However, many investors are relatively ignorant of the options open to them. They know the best returns are to be made in the stock markets, but also that there's risk involved. They have little taste for stock picking and are happy to put their cash into professional hands - if they know where to turn.
One option is to buy into unit or investment trusts, which pool the funds of many investors to create a substantial portfolio of shares. That way, risk is spread across a broad spectrum of companies. An independent financial adviser (IFA) should be able to guide you in your choice, but that entails commission charges which can erode returns.
The alternative is a portfolio management firm. After finding out about your investment needs, the manager will put together a suitable portfolio of investments - stocks, bonds, perhaps collective investments - which may be managed on a discretionary basis (meaning you leave all the decisions to them), or an advisory basis (the manager will check with you before making any changes to your holdings).
Most portfolio managers consider less than pounds 50,000 to be small change; the view is that portfolios of only a handful of stocks leave investors exposed and are expensive to run. But there are compromises. One is a new discretionary service for smaller investors, from the merchant bank Close Brothers. Close Wealth Management (CWM) is open to anyone with pounds 25,000 or more to tuck away.
"Traditionally, portfolio management has been the province of the wealthy," says Martin Smith, CWM's managing director. "Yet there are 600,000 people retiring in the UK each year, and around half have a tax-free lump sum averaging pounds 29,000 as part of the pension package. When you add that to other windfalls, it mounts up."
CWM wins out over fund companies on costs - particularly initial charges where the cost is 1.5 per cent, against 5 per cent for a typical UK equity unit trust or with-profits bond through an IFA. Annual fees of 1 per cent and a brokerage charge of 0.9 per cent on transactions are also levied by CWM.
Even if you aren't interested in investment, CWM provides historical figures to show what "high/medium/low risk" really means. Once you have decided what sort of risk you are comfortable with, the cash is allocated accordingly and managed on a discretionary basis as part of Close's pooled portfolio.
CWM is not the only manager catering for smaller clients, though others are not pitching specifically for this sector. Keith Bayley Rogers accepts private clients on an advisory basis with as little as pounds 10,000. "We hope little clients will end up as big ones," says Michael Fraser, head of the private-client department.
"The usual tack, for those with pounds 20,000 or pounds 30,000, is to steer them into a mix of four or five high-quality managed funds and then leave them there for the long term," he says."One can't be too active because every transaction will eat up 3 to 4 per cent in dealing costs."
There is no joining or annual fee, just a commission charge of 1.85 per cent per transaction.
Another firm offering a pounds 20,000 entry level is Broadbridge, which provides discretionary or advisory services.
n CWM, 0171-423 6440; Keith Bayley Rogers, 0171-378 0657; Broadbridge, 0113-242 2211.Reuse content