions she is receiving as wella s cash savings

Linton

What is not clear is what the money is for.  Without this it is impossible to say how it should be invested.

Is mother mentally capable of making financial decisions? If so this is something the OP needs to work through with her. And if not the OP will need to do this for her, taking into account the PoA over-riding duty to only act in the donor's best interest.

If mother is elderly, say 80+,  or with a reduced life expectancy and the portfolio not  life-changingly large I would consider cashing in the lot and putting it in something like NS&I.

schiff

Linton said:

If mother is elderly, say 80+,  or with a reduced life expectancy and the portfolio not  life-changingly large I would consider cashing in the lot and putting it in something like NS&I.

Is that the blanket suggestion for anyone 80+, to cash it all in? At that sort of age what would be considered 'life-changing' other than having to pay to go into care?

Linton

schiff said:

Linton said:

If mother is elderly, say 80+,  or with a reduced life expectancy and the portfolio not  life-changingly large I would consider cashing in the lot and putting it in something like NS&I.

Is that the blanket suggestion for anyone 80+, to cash it all in? At that sort of age what would be considered 'life-changing' other than having to pay to go into care?

It is not a blanket suggestion for anyone 80+ to cash-in all their investments if they are capable of making their own decisions. First of all it is a suggestion for consideration and secondly it is purely for people holding PoA in the case where there is no good reason not to cash in, such a reason could be an investment plan for paying care fees.

The point is that PoAs are legally required to act in their donor's best interest and are not authorised (unless the Court of Protection says otherwise) to act in anyone else's.  For what could be be a relatively short term given that this only applies if the donor is incapable of making fginancial decisions, it is far from clear that taking the risk of holding investments, and the associated costs, is in the donor's best interest if there is no real benefit to the donor from a non-guaranteed relatively small gain.

The point about a life-changing size of investment pot is that if the donor has such a pot the PoA would be well advised to seek professional advice and possibly to take guidance from the Court of Protection.

dunstonh

Her current risk rating is 3, low/medium.

On what scale is 3 low/medium.

On 1-10 scale, it would be defensive

On 1-7 scale, it would be cautious

On 1-5 scale, it would be medium risk.

Many models also have time based weightings.  So, the portfolios with a shorter term would have more cash than those with a medium or long term.

At the moment the account is 30% in cash, with the rest in equities, infrastructure, gold and gilts.

With current fluid asset allocation models at the defensive-very cautious end of the risk scale, you are seeing higher amounts of cash used than normal.  This is because of investment-grade bonds being viewed as unattractive and index-linked gilts not offering value.  So, you are effectively left with gilts and cash as being the least worst options.

Bobziz

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

Bobziz

dunstonh said:

Her current risk rating is 3, low/medium.

On what scale is 3 low/medium.

It's on a 1-10 scale and described by the IFA as low/medium. 

Prism

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

Some options are to withdraw the cash and then put it into instant access or maybe part into some short term fixed savings accounts. This might get taxed if the amounts are large enough. You could use premium bonds as a way of avoiding that tax if needed.
Or you could partial transfer (if allowed) into a cash ISA which removes the tax problem but often pays lower interest rates.

Albermarle

Bobziz said:

Mother does not have mental capacity, having advanced stage dementia. She has sufficient funds in cash and other investments to meet her needs until she passes. There is no doubt about this. So, where I think we are realistically at is, given she will never need the money, what is in her best interests ? My assumption is that it is to ensure reasonable growth of her estate for her beneficiaries, and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

My personal opinion in this case is that keeping some of the money invested in lowish risk investments in a S&S ISA is OK, as she has all the cash /income necessary to live as comfortably as possible in the circumstances.
Also better to get the cash out of the S&S ISA and put it in a savings account - some interest and less paid to the IFA !

dunstonh

and paying 1.3% for the pleasure of holding 30% of her S&S ISA in cash does not meet this requirement.

Yes it does meet that requirement as the portfolio is viewed as a whole.   The weightings are balanced over the whole portfolio.

You said earlier that the portfolio has already returned to surplus on its pre CV values.  So, it is doing its job and its the portfolio you are paying for.  Not one chunk of the portfolio.

It's on a 1-10 scale and described by the IFA as low/medium. 

That has got to be an error or misunderstanding.  On a 1-10 scale. 6 is usually medium (if 1= cash).  2 is your guaranteed investments (rarely anything fits in 2 nowadays),   3 is your ultra-defensive.  Typically around 20-25% equity.  However, the actual equity ratio will depend on the level of defensive assets used.   Cash would allow a bit more in equities whereas as gilts, bonds etc would reduce the amount in equities.