£500k he doesn't know what to do with

colsten

Why is he selling the BTL?

steampowered

Linton said:

You with experience of equity investing may well take the view that this £500K could almost be regarded as play money.  If it's not needed why not make more.  However as we often see on this forum people without that experience can be extremely worried about  even relatively small falls.  The OPs relative presumably is not an experienced investor, otherwise he would be sorting a portfolio himself.  Why create worry when none is needed?

Also, we are not discussing the matter with the relative but rather someone who may be advising him.  When advising on other people's money one should be a lot more cautious than if it were one's own.  If the relative took advice to do as you suggest what would happen in the next Great Crash?  I doubt he would just shrug his shoulders and say "well I didnt need it anyway so what's the problem?".  More likely perhaps there would be a quick call to his solicitor to rewrite the will.

I would agree with you if Op's relative is the sort of investor who might have sleepless nights worrying about falls in a cash or constantly checking his statements.

The Op's post suggests, at least to me, the opposite. The nature of this person's asset profile, the fact that it is very difficult to see any immediate need for this money and particularly the fact that he has had money invested  with St James Place for years seems to suggest that he is a "passive buy and hold" type investor who perhaps doesn't pay too much attention to the short term ups and downs of the markets. These facts also suggest a long term investment horizon (i.e. conceivably 15+ years).

That all makes it sound to me like high equity exposure is absolutely the way to go.

Perhaps the Op might ask his relative whether he started having sleepless nights and panic selling his investments during the Covid crash, 2008 crash or dot com bubble? If not, I don't see why he would start now.

macman

How is he financing the £10K pa overspend in future? Does the investment of the former BTL capital need to produce 2% return in order to cover this? Or is he content to deplete his capital?

Linton

steampowered said:

Linton said:

You with experience of equity investing may well take the view that this £500K could almost be regarded as play money.  If it's not needed why not make more.  However as we often see on this forum people without that experience can be extremely worried about  even relatively small falls.  The OPs relative presumably is not an experienced investor, otherwise he would be sorting a portfolio himself.  Why create worry when none is needed?

Also, we are not discussing the matter with the relative but rather someone who may be advising him.  When advising on other people's money one should be a lot more cautious than if it were one's own.  If the relative took advice to do as you suggest what would happen in the next Great Crash?  I doubt he would just shrug his shoulders and say "well I didnt need it anyway so what's the problem?".  More likely perhaps there would be a quick call to his solicitor to rewrite the will.

I would agree with you if Op's relative is the sort of investor who might have sleepless nights worrying about falls in a cash or constantly checking his statements.

The Op's post suggests, at least to me, the opposite. The nature of this person's asset profile, the fact that it is very difficult to see any immediate need for this money and particularly the fact that he has had so money invested  with St James Place for years seems to suggest that he is a "buy and hold" type investor who perhaps doesn't pay too much attention to his investment statements over the short term. These facts also suggest a long term investment horizon (i.e. conceivably 15+ years).

That's why the Op's description makes it sound to me like high equity exposure is absolutely the way to go.

Perhaps the Op might clarify if this relative started having sleepless nights and panic selling his investments during the Covid crash, 2008 crash or dot com bubble? If not, I don't see why he would start now.

Of course I could be wrong - perhaps the question for the Op to ask his relative is whether he is happy to take statistically superior returns on the understanding that that will mean more volatility. The question is would he have sleepless nights - or would he even notice? If his portfolio dropped then recovered from time to time.

It's the relative's money.  He has more than enough to last his lifetime, he does not need to invest. From what we have been told his only objective is to match inflation. Therefore anyone giving advice should seek only to meet that objective, nothing more.

If the relative wants to invest at a higher risk level for amusement or pleasure is purely up to him. No-one shouild be advising him to do so.  It would be totally inappropriate to propose an investment strategy that far exceeds his objectives. There is no obvious benefit to him were he to hold £1M rather than £500K if he doesnt know what to do with it. 

El_Torro

Linton said:

steampowered said:

Linton said:

You with experience of equity investing may well take the view that this £500K could almost be regarded as play money.  If it's not needed why not make more.  However as we often see on this forum people without that experience can be extremely worried about  even relatively small falls.  The OPs relative presumably is not an experienced investor, otherwise he would be sorting a portfolio himself.  Why create worry when none is needed?

