Money: Cold calls can get you into hot water
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."
Simon Read: It's time for a clear line on soaring mobile phone charges
Simon Read: Here are some Budget changes George Osborne could make, but I don't hold out much hope in times of austerity
Ukraine crisis is Russian roulette for investors
How to start your own internet business
Plymouth Energy Community's solar share scheme backed by council
- 1 Is your name now 'banned' in Saudi Arabia?
- 2 Sailor who kissed a nurse in famous WWII photograph dies aged 86
- 3 Best films on Netflix: 32 movies that will put an end to your scrolling
- 4 Istanbul protesters take 'Ellen selfie' from the back of a police van
- 5 Lady Gaga has struggled with eating disorders in the past, so it's indefensible that she's glamourising bulimia in her SXSW set
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Grace Dent: Who cares if she spells it Barraco Barner? Gemma Worrall is more employable than some bookish arts graduate
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
Fracking is turning the US into a bigger oil producer than Saudi Arabia
The rise of Ukip: Study warns Labour that Eurosceptic party's electoral base now 'more working class than any of the main parties'
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
Day In a Page
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden