Appropriate % cash in portfolio

eskbanker

Bobziz said:

eskbanker said:

Bobziz said:
I should make it clear that the amount of cash in question represents less than 1% of the value of my mum's wealth.

....which in turn suggests that the S&S ISA is about 3% of the total.  How much of the other 97% is being managed or advised by the IFA?

We have two advisors at the moment, long story...the Isa is being managed by one, with the other 97% managed or advised by the other. 

Personally I think the materiality makes quite a difference - if the 1.3% charge applied to 30% of her wealth then I can see the argument that it's perhaps worth doing something about, but if it's 1.3% of 1% of her wealth then surely it's not worth devoting much attention to that, even if it's the principle you're objecting to?

Thrugelmir

Bobziz said:

Thrugelmir said:

Bobziz said:

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.

That's not a legal responsibility of someone granted an LPA. 

I'm not sure I follow your point. The attorney has to make a decision based on what's in the person's best interests and taking into account the person's preferences and beliefs, as per the above guidance. 

Will you be a direct beneficiary of the estate at some point in the future? 

Bobziz

Thrugelmir said:

Bobziz said:

Thrugelmir said:

Bobziz said:

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.

That's not a legal responsibility of someone granted an LPA. 

I'm not sure I follow your point. The attorney has to make a decision based on what's in the person's best interests and taking into account the person's preferences and beliefs, as per the above guidance. 

Will you be a direct beneficiary of the estate at some point in the future? 

yep, as would my two sisters who are also attorneys, but I would obviously be asking the same questions even if this were not the case i.e. what would my mum want if she were still able make her own decsions.

Bobziz

eskbanker said: 

Personally I think the materiality makes quite a difference - if the 1.3% charge applied to 30% of her wealth then I can see the argument that it's perhaps worth doing something about, but if it's 1.3% of 1% of her wealth then surely it's not worth devoting much attention to that, even if it's the principle you're objecting to?

Agreed, and I'm not objecting, although it does seem reasonable that any cash should be sat outside the ISA unless it will be used to buy in the dips. However the issue of investing will arise again in the near future as there is a property to be sold/rented/left as is. So I'm also keen to ensure I'm absolutley clear on the principles and duties of a PoA re investing. The bit I'm interested in exploring is any requirement to make mums money work i.e would sticking everything in a savings account be seen as acting in the her best interests. If so, then fine, it makes life much easier, although I don't believe it would be what she would want were she able to make the decision herself.

Audaxer

Bobziz said:

eskbanker said: 

Personally I think the materiality makes quite a difference - if the 1.3% charge applied to 30% of her wealth then I can see the argument that it's perhaps worth doing something about, but if it's 1.3% of 1% of her wealth then surely it's not worth devoting much attention to that, even if it's the principle you're objecting to?

Agreed, and I'm not objecting, although it does seem reasonable that any cash should be sat outside the ISA unless it will be used to buy in the dips. However the issue of investing will arise again in the near future as there is a property to be sold/rented/left as is. So I'm also keen to ensure I'm absolutley clear on the principles and duties of a PoA re investing. The bit I'm interested in exploring is any requirement to make mums money work i.e would sticking everything in a savings account be seen as acting in the her best interests. If so, then fine, it makes life much easier, although I don't believe it would be what she would want were she able to make the decision herself.

I think keeping 30% in cash savings seems to be in her best interests to reduce volatility or her portfolio as a whole, but I can't see the benefit to her of it being kept within the S&S ISA. I don't know the total amount in the S&S ISA, but if it is at least say, £100k including cash of £30k, why can't that £30k be kept outside the S&S ISA earning some interest? Even if the IFA was getting a percentage for being in charge of the whole portfolio, including the cash outside the S&S ISA, at least the cash outside the S&S ISA would earn some interest. 

If the overall portfolio strategy is to keep the cash percentage at 30%, I'm sure that the IFA could still manage the portfolio as a whole (with the cash held outside the S&S ISA) so it is rebalanced annually, or more frequently, to ensure the cash percentage remains at 30%.

NedS

Bobziz said:

Agreed, and I'm not objecting, although it does seem reasonable that any cash should be sat outside the ISA unless it will be used to buy in the dips.

And what exactly would the IFA buy during the dips? He can't buy more equities as that would move the portfolio outside the risk tolerances set out by your mother, so he's limited to more defensive assets such as bonds/gilts and maybe gold, all of which already look overpriced. Hence why there is a 30% cash holding in the first place.

Sailtheworld

Bobziz said:

Thrugelmir said:

Bobziz said:

Thrugelmir said:

Bobziz said:

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.

That's not a legal responsibility of someone granted an LPA. 

I'm not sure I follow your point. The attorney has to make a decision based on what's in the person's best interests and taking into account the person's preferences and beliefs, as per the above guidance. 

Will you be a direct beneficiary of the estate at some point in the future? 

yep, as would my two sisters who are also attorneys, but I would obviously be asking the same questions even if this were not the case i.e. what would my mum want if she were still able make her own decsions.

You're answering an insinuation rather than a question - I'd ignore it. 

If you and your siblings are attorneys, the only beneficiaries and executors and you're all on the same page you can do pretty much whatever you want within reason. Especially given your mother is nearing the end and has plenty of cash to see her out.

With the question at hand just do what you think's best - even if your actions are imperfect there'll be no comeback.

Linton

Bobziz said:

eskbanker said: 

Personally I think the materiality makes quite a difference - if the 1.3% charge applied to 30% of her wealth then I can see the argument that it's perhaps worth doing something about, but if it's 1.3% of 1% of her wealth then surely it's not worth devoting much attention to that, even if it's the principle you're objecting to?

Agreed, and I'm not objecting, although it does seem reasonable that any cash should be sat outside the ISA unless it will be used to buy in the dips. However the issue of investing will arise again in the near future as there is a property to be sold/rented/left as is. So I'm also keen to ensure I'm absolutley clear on the principles and duties of a PoA re investing. The bit I'm interested in exploring is any requirement to make mums money work i.e would sticking everything in a savings account be seen as acting in the her best interests. If so, then fine, it makes life much easier, although I don't believe it would be what she would want were she able to make the decision herself.

Keeping the money is a bank savings accounts or in NS&I (which provides 100% guarantee for any amount of money)  would be fine.  It is prudent given your mothers situation and after all it is what many, probably most, elderly people do.

Thrugelmir

Sailtheworld said:

Bobziz said:

Thrugelmir said:

Bobziz said:

Thrugelmir said:

Bobziz said:

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.

That's not a legal responsibility of someone granted an LPA. 

I'm not sure I follow your point. The attorney has to make a decision based on what's in the person's best interests and taking into account the person's preferences and beliefs, as per the above guidance. 

Will you be a direct beneficiary of the estate at some point in the future? 

yep, as would my two sisters who are also attorneys, but I would obviously be asking the same questions even if this were not the case i.e. what would my mum want if she were still able make her own decsions.

You're answering an insinuation rather than a question - I'd ignore it. 

Was actually a question. As in who interests is the change to a more speculative investment regime being made. One needs to wear different hats. 

Bobziz

Thank you all for your comments. They have been very useful in helping me to have an informed conversation with the IFA next week. I shall update on his recommendations. Stay safe and enjoy your weekend.