HOW TO INVEST A LUMP SUM
As someone who has advised clients on their investment options for over 30 years, people often contact me seeking impartial and unbiased advice on how to invest a lump sum. Whether you have recently received an inheritance, successfully completed the sale of an asset or even won the lottery jackpot the advice I provide is pretty much the same in every case. Here are some simple steps to help demystify the whole process:
1: Decide on your investment goals
Some important questions to ask yourself at the early stages of investing include:
- How long do I want to invest for, is it short or long term?
- What level of return do I expect to receive?
- Do I want a guaranteed level of return?
- Will I need access to my fund if my personal circumstances change?
- Do I want to receive a regular income from my investment?
- How much risk should I take?
2: Seek Impartial Advice
Often people assume that they save money on fees or commission by arranging their investment directly through a product provider, bank or other financial institution when in fact the opposite is often the case.
The Competition Authority recently noted that Life and Pensions companies tend to provide better product design, more flexible terms and more competitive quotes when engaging with an Impartial Financial Broker.
An Impartial Financial Broker is a highly qualified professional who is required by law to work in your best interest, not in the interest of investment companies.
Their impartiality enables them to research the market thoroughly for the most suitable investment opportunity and to provide a range of choices to suit your needs. This is known as “fair analysis” of the market as it gives you a much better picture of the range of investment choices available.
3: Ensure your Advisor conducts a “Factfind”
Before imparting any advice on how to invest a lump sum your advisor should conduct a “Factfind”, which is essentially an in-depth analysis of your current financial circumstances and includes your income and expenses, your family situation (number and ages of dependants etc) and your existing assets and liabilities. This helps both advisor and client to build up a picture of where you currently stand financially.
4: Ensure a Risk Assessment is carried out
All investment funds are rated from 1 to 7 in terms of the level of risk involved, with low rated funds offering lower returns and less chance of volatility, and higher rated funds offering the potential for greater returns, but also greater volatility.
By conducting a Risk Assessment an advisor can ensure that you fully understand the different levels of volatility risk involved. In recommending a particular investment for you, the advisor will also take into account what they believe to be your threshold for withstanding any potential losses that could occur. This helps you to gauge your own attitude to risk when deciding what type of fund you may want to invest your money in.
At Lifetime Financial Planning, conducting a Factfind and Risk Assessment is an integral part of our advice process.
5: Review your Investment Options
At this point your advisor will research the market thoroughly for a range of options to suit your needs, providing you with a choice of suitable investments based on your requirements, your financial situation and your attitude to risk.
A good impartial advisor will also take a number of other factors into account, such as the financial strength of the product provider, the past performance of similar investments, and the cost of fund management fees.
6: Conduct Regular Reviews
When you have made your investment decision we strongly advise conducting regular reviews with your advisor in order to stay up to date on the performance of your chosen fund. Conducting reviews also enables your advisor to stay updated with regard to your personal financial circumstances and recommend any changes needed to ensure you stay on track to meet your goals.
About Lifetime Financial Planning
At Lifetime Financial Planning we have been providing impartial investment advice to clients at all stages in their lives since 1983. If you are seeking impartial advice on how to invest a lump sum or you wish to conduct a review of an existing investment then please don’t hesitate to contact us.
We can help you to diversify your investment, devise a phased strategy and/or switch or redirect an existing investment if you so choose.
Call Aidan Wall, Lifetime Financial Planning, at 046 924 0961 or email: email@example.com
Investments can fall as well as rise. Past performance is not a reliable guide to future performance.
Aidan Wall Financial Services Ltd T/A Lifetime Financial Planning is regulated by the Central Bank of Ireland.