Good IFA around Berkshire + what to do with a lump sum?

Good IFA around Berkshire + what to do with a lump sum?

Author
Discussion

daddy cool

Original Poster:

3,996 posts

228 months

Monday 19th February 2018
quotequote all
Imagine you acquired a chunk of cash – lets say a nice round £100,000. You want to use it to generate some additional income.

You are: 40, own your modest home outright, live a fairly frugal life, earn a pretty average (for Berkshire) wage of £40k, and have no kids and no debt. You also have no real experience of “finance stuff” and so the money is currently resting in a current account earning zip.
You just want the money to maintain the capital and/or increase, and also generate some extra money every month to supplement income, start spending extra on toys and sweets and stuff, and start putting a bit more away for pensions.

Two options appear to be:
1) Buy to let. With one-bedroom flats starting at ~£150k around here, what should the plan of attack be – put £100k down and £50k on a BTL Repayment mortgage? Or put a much smaller amount down on an interest-only mortgage and hope that property value increases? Is BTL still a viable way of generating extra income if you only have one property and a full-time “normal job”, vs career property investors who have a portfolio of properties and can also do up places themselves to reduce costs? The extra stamp duty, and general feeling of hatred from the government to BTL’ers makes me think the ship has sailed on this one for amateurs.
2) Investments. What would a realistic return be on £100k invested, in a medium-risk scenario? If you know nothing about investment, where do you start? How do you even chose a financial advisor, and trust that they are aiming to generate you the most income, vs using your money to generate themselves the most commission? Does anyone have any experience of a Berkshire based IFA that they trust and have had good experience with? Presumably its not advised for a financial noob to just investing here and there without expert help?

Appreciate this is a pretty broad topic, so if nothing else would be interested in some IFA/Fund manager contacts in the area that could give professional advice…

DoubleSix

11,691 posts

175 months

Monday 19th February 2018
quotequote all
Over the last 100 years or so equity returns equal around 7% when averaged - you need to be in the market for a sensible timeframe for starters.

An IFA isn’t all about investment performance and should be useful to you in a broader sense; tax and retirement planning for example...

You should seek out independent, whole-of-market advice and avoid restricted advisers imo.

PM if you feel a chat would be of benefit.


Edited by DoubleSix on Monday 19th February 14:14

Derek Chevalier

3,942 posts

172 months

Tuesday 20th February 2018
quotequote all
daddy cool said:
Imagine you acquired a chunk of cash – lets say a nice round £100,000. You want to use it to generate some additional income.

You are: 40, own your modest home outright, live a fairly frugal life, earn a pretty average (for Berkshire) wage of £40k, and have no kids and no debt. You also have no real experience of “finance stuff” and so the money is currently resting in a current account earning zip.
You just want the money to maintain the capital and/or increase, and also generate some extra money every month to supplement income, start spending extra on toys and sweets and stuff, and start putting a bit more away for pensions.

Two options appear to be:
1) Buy to let. With one-bedroom flats starting at ~£150k around here, what should the plan of attack be – put £100k down and £50k on a BTL Repayment mortgage? Or put a much smaller amount down on an interest-only mortgage and hope that property value increases? Is BTL still a viable way of generating extra income if you only have one property and a full-time “normal job”, vs career property investors who have a portfolio of properties and can also do up places themselves to reduce costs? The extra stamp duty, and general feeling of hatred from the government to BTL’ers makes me think the ship has sailed on this one for amateurs.
2) Investments. What would a realistic return be on £100k invested, in a medium-risk scenario? If you know nothing about investment, where do you start? How do you even chose a financial advisor, and trust that they are aiming to generate you the most income, vs using your money to generate themselves the most commission? Does anyone have any experience of a Berkshire based IFA that they trust and have had good experience with? Presumably its not advised for a financial noob to just investing here and there without expert help?

Appreciate this is a pretty broad topic, so if nothing else would be interested in some IFA/Fund manager contacts in the area that could give professional advice…
Have sent you a PM

anonymous-user

53 months

Tuesday 20th February 2018
quotequote all
daddy cool said:
Presumably its not advised for a financial noob to just investing here and there without expert help?
An expert will charge for "initial advice", probably charge for "ongoing advice" and may even charge for "other stuff" as well so you'll immediately lose investment return just paying for that lot.

Personal view,
  • BTL is toast. (1) Far too heavily taxed, and (2) significant risks and/or management costs.
  • Use the tax wrappers! i.e. Pension and ISA. Remember a spouse can do the same.
  • You can't avoid "risk" unless you accept your money is just going to shrink with inflation.
  • Many people choose to invest in stocks & shares by using some of the mainstream funds to spread risk. Don't start trying to pick individual companies. However, you do still need to choose funds which fit your overall objectives. And you need to decide on "asset allocation" which at the very simplest level means what proportion to risk in which type of investments and what proportion to keep safe on bank deposit, just in case markets take a dive.
  • If you click around on this finance forum you'll see questions like yours come up over and over again with some helpful general guidance being given - and it's free!
  • Broadly if you can accept some risk, maximise the tax benefits and minimise costs you'll be off to a flying start.
Remember, if your investments do well your adviser will tell you what an excellent job he's done. If your investments do badly he will blame the markets.

