# What to do with windfall?



## 123456789 (29 Jan 2007)

With the sale of land my family is due to recieve roughly seven million euro after capital gains tax. We are simple people and have lived within our means for all our lives and now that we are faced with this huge windfall we have no idea of what to do with it.
We have had a mortgage with Ulster bank and have been banking with them for years so should we just go to them and ask for advice?
Advice appreciated,
jj


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## ClubMan (29 Jan 2007)

123456789 said:


> so should we just go to them and ask for advice?


No - they are tied agents who will just try to sell you their own products. In cases such as this, especially given the large sums involved, you would be better off getting independent, professional advice from a good authorised advisor or multi-agency intermediary ideally on the basis of a fixed fee agreed up front.


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## Satanta (29 Jan 2007)

123456789 said:


> We have had a mortgage with Ulster bank and have been banking with them for years so should we just go to them and ask for advice?


If you have an existing relationship with your bank and you want to stay with them, then fair enough. But don't expect them to give you true financial advice. 
(It may be an easy route but it'll leave you far worse off)

They will suggest the products they have which best/may suit your needs. They won't identify external products which would provide (far) greater returns.

With a sum of money this large you should seek independant financial advice. A financial advisor will do a full fact find on your situation and be able to provide you with far more options than simply relying on UB.

Edit: Post crossed with CMs.


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## micamaca (29 Jan 2007)

I agree with the above. I went into talk to AIB and they told me the best thing to do with money was to leave it sit in my personal savings account where I was earning 1.6%.  

That's a clear case of a bank working for a bank, not for their customer. 

Naturally I didn't comply with that useless advice.


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## oopsbuddy (29 Jan 2007)

Also, when dealing with sums of  this size, do not be afraid to ask about what commissions would be due on any recommended investments, and be prepared to ask what commissions would be rebated to you in exchange for additional investment allocation. For eg, if a broker gets 3.5% to 4% on 7million, that's almost a quarter of a million just for giving you advice and setting up a policy or two. Brokers (and banks) will be tripping over themselves to get at your money, so if you allow a broker to take maybe 0.5% or 1%, its still good money for him (and he'll get override commission) and you'll get a far better deal. Definitely stay away from banks for this type of transaction.

I don't know if this is allowed, but if you pm me I'll recommend such a broker. If that's not allowed, apologies.


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## niceoneted (29 Jan 2007)

Slightly off topic but I saw a programme on the making of the Ferrari car last week and I said to myself if I ever get a windfall that would pay for one I would be buying one. 
On topic Independant financial advsior is the bast way to go. You can still bank with UB no problem but for yr to yr spending. 
One last thing enjoy some of the money!


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## MOB (30 Jan 2007)

"Brokers (and banks) will be tripping over themselves to get at your money, so if you allow a broker to take maybe 0.5% or 1%, its still good money for him (and he'll get override commission) and you'll get a far better deal."


I would not disagree with this statement;  However, I find it hard to see how any managed-fund type product (which is mostly what brokers\financial advisers sell) would be the right product for somebody with 7 million to invest.  


Why would you give up 0.5% (or maybe 1%) a year in charges for a managed fund, with, say, 30 shares in it, when you could just go out and buy the 30 shares yourself?   Granted there are managed funds out there with scores of different shares in the pot, but do you really need this? (is it in fact of any real benefit?).  With 7 million, you already have your own (small) managed fund.

With 7 million in the bank, and no knowledge of what to do, I think I would go to the wealth management people in of one of the large accountancy firms and pay for a detailed written review of my investment\wealth management options.


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## Nedtastic (31 Jan 2007)

Ehhhhh ... Spend it !!!


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## oopsbuddy (1 Feb 2007)

I would not disagree with this statement; However, I find it hard to see how any managed-fund type product (which is mostly what brokers\financial advisers sell) would be the right product for somebody with 7 million to invest. 

Why would you give up 0.5% (or maybe 1%) a year in charges for a managed fund, with, say, 30 shares in it, when you could just go out and buy the 30 shares yourself? Granted there are managed funds out there with scores of different shares in the pot, but do you really need this? (is it in fact of any real benefit?). With 7 million, you already have your own (small) managed fund.

