Midweek Money: When Harry saw the facts

The Fixers
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The Independent Culture
A COUPLE of weeks ago I took a call from Harry Thomas. He had been referred to us by a long-standing client, and he came straight to the point.

"I have just inherited pounds 85,000," he said, "and I want somewhere to put it." Before I could respond he continued: "I fancy the Jupiter Income Pep and the Scottish Widows with profits bond. What do you think?" "The quality is fine," I said, "but..." At this point he interrupted. "Good, can you send me the applications?"

I explained that an excellent choice for one person may be completely inappropriate for another, saying that I would be happy to design a portfolio for him but that, to do so, I would need to know about his circumstances, objectives and constraints. I suggested giving him a questionnaire designed to provide the necessary information.

However, Mr Thomas was still keen for me just to send him the selection of brochures he had asked for. It was only when I explained that this selection might involve details of several thousand investment products that he realised that it would profit him to provide me with more information.

"I really do not feel inclined to give you my life story," he then said. That is a common and understandable response. So I said: "First, let me promise you that the necessary information is not too daunting. If I know your tax position I can probably enhance your investment returns via tax savings." He agreed that this seemed sensible.

"Second, would you like to ensure that any investments you make are within your acceptable risk constraints?" "Yes, I would," he confirmed.

"What about your wife's tax allowances, your income needs, and protecting your capital against inflation? Do you feel it makes sense to take those into account?"

Mr Thomas agreed.

"Why don't I send you the questionnaire and see how you feel," I suggested. "I can also send you a copy of our publication Investing a Substantial Lump Sum."

Four days later the completed questionnaire arrived on my desk, along with a note. Harry Thomas confirmed that the process had not been as painful as he had expected. We then had a long telephone conversation about his investment decisions.

Harry admitted: "I'm really a building society man at heart, but I know long-term it's not where my money should be." We then discussed tolerance of risk.

"I've also got a large holding in ICI shares," Harry added. His holding was worth over pounds 25,000, a dangerously high exposure to a single stock for a low-risk investor.

My recommendations included a low-risk AIG guaranteed income bond, a Scottish Widows with-profits bond and a portfolio of unit trusts including Credit Suisse and Newton Equity Income, plus M&G and Aberdeen Prolific corporate bond funds.

In my report I included detailed reasons for the recommended funds, and how they fit together to help him achieve his financial goals. The upshot is that he will be instigating the portfolio as recommended.

It would have been easy just to send Harry Thomas a few ideas. As it is, I feel that he has learnt some useful basic principles. He has now asked me to contact his sister, who also has some investment decisions to make.

The writer is managing director of Whitechurch Securities, independent financial advisers, 14 Gloucester Road, Bristol, BS7 8AE (0800 374413). Write or call for a free copy of `Investing a Substantial Lump Sum'