IFA advice / Investing a large sum?

[johnnywb]

Morning all,

I have a reasonable amount of cash to invest from a house sale whilst i search for another house to buy (although i might mortgage the next house).

I have spoken to my bank (Lloyds) and they have advised on some ways to use the money. My branch also put me in touch with one of their financial advisors who can take some of the money to invest.

Now, is this sensible, or should i seek out an Independent Financial Advisor to speak to instead / as well?

If so, where's a good place to find someone decent? (feel free to PM if needs be).

Thanks in advance.

[DonkeyApple]

johnnywb said:

Morning all,

I have a reasonable amount of cash to invest from a house sale whilst i search for another house to buy (although i might mortgage the next house).

I have spoken to my bank (Lloyds) and they have advised on some ways to use the money. My branch also put me in touch with one of their financial advisors who can take some of the money to invest.

Now, is this sensible, or should i seek out an Independent Financial Advisor to speak to instead / as well?

If so, where's a good place to find someone decent? (feel free to PM if needs be).

Thanks in advance.

There are good and bad IFAs, like in every industry. The issue with this one though is that they are commission incentivised and so it is all too easy for them to just stick your money into what is going to pay them the most.

My advice would be to find the time to talk to at least 3, if not more to get an idea as to who is screwing you and who is looking for a lifetime client relationship.

You have to be honest about the length of time you want to be invested but there is no harm in alluding to this being a test for additional large funds.

I believe they also have to tell you the comm per product that they will be recieving and also if they are tied to a product supplier. This is essential information and you must ask for that. Somm kickbacks to IFAs on products are fking enormous and obviously the comm puts you offside from the outset.

[scotal]

johnnywb said:

Morning all,

I have a reasonable amount of cash to invest from a house sale whilst i search for another house to buy (although i might mortgage the next house).

You need to decide before you sing any paperwork how long you want to tie the money up for, and how important access to that money is to you. Its no good you agreeing to a product with lock ins or redemption fees if you actually decide you need access in 3 months time. Think about this, hard, irrespective of whether you stick with your banks advisors, or whether you go with an IFA.

johnnywb said:

I have spoken to my bank (Lloyds) and they have advised on some ways to use the money. My branch also put me in touch with one of their financial advisors who can take some of the money to invest.

This is going to sound like I'm splitting hairs, but be careful. My bet is you have not received any advice at all from LLoyds. You have merely been told what options are open to you, from the limited range that Lloyds offers. That sound daft, but if something goes wrong with an investment you make, the definition of advice is important should you end up speaking to the FOS about it..
Bank staff (some of whom are excellent by the way) are not personally liable for the "advice" they give.(Something else that will be changing) They also have sales targets. The unscrupulous amongst them will sell you the product that suits them best as soon as an IFA will
You should have received info from lloyds on the basis of their transaction, i.e advised or not.

johnnywb said:

Now, is this sensible, or should i seek out an Independent Financial Advisor to speak to instead / as well?

If so, where's a good place to find someone decent? (feel free to PM if needs be).

Thanks in advance.

The best way to find a decent IFA is via recommendation. Beyond that you are metaphorically sticking a pin in a telephone directory. I think you shuld certainly speak to Lloyds guy, and compare and contrast what he offers you with what you are offered by an IFA.

DonkeyApple said:

There are good and bad IFAs, like in every industry.

Compeltey agree with this, and some of the bad ones are very very good at looking like good advisers.
I'm not a massive fan of some of the bigger IFA firms, their staff are targetted like the banks staff will be. I could bang on about compliance, and how regulated the industry is, but it would be fairly pointless. Plenty of systems can be worked to make the outcome exactly what the IFA/bank staff etc wants it to say.

DonkeyApple said:

The issue with this one though is that they are commission incentivised and so it is all too easy for them to just stick your money into what is going to pay them the most.

Although it doesn't currently apply IFA's will have to charge fees from the end of 2012. Commission is being banned on most investment products. Some IFA's already charge. Some offer options between charging and fees. Make sure you understand their remuneration structure, it should be clearly explained to you. If you are going for a short term investment this will be particularly important.

DonkeyApple said:

My advice would be to find the time to talk to at least 3, if not more to get an idea as to who is screwing you and who is looking for a lifetime client relationship.

You have to be honest about the length of time you want to be invested but there is no harm in alluding to this being a test for additional large funds.

I find that a bit odd. On one hand he has to spend time making sure the IFA he deals with is honest and upfront. On the other he should lead the guy on by alluding to a mythical future investment?
From a personal opinion it would be better if hes was as straight with the IFA as he hopes theIFA will be with him.