With 7 million in the bank, and no knowledge of what to do, I think I would go to the wealth management people in of one of the large accountancy firms and pay for a detailed written review of my investment\wealth management options.[/quote]


To say that managed funds (and there are loads to choose from) are inappropriate just because you have €7m to invest is very poor advice. They are a moderate risk investment overall, compared to direct share or property investments which are very high risk, and paying an annual management fee of about 1 to 1.5% would be acceptable to someone who knew nothing about investment options, but who would like to enjoy the benefits of some managed fund returns, for example by indirect investment in property, shares, etc., and to employ the services of a professional fund manager to help him achieve that is perfectly acceptable. The broker will help the client choose which type(s) of funds are appropriate, and if you can achieve a modest enough return of 10% p.a. (and usually more by selecting a range of diversified funds), ie, €700,000 for the trouble, you can spread your risk and its not a bad way to keep your money working for you. A detailed financial review would be necessary in any case before any recommendations could be made, but that is not an end in itself! What to do with the review is what counts, and depending on your requirements (income, investment growth etc) should lead to appropriate investment decisions being made.


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## Wilkes (1 Feb 2007)

Keep in Rabo or Northren Rock until you've read a good book or two about money and investments. All you'll need is less than €30. It will save you a vast fortune on red herrings, mediocrity and charges. Try Investment Planning by Eric Tyson in the excellant dummies series. For home grown books try Loot by Hobbs which is written for the home audience. Read Brendan's Guide here. Subscribe to The Economist and read a few back as well as current issues.

When you've your homework done, c'mon back and lets see how your thinking. I know that's probably not what you wanted to hear but its hard won advice.


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## Newby (1 Feb 2007)

Buy 7 million quids worth of lottery tickets! Or give it to me!! 

Failing that all the above advice on getting independant help seems very sensible. One other point is that the "family" is due to receive the money. A good way to minimise any potential family conflict on what to do with it (if it is to remain as a lump sum and not split amongst the parties) is to get independent advice.


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## 123456789 (2 Feb 2007)

First of all i would like to thank everyone for there advice. 
The sale has not gone through just yet but when it does the money will be coming to my parents. Surprisingly their accountant does not seem too interested in them or their money just yet. Although he has known about the sale for almost a year and the kind of money involved he has not give them any advice. 

They have no knowledge of finance (or me for that matter) and are of the opinion that stock markets crash and people lose their shirts. They are basing this on the advice of an auctioneer they know who told them to stay well away from it. He told them to put the money in northern rock and live happily on the interest.
I see in the other thread that northern  rock have an interest rate of 4.15% with a €3m maximum. The other banks also have maximums on the accounts too. Why is this?
I always presumed that banks had a certain interest rate for regular customers and a higher one for the one millions plus customers. Is it a case that once you get above a certain amount the bank invest it for you, with guaranteed fixed rate returns rather than have a sit in an account?

Seeking independent advice is a must in my opinion but what exactly would a multi-agency intermediary tell us? Would they tell us to Buy shares in companies of xyz to the value of 6 million and put the rest in a bank. 
If a broker gets 1% per annum what exactly do they do? 
Do they pick a portfolio of stocks and buy and sell among them as they see fit? 



Wilkes said:


> Keep in Rabo or Northren Rock until you've read a good book or two about money and investments. All you'll need is less than €30. It will save you a vast fortune on red herrings, mediocrity and charges. Try Investment Planning by Eric Tyson in the excellent dummies series. For home grown books try Loot by Hobbs which is written for the home audience. Read Brendan's Guide here. Subscribe to The Economist and read a few back as well as current issues.
> 
> When you've your homework done, c'mon back and let’s see how your thinking. I know that's probably not what you wanted to hear but its hard won advice.



This is exactly what i had planned on doing. Would you think "Investment Planning" is a difficult book for someone like me?
I never liked eddie hobbs version of economic when he was on tv, although i suppose it would probably be easier for me to grasp.

Again thanks for the advice and i would be delighted if you could offer more. Especially on books or web material i should read.
Cheers,
jj


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## pinkyBear (2 Feb 2007)

Hi there 123456789, if you would like to pm me I can give you the details of 2 independent financial brokers that I have been in touch with and we have faired out well. 

