Investing £1.5m(31 Posts)
Name changed so as to not out myself. We can see a lot of years ahead looking after elderly parents, so future work is likely to limited through caring for DPs.
Come share your thoughts about how you would invest £1.5m or thereabouts, to get on-going income, and not erode the real value of the initial investment. Likewise, are there any things to stay away from?
Look at personal situation, look at the level of risk you wish to take, a mix of investments and investment styles, and asset classes. So use a discretionary manager for some, use your ISA allowances as much as possible slowly over the years. If you use an IFA, check on the ongoing fees and what you get for these costs......ongoing review, home visits, email/phone contact. Ethical advisers in your area on www.ethicalinvestment.org.uk, may look at other things apart from maximising short term profits. Independant financial advisers now are much more exam sitters than sales peolpe, and they sell a service rather than products....so check on the service.
Do you need the income? If income tax is 50% and capital gains tax 28% (or 10% with ER) then if you can earn capital not income obviously you end up much better off. It sounds like you want no risk, no EIS and that new thing starting with S. So perhaps just do a traditional spread between safe investments, perhaps some premium bonds, shares in biggest 15 companies or some of them and property as you say.
I am not an IFA but I agree that spreading risk is wise.
Also IHT is an voluntary tax on the stupid. If you don't want David Cameron to spend what is left of the £1.5m on death then you need to plan not to ensure that will not happen. You may want to make gifts to children for example IF you can afford not to have that capital. You should certanily put any life policies and pensions into trust which costs nothing and keeps them away from 40% IHT.
Well said Loopyhasanotherbean, I am also an IFA and have been quite disappointed in some of the derogatory comments contained in this thread, it is very clear that there has been some very poor advice and experiences undergone by joe public.
Diversification of assets is about the most important consideration, no matter the amount being invested or the individuals attitude to risk, having all your eggs in one basket (like property is just madness & asking for trouble IMHO).
The underlying tax considerations / tax efficiency, especially regarding IHT with a potential 40% liability could also form a significant part of the general recommendations.
A couple of things I would point out, contrary to earlier comment would be that I would be looking at more than 15 different funds & companies for any investment portfolio, and a recent cautious (Attitude to Risk) client portfolio I set up & reviewed this week had made more than 10% over the last year as an example of returns available, no guarantees, but with mix of the four main asset classes & diversification considerations, decent returns can be made even in the current difficult climate.
There are decent whole of market fully qualified advisers out there.
I agree with property rental income for city based places...
My favourite investment would be doctors surgeries (to let), city apartments (to let) a portfolio of houses (to let) ....need I go on?
Google Monkey with a pin. Good (free!) book on investing. Don't trust a bank or an IFA.
speaking as an IFA, who has sat 11 professional exams through the CII plus obtained the Certified Financial Planner Status from the IFP, we should not all be tarnished with the same brush. Like any field of work, there are some people who are not as good or dedicated to their job as the rest, but to dismiss an entire industry founded on ethics and so heavily regulated to provide best advice, is i fear rather foolish. I am not just directing that at the OP, but at others who have commented on our profession.
From January, the minimum level of qualifications that an adviser needs to hold in order to keep advising will be raised from a basic 3 exams (or 5 if qualified in the last few years) to a more advanced Diploma level, and as a result there will be an exodus of older advisers from the industry. The industry is also moving from a commission or fee basis to a purely fee basis environment, where everything regarding the cost of advice is made clear and visible to a client. We can only hope that this flushes out some of the weaker/greedy individuals.
If you were one of my clients, i would be wary of you investing into just one asset class, and particularly into direct property of any kind. Property is rarely a liquid asset, and there are the other additional risks that it may not be let, and the costs of setting up such an investment are high, when you take into account legal costs, stamp duty, plus ongoing maintenance and insurances. Generally my clients do not invest into direct property unless the property is being leased to their own company or one which they are strongly connected to.
My clients would be more likely to hold a wide and diversified portfolio, which would include immediate access savings accounts with a bank or building society, ISA's, pensions, and then depending on their circumstances, and attitude to risk, they may hold unit trusts, OEICS, investment trusts or bonds, which enables them to invest either directly or as part of a collective investment fund into for example gilts, corporate bonds, uk and overseas equities for growth or income, commodities, property funds, absolute return funds. These investments could be invested for any period of time without being tied in, and i would never recommend anything that has an exit penalty as life is unpredictable and my clients like the knowledge that they can access their money whenever they need to (apart from pensions where you can rarely just get all of the money withdrawn).
Some clients will just want to invest for growth, and reinvest any natural income, other clients may have a specific level of income that they need from the outset. It is these needs that will determine exactly what the recommendations are, along with their attitude to risk. For the more speculative client, there are other specialist invesments that could be considered, some of which have many tax advantages. In addition to creating a diversified asset allocation in terms of asset class, sectors and geography, tax planning is a large part of what we do, as it is one common goal that clients have, to minimise the tax that they have to pay on their investments, which generally stems from money that has already been taxed by the time they receive it in the first place, and to take steps to minimise what their future inheritance tax bill might be on their estates, to lessen the cost to the people they leave behind. It isn't just Jimmy Carr who doesn't like paying tax!
sorry, you dont trust the entire investment, banking, accountancy profession but you are willing to take advice from a load of people you've never met whose primary qualification is being a parent???
there are some excelletn IFAs who will give you solid advice on asset allocation and be able to tie in with tax and legal advisors. you should look for an independent or small firm IFA who charge for advice upfront rather than make their money via commission.