DonkeyApple said:

I believe they also have to tell you the comm per product that they will be recieving and also if they are tied to a product supplier. This is essential information and you must ask for that. Somm kickbacks to IFAs on products are fking enormous and obviously the comm puts you offside from the outset.

Yes IFA's have to tell you the commission they are receiving. Dont be afraid to ask questions about it. You shouldn't have to ask for the commission details, it has to be on the product illustration.
Make sure you read them, plenty don't.
Yes IFA's have to tell you if they are tied ot a single provider or a panel of providers, or if they are whole of market. This should be disclosed at the very start of any contact you have with them. Any fudging on this issue should be a warning sign to you.

[johnnywb]

Thanks for the input so far guys very helpful.

Just to paint a bit of a clearer picture, i'm pretty open on how long i tie the money up for. I would look to keep some money aside to use as a deposit to allow me to move quickly.

Given the current price of borrowing, i believe it would be possible to take the sum i have and invest it, whilst using a mortgage for any property purchase and achieve a return in excess of the mortgage costs.

FYI i am a 'part time' property developer so would be borrowing only for a period of around 6 months whilst i carried out the development. At some point, borrowing costs will rise again, but i don't see huge rises happening in the next 12 months or so.

Hence the reason for asking about an IFA.

My concern in my 'chat' with Lloyds was that they could well be on commission. I would rather form a relationship with someone who will become a long term contact rather than someone who happens to be in that role at the bank for the next year or so.

[F458]

A friend of mine was in a similar position, funds from house sale and him wanting to rent for a while, i put him in touch with an ifa who has given him a 6% uplift on the original investment and 1/2 of the 6% commission rebated - cracking deal - he's looking to stay put for 3 years minimum and yes there are early penalty charges but his £500k became £530k as soon as it went in and hes had £15k back from the ifa - savings rates are a joke so he went down this route but very unlikely you will find an ifa who will give so much away!!! Forget the banks the kids (advisors) are there 1 month and gone the next!!!

[F458]

he puts in £500K from day 1 its worth £530k, yes there are penalties to come out within the 1st 5 years, these are explanied to the client at the outset, thats why an investment like this - shortish term/money from house would not normally go in to this type of investment, but its compensated for from the outset. its not bull, the ifa puts between £20m and £50m a year with this provider, of course hes going to get preferential terms!!! its not unusual for an ifa to take 6% on an intial investment at all!!!! what %age do you take? get with it we all no this is not the game to be in on a fee basis most of the time. if this ifa sent a bloke a £500 bill for 1 or 2 hours of his time he would tell him to stuff it, but now there is the opportunity for the ifa to put his 'fee' on to the clients bills, or take it away as it were!!!! so u invest £100k but actually only £99k goes in!!! at the end of the day when interest rates are so low you have to create the best deal you can in order to service your clients, that involves getting the best possible deal off the provider, screwing the smallest bid/offer prices and giving up trail commission and splitting commission 50-50.......... you can take as much or as little risk as you want!!!

[johnnywb]

MCM,

Thanks for your input. To be honest what I'm looking for is some of the advice you've provided. I could double the sum i have available by getting a mortgage and could easily go down this route for any purchase, taking an amount out of the capital i have now to form the deposit / increase my purchasing power upto the level i would need, but this would still leave a very sizeable some of money to invest, the horizon of whcih would be more flexible.

Thanks for your help.

[NoelWatson]

F458 said:

you have to create the best deal you can in order to service your clients

Would that not be a tracker?

[DonkeyApple]

NoelWatson said:

F458 said:

you have to create the best deal you can in order to service your clients

Would that not be a tracker?

With an ETF being the cheapest. 1p spread on the FTSE ETF, £10 comm per side and 0.5% stamp on close. Obviously, exposed to market fluctuations.

[patti]

If it helps any, when we sold our last house 6 years ago we had a substantial sum to invest whilst looking around and going into rented. I put what seemed like a suitable sum for a deposit into an easy access account and the rest in 60 days accounts and kept my fingers crossed we wouldn'+t need it in a hurry. I divided it up between 8 accounts, keeping 4 in my name and 4 in my husbands, using 4 building societies. I'm afraid I did take a risk by putting far more money than reclaimable in all the accounts but it worked out fine. We are about to sell again and may have to go into rented again and this time it will be more difficult to decide what to do but I don't think I'll take risks this time round, somehow the 'climate' was more stable 6 years back. We didn't think we would be in rented for 2 years otherwise I might have thought twice. I will probably divide the money into £50,000 accounts..60 days again, tedious , boring, but safe.
Years ago we had a friend who was a broker and we trusted him enough to invest our money for us when we were in a similar situation. Admittedly the interest rate was higher then but we were in rented for only 6 months and came out of it, not just with a decent return but enough to buy a new car and have change. No chance of that now!