If I'm planning on investing £100k, is it worth doing it through a financial advisor?

[MoneyMoneyMoneyMustBefunny]

At the moment I only invest in cash ISAs or fixed rate bonds where the rate is 1% to 2%.
Is £100k enough to justify using a financial adviser or will the fees outweigh the benefit?
I'm quite conservative so I'm not expecting huge returns but would like to get 5% ish.
Thanks

I wouldn't bother for £100k. They will likely want to charge you £500 -£2000 just to chat about it!
Better to hang out on sites like MoneySavingExpert (investment threads); Monevator website and even here on MN on the Investments board.

A return of 5% wouldn't even cover inflation at the moment though!

I would, because I don't kid myself that I know better than someone with experience and qualifications in that field.

@CornflakeMum
"I wouldn't bother for £100k. They will likely want to charge you £500 -£2000 just to chat about it!
Better to hang out on sites like MoneySavingExpert (investment threads); Monevator website and even here on MN on the Investments board.

A return of 5% wouldn't even cover inflation at the moment though!"

Even if they charged me 2k, if they got me 5k interest I'd still be better off than I am today.

@bangaverage
Yes, I don't feel comfortable doing it myself though I will have a look at the MSE site.

If the OP is quite conservative (= relatively risk averse) then it's unlikely a FA will be able to recommend much that she couldn't find out for herself quite quickly and the fee is likely to eat up a significant chunk of her returns on £100k.

It's a myth that IFAs are highly qualified. Anyone can study for 6 months part time and get a DipFA, which is just a level up from A levels.

OP - invest the 'fees' amount in a course for yourself and learn about investing!

Depends on your financial literacy and by what you have written, I would get IFA. You don’t have to buy their products but at least get their advice. I would also start to read up on financial literature as it’s always good to have an understanding of what you are investing in. How to Own the Wprld by Andrew Craig is a good place to start.
You want to diversify your assets depending on your age, risk profile, returns you are aiming for. The younger you are, the more you should focus on global equities. Look at index trackers, global equities. Then you could look into crypto and maybe property (but you may not have diffident funds for the latter)

Even if they charged me 2k, if they got me 5k interest I'd still be better off than I am today

But if inflation is 5% then you'd actually be significantly worse off!

This isn't running at the moment, but look for free courses like this:
www.futurelearn.com/courses/investment-theory-and-practice

If you are risk averse a financial advisor isn’t for you as they wouldn’t recommend anything other than cash anyway. You could try Hargreaves Lansdown’s Active Cash Savings service - they shop around for the best cash rates. It isn’t worth locking your money away for too long though as cash interest is predicted to rise.

Depends on what set of skills you possess. 100k is sadly too little to make significant return without your intervention, intervention that requires time and expertise to an extend.

Unfortunately it isn’t as simple of handing someone 100k and receive a return by the end of a set period.

I am going to go ahead and assume you do not have the necessary skills simply based on the fact you asked this questions on this website. I stand corrected of course. But if that assumption were correct you are better off saving the money in an ISA. The better alternative is to educate yourself and invest in your areas of interests.

Also I would recommend against stocks and bonds if you do not understand them.

An afterthought: Perhaps renovate your house and aim to sell for a profit and move up the property ladder. That would be the least risky option for 100k in my opinion.
In any case congratulations and I I hope you will make a handsome return however you invest it.

[quote CornflakeMum]This isn't running at the moment, but look for free courses like this:
www.futurelearn.com/courses/investment-theory-and-practice[/quote]
Thank you for sharing this, I have been searching for courses like these.

@MoneyMoneyMoneyMustBefunny

At the moment I only invest in cash ISAs or fixed rate bonds where the rate is 1% to 2%. Is £100k enough to justify using a financial adviser or will the fees outweigh the benefit? I'm quite conservative so I'm not expecting huge returns but would like to get 5% ish. Thanks

You safest avenues are:

1. SIPP - self invested pension plans (vanguard / hargreaves lansdown etc) They have readymade portfolios in which you can invest. You can do 40k before 5th April and another 40k after 5th April. You can also claim back any higher rate tax you may have paid on this amount in the financial year that you invest.
2. Invest in a Buy-to-Let in an upcoming cheap area with a small mortgage. Leave it in for as long as you can.

Other than these you'd either need an IFA (who will point you towards 'his/her' products of choice) OR you'll need to get yourself up to speed on investing in stocks/crypto etc.

