Investment advice to adult children

[Leither]

We've been gifting sizeable sums of cash to our children for some time. One of them is now mortgage free and I'd like to offer some investment advice, although I'm wary of doing so. Our own HYP shares and ITs have done fairly well over the years but then I'm a finance professional (retired) and the children aren't.

Clearly first priority is what they want to with the cash, ie available to move house in X years, their children's further education etc etc but assuming they want to invest for at least five years, I had started preparing a list of hopefully safe & boring ITs like Foreign & Colonial, Scottish Mortgage etc but then the Vanguard LifeStrategy 80% Equity fund caught my eye. I already have some cash in one of Vanguard's global ETFs. It seems to me that this would be an even simpler choice than a selection of ITs and probably just as likely to safeguard capital (the key requirement).

Any views would be much appreciated.

Regards,

Leither.

[GJHarney]

Hard to say not knowing them. Most people are not particularly interested in finance/investment matters, but most want to protect what money they have and have more in the future (go figure). The trade off is in the suggestions you have in mind, some generalist IT's or the Vanguard 80/20.

The key to whether that message is both understood and acted upon is in the way you tell 'em (as Frank used to say). For me the really key messages would be regular saving, reinvested divis and (for wider savings or any income funds) the wonder of compound interest. The Vanguard will do all that for them without having to think about anything other than the size of the regular monthly DD, and would be great for the don't want to care what is under the bonnet type person. The basket of IT's are obviously more interesting to have, but only if they are interested to begin with.

One easy way to do the IT approach though in my opinion would be though Baille Gifford as their savings plan (or ISA) has no charges (only the standard charges for each IT you hold in it), no charges for the regular investments (other than the standard stamp duty levy) and automatic and free divi reinvestment (you also get their rather good regular magazine with regular offers of free tickets to literary festivals, if they are into books that could swing it!), and with a single monthly DD you can split it a number of very interesting ways into their different IT's (minimum £30 per fund), so a 4 or 5 way split and you have a great ready made basket that could include Scottish Mortgage, Monks, SAINTS, one of their two Japanese funds, and perhaps Edinburgh Worldwide (for small cap growth) and/or Pacific Horizon. As a one-stop fire and (almost) forget shop with no platform charges I think you (and they) would struggle to find better.

[BarrenWuffett]

I had started preparing a list of hopefully safe & boring ITs like Foreign & Colonial, Scottish Mortgage etc but then the Vanguard LifeStrategy 80% Equity fund caught my eye. I already have some cash in one of Vanguard's global ETFs. It seems to me that this would be an even simpler choice than a selection of ITs and probably just as likely to safeguard capital (the key requirement).

I switched much of my IT portfolio over to Vanguard LS 60 some 3 years back and would certainly recommend to any new investors who require a simple no-frills, low cost strategy. Just drip feed your regular monthly DD into the appropriate level of equity/bond and get on with life. What could be simpler?

Of course, much depends on their individual temperament. Some people are probably not suited to investing at all and others want a more hands on active approach with the aim of outperforming the market in which case SMT and smaller companies may be appropriate so I guess they need to take ownership of the process and find a strategy that meshes well with their aims and personality.

[Leither]

Sorry, just to clarify, the investment wouldn't be by DD, they already have the cash, so my question is more to do with the basket of ITs v the Vanguard scheme, and is there any great risk in all eggs in one basket with Vanguard?

Thanks for the replies so far.

Regards,

Leither.

[Chrysalis]

The risk with the lifestrategy is basically market risk. That’s the rationale behind index investing - that most people don’t have the skill to pick either individual assets or collective funds that will outperform the market, so the priority is to buy the whole market at the lowest possible cost. If you want a better explanation, check out the monevator.com website articles on passive investment, or read the books by Tim Hale or Lars Krojer (sp?) - though both the latter are rather dry so might not be the best ways to inspire your adult children. Personally, I’m a bit fan of the fire and forget Lifestrategy funds.

However my main concern would be about the appropriateness of you advising your adult children, to the extent of choosing their investment vehicles. Presumably they have some thoughts/ideas, and indeed experience, about how to manage their finances (you say they are adults and home owners, so I’m assuming established in their own lives and standing on their own two feet). Have they ever asked for your help or advice? Do you want them to become responsible for their own financial futures - if so, perhaps resist the temptation to direct what they do with your gifts. I know as parents we think we are helping when we do things for our children, or offer the benefit of our wisdom and experience, but perhaps we are actually hindering their development. I have never sought or taken financial advice from my parents, have you?