Also, we are not discussing the matter with the relative but rather someone who may be advising him.  When advising on other people's money one should be a lot more cautious than if it were one's own.  If the relative took advice to do as you suggest what would happen in the next Great Crash?  I doubt he would just shrug his shoulders and say "well I didnt need it anyway so what's the problem?".  More likely perhaps there would be a quick call to his solicitor to rewrite the will.

I would agree with you if Op's relative is the sort of investor who might have sleepless nights worrying about falls in a cash or constantly checking his statements.

The Op's post suggests, at least to me, the opposite. The nature of this person's asset profile, the fact that it is very difficult to see any immediate need for this money and particularly the fact that he has had so money invested  with St James Place for years seems to suggest that he is a "buy and hold" type investor who perhaps doesn't pay too much attention to his investment statements over the short term. These facts also suggest a long term investment horizon (i.e. conceivably 15+ years).

That's why the Op's description makes it sound to me like high equity exposure is absolutely the way to go.

Perhaps the Op might clarify if this relative started having sleepless nights and panic selling his investments during the Covid crash, 2008 crash or dot com bubble? If not, I don't see why he would start now.

Of course I could be wrong - perhaps the question for the Op to ask his relative is whether he is happy to take statistically superior returns on the understanding that that will mean more volatility. The question is would he have sleepless nights - or would he even notice? If his portfolio dropped then recovered from time to time.

It's the relative's money.  He has more than enough to last his lifetime, he does not need to invest. From what we have been told his only objective is to match inflation. Therefore anyone giving advice should seek only to meet that objective, nothing more.

If the relative wants to invest at a higher risk level for amusement or pleasure is purely up to him. No-one shouild be advising him to do so.  It would be totally inappropriate to propose an investment strategy that far exceeds his objectives. There is no obvious benefit to him were he to hold £1M rather than £500K if he doesnt know what to do with it. 

I understand both Linton's and steampowered's point of view in this. My personal view remains the same, all things considered I think a 60/40 fund is the most appropriate. Buy hey, it's not my money and not up to me how it's invested ultimately.

Regarding the question about risk and volatility, he does understand this. He wasn't particularly concerned about the stock markets dropping earlier this year, though of course if the slump had lasted longer his opinion might have changed. As far as I know he didn't have significant investments in 2008 so didn't go through that test.

macman said:

How is he financing the £10K pa overspend in future? Does the investment of the former BTL capital need to produce 2% return in order to cover this? Or is he content to deplete his capital?

He's happy to deplete his capital over time, if necessary.

DireEmblem said:

There is also a question we are missing - how do they plan to enjoy retirement.  Why not see the reward for the savings they have been able to make?

I think he doesn't hold back on spending. He takes a few holidays a year (during normal years anyway) and is happy with his lifestyle. It's easy to say "You don't need the £500k, just spend it.". But on what? As mentioned in a previous post he also wants to make sure he has enough to be able to afford the care home of his choosing.

NottinghamKnight said:

Has he thought about handing over the management of the properties to an agent and still taking the income, there would be costs but remove hassle. There would be a large amount of cgt to pay on that sum as well, so that's a consideration. HL would be expensive for that large a sum in funds, fixed fee providers could potentially save hundreds a year in fees. 

The properties are actually already managed by agencies. The reason he wants to sell is because he feels now is the right time for him personally. Also he's annoyed about how taxes for landlords have increased over recent years and thinks this trend will continue. I have told him that selling during a pandemic may not be the best thing to do (depends on which area the property is in I guess) but his mind seems to be made up.

I take your point about HL, I know they're one of the more expensive providers out there. He may still want to keep his money there, for simplicity and because they have good customer service.

Albermarle

With all this excess money he does not apparently really need , he could do a lot of good with it by donating to charities, helping local or international causes etc . Maybe converting one of the BTLs to assisted living, or accepting below market rent for a family in trouble , or disabled person .
Of course it is a personal decision and not easy to give your 'hard earned ' away, but it can bring some intangible benefits and is always an option.

Sailtheworld

El_Torro said

I think he doesn't hold back on spending. He takes a few holidays a year (during normal years anyway) and is happy with his lifestyle. It's easy to say "You don't need the £500k, just spend it.". But on what? As mentioned in a previous post he also wants to make sure he has enough to be able to afford the care home of his choosing.

Sounds like he is already able to afford the care home of his choosing and he's probably over estimating the amount of money required. Once you go into one of these places you'll typically expect to live for a couple years.

The reality is that without a committed spending plan the kids are going to get it. The choice he has is whether this will be sooner or later. Later probably involves his estate paying more IHT than is necessary.