@ElephantLover

There are a whole load of Money & Business courses available for free on OpenLearn which might also suit you (and the OP):

www.open.edu/openlearn/money-management

www.open.edu/openlearn/money-business/managing-my-investments/content-section-overview?active-tab=description-tab

Thanks all.

I'm definitely not financially literate.

The Idea of investing in crypto would be akin to me investing in fairy dust, I have as much understanding of one as the other.

We have just seen a financial advisor to sort wills, Power of attorney and invest a whole 10k. It was £300 to set it up which he said was a flat rate and about the 1 5% a year fees. He did our risk profile, my husbands was higher than mine. We could also specify if we wanted an ethical portfolio which I did. . We will then continue to add £200 a month. I think it was worth it, I would have no idea where to start.

Thank you @CornflakeMum

@MoneyMoneyMoneyMustBefunny - I was in a similar position as you exactly a year ago. I did a lot of fast learning and spoke to IFAs (no charge) and other folks who self invest and set about doing it myself using SIPP, LISA and ISA - distributed my risks. I didn't know a thing about investing so learnt froM scratch (it's not rocket science although it looks like it).

I stayed away from crypto (Latin/Greek to me) but I will learn it one day.

It's definitely possible to do it yourself even if you think you don't know much. Use the internet and search on the keywords in the replies above. You'll get there.

There are books, podcasts, and videos which can help you get started with investing.

The Meaningful Money Handbook - www.petesbook.com - has about 1/3rd of the book about investing using Pension and ISA. It explains about asset types and about volatility, and how to spread money around.

If you want to gain more confidence in your ability to invest the money, then you can find out a lot of information and with that knowledge you will find that you will gradually move money from your low interest accounts, to investments, whilst keeping some back in the low interest account and current account/instant access savings as your emergency fund.

If you were to spend £2000-3000 having a financial plan done for you, would you really be prepared at the moment to put your money in to investments where that money goes up and down in value quite a bit? I guess not, so having a financial planner now may not be beneficial, as they would be teaching you about how to spread your money globally in assets that go up and down in value a lot - mutual fund comprising of thousands of company shares for example.

I would suggest that you learn yourself about investing and take the plunge with a small amount using your 2022-23 ISA allowance - so using a Stocks & Shares ISA.

If I had £100K going spare and didn't want to use it to, say, make a capital repayment on mortgage or spend it on anything essential and didn't want to take too many risks - here's what I'd do.

I'd use an investment platform (e.g Hargreaves Lansdowne, but there's loads of other's to choose from - anyone who's regulated with FSA) and buy £10K worth or shares in 10 different, big, reliable and diverse companies within an ISA stocks and shares package (so I wouldn't have to pay and tax) and chose ones which give a decent dividend - up to about 5% if that's your goal for returns.

I'd chose companies like Shell/BP in energy sector (big dividends), unilever (we all need soap-bars and baked-beans), tobbacco (if your conscience allows you - massive dividends and addictive products that have a good track record of churning out money and diversifying into non-combustable nicotine products), defence (i.e BOE systems - again, if you feel it's ethical), vodaphone, HSBC , national grid, a gold-miner / copper miner , McDonalds / Coca-cola (if your platform supports USA shares) etc etc.. - you get the idea - big companies producing essential products all which should be in FTSE 100 (or USA equivalent - Dow / S&P500).

The share price will go up and down (v much down at the moment so perhaps not a bad time to buy) and you have to be prepared to hold them for a long time to iron out the risk - but you will get your 3/4/5% tax free dividends every year and prob better - although slightly riskier - than putting it in some rubbish cash ISA

I would invest it in the S&P 500, where it's automatically invested in the top 500 performing companies.

www.forbes.com/advisor/investing/how-to-invest-in-sp-500/

I’d sign up for an investment platform like interactive investor. You need tracker funds with low annual fee - (annual fees eat into your return rate - try to keep them below 1%. It’s a good time to invest - stock markets are down. Buy in 10k chunks, in sterling. Diversify by buying across industry sectors and world regions. Using interactive investor you can choose shares by risk profile too. Buying diverse tracker shares reduces your exposure to risk - one company going bust will have minimal affect on your portfolio. Financial advisors will charge you an up front fee and then an annual percentage - it’s money for old rope - you are better off going down the low cost tracker route.

OP, there are lots of podcasts about investing. Somebody on Mumsnet recommended the Meaningful Money series to me, and I've found them reasonably good.

I did talk to a financial advisor, but won't be investing with her. The fees were unjustifiably high but, more worryingly, if I had later wanted to move my money to another advisor, or start managing it myself, I would have had to cash in all the shares first, rather than move them - that was enough to put me off.