[Chrysalis]

Big fan, of course. Must learn to preview!

[GJHarney]

Sorry, just to clarify, the investment wouldn't be by DD, they already have the cash, so my question is more to do with the basket of ITs v the Vanguard scheme, and is there any great risk in all eggs in one basket with Vanguard?

Thanks for the replies so far.

Regards,

Leither.

But surely they will also have more cash to invest going forward, so a DD soon after monthly salary makes sense anyway as you don't want them to stop do you? As for any lump sum, I would always advise that someone breaks that up into 10 or 12 monthly DD payments rather than punting the lot at once to reduce volatility risks and to have the better safety of pound-cost averaging.

[Leither]

However my main concern would be about the appropriateness of you advising your adult children, to the extent of choosing their investment vehicles. Presumably they have some thoughts/ideas, and indeed experience, about how to manage their finances (you say they are adults and home owners, so I’m assuming established in their own lives and standing on their own two feet). Have they ever asked for your help or advice? Do you want them to become responsible for their own financial futures - if so, perhaps resist the temptation to direct what they do with your gifts. I know as parents we think we are helping when we do things for our children, or offer the benefit of our wisdom and experience, but perhaps we are actually hindering their development. I have never sought or taken financial advice from my parents, have you?

As I think I said, neither of my children or their spouses have much experience of investing whereas I have so I think it's only sensible that I give them some, it's up to them whether to act on it or not.

As to whether I took any financial advice from my parents, my dad was injured on the 1st day of The Somme, later he had a small fruit shop and certainly never had sufficient spare cash to invest. But it was he who recommended that I qualify as a CA and that advice has served me well.

Regards,

Leither.

[Leither]

But surely they will also have more cash to invest going forward, so a DD soon after monthly salary makes sense anyway as you don't want them to stop do you? As for any lump sum, I would always advise that someone breaks that up into 10 or 12 monthly DD payments rather than punting the lot at once to reduce volatility risks and to have the better safety of pound-cost averaging.

I think like most young couples these days, it's hard enough raising a family without having spare cash left over to invest (apart from pensions) so no, I don't think there will be any additional cash, that's why we're only too happy to help them! But I do agree with your point about not necessarily investing all at once and indeed I was going to suggest to them that this was something to think about it but of course that strategy could equally work against them, no-one can say.

Regards,

Leither.

[TimR]

I switched much of my IT portfolio over to Vanguard LS 60 some 3 years back and would certainly recommend to any new investors who require a simple no-frills, low cost strategy. Just drip feed your regular monthly DD into the appropriate level of equity/bond and get on with life. What could be simpler?

Which platform do you use for Vanguard LS 60 and is it in an ISA or SIPP wrapper ?

Thanks TimR

[Dod101]

Frankly, Leither if you are an investment professional(retired), then you probably know or feel you know as much as any of us, so my question would be why are you seeking advice on this forum so as to advise your children?

All I can say is that I would never buy an index type fund but prefer to make my own picks and stand or fall by them. With grown up adult children I would not in any case attempt to advise them on investment matters unless they asked me (which is highly unlikely!)

Dod

[Muddywaters]

Leither I wouldn't call Scottish mortgage safe and boring. Successful yes, safe and boring no.

I make regulars into vanguard lifestrategy 100 for my children but they are both under 3 so I would imagine different time horizons. My portfolio is mostly investment trusts but I wanted something low cost that I could buy and forget for them do it's difficult to argue with the lifestrategy funds

[BarrenWuffett]

I switched much of my IT portfolio over to Vanguard LS 60 some 3 years back and would certainly recommend to any new investors who require a simple no-frills, low cost strategy. Just drip feed your regular monthly DD into the appropriate level of equity/bond and get on with life. What could be simpler?

Which platform do you use for Vanguard LS 60 and is it in an ISA or SIPP wrapper ?

Thanks TimR

I use Halifax Share Dealing and hold in ISA. The annual fee is only £12.50 for my one-off lump sum holding.

[Leither]

Frankly, Leither if you are an investment professional(retired), then you probably know or feel you know as much as any of us, so my question would be why are you seeking advice on this forum so as to advise your children?

All I can say is that I would never buy an index type fund but prefer to make my own picks and stand or fall by them. With grown up adult children I would not in any case attempt to advise them on investment matters unless they asked me (which is highly unlikely!)

