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Financial investment by deputies of large sum-how do you assess risk???(14 Posts)
Can anyone help with this?
My mum received a 6 figure legal case payout for injuries sustained in an accident. She is severely brain-injured so deputies from the lawyers who won the case on her behalf have been appointed.
When the deputy-ship happened the lawyer involved suggested that in order to not let the investment slide in terms of inflation etc that an investment portfolio be looked into.
Anyway, myself and siblings have now been sent three portfolios (so already a bit limited!) to look at and decide which one we want to put Mum's money into...Initial investment being £500,000.
The thing is how can we decide?? I realise the lawyers will be rubbing their hands as no doubt they have deals with each of the companies but what can we actually do?
My sister is happy to trust the lawyers are making low/medium risk investments but ultimately Mum could lose everything no??
So my question is is it ever better to just keep the money in various accounts or is that just totally naive considering the inflation situation.
I know I'm pretty risk averse but I'd rather keep £500,000 than risk losing it all or would that definitely never happen and in fact we just might not make any money??
What would you do????
I'm pretty cynical where lawyers are concerned or rather I understand they work in their best interests...
I have asked to meet with the lawyers to go through the risk once more but ultimately do you have to accept that you may well lose the lot ??
Any advice gratefully received
This must be a very difficult situation for your family. My dad has long term issues resulting from a head injury so I do sympathise.
That payout was designed to support your mum's future care needs so that lump sum will need to be sensibly invested to earn the best return. A district judge recently (in 2017) told me that he would expect average gross returns to be 3-4% from a medium to long term investment in securities and bonds (ie 5+ years) and an even greater return (eg 12% gross) from a buy to let property. I have some financial knowledge but was very surprised by this. So I have made appointments with financial advisors to see if this is the case. My lump sum is a lot smaller than yours but I have been told that yes 3-4% for medium to long term could be achieved. I have yet to see the detail.
Investment in stocks and shares always carries risk and that is why a diversified portfolio is important with funds being invested over a period of time. My guess would be that the 3 portfolios offer different levels of risk. Are you as family not being offered any time with a financial adviser or can the deputies go ahead without your consent? Any investment in the UK anyway should have regular reporting at least annually so that should be monitored. So do ask who will have responsiblity for the ongoing monitoring of the portfolio? I would expect there to be a document that sets out roles and responsibilities and fees.
Also, if you dont already start reading the Personal Financial pages of good papers eg Times, Telegraph, Sunday equivs. There are personal financial magazines eg Moneywise. Well written in lay person words.
Read this book
Then decide what to do. It is easy and informative and will give you all the basics, it is also written a fun relatable way and is not patronising.
Childmaintenance thank you for that info will look back at the portfolios and check the responsibilities etc are set out and the annual review etc is specified.
In the end I just know we have to agree but it's just horrible to think it could all go...arghhh.
We don't have financial advisors & the deputy will only act with the family consent (I think!!)
Quick answer is that you don't decide, nor should the lawyer. You need specialist advice.
Go and see an IFA who can manage a portfolio in accordance with your mum's needs. Most lawyers will offer this service, but farm out the management to an IFA and charge you for the privilege. They will certainly charge you to attend meetings with the iFA, which you don't need them to do. Look on the Wealth Management Association website for an IFA near you.
You could ask the lawyers if they have deals with any of the companies for a start to see if they might be biased.
It is very hard to generate much revenue these days without taking risk with money as interest ratesare low eg 1% on £500k is £5000.
It's not that a lawyer may be biased - if they were getting kickbacks they would likely be struck off- more that they will charges excessive fees. An IFA may meet trustees every six months. The lawyer will no doubt want to be involved, and charge you for two hours work. You don't need them - they won't necessarily have any more financial knowledge than you, but you will pay them for their time.
You would be better off with an IFA who specialises - or at least is qualified in- long term care advice. They will be able to take a dispassionate view about the various funds and bonds, and suggest a tailored package to suit your Mum's needs.
Sorry for your situation.
12%, even gross, from buy to let, is only vaguely possible (being open minded here, I actually that figure is guardian speak)in the areas where places go for £40k, and there is usually a good reason why the properties are so cheap.
Real inflation is 3% or more now, so cash savings are diminishing. Stock market very high so like anyone else trying to safeguard cash, it is almost impossible. The best plan will depend on your mother's age and life expectancy as well as other factors.
Thanks again for all your input!
I think the trouble is myself & siblings just don't have time to research etc.
The deputy is part of the lawyer company... My sister did it for about four years but when the payout was awarded we decided to 'outsource' as quite onorous for her...
Very basically, would the worst be that no money is made rather than an actual loss on the investment??
On what basis could we logically just say no we'll just put it into ISAs 😬😬
I think we wouldn't really want to buy a property's as any 'process' just makes money for the lawyers who will be leading it etc.
You can't put it in ISA's at more than £20k a year, and with rates so low it will lose money rapidly.
Sorry. There is no way for money to make money unless you get lucky on the stock market, which is difficult with it so high. Government policy works hard against savers.
Realistic b t l return is 4-5% gross, much less after expenses and much less if you get a tenant like I did.
I would expect the deputy has already consulted an IFA who has prepared the three portfolio options to present as lawyers are not financial advisors and are not authorised to recommend investments. Nor can they get kick backs as referred to above - it's not permitted fro lawyers - v strict professional rules.
You're not going to lose all the money. Worst case some of the investments may not do well and may decrease in value a bit but a varied portfolio minimises the risk and overall should increase.
Most people investing £500k would look at the right risk profile for that. They probably would put some in shares or products based on shares which means the value could reduce but I don't know what the rules are on investing for those with disabilities as perhaps you have to stick to funds where it is basically cash but then it will lose money year on year. It has always been the same you take risk and might lose capital if you invest in something that will keep up with inflation . perhaps keep £250k in cash and the other half in a broad spread of UK shares in large companies?
If you buy a £500k house near me that rents out at about £20k a year, which is 4% (ignoring any tax and buying costs like stamp duty). With inflation at 2.3% in the UK that is better than inflation but if you add on agent fees and repair costs it may well be a lot easier to put it in various funds some higher and some lower risk.
Sounds like £500k is the initial pay out - I think they might pay out for these things in stages as they don't know how someone will be longer term with brain injuries but I might be wrong.
There is no chance they will buy a house. There will probably be companies which specialise in how to invest for someone with a major brain injury like this but keep a watch on it. Perhaps ask to see monthly statements and always know 100% what investments have been chosen. Does she need a home or an income to pay carers?
Thank s all. Really useful again!!
She's fortunate in that all care is funded so award is purely that and is not needed, at the moment, for any care etc
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