Best of regards,
p


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## oopsbuddy (2 Feb 2007)

123456789, as part of the financial review that an independent financial adviser (FA) would carry out with you (all, or each), your own objectives need to be assessed, quantified, prioritised, and recommendations made accordingly. For example, lets say you have 7m yourself. What do you want to achieve with it (ie, do you want a small, medium or large income from it, or do you not need any real income from it right now but would like to see max capital growth for the future?), do you want capital protection, or can you quantify by how much you want to see your capital grow? What is your attitude to risk? eg, if you want capital guarantees (low risk appetite) AND a huge income each year, AND an investment return of 15 to 20%, you need to reconcile these objectives to what is practically available, ie, a low risk appetite (implies low return investments) does not sit well with a desire for a large income (which will deplete the capital over time) and a desire for above average returns (requirement for riskier investments).

Some life companies which offer these investment bonds allow a very wide range of mixed investments, and with a sum as large as 7m, making choices is, relatively, more straightforward. Some will allow, in addition to the usual range of managed funds (a mix of equities - shares) with property, bonds, some cash, some fixed interest) and specialist funds (depending on your investment appetite) a portion of your investment to be invested in direct stock selections, and further, will allow you a choice of execution only (you decide what shares to buy and sell, and when) or discretionary or full advice from stockbrokers. The more you want though, the hiogher the charges. However for the inexperienced investor, these may appear great options, but would probably be totally inappropriate.

The overall point though is that you have to reconcile your attitude to risk with what you want to achieve with your money. A good financial adviser will help, but make sure they are independent, and do not be afraid to discuss up-front ho they will be paid (how much commission they get). 

I'm sure you'll get a lot of 'pm' requests when you have 7m to invest, so I'll only say pm me if you want. I am a QFA, and would be more than happy to assist you with no strings attached.


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## MOB (2 Feb 2007)

"They are a moderate risk investment overall, compared to direct share or property investments which are very high risk,"

I don't agree.  How does a managed fund achieve lower risk?  Is it not simply invested in shares and property, along with cash and gilts?  How can direct investment in shares and property be higher risk than a managed fund invested in the same assets?  Only if in your direct investment you do not have sufficient diversification.   But if your budget is large enough to buy diversity (and seven million is large enough) I don't see how the risk profile or volatility profile would be significantly different. 

Maybe I am being a little simplistic, but I don't think so.  

€700k per annum, based on a 10% return, sounds a little ambitious to me for people who are probably quite risk averse.  I would instead assume a 5% return, and I am sure that €350k per annum sounds fine as an annual return for such people .  €70k per annum in management charges would be a heck of a bite out of €350k, hence my aversion to having these investments in the form of a managed fund.  And of course, the 1% per annum is only the tip of the iceberg in some managed fund products.


"Seeking independent advice is a must in my opinion but what exactly would a multi-agency intermediary tell us?"    

Not being smart, but you will have to ask them.  There is no great consistency of advice, so you might want to talk to a few.

"Would they tell us to Buy shares in companies of xyz to the value of 6 million and put the rest in a bank. "   

Certainly, a portfolio of shares should form a part of your overall investment holdings in the opinion of most financial advisers (and opinion which I would share - I am not a financial adviser). 

"If a broker gets 1% per annum what exactly do they do?  "   

Again, not being smart, you need to ask the broker.  It very much depends on what broker (and what investment vehicle) you choose.

"Do they pick a portfolio of stocks and buy and sell among them as they see fit? "

Stockbrokers will do this if you hire them to do so.   I do not trust stockbrokers to keep the client's interests at heart, so I would not give this sort of control to a stockbroker.  I would be concerned that the broker would buy and sell more often than necessary merely to generate commissions.   I would restrict myself to reviewing the shareholdings with the stockbroker\investment adviser once every couple of years. Actually, I would leave it longer than that, but every two years is probably ok for most people.


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## tyoung (2 Feb 2007)

Agree totally with Wilkes. Put the money on deposit in a high yield savings account for at least 6 months. You and your family are now wealthy and have to learn how to manage your assets. Certainly consult a number of independent financial advisors. Pay them by the hour, ask them directly if they have any financial relationship with the products they recomend or do they receive a commission for selling you these products. Most of all educate yourself about financial matters .  
 In general you can look to protect the capital value of your assets or to derive an income from them but not both. Be clear in your mind what your priorities are.  If income is your priority  the capital value will  probably be eroded by  inflation over time.
Good Luck!


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