Dod

Dod, don't know how you got the idea that I was an investment professional, I'm not. The reason I'm seeking advice on this forum is that I knew very little about the Vanguard Life Strategy ETFs until I'd seen them referred to on these boards. Thanks to some helpful replies I've received on this board I've now had cause to look at them in more depth and think that they may well be something for my children to investigate, if they're interested. In fact, the more I think about it, I may well transfer some of my HYP into one of these funds. Would certainly simplify life.

I must say, I'm quite surprised at the replies I've received which are antagonistic to giving advice to children; surely to goodness if you've had more experience of the financial world than they've had, it's only right & proper that you proffer that advice. It's up to them whether they act on it or not.

Regards,

Leither.

[swill453]

The reason I'm seeking advice on this forum is that I knew very little about the Vanguard Life Strategy ETFs until I'd seen them referred to on these boards.

Probably just a slip of the finger, but the Vanguard Lifestrategies aren't ETFs. If only.

Scott.

[Leither]

The reason I'm seeking advice on this forum is that I knew very little about the Vanguard Life Strategy ETFs until I'd seen them referred to on these boards.

Probably just a slip of the finger, but the Vanguard Lifestrategies aren't ETFs. If only.

Scott.

Thanks Scott but don't they invest in Vanguard's own ETFs?

Regards,

Leither.

[swill453]

Thanks Scott but don't they invest in Vanguard's own ETFs?

I wouldn't know. I just know I had to rule them out for me because my platform of choice (Youinvest) would charge me about £500 per year for Lifestrategy (and other) funds, while using purely shares, ITs and ETFs caps the fee at £100.

Scott.

[BarrenWuffett]

The reason I'm seeking advice on this forum is that I knew very little about the Vanguard Life Strategy ETFs until I'd seen them referred to on these boards.

Probably just a slip of the finger, but the Vanguard Lifestrategies aren't ETFs. If only.

Scott.

Thanks Scott but don't they invest in Vanguard's own ETFs?

Regards,

Leither.

I think mainly their own index funds and the odd ETF. Here's an article on Monevator which may be of interest.
http://monevator.com/using-vanguard-lif ... unds-life/

[dspp]

I must say, I'm quite surprised at the replies I've received which are antagonistic to giving advice to children; surely to goodness if you've had more experience of the financial world than they've had, it's only right & proper that you proffer that advice. It's up to them whether they act on it or not.

Leither.

Since they are adults I'd ask them Q1) if they want to be given advice; and Q2) if they have a preference as to how it is given. If they say no to Q1) then you know where you stand. If they say yes then move on to Q2).

Lesson #1 is of course make your own mind up. Lesson two is return of capital beats return on capital. Lesson three is that it keeps changing. But you are a finance professional so you know all this far better than I.

In any case start with an open Q1.

regards, dspp

[Dod101]

Frankly, Leither if you are an investment professional(retired), then you probably know or feel you know as much as any of us, so my question would be why are you seeking advice on this forum so as to advise your children?

All I can say is that I would never buy an index type fund but prefer to make my own picks and stand or fall by them. With grown up adult children I would not in any case attempt to advise them on investment matters unless they asked me (which is highly unlikely!)

Dod

Dod, don't know how you got the idea that I was an investment professional, I'm not. The reason I'm seeking advice on this forum is that I knew very little about the Vanguard Life Strategy ETFs until I'd seen them referred to on these boards. Thanks to some helpful replies I've received on this board I've now had cause to look at them in more depth and think that they may well be something for my children to investigate, if they're interested. In fact, the more I think about it, I may well transfer some of my HYP into one of these funds. Would certainly simplify life.

I must say, I'm quite surprised at the replies I've received which are antagonistic to giving advice to children; surely to goodness if you've had more experience of the financial world than they've had, it's only right & proper that you proffer that advice. It's up to them whether they act on it or not.

Regards,

Leither.

You said you were in a your original post. You said, 'I am finance professional (retired)'. Sorry, not quite the same thing as an investment professional.

I have adult children and I must say whilst I might suggest a few things to them it would never go beyond that unless they specifically asked. I am not suggesting you are proposing to do so but I would also be very nervous about running a portfolio for someone else. It is one thing doing my own thing and I am happy to stand or fall by own decisions with my own money but for someone else?

Dod