However, probably not all FAs work that way.
If you sign up for a platform like Hargreaves Lansdown I think you can pay a one off fee for stand-alone advice.

Using an IFA is no guarantee that you will get a decent return on your investment but it is a guarantee that they will charge you a (probably hefty) fee even if your investment is losing money.

However, you need to educate yourself if you want to go DIY and that takes time and effort. That effort will save you thousands of pounds though (maybe tens of thousands over your lifetime), so if you can find the time, it may be better ‘pay’ per hour in return than your day job!

Try starting here:

www.moneysavingexpert.com/savings/investment-beginners/

I think the best advice on here came earlier on, which is to educate yourself about financial markets and investing. You probably will not be able to purchase the best advice for £100k. You might get sound, generic advice but that is not perfectly adapted to your circumstances.

First, you need to decide how long you are willing to have your money locked up. If you might need it within the next five years then that strongly curtails your options.

Then, one really important distinction to learn is the difference between what you are buying and how it is packaged -- what sort of "tax wrapper" or "type of account"

For "type of account" or "tax wrapper", for most people in UK, there are three main options: taxable account, ISA or pension. With a pension (for example a SIPP), the money is locked up until retirement age, but for most people with taxable income that option is likely to give the greatest tax savings because you can, in effect, invest with pre-tax income. With an ISA, you invest with post-tax income, usually pay somewhat higher fees, but any earnings or gains on the investments are tax free, and you normally keep the ability to take the money out if you need it. With a regular taxable account, you usually get the widest choice of investments with the most competitive fees, but income and gains are usually subject to tax unless you are under certain "tax free" limits in the tax law.

Your decision about "type of account" is separate from your decision around what to actually buy within the chosen account type. Broadly speaking, at the moment, in GBP you cannot get more than 1-2% return without taking some type and level of risk, whether that is the risk of having money locked up and then needing it, or the risk of losing some of it. If you are able to lock up your money for several years, you may be able to get 2-3-4%. To get more than that, you will have to take investment risk, which means the possibility of losing some of money, at least temporarily and possibly permanently if you choose to sell or need to sell after a decline.

The big problem right now is that with inflation being higher than "risk-free" interest rates, there really is no risk-free way to avoid erosion of purchasing power. So your choice is between a slow erosion, or gaining the possibility of keeping up or beating inflation but paying for that by taking the risk of a faster erosion in value.

An IFA, for a fee, can help you to understand the above in more detail, and may be able to help you to feel reassured and to get comfortable with certain specific options. A good one can keep you from buying something that is absolutely terrible; some funds charge fees that are too high, or are too concentrated or too leveraged, and should best be avoided. However, no IFA can change the basic facts as outlined above, and if anyone promises you a 5% risk-free return in GBP then they are most likely lying.

Good luck!

Context - I worked for 5+ years for one of the biggest advice companies in the country. I now work for a DIY investment provider.

You need to understand that advisers don’t have a magic crystal ball revealing which investment will perform best. Lots of people have a false perception that advice is about paying someone to tell you where to invest. It is not. Don’t expect them to try and predict which shares are going to do well. Or that they will help you access any special any special investment you can’t find yourself. If they’re honest, most will tell you they don’t really specialise in investments at all.

If you simply want to invest £100k then put it in an account with a platform (research the best price for your £100k portfolio - Hargreaves are expensive). Open an Isa. Then pick some multi-asset funds (e.g Vanguard Lifestrategy) and drip feed in £1600 a month to maximise your £20k ISA allowance. The investments are EXACTLY THE SAME as those an adviser will recommend to you.

An adviser is extremely valuable for helping you plan how that investment fits into your life plans and to maximise tax breaks, however. If you’re not using your pension allowance and you want that investment to retire on then it is likely the best option for you will be to open a Sipp. But that depends on how old you are, your marginal rate of income tax, what other assets you have in place and so on. This is where an adviser will give you a personal plan you won’t get from an internet message board.

I agree with prev post - no-one has that crystal ball telling you exactly what to invest in for a profit. They'd like you to think they do - they are called fund managers. You pay them alot of management fee to manage your account, but they consistently under perform indexes like FTSE100 etc. If they have a good year it's usually due to standard deviation around the mean (throw enough darts at a board and eventually you'll hit the bulls-eye). So understanding the investment process is the way to go, then go DIY. As has been mentioned, Indices Tracker Funds (low cost funds which follow the major international top shares) is the way to go for a beginner. But expect the value of your investment to fall the minute you click Buy. It's a long term thing.