I used to work in off shore wealth and you could see an advisor I know or someone he recommends. You pay tax in the uk on savings and investment and there is a way round that. You need to plan for inheritance too, so you can see what that entails. I'd you like i can pm you the details.
Try fool.co.uk and moneysavingexpert.com
Not all IFA's are bad! Can't possibly give you advise on what to do with it as I dont know the whole picture and I would have to put massive amounts of disclaimers as I am an IFA.
Basically steer clear of IFA'swith high charges. I have done well for plenty of clients without needed to charge them a fortune. Make sure your IFA is whole of market. It is really difficult to find a good one, it really is and I know there are some awful ones out there. Dont get a self employed one, dont go for the big companies that give lovely lossy documentation as boy you will be paying for it.
If you want to manage things yourself SIPPCenter and hargreaves lansdown are quite adequate
Talk to at least 3 IFA's before you make any decisions. And remember, there should not be exit charges on pensions, 1.5% is the max you should pay in their commision costs if you are investing that kid of some (if they say 3% when you are talking over a mill...run!)
hope that helps
I've just read Money with a pin by Peter Comely. Good insight into investing and the rip offs.
I think that you will find a diversity when you see IFAs, differing opinions on what will suit you etc - likewise if you sit with your friends in the pub they will have differing opinions, there is no "right" answer other than what strategy and risk you feel you are happy with.
RichMan nice to see you've found a good un! We do exist!
I'm not arguing that IFAs are dishonest. I just think they would each offer different advice, and how would I choose whose advice to follow? If I just spoke to one IFA, how would I know that IFA had good or the best advice? Only safe strategy is to speak to many IFASs, but then I'd get confused by the diversity of opinions & options.
They would have consensus views on basic investment principles which OP can discover herself with a few hours research online, anyway. But their advice beyond that could be very diverse, depending who they talk to. I'd rather not pay a lot for IFA(s) when there's no way of telling how good their crystal ball is (are).
Tax planning is a big deal, though, and I think one does need a proper qualified accountant to make the most of it.
I'll remember that about Swiss banks if I ever scrape together a spare £100k or so.
To speak up for the IFA's a bit, mine has been pretty great over the last 10 yrs. Where he's really had value is on the admin front- i.e he's reviewed 85 different SIPP wrappers so I don't have to, tells me when funds I've invested in have changed their management fees, and does something about it, has transferred all my personal pensions into the SIPP wrapper when I've left jobs, applied for transfer values etc. Left to me, this admin would never ever happen.
sorry and Mooncup
Think you've met the wrong IFAs ragged
Sadly its opinions like that that tarnish the whole industry.
Swiss bank/investment accounts are only really worth having if you're not UK resident or even better are a non-dom. That is when you benefit from having assets offshore. If you are UK resident and intend to remain so (sounds from your OP as though you do) then you pay UK tax on your worldwide income so it makes no difference where it is.
If you buy property, you'd be better to mortgage it up a bit, because then you get the inflation hedge and can offset the interest against tax.
But yes, basically you want a portfolio of assets- shares, bonds, property, commodities if you're feeling brave etc.
Apparantly the swiss banks are interested from £100K upwards.
Thanks for all your points, everyone. I knew Mumsnet would be the biz. However, we're not in the Swiss limo league!
Sadly, I think OP would need a minimum £150 million to be interesting to the Swiss bankers!
There was a lady on radio saying how "easy" it is for lottery winners to fritter away their winnings: Lear jets, private islands, French chalets, the lot.
I would see a financial advisor in Switzerland. I'm actually being very serious about that - having met a few rich folk in my time, most of them had bank accounts in Switzerland. Some were even rich enough for the bank to send a limo to the airport for them.
I would have no faith in professional advice in this situation... they are total arse-coverers and also influenced by the income they'll personally receive from your investments.
You need a proper asset allocation strategy. Do you have experience of investing in property? It is very, very easy to lose money if you don't factor in all the risks.
That aside, I would do as ragged says and divide it between a handful of funds/investment trusts. Hargreaves Lansdown are a good fund supermarket and all the comparative data is on www.trustnet.com.
It takes a lot of research but is really worth doing, in my experience. From what you say you probably want quite a bit of the capital to be in index-linked gilts and equity income to provide inflation-proofing and income, but with some in developing markets etc for diversification and to reduce currency risk.
Eek, sorry, £1.5m, but same principles apply.
Oh, and tax planning, getting that right could save you heaps of money. For that you need to see an accountant anyway, NOT an IFA.
I have no faith in IFAs. Problem is, if you see 10 different IFAs, then you might get a group consensus on best ways forward. But more likely you'll get 10 different suggested investment strategies & still not know what to do for best.
You could try this thread again on a site like moneysavingexpert.com, but instead of asking "What to do?" ask "What factors to keep in mind?"
Pay off all existing debts first (usually a sure bet)
Plan for retirement
Make sure your investment portfolio is diverse
Decide when you'd like to retire
If I had £10m I would put it approx equally into 4-8 investment areas, from very low to med high risk.
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