I wouldn't pick a garage by looking in the yellow pages and the same goes for IFAs. Try to get a sound personal recommendation from a "satisfied client".

ringram

14,700 posts

247 months

Thursday 22nd February 2018
quotequote all
+1

IFA = Rape which ever way you go when you can easily educate yourself.

With 100k you can wipe out your tax liabilities for 8 years+ (SIPP) etc.
Loads of options as above. SIPP is well worth looking into. Put it into a low risk place like NSI income bonds etc and DYOR spend a good few months the money saved on an IFA will pay for the time spent and you will be better placed for the rest of your life smile

alan-87

393 posts

204 months

Thursday 22nd February 2018
quotequote all
Read the thread below. It's excellent. On the back of that definately read How to own the world & also The millionaire teacher.

That will at least start to get your understanding in place. You could also try looking at some of the free finance / investment courses on Futurelearn.

https://www.pistonheads.com/gassing/topic.asp?h=0&...

daddy cool

Original Poster:

3,996 posts

228 months

Thursday 22nd February 2018
quotequote all
Thanks for the replies & PMs chaps, some useful advice and food for thought thumbup

sidicks

25,218 posts

220 months

Thursday 22nd February 2018
quotequote all
ringram said:
+1

IFA = Rape which ever way you go when you can easily educate yourself.

With 100k you can wipe out your tax liabilities for 8 years+ (SIPP) etc.
Loads of options as above. SIPP is well worth looking into. Put it into a low risk place like NSI income bonds etc and DYOR spend a good few months the money saved on an IFA will pay for the time spent and you will be better placed for the rest of your life smile
Ignorant nonsense.

But you can of course educate yourself to some extent to allow you to make the best use of an advisor.

Edited by sidicks on Thursday 22 February 09:39

ringram

14,700 posts

247 months

Thursday 22nd February 2018
quotequote all
Hahahaha.. Never used an advisor and never will.

Those that need to cant afford to. Kind of like payday loans, overdrafts, credit card debt etc.

Why is self-education considered so wrong!? Why cant anyone take control of their own life/destiny/finances..!?

sidicks

25,218 posts

220 months

Thursday 22nd February 2018
quotequote all
ringram said:
Hahahaha.. Never used an advisor and never will.

Those that need to cant afford to. Kind of like payday loans, overdrafts, credit card debt etc.

Why is self-education considered so wrong!? Why cant anyone take control of their own life/destiny/finances..!?
I never said it was. Indeed I quite clearly said the opposite.

Yipper

5,964 posts

89 months

Thursday 22nd February 2018
quotequote all
Just stick it in a Dow Jones and FTSE tracker and leave for 25 years.

If you had put £100k in there in 1993, you'd now have about £1.3m.

red_slr

17,122 posts

188 months

Thursday 22nd February 2018
quotequote all
If you have a wife / partner you can put £20k each into a S&S ISA and then another £20k each in April. That's £80k invested in the next 2 months. You are then looking at April 2019 to put in the final £20k. S&S ISA is tax free so any gains etc are 100% tax free.

Another option is to look at cheaper BTL out of the area you live in, to get a better return and avoid BTL mortgage.

Finally depending how / when you plan to retire you could use up any unused pension allowance which would generate you an upfront gain due to tax relief. Would be taxed coming back out though and access is limited with age.

cashmax

1,099 posts

239 months

Friday 23rd February 2018
quotequote all
I was in a similar position (although the number were quite different) a couple of years ago. I firstly put everything into premium bonds and the rest into income bonds whilst I decided what to do.

After talk to a few IFA's it became clear that they understood the mechanics of minimising tax via pensions and ISA's better than me, but of course has zero idea of how any investment was likely to perform unless it was a packaged scheme with black & white criteria (not a dig, if they did, they wouldn't be an IFA) and although I did dabble in the markets, I wanted to invest in tangible assets that I could borrow against if the opportunity for a better investment presented itself, so I went went with what I knew which was bricks and mortar. BTL isn't quite a lucrative as it used to be, thats for sure, but I choose property that was low risk with tenants I knew. On residential property, in Berkshire (where I am) you would be lucky to see a 5% return, but if you are in it for the long term, then the capital growth is what made this worthwhile for me. The housing market will of course rise and fall, but it's only ever going to go one way in the long term and always has since records began.

