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  1. #1

    New investor with £1,000,000 to invest

    I'm in the very fortunate position to be the main beneficiary of an estate which is worth around 1,000,000.

    I've never invested in funds, stocks or shares before other than with my pension which I've made some funding choices with and split it across 4 funds with different risk profiles.

    I've always had a casual interest in investments and the money markets and I quite like the idea of making this money work for me using investment funds. I've taken a number of risk assessments online and each of them has categorised me as having a medium attitude to risk. I won't need access to the money for a number of years so I'm happy to take a long view of 10+ years.

    I've done some research and I have a number of questions.

    1. What would you do if you inherited this money?

    2. What would you avoid doing?

    3. What is the best investment platform to use with a balance of good funds, reasonable fees and good functionality?

    4. Are there specific funds you would recommend for someone in my situation?

    4. If I have a good idea of what I want to do with the money and understand how financial products work what value would a personal financial adviser add over me making the decisions on my own? Also, if I decided to use a PFI what do they typically charge?

    5. Do investors tend to work out their own tax affairs or employ a tax accountant? If the latter where could I find a reputable one who chargers reasonable rates?

    If I've missed anything then please let me know. All advice is greatly appreciated.


  2. #2
    Congratulations - a very nice position to be in.

    I have had similar inherited wealth in the past and this is my view on where to invest:

    As it is a very large sum by anybody's standards, I would put half of it with a professional , reputable investment firm who usually charge a percentage of the value of the portfolio, which may be negotiated. This can be on an Advisory or Discretionary basis. I tend to let mine be Discretionary and see how they do against what I do. This mainly invests in individual shares globally.

    As you have some interest in investing, I would put a large part of the remainder in two different portfolios of investment trusts and another of unit trusts. You can easily diversify the risk and cover the globe rather than just investing in the UK. I have done this myself without consulting an Advisor so I am not equipped to say what they charge.

    Whatever, you should utilise your ISA allowance every year, as you can shelter 20,000 now annually, free of any income or capital gains tax.This can be used every year and is ideal in building up a tax free portfolio..Halifax iWeb are a no frills low cost platform to invest if you make your own decisions.

    Then of course, I would always keep some cash in a Fixed Rate term bond with a Building Society or Bank, just in case. Or this could be an easy access but the interest rate will be lower.
    Either that or invest the maximum permitted into Premium Bonds - you probably won't win the big one but small payments come fairly regularly and the capital is safe.
    I have not suggested a Bond portfolio as such as I believe they are only necessary if you are seeking income, and I have not been a great fan of them.

    Otherwise, as a platform, Hargreaves Lansdown is a very user- friendly portal and makes self-investing in shares unit trusts and in investments trusts very easy. They are not the cheapest but they give plenty of ideas and offer low cost funds. They do not charge for buying funds but take a percentage of the value of the portfolio, but all platforms have dealing charges for buying individual shares.

    My best advice is, when you have invested, sit back and don't be tempted to keep switching funds or shares or whatever, not unless you intend to spend a lot of time watching the markets. That's how other people make money, not you.

  3. #3
    Good advice from Groushot already, nothing I disagree with

    Pay down your debts starting with most expensive, and possibly some off mortgage if you have one

    Consider turbocharge your work pension contributions from now on by making a much higher contribution. (eg 50% of salary). That way you can use some of your inheritance to cover the difference, and benefit from the pension uplift.

    Depending on spouse/kids, consider S&S ISAs for them.

    For platforms you have some options depending on what you're inclined to do

    Vanguard Lifestrategy 60 or Vanguard Lifestrategy 80 would be cheap on Vanguard platform. This would track world markets, rebalanced with some bonds as well. This would be a great core fund going the cheap passive approach. Eg, you could put 3/4s of your investment in this and leave it alone then invest the rest more actively.

    Fundsmith Equity on Fundsmith platform, this would be a great core fund as well going the active route.

    Baillie Gifford have some great funds you can buy on their platform, SMT, Monks, PHI, JPS etc

    Or HL is very good, pricier platform but gives you much wider choice. Other platforms do as well, check out some forums here where they're discussed. Look carefully at prices, and compare for your circumstances.

    Spend some time and effort into educating yourself about investment

    You might want to think about getting advice from a wealth manager, not so much about where to invest necessarily but to take a proper overview of your situation and advise accordingly. Try and get one recommended by someone you trust, ideally a small firm which could could also help with your accounts.

    oh, almost forgot...AVOID ST JAMES'S PLACE!!!

  4. #4
    I suspect handing over control to someone else's "discretionary" management service isn't going to be a satisfying experience for someone who knows a bit about things and wants to get their hands dirty DIY-ing, but anyway...

    One data point for the advised/wealth management route: a relative in a similar situation engaged a CFP (Chartered Financial Planner) recommended by an acquaintance. That professional arranged a bit of a "beauty contest" of Wealth Management companies. The one they went with (discretionary basis) charges them 0.8% on the first million, 0.6% on the second, 0.4% above that (and that *includes* an ongoing 0.2% for the CFP who continues to be involved and useful/helpful re tax and inheritance planning). Obviously holdings' own OCF charges are on top of that. You won't find those rates advertised on that company's website; I think having the CFP involved helped get a better deal. The portfolio they were in looked pretty sensible to me from what I know of their risk preferences (and I was pleased to see some use of ETFs and direct bond holdings helping keep costs down). Anyway, I thought this was pretty good value for the peace of mind this brings my relative, especially when I have another relative who's assets are in the clutches of St James Place (ah, I see Jim S's post namechecked those vultures too!) paying a much higher percentage of AUM overall (but on a smaller portfolio).

    BTW I help the well-off relative with their tax return. So far we have had no need of an accountant, but that's because things have been kept fairly simple and the wealth managers' tax certificate and accompanying info is very good. However over the years of doing my own - and being quite interested in such things - I've come to know a reasonable amount about it reasonably gradually. If a self-assessment form with CGT and foreign pages included looks intimidating (rather than really interesting)... you should probably consult an accountant. Then take a look at the paperwork they submit for you and decide whether you've got good value or not compared with doing it yourself.

  5. #5
    At 1m, obviously capital preservation and safety become more important.

    – So I'd put 1/3rd in NS&I growth or income bonds, getting around 2.2% interest, with full protection guaranteed by HM Treasury – if they bring inflation-linked products back, I'd move some money into some of them .. and you can put up to 1m in certain bonds.

    – Considering the 85k FSCS limit, I'd spread the rest between:

    –– Fundsmith (their ISA)
    –– Hargreaves Lansdown (S&S account)
    –– Vanguard

    (* I think we focus too much on fund choices .. Stocks are stocks, over the long-term .. Avoid anything too speculative and avoid too many fees, and you're likely to get roughly what the market gives you.)

    – I'd buy some share certificates in some quality companies (I like Diageo, Unilever, Microsoft .. all good dividend payers too)

    – I'd put *some* in real assets (outside the financial system) .. 5% in Gold coins and a safe perhaps?

  6. #6
    Yeah, think I stand corrected on this one! What I meant was find a wealth adviser you can pay a known fixed fee to for a few hours of assessing what you have and your overall situation. Then get a few pages of advice in writing and walking away without any ongoing fees after that. Because the advice you'd get here is only based on some quite basic info you've provided not a proper analysis of your circumstances.

    But quite possibly I'm as deluded in believing you can get such a service for a reasonable fixed fee as my youngest is in believing in the tooth fairy!


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