Episode Details

I was a financial adviser for 25 years working for banks, insurance companies and in my own IFA practice. I am also the author of the book, Yes, Money Can Buy You Happiness.

For the average person who has a small lump sum or monthly amount of cash to invest there are a number of investment vehicles from which to choose. Here is a basic list of products available to the average investor.

Deposit based investments

ISAs and bank deposit accounts which are usually guaranteed up to £85,000 by the government.

Advantages:

• Safe, guaranteed investment up to £85,000.

Disadvantages:

• Low returns. 
• The purchasing power of your money will be eroded by inflation.

Asset-backed investments 

Shares, bonds and property. You can invest in these assets directly or through investment vehicles or funds such as, unit trusts, mutual funds, pension schemes and ISAs. 

Advantage: 

• Potential for better returns over the longer term.

Disadvantages:

• Higher risk.
• You could get back less than you’ve put in.
• More specialised. 

If you have less than £250,000 to invest, most financial advisers will only be able to recommend products via funds which invest in the above asset-backed regulated investments, which are regulated by the FCA (Financial Conduct Authority) rules. You are protected by the FCA, for instance, if you are miss-sold one of these products by an authorised adviser.

You can check the FCA register for a list of authorised firms and advisers. Advisers must study and pass exams and prove they are keeping up-to-date by attending training courses and CPD.  If you want to know what they know, take a basic financial adviser course.

Financial advisers can usually only recommend regulated products. This is usually outlined in a long brochure or leaflet, who nobody reads in my experience, or is blurted out in a long sentence over the phone. Financial advisers will not advise you to buy a property or invest in an individual share, as they will say that it’s too risky.

Some financial advisers are independent and can recommend a range of products with a number of product providers or companies. 

However, other advisers work for an insurance company and can only recommend the products or services.

Investors with large amounts of money can access specialist financial planners and a wider range of investment vehicles.

There are of course more specialised direct investments, such as, art, vintage cars, antiques, fine wines, stamps, as well as metals like gold and silver. 

Lots of people collect art, wine and gold and silver coins, either as a hobby or as a hedge against inflation. 

Advantages: 

• Potential for higher returns if you know what you’re doing.
• Usually, but not in all cases, capital gains tax free. 

Disadvantages:

• Higher risk.
• Unregulated. 
• Requires specialist knowledge and expertise.
• These types of investments do not generally produce an income.

Property

In recent years, there has been an explosion in buy to let property investors and small property developers. There are now around 2 million buy-to-let landlords in the UK.

Direct investment into property, or “bricks and mortar” as my parents would say, has proved extremely popular with investors who have shunned more traditional investments like pensions and shares.

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