Investment advice for a newbie

Rockingfella · 16 May 2018 at 9:42AM

Hi,

I am in the very fortunate position at 34 to be mortgage free. I would like to capitalise on this by investing for three main reasons:

1. Buy a bigger house in 8 years (when my children start secondary school) in London
2. Save for retirement
3. Be able to help my children out when they need to buy their first home

I can invest approximately £80k per annum.

Re. buying a bigger house, for this I would need £500k of available cash, the rest (c. £1m) would either be mortgage funded or via the sale of our current home; if this would be more tax efficient given the recent tax changes in the UK.

Additionally we have another property that we rent out which generates £21k per annum in rent. This is under my wife's name and she currently uses the proceeds as her income until she returns to work (July next year). After this we will be able to use the income for investing.

I'm not opposed to investing in property but returns vs hassle (again, given the recent tax changes) do not seem worth it and I cannot see property prices in London increasing significantly in the next 5 years given the saturation point / affordability issues. Perhaps I am wrong?

I was looking into a couple of Fidelity funds but I am certainly not an expert so any advice would be greatly appreciated.

What would you do if you were in my position?

Thanks.

AlanP_2 · 16 May 2018 at 10:04AM

Given the amount you have to play with - significant - and your admitted lack of expertise I would suggest you engage the services of an INDEPENDENT Financial Adviser.

Investing is like home improvements or car mechanics, as an IFA on here often says - You can do it yourself and save money but if you do it badly it will end up costing you a lot more than getting a professional involved and paying the fees.

Rockingfella · 16 May 2018 at 10:27AM

AlanP wrote: »

Given the amount you have to play with - significant - and your admitted lack of expertise I would suggest you engage the services of an INDEPENDENT Financial Adviser.

Investing is like home improvements or car mechanics, as an IFA on here often says - You can do it yourself and save money but if you do it badly it will end up costing you a lot more than getting a professional involved and paying the fees.

Thanks AlanP, very fair advice. I use the same logic when filling my self assessment - use a professional.

Is there somewhere you would recommend?

AlanP_2 · 16 May 2018 at 3:38PM

No, as I don't use an IFA.

Our investment levels are much lower than yours, it is all pension based and represents only a small proportion of our retirement funds as we are fortunate to both have good DB pensions to look forward to. Hence we can take more risk that I get it all totally wrong and, heaven help me, lose the lot - we would still be OK (although my wife may be looking for an IFA and/or a new husband!).

Ones to avoid, based on comments on here, are those such as St James Place that charge a lot and are not independent.

Sounds like you are in London, I would have thought London based ones would be higher fees than outside but more hassle in terms of meetings etc.

If you google you should be able to find a few local ones and then meet with them and see how you feel about working with them and trusting them.

Superscrooge · 16 May 2018 at 8:00PM

https://www.unbiased.co.uk/ is a useful website when searching for a local IFA

Credit-Crunched · 17 May 2018 at 10:09AM

AlanP wrote: »

No, as I don't use an IFA.

Our investment levels are much lower than yours, it is all pension based and represents only a small proportion of our retirement funds as we are fortunate to both have good DB pensions to look forward to. Hence we can take more risk that I get it all totally wrong and, heaven help me, lose the lot - we would still be OK (although my wife may be looking for an IFA and/or a new husband!).

Ones to avoid, based on comments on here, are those such as St James Place that charge a lot and are not independent.

Sounds like you are in London, I would have thought London based ones would be higher fees than outside but more hassle in terms of meetings etc.

If you google you should be able to find a few local ones and then meet with them and see how you feel about working with them and trusting them.

My parents used a St. James's place adviser and he was cheaper than two IFA's they sat down with. They have flexibility on what they charge, they paid a 2.0% initial fee, and a total ongoing fee of 1.2%. This include the adviser 0.5% (ifa's wanted between 0.6% and 1%) fund fees. So all in of 1.2% seemed reasonable to me.

Yes, they are not independent, but the other two IFA's both were recommending the Pru Cautious fund, whereas my parents have a portfolio with more than one provider running it.

Horses for courses though, parents liked the St James chap and found the two IFA's a bit contrived.

I would have several meetings, and go with who you feel most comfortable with and ensure that you have a total break down of ALL costs from everyone before a decision is made.

Malthusian · 17 May 2018 at 12:56PM

Credit-Crunched wrote: »

My parents used a St. James's place adviser and he was cheaper than two IFA's they sat down with. They have flexibility on what they charge, they paid a 2.0% initial fee, and a total ongoing fee of 1.2%. This include the adviser 0.5% (ifa's wanted between 0.6% and 1%) fund fees. So all in of 1.2% seemed reasonable to me.

If true that's a remarkably cheap SJP salesman.

St James Place salesmen usually charge 0.75% to 1%, with high initial costs, and all-in fees typically in the region of 2 - 2.5%pa.

Credit-Crunched · 17 May 2018 at 4:28PM

Malthusian wrote: »

If true that's a remarkably cheap SJP salesman.

St James Place salesmen usually charge 0.75% to 1%, with high initial costs, and all-in fees typically in the region of 2 - 2.5%pa.

I have seen the paperwork, and the ongoing advice fee is 0.5%, with the TER of 1.2%.

He did explain that most people think that he will be expensive, but he is able to reduce the initial fees to a level he feels comfortable with. From what I can see on the website the max they can charge for ongoing advice is 0.5%, obviously other costs on top of that.

bostonerimus · 17 May 2018 at 4:37PM

Credit-Crunched wrote: »

I have seen the paperwork, and the ongoing advice fee is 0.5%, with the TER of 1.2%.

He did explain that most people think that he will be expensive, but he is able to reduce the initial fees to a level he feels comfortable with. From what I can see on the website the max they can charge for ongoing advice is 0.5%, obviously other costs on top of that.

What do you get for you 0.5% every year? I'm continually amazed at how people will give money away when they can DIY quite easily

dunstonh · 17 May 2018 at 4:51PM

bostonerimus wrote: »

What do you get for you 0.5% every year? I'm continually amazed at how people will give money away when they can DIY quite easily

Better returns. More free time. Less hassle.

All the usual things that people benefit from by letting someone else do the work.

eskbanker · 17 May 2018 at 5:01PM

bostonerimus wrote: »

What do you get for you 0.5% every year? I'm continually amazed at how people will give money away when they can DIY quite easily

I'd have thought that most people spending money in this way will do so precisely because they don't feel that they (personally) can DIY quite easily, even if others can (the sort of people who'd dismissively describe it as 'giving money away'!)....

Investment advice for a newbie

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