I am uninformed on investments - I have a large amount to invest, do I use an adviser?
28 July 2021
Question by Michelle
Hello! I have recently sold a property and am not wishing to go back into the Buy To Let arena. Therefore I have a large sum of money to play with. I am totally uninformed on investments - not something I have ever learnt really. My question is - do I spend the money with a fully managed advisor - who will charge me £2,500 as a one off + fund fees etc? Or is there another way or hybrid to get me started. For information I have probably in excess of £300K to invest, am a very strong medium risk and looking for strong returns - of course! Thank you in advance for any guidance. M
Answered by James Mallinson
Hello Michelle, thanks for your question. I’ve seen many people exit the buy to let arena over the recent months given the changes to taxation and reliefs, so you’re not alone with this query. To answer your first question, there are many attractions to DIY or investing without an adviser, not only the lower charges, but don’t forget that decent IFAs charge fees to do much more than just picking a fund or product for you. Any IFA worth their salt will help you plan what your money is for, where to put it (ISAs vs Pensions vs Bonds etc) how to take the right level of risk, how to minimise your taxes, forecasting your financial future with cashflow modelling, as well as asking you questions to work out if investing is the right thing to do in the first place or if you should consider other things such as paying down debt or saving for emergencies.
IFAs typically charge either an hourly rate, a fixed fee, or percentage based fee of between 1-3% initially and 0.5%-1% per annum for their services, plus fund costs on top. The total charge that many clients I work with pay is between 1.25%-1.75% per annum all in. If however the firms you’ve spoken to don’t do this, or you just want to explore investing under your own steam, then Boring Money’s own website here has a number of providers who will help you with selecting a hybrid provider who can give you the product as well as some potential funds or portfolios to invest in.
Be warned though – these are all ultimately selected by you, so if you are as uninformed on investments as you state above, then this may be beyond your comfort zone. You’re ultimately responsible for the level of risk you take, which funds and products you invest in, and if they are right for you. Just because you may start to work with a fully managed adviser doesn’t mean that you’re tied into them for ever. Clients can remove their adviser whenever they like without penalty if they no longer get value from working with them. It might be worth speaking to a few firms to explore things, and perhaps begin with one to get you set up, and then if you’re no longer happy to have them working with you, you can get terminate your relationship with them and go ahead under your own steam.
I hope this helps.