Money: Cold calls can get you into hot water

If you ever get a cold call from so-called "investment expert" offering a share tip, be very wary. How does he or she know what your investment goals are?

Professional stockbrokers only make recommendations after they have a clear picture of their clients' attitude to risk and their long-term investment aims.

"Before I can give advice it's important that I understand a client's overall financial circumstances," says Chris Ring, head of stockbroking at NatWest Stockbrokers. "Then I need to understand what that client's objectives are. The important thing when you're offering a personal service is to assess the personal circumstances, attitudes and objectives of your client, for example their personal preferences, such as if they don't want to invest in tobacco shares."

Most private client stockbrokers agree. Understanding the client is the key to building the right investment portfolio. In general terms, however, there are usually two key factors that drive the investment criteria decision: the age of the client and attitude to risk.

"In broad terms, clients fall into three categories. There are those requiring income, those wanting growth, and those wanting a balance of the two," says Michael MacDougall, head of private clients at Waters Lunniss, a firm of brokers. "Within that we have sorted the risk of different investment into low, medium or high. Most investments fall into low or medium."

Low-risk, says Mr MacDougall, includes gilts, good quality rated bonds and shares in the FT-SE 100 index. Medium risk includes other bonds and the share profile stretches to include stocks of companies in the FT-SE 250 index. High risk means: "In consultation with the client, anything goes," he says. "We keep a current list of stocks we like, tailoring the choice of particular shares to a client's individual requirement."

Whether you are seeking income or growth is likely to be influenced by your age, according to Matthew Orr, partner at Killik & Co, a firm of brokers in London. "In general, younger clients don't need to worry about [investment] income and so can take a higher risk," he says. "As they move towards middle age and retirement looms on the horizon, they become more of a medium risk person. When they near retirement age they want a blue chip investment and, later in life, they look for out-and-out income. We really want to know from clients whether they fit into that standard model."

"The stock market has a spectrum of risk," Mr Orr continued. "At one extreme there are index-linked gilts offering a large degree of safety, while at the other end there are tiny companies making no money now but with the potential to grow in the future. Depending on where you are in your life cycle, will decide the sort of risk you can take."

On that basis he suggests younger investors, a 30-year-old say, might be looking at the potential offered by technology stocks, or going for emerging markets, where the long-term trends remain potentially quite rewarding, but are clearly very high risk, witness the current market shake-out. By the time they reach 45 to 50, they need to start protecting capital. Then they are likely to want to move their investments into blue chips and quality names.

"When you retire, you're likely to want to move your portfolio into safer investments, such as gilt edged stock, as income will become an important element in the decision making. When you get into your 70s, you will be seeking to maximise the highest level of income that you can," says Mr Orr. One of the major determinants in constructing a portfolio for an investor is also the amount of cash available for investment, according to Stephen Vakil, director of Quilter & Co, a firm of brokers. "A stock market portfolio should represent only part of an investor's overall wealth, which would normally include property, pension provision, perhaps National Savings, and cash."

News
people And here is why...
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
Voices
voicesBy the man who has
Sport
Arsene Wenger tried to sign Eden Hazard
footballAfter 18 years with Arsenal, here are 18 things he has still never done as the Gunners' manager
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
The new Windows 10 Start Menu
tech
News
Floyd
newsFloyd 'Creeky' Creekmore still performed regularly to raise money for local hospitals
Arts and Entertainment
Kristen Stewart and Robert Pattinson star in The Twilight Saga but will not be starring in the new Facebook mini-movies
tvKristen Stewart and Stephenie Meyer will choose female directrs
News
William Hague
people... when he called Hague the county's greatest
News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
News
peopleStella McCartney apologises over controversial Instagram picture
Arts and Entertainment
Twerking girls: Miley Cyrus's video for 'Wrecking Ball'
arts + ents
Arts and Entertainment
Ed Sheeran performs at his Amazon Front Row event on Tuesday 30 September
musicHe spotted PM at private gig
Extras
indybestKeep extra warm this year with our 10 best bedspreads
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
Finacial products from our partners
Property search

Simon Read: The timeshare battle intensifies with Macdonald Resorts

An action group of disaffected Macdonald owners are now readying for their own legal battle with the company

Debt problems: How you can nip your money problems in the bud and sleep easy at night

Money worries are keeping more than 7 million of us awake at night

Venture Capital Trusts: You will love the tax-free income

To encourage investment in this higher-risk area, the Government offers generous tax relief to those who invest in new issues of VCT shares

Runaway debt: It's the new norm for university students now

StepChange, the debt charity, has revealed that students who called its helpline in 2013 had racked up average debts of £7,818

Michael's crisis could have 'dragged on for a long time', says CPA adviser Ruth Millward, right

More than 300,000 adults are too deeply in debt to apply for bankruptcy

Charities are urging the Government to offer a cheaper alternative for people in financial difficulty

Scottish independence: How will kilt-edged stocks fare?

Scottish companies were caned when the separatists surged in the polls. Is this the future, asks Simon Read, and would they be any better together?

Two million first-time buyers are locked out

The drought in lending to people with low deposits has created legions of frustrated buyers, writes Emma Lunn

Leaving money to charity in your will could help reduce the tax bill for your loved ones

Next week has been designated "remember a charity in your will week", to put the focus squarely on the subject
Money is slipping through our fingers: the UK is falling behind other countries in the amount we put away

How to save money: UK is crashing down the European league table for putting money away

The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options

Energy firms found guilty of bad practice could have licences revoked under Labour government

Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator

A student's guide to financial survival: You don't have to drown in debt at university

Fresh from A-level delight, the moment does not have to be soured by students resigning themselves to thousands of pounds worth of debt in three years' time. Rob Griffin sees how to pass the university challenge

'Dismal' eurozone data sparks concerns

European Central Bank chief Mario Draghi is under pressure to launch promised stimulus before the EU slides further
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

    The children orphaned by Ebola...

    ... then rejected by surviving relatives over fear of infection
    Pride: Are censors pandering to homophobia?

    Are censors pandering to homophobia?

    US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
    The magic of roundabouts

    Lords of the rings

    Just who are the Roundabout Appreciation Society?
    Why do we like making lists?

    Notes to self: Why do we like making lists?

    Well it was good enough for Ancient Egyptians and Picasso...
    Hong Kong protests: A good time to open a new restaurant?

    A good time to open a new restaurant in Hong Kong?

    As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
    Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

    Paris Fashion Week

    Lagerfeld leads a feminist riot on 'Boulevard Chanel'
    Bruce Chatwin's Wales: One of the finest one-day walks in Britain

    Simon Calder discovers Bruce Chatwin's Wales

    One of the finest one-day walks you could hope for - in Britain
    10 best children's nightwear

    10 best children's nightwear

    Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
    Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

    Manchester City vs Roma

    Five things we learnt from City’s Champions League draw at the Etihad
    Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

    Trouble on the Tyne

    Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
    Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

    Isis an hour away from Baghdad -

    and with no sign of Iraq army being able to make a successful counter-attack
    Turner Prize 2014 is frustratingly timid

    Turner Prize 2014 is frustratingly timid

    The exhibition nods to rich and potentially brilliant ideas, but steps back
    Last chance to see: Half the world’s animals have disappeared over the last 40 years

    Last chance to see...

    The Earth’s animal wildlife population has halved in 40 years
    So here's why teenagers are always grumpy - and it's not what you think

    Truth behind teens' grumpiness

    Early school hours mess with their biological clocks
    Why can no one stop hackers putting celebrities' private photos online?

    Hacked photos: the third wave

    Why can no one stop hackers putting celebrities' private photos online?