Something else I did was to pay of the mortgage of a friend of mine who had a CCJ and a very expensive mortgage, put a charge of the house and agreed a rate that benefits us both. Once he can get a reasonable deal, he will refinance. Pretty much risk free unless you might need that particular cash back in the short term.

Perhaps I'm old school, but I also wanted something I could touch & see, something tangible, which although it could loose value in the long term, could never loose all it's value.

Perhaps worth mentioning that every IFA you ever meet will subtlety try and steer you clear of any direct investment in property for obvious reasons.

BanzaiMan

157 posts

146 months

Friday 23rd February 2018
quotequote all
cashmax said:
Perhaps worth mentioning that every IFA you ever meet will subtlety try and steer you clear of any direct investment in property for obvious reasons.
Concentration risk, illiquidity, increasing taxation, lack of diversification and a speculative bubble the likes we have never seen before at the obvious reasons. Was that what you meant?

bitchstewie

50,767 posts

209 months

Friday 23rd February 2018
quotequote all
I'd like to think that spending a few hours/days reading and learning will be the best investment you could make when you consider the impact it can have on how much your investment makes you.

Only comment on the IFA side is maybe find one that charges for time if possible. I'm not in the financial industry but it's always felt odd that an IFA can be rewarded for many years for the results of a couple of hours work but that's just my view.

BanzaiMan

157 posts

146 months

Friday 23rd February 2018
quotequote all
bhstewie said:
I'd like to think that spending a few hours/days reading and learning will be the best investment you could make when you consider the impact it can have on how much your investment makes you.

Only comment on the IFA side is maybe find one that charges for time if possible. I'm not in the financial industry but it's always felt odd that an IFA can be rewarded for many years for the results of a couple of hours work but that's just my view.
A good adviser should be encouraging the client to learn as well (if they want to, many don't). Charging for time carries the risk (which the client bears) of time (and therefore cost slippage). Fee based may be better to avoid that risk and also ensure contingent charging (only getting paid if client goes ahead) is avoided.

Not sure on your last comment. The initial charge will be for the initial work, ongoing fee (which isn't insignificant due to ever increasing regulation) will be for ongoing work to ensure client is on course to achieve their objectives. BTW it's a tad more than a couple of hours work!

bitchstewie

50,767 posts

209 months

Friday 23rd February 2018
quotequote all
Fair point and I shouldn't have used the phrase "couple of hours" smile

What I was driving at was that presumably time put in doesn't always increase linearly with the portfolio size, but rather with the complexity of the clients situation, whilst a percentage fees will always be linked to the portfolio size, if that makes sense?

I'll get my coat... smile

cashmax

1,099 posts

239 months

Friday 23rd February 2018
quotequote all
BanzaiMan said:
cashmax said:
Perhaps worth mentioning that every IFA you ever meet will subtlety try and steer you clear of any direct investment in property for obvious reasons.
Concentration risk, illiquidity, increasing taxation, lack of diversification and a speculative bubble the likes we have never seen before at the obvious reasons. Was that what you meant?
No, but you have proved my point very nicelyreadit

Edited to add that I don't have anything against IFA's, but to see them as an alternative to spending some time educating yourself would be madness in my view. To be able to make an educated decision, you need to understand your own options and while an IFA might be able to provide some useful advice around many aspects of any investment, my experience has always been that there is an element of bias, regardless of how they charge/don't charge, they will also only be able to recommend a course of action that they are familiar with or even aware of, neither of which will be comprehensive.

Edited by cashmax on Friday 23 February 17:56

BanzaiMan

157 posts

146 months

Friday 23rd February 2018
quotequote all
bhstewie said:
What I was driving at was that presumably time put in doesn't always increase linearly with the portfolio size, but rather with the complexity of the clients situation, whilst a percentage fees will always be linked to the portfolio size, if that makes sense?
Some costs will increase with portfolio size, but agreed, total cost shouldn't be driven solely by portfolio size.

trowelhead

1,867 posts

120 months

Saturday 24th February 2018
quotequote all
Here's what I would do seen as your goal is extra income

Setup company
Buy 5 x 70k flats or houses, within a 3 mile radius of Manchester / Liverpool / Leeds
25% deposits on all - roughly 17.5k plus fees
Buy them all inside company so mortgage interest is deductible
Mortgages roughly 4% so each one is £187 interest only pcm. Rental income will be £500-£600 per unit.
Roughly £350 profit x 5 units is £1750pcm or £21000 per year
Minus accountants fees, maintainence, agent fees.

Draw some out to spend or allow it to build up in the company and buy more property. One a year would be doable so the snowball grows on the income alone

Bonus points if you buy run down, light refurb and then refinance at new value leaving little to no of your own capital in the deal

As an pure income strategy can anyone beat that??!