is it worth going down the IFA route with £100K?

[Lizardlegs]

Hello,

After a shares-related windfall I have about £100k to invest. My instinct is to lock it away for 5 years and hopefully it will do that lovely compound interest thing.

I've talked to 2 IFA companies now. One will do a face to face meeting to discuss, the other will only give me telephone advice (for £449!) because I have less than £150k to invest. I'm beginning to think that it's just not worth it considering all of the fees.

Other option is to try some robo-investing with either Nutmeg or WealthSimple or something similar.

Final option is to make a massive overpayment on my mortgage (currently at around £260k on a £800k property)

I'm normally a risk taker but I'm terrified about what's going to happen after Brexit so my goal is to protect this capital as a buffer against us losing our jobs, etc. Husband is in public sector, and I'm a freelancer, so we're both feeling a bit worried about possible fallout.

Any advice much appreciated...!

As per message on a previous thread, I wouldn't go down IFA route unless you are prepared to spend money for advice, money probably you could save by educating yourself. I am a freelancer too - I initially went down the route of clearing my mortgage- but if you are looking for a buffer against losing jobs, maybe you should look at easier access so a combination of some easy access (but there is an inflation risk) and stocks and shares ISA. Overpaying the mortgage and contributing to pensions don't help much in terms of tiding over emergencies. HTH.

Thank you Swimster! Investing is definitely not my area of expertise and I should spend some time getting up to speed. Good tips!

This is what I would do : -

1. Max out your pension contributions with regard to tax relief.
2. Make a capital payment to reduce your mortgage. I have an offset mortgage so utilised the linked savings account to offset the mortgage rather than pay down the capital (to enable access should I require it)
3. Max your ISA allowances for this tax year
4. Max your JISA allowances for your children for this tax year.
5. Set aside £5K for a holiday/treats

What's your equity and job security like? Could you afford the mortgage payments on one income? What are the monthly payments like?

My fear would be property falling in value, being in negative equity and unemployed.

Kids jisa can’t be touched until they are 18 so beware you won’t be able to access those funds

Well, if your goal is to preserve this money in a pretty liquid form, you could consider investing through a platform. I use AJ Bell but there are several other ones that offer similar services. Just keep it in an ISA wrapper (presumably it is in that already?) and you can spread your risk by investing in a number of funds. Similarly to yourself, we also don’t feel very confident about Brexit so have chosen to invest around the world rather than in the UK stock market. This approach would give you a lot of liquidity.
It would be easy enough to withdraw some/all of the money if your finances deteriorate or eg pay down the mortgage if you decide to adopt a different strategy in the future.

Look into an offset mortgage? I

I wouldn't use an IFA for £100K.
Put some in a SIPP.
Get yourself up to speed about investments, www.moneysavingexpert.com/banking/Moneysavingexpert is a good starting point.
Decide whether you are willing to put some time and effort into making the money work or whether you just want to find a safe home for it.
ISA's are really not a good investment unless you are likely to have interest from savings of over £1000 a year and £100K won't give you that. (£500 if you are HR taxpayer).

The highest rates of interest around are usually in current accounts with linked monthly savers. You have to feed the money in and they all have modest limits. It requires some faffing but is the only way to make a decent return while interest rates are so low.

Or pay it off the mortgage. You have £360k equity in your home. That's a big buffer and a lot of money tied up in property which you could easily free up by moving at a later date.

Thank you to everyone who has responded - it's much appreciated. We are relatively secure in our jobs (I'm a freelancer, but in a field where there is not enough labour supply). We could pay the mortgage on one salary if absolutely needed (though would need help from Granny for our daughter's school fees). We also have about 40k in an easily accesible 'emergency fund' so we wouldn't need to break into the 100k unless everything went very very wrong.

What's your current interest rate on the mortgage? Unless moving is a realistic option, I'd throw a big chunk-75k at the mortgage -after maxing pension payments. From age 55 you could start to drawdown pension benefits (take tax fee cash), so depends how far you are from there as to whether you'd use that as an option for quick access to funds

I would take it all off my mortgage & look at either 1) upping my pension contribs in future, by the amount no longer required on the mortgage; 2) go for a shares ISA.

Yeah... IFA advice is very expensive & they still leave you wondering what to do that is best. I can't see the point!

DH has a SIPP but I think I would make very terrible decisions if I tried to do active trading. The guys on MSE shout that I'm an idiot not to do a SIPP, so just imagine how much more terribly idiotic my decisions would be in a SIPP. Also, to do a SIPP, I'd have to spend at least 20 hrs a month keeping informed about best options. At my wage rate that's £240/month worth my time. An index-linked shares ISA would perform about as well as I could hope a SIPP to do (if I could ever be competent at a SIPP) but the ISA fees are a lot less than £2800/yr.

Well, we went down the IF A route with less and I don't regret it. It educated me and I am confident that our money is as safe with them as it anywhere else. Different strokes and all that.

I think it would be worth speaking to an IFA in the first instance. The first meeting should be free and you may walk away feeling more educated than you were before the meeting. 100K is a lot of money and you will want to make the most of it. A good IFA will share your ideals and advise appropriately. If their fees negate the value they should tell you and guide you on the right path. It’s finding the right one!

We have an IFA with far less to invest!

Lljkk - you can buy pretty much the same investments in a SIPP as you can in an ISA, so it's exactly the same decisions. The only difference is the tax treatment.
A pension (of any sort except final salary) is only useful for tax purposes if you are a higher rate tax payer now and likely to be a lower rate tax payer on drawing it, based on current tax rules.
I have both a SIPP and an ISA, as well as other pensions, and I make all the decisions and no way do I spend twenty hours a month on it, I don't think I spend two
Also, no idea why you think a SIPP costs £2,800, mine is about £15 a quarter (changes a bit depending on the value of some of the holdings). It's a pretty similar charge to the ISA.

The op needs to decide their attitude to risk and how much time they have learn about investing. Moneyvator website is excellent for it, look for the pages on passive investing.

I don't "trade" as such, I buy funds and then just leave them. There is certainly no compulsion to trade in either type of account.

Re final salary pensions, these are still good value in the public sector if you can buy years, so worth looking into whether the public sector employee can do that.
The freelance person needs to consider the tax issue and make sure their NI stamp is all paid up (this is also still good value).

Personally I would pay down the mortgage though and then save the difference.

I would not use an IFA.

Sorry, no y in Monevator.com :

monevator.com/category/investing/passive-investing-investing/

My h is an IFA. He doesn’t charge for initial meetings or advice.

He says you should ask your friends and colleagues to recommend their IFA. In a first meeting, an advisor will fact-find about your entire financial situation, and will advise on pensions, making the most of tax- free investments etc.

You research and invest the money yourself, but many funds are not available to individual investors, just IFAs and financial companies.

100k is a good chunk of money to invest. I would recommend a good IFA - you’re paying for their expertise, years of experience, and knowledge of the financial market and funds.

Update from OP here - in the end I found an wonderful female IFA who I felt understood me, and my financial goals/attitude to risk etc, so I have locked up the £100K with her! I might still have a bit of fun playing the markets with a few small investments here and there too.

Lizard, that sounds great. I’m in a very similar position and am looking for an IFA. Where/how did you find her?

And can I ask what charges she is making?

@lizziesiddal I found her through the association of IFAs who deal with ethical funds - which is what I was looking for. We settled on a part-ethical part 'unethical' portfolio. I'll DM you her details and about the costs...

Thanks Lizard! I’ve replied to your DM.