News/Events

Getting The Right Advice On Investments [2nd October 08]

Even in these troubled Times, I have had several telephone calls from new clients and indeed some that are existing saying “I have recently come into some money and need advice but having had some conflicting advice already, can I trust an Independent Financial Adviser (IFA) to understand my financial requirements?!

I have to say IFAs will always have slightly different angles on the way they see things which is something you would obviously expect but the final advice can be surprisingly variable!

However, I do feel there are times when IFAs do suffer with tunnel vision and do not view the larger picture perhaps as well as they could and take, for example, a couple who approached me earlier this year. They were in there early 60’s and had sold their business for £2.5 million which was paid into their Bank account. As soon as it hit this account, they had a call from a friendly bank person who arranged for their investment adviser to come down and meet with them.

Suddenly, £1.2 million was placed into the Bank’s own Discretionary Management Service and £1 million into an investment bond linked to a bank rate return. There had been little consideration to their income tax position, no thought on perhaps ways to help or defer the potential capital gains tax liability of £800,000 or any inheritance tax planning or level of investor protection.

Another client in her mid 50’s had received just over £1 million pounds as part of a divorce settlement which was sat in her deposit account whilst the other part was used for the purchase of a house. This lady walked into a Building Society to lock up £20,000 in a fixed rate bond which had current account advantages and ended up investing £400,000 in a linked investment plan. The 1 year headline rate on half of the investment was particularly attractive but the other half was tied up for 4 years on a rate that was not that clever at all.

The problem is that some people do find they are suddenly wealthy with an unexpected legacy and need prudent advice on how to invest for the long term. As any IFA worth their salt will know, more consideration has to be given when you are building a portfolio around investments clients already have. Sometimes these investments are not quite right and there is little one can do especially when there are inevitably heavy penalties for undoing the previous advice.

Over time one will be able to make the portfolio more cohesive but initially there may have to be a combination of investments with some being very cautious with others being a little more adventurous. Then there was the question of tax allowances as these may have not been taken fully into consideration with perhaps just a couple of Stocks and Shares ISA’s being put in place.

As I mention every week, it is paramount to have a review of your finances ever year and in this case, the portfolio will have to be tinkered with each time. This will ensure the investments are brought in line with the desired solution but also to ensure the portfolio meets the changing needs with full use of tax allowances being utilised in coming years.

This article was written by Langtons - Published in the Western Morning News, Money, 2nd October 2008