IFA's and parents

[Alaric]

I've read the brochure in the first link a couple of times and it sounds as though the Investec product can be cashed in at market value minus of course what has been taken out.

The brochure indicates that it can be cashed in. I'd suspect that you would get an amount of around the original investment provided that the level of the FTSE 100 when you cash in is above what it was when the Bond was taken out.

[Aminatidi]

I've read the brochure in the first link a couple of times and it sounds as though the Investec product can be cashed in at market value minus of course what has been taken out.

The brochure indicates that it can be cashed in. I'd suspect that you would get an amount of around the original investment provided that the level of the FTSE 100 when you cash in is above what it was when the Bond was taken out.

Thank you

Appreciate you're only going off the same info as I am but can you think of any good reason not to cash* it in and re-invest in a more conventional fund?

* when I say cash in I mean transfer the proceeds but within the ISA wrapper.

[Alaric]

Appreciate you're only going off the same info as I am but can you think of any good reason not to cash* it in and re-invest in a more conventional fund?
.

The obvious risk and good reason is that what you put the money in may plummet. To an extent there is that risk already with the "structure" which bases the return some of the time on the relative values of the FTSE 100. The most direct comparison would be to notionally put the cash value into a FTSE 100 tracker. It should then be possible to compare the risks and rewards of that approach directly to the structured product.

At present you can get an income of 4% to 4.5% by investing in either a cheap FTSE 100 ETF or OIEC such as those offered by Vanguard or into an IT such as City of London which invests in similar big stocks. Your capital and income are both at risk. Structured products may on some scenarios beat this, but may just offer a lower return without entirely eliminating the risk to capital.

The problem with structured products is that you just don't know what they cost. For all you know, or for that matter an advising IFA, there might be an implicit 5% initial charge and 1% annual charge which gets taken out before the money is placed in the derivatives markets.

[Aminatidi]

Appreciate you're only going off the same info as I am but can you think of any good reason not to cash* it in and re-invest in a more conventional fund?
.

The obvious risk and good reason is that what you put the money in may plummet. To an extent there is that risk already with the "structure" which bases the return some of the time on the relative values of the FTSE 100. The most direct comparison would be to notionally put the cash value into a FTSE 100 tracker. It should then be possible to compare the risks and rewards of that approach directly to the structured product.

At present you can get an income of 4% to 4.5% by investing in either a cheap FTSE 100 ETF or OIEC such as those offered by Vanguard or into an IT such as City of London which invests in similar big stocks. Your capital and income are both at risk. Structured products may on some scenarios beat this, but may just offer a lower return without entirely eliminating the risk to capital.

The problem with structured products is that you just don't know what they cost. For all you know, or for that matter an advising IFA, there might be an implicit 5% initial charge and 1% annual charge which gets taken out before the money is placed in the derivatives markets.

It may yes, but my thought would be in practice is it conceivable that if I put it in something mainstream and global that could plummet whilst the FTSE 100 wouldn't?

The £20 of monthly income isn't needed so my rough train of thought would be either treat the £35k + £5k as one big investment pot or put the £5K from the Investec into something that is 100% stocks and likely a global fund.

[Gan020]

Can anyone see any hidden benefit or something I may be naive to in suggesting she moves to something DIY and cheap and simple - most likely with me managing it though the accounts of course being hers?

The fees as already discussed by many posters can be significantly reduced by not using the IFA. However, it may be worthwhile pausing to consider the impact on your relationship if the funds you choose to replace the current investments start falling. Over the years I have found that one gets little thanks when funds rise year on year, yet people are soon ready to shout up when the value starts falling.

[Aminatidi]

Can anyone see any hidden benefit or something I may be naive to in suggesting she moves to something DIY and cheap and simple - most likely with me managing it though the accounts of course being hers?

The fees as already discussed by many posters can be significantly reduced by not using the IFA. However, it may be worthwhile pausing to consider the impact on your relationship if the funds you choose to replace the current investments start falling. Over the years I have found that one gets little thanks when funds rise year on year, yet people are soon ready to shout up when the value starts falling.

Yes that is a very fair point.

Has anyone any experience of this?

I'd struggle to think of any simpler way of handling it than explaining it as I've done by showing how the Standard Life fund has performed and pointing out that her perception of "losing money" depends entirely when you look on the graph and when you need to access the money.

She gets the principle and we don't have the sort of relationship where I think it would ever come to that but it's a good point and something to think about.