Personal Finance: So, have the experts anything to be proud of? Well, yes

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Indy Lifestyle Online
Just over a year ago, `The Independent' asked five top independent

financial advisers to take on several hypothetical investors.

Twelve months on, Nic Cicutti discovers how savers would

have fared with each adviser

and then carries out the

acid test: double or quits.

They always seem to sit in padded leather chairs that bob about as they speak, they talk confidently about markets, sectors and what have you. But when chips are down, are independent financial advisers really any good at advising their clients?

Last year, The Independent created different scenarios for five advisers and gave them each a notional pounds 10,000 to look after. The aim was - and is - not to make them look stupid by comparing them to each other but to see how well they met their clients' needs.

We also assumed that savers would not only want their investments to be reviewed at the end of the year but, to complicate matters further, they might also have a further pounds 10,000 to tuck away this year. Here's what three members of our panel suggested. Next week, the spotlight turns on our two remaining financial advisers.

`Consider reducing a mortgage'

Phillippa Gee, of Gee & Company

Philippa Gee, at Gee & Company in Shrewsbury, was aiming for long- term growth for a couple with a relatively conservative investment strategy, but with a slight element of risk. She chose to place pounds 5,000 in Schroder's UK Equity Fund, and pounds 4,000 in Invesco's European Growth Fund, which are both pepable. A further pounds 1,000 went into Fidelity's Latin America Fund.

As at the end of December, the Schroder fund stood at pounds 5,556.46, Invesco's pounds 4,000 was up pounds 600.12 and Fidelity's fund stood at pounds 1,230. In all, the gain was pounds 13.85 per cent after charges, many of which would have been rebated back to the client anyway, as Gee & Co operates on a fee-paying basis.

Philippa says: "Both the Schroder and Invesco recommendations have continued to meet the criteria they were given last year, while the Latin American fund ended the year on a more volatile point. Nevertheless, it met the intention of taking only one tenth of the investment and produced the strongest growth.

"Our aim is to achieve long-term growth by retaining the holdings already recommended and building on the existing investments to develop the portfolio further.

"This year, we would recommend pounds 3,000 into the Mercury Eastern European Fund. This is denominated in German marks and carries both some currency and equity risk. To provide exposure to fixed interest holdings and balance this, we would recommend pounds 5,000 be invested into the Aberdeen Fixed Interest unit trust, which is pepable. The aim is to produce a relatively high income, which is reinvested.

"Finally, M&G have had a troubled few years but have since made various changes to their funds. We recommend pounds 2,000 into M&G's Growth fund, which is pepable. One final point, is that with interest rates likely to rise slightly this year, investors could consider reducing their mortgages with part of the lump sum available and channel part of their monthly savings into the various investments."

`Good prospects in Europe'

Bhupinder Anand at Anand Associates

Bhupinder Anand, a former IFA of the Year, is based at Anand Associates, in central London. For a couple also seeking long-term growth but willing to accept much more risk, he suggested pounds 3,500 into Schroder's Far Eastern Growth unit trust, plus a further pounds 3,500 into Baring Europe Select and a final pounds 3,000 into Johnson Fry's Slater UK Growth unit trust.

Johnson Fry's fund showed gains of 21.4 per cent over 1997, while Barings delivered returns of 16.1 per cent. Sadly, this excellent performance was let down by Far Eastern markets, leaving Schroder down by 20.25 per cent. In all, Bhupinder's pounds 10,000 delivered net gains of pounds 670, which, as he stoutly maintains, is still better than a building society account.

He says: "Generally, two of the three main investments have delivered well and I would not touch them. The Far East has not been good. But while I would not recommend investing more in that area, I think we should view this fund as a long-term investment over at least five to seven years.

"As for the next pounds 10,000, I would suggest a further pounds 3,000 into the Johnson Fry fund. It is a long-term performer, with a strong analytical bias, which should do well even in a volatile market. It also has significant exposure to smaller companies, which many people feel should begin to catch up with larger-cap stocks this year..

"Next, I would put pounds 4,000 into Old Mutual's European Growth fund. There are good prospects in Europe and Old Mutual, a consistently good performance in this area, tends to look at quality stocks and would be a good counterbalance to the Barings fund.

"Third, would recommend pounds 2,000 into the Henderson Global Technology fund. This is quite a volatile fund, one that in a real exposure you might switch in and out of. This year, I think, is a time to be in.

"Finally, I would suggest pounds 1,000 in the First Russian Investment Trust, offered by a fund manager called Pictet. This is a bit of a gamble. But research by the fund managers shows the share price of some of the companies is less than 1 per cent of their net asset values. The share prices simply do not reflect their resources. Clearly this is a volatile investment. But investors whom I placed in this fund over the past year or so have shown returns over 100 per cent."

`Property will give growth'

Roddy Kohn at Kohn Cougar

Roddy Kohn, an IFA at Kohn Cougar, in Bristol, who is also a on the board of the financial advisers' watchdog, the Personal Investment Authority, was there to help a younger couple who wanted to save for the children's future education needs. They did not need access to their funds for at least six or seven years.

He recommended just two stocks, Bankers' Investment Trust from Henderson Investors, a pepable fund in which he suggested pounds 5,000 should be placed. His other selection was Kleinwort Benson's Charter Investment Trust, also pepable, for an equal amount.

The Henderson fund would have been worth pounds 5,965, with net income reinvested at the beginning of January, a rise of almost 20 per cent, while Kleinwort's investment trust delivered gains of 23.37 per cent, rising in value to pounds 6,168.71.

Roddy says: "I think this couple should keep their first pounds 10,000 where it is. Both funds have some way to go and there is a danger in constantly switching in that you incur initial charges whenever you do so.

"But for the next pounds 10,000, I would advise pounds 3,000 to go into a M&G Corporate Bond PEP, with income reinvested. This is a defensive strategy for what may be a more volatile year investment-wise.

"A further pounds 4,000 could go into the TR Property Trust, which is also pepable. I think property will give good growth over the next 18 months or so, while also enhancing the same defensive strategy, acting as a balance to last year's investments and this year's remaining selection.

"For the last pounds 3,000, I would recommend some exposure to emerging markets. Therefore, pounds 1,000 should go into Templeton's Latin American trust, with the same amounts into Fleming's Chinese Investment Trust and Fidelity Asian Values. All of these funds have been knocked sideways in the past few months and there is the prospect of long-term recovery in each case.

"However, it may be that there will be further weaknesses in months to come. It may make more sense to keep the remaining pounds 3,000 in a high-interest deposit account and either invest in a few months, or dribble the money in gradually over the year."

Next week: Kean Seager at Whitechurch Securities, in Bristol, and Cherry Dodd, at Bradford & Bingley's IFA arm, give their tips for 1998.

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