Is my housemate being naive with his savings?
Discussion
Having had a chat with my housemate I'm slightly worried that he's not getting the best deal with his savings.
He'll max his ISA allowance soon and is saving around £500 a month. He went into his local NatWest branch to see what options he had with his regular monthly savings, they told him that their financial advisor was in the branch that day and to have a talk with him.
The guy said they have 5 "levels" of risk with the type of saving you can run, with 1 being ISA (low risk, low return) going upto 5 (high risk high return e.g given was investing in start ups).
Now my housemate comes home having set up monthly payments going 50:50 for a "level" 2 and 3 set up. I have no idea exactly what they were talking to him about ( I dont think he really and truly understands where his money is going!)
Now I'm worried that the advisor is just in it to make money for NatWest and might not have been giving him sensible advice, I am right to be hesitant?
Now presumably my housemate has put his trust (and hard earned) in NatWest to invest it ans they see fit in the hope he will get a good return?
Is this normal practice, or would a standard savings account be a better bet?
He'll max his ISA allowance soon and is saving around £500 a month. He went into his local NatWest branch to see what options he had with his regular monthly savings, they told him that their financial advisor was in the branch that day and to have a talk with him.
The guy said they have 5 "levels" of risk with the type of saving you can run, with 1 being ISA (low risk, low return) going upto 5 (high risk high return e.g given was investing in start ups).
Now my housemate comes home having set up monthly payments going 50:50 for a "level" 2 and 3 set up. I have no idea exactly what they were talking to him about ( I dont think he really and truly understands where his money is going!)
Now I'm worried that the advisor is just in it to make money for NatWest and might not have been giving him sensible advice, I am right to be hesitant?
Now presumably my housemate has put his trust (and hard earned) in NatWest to invest it ans they see fit in the hope he will get a good return?
Is this normal practice, or would a standard savings account be a better bet?
All financial advisers have to understand their clients attitude to risk. The 1-5 scale is an easy way of doing this. If he is looking to build up a nest egg and save for the medium to long term (5yrs+) then what he is doing doesn't sound like a bad thing. Yes the advisor will make money but good advice doesn't come free. If he doesn't understand what it is he's signed that is the worrying bit!
Perhaps try getting another meeting with the advisor to understand properly. Threaten cancelling, that should get their attention.
As for the 5% regular savings, all the banks do a similar thing, they really give very little back in monetary terms even though the return looks attractive. Therefore in the longer term a Unit trust type product is a worthy alternative to consider.
HTH - if it doesn't make sense, appologiies, few to many birthday beers.
Perhaps try getting another meeting with the advisor to understand properly. Threaten cancelling, that should get their attention.
As for the 5% regular savings, all the banks do a similar thing, they really give very little back in monetary terms even though the return looks attractive. Therefore in the longer term a Unit trust type product is a worthy alternative to consider.
HTH - if it doesn't make sense, appologiies, few to many birthday beers.
blank said:
I wouldn't trust a Natwest "Financial Advisor" after one tried to tell me that X.10% was better than X.1%. "Oh that one's better actually 'cause it's point ten per cent rather than point one."
Would imagine that was just one of the normal customer advisors. Sounds like this guy has seen a Financial Planning Manager which is like an IFA in the qualifications they have, but can only advise on their own products unlike an IFA who has access to the open market.Although it is worth noting that an IFA doesn't have access to all the products and therefore won't necessarily recomend the best thing, just the best he has access to.
As with all advice, its just that, use your own judgement and do some of your own research.
That seems like BS from the NW advisor.
I am not an IFA but your buddy should see one. The key is in the "I" = independent.
These days you can buy almost ANYTHING in an ISA and (other than a pension) an ISA is pretty much the only way to save tax free.
IMHO he should be maxing his ISA first before thinking about anything else.
I have a self-select ISA that has let me take a wild ride on a whole bunch of small/mid-cap stocks which should be enough risk for anyone!!
Frankly, I strongly suspect those "higher level" risk products just charge more fees.
I am not an IFA but your buddy should see one. The key is in the "I" = independent.
These days you can buy almost ANYTHING in an ISA and (other than a pension) an ISA is pretty much the only way to save tax free.
IMHO he should be maxing his ISA first before thinking about anything else.
I have a self-select ISA that has let me take a wild ride on a whole bunch of small/mid-cap stocks which should be enough risk for anyone!!
Frankly, I strongly suspect those "higher level" risk products just charge more fees.
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