Voltage started this thread with the words "friends want advice"....
"Friends want advice" is one of those frustrations that strike a lot of professions, and the financial arena is one of the trickiest. Some issues:
- there are rarely 100% "right answers"
- you probably don't have all the information and may not feel able to probe their finances in full
- odds are they won't tell you what they choose to invest in, but will at some stage feel aggrieved when an investment loses money.
- the more money your initial advice makes for them, the more advice they will expect you to provide and the more money they will bet on it - until the inevitable bad investment.
What your options are:
- Send them to an Authorised Financial Adviser - Unfortunately, most of us don't know of any we would be happy to leave our funds with, or we might be doing so (if anyone knows of any that have actually made them or their friends returns that are greater than term deposit over 10 years or more, then it would be good to know!). However, if the friends are more like acquaintances who are just looking for a free lunch, then it pays to have an advisers name up your sleeve for them.
- Educate them - if you have friends who are genuinely interested in making good investments and show a bit of interest, then the best place to start might be loaning them some investment books and helping them to understand how they can apply what they're learning to their own situation. Even here, there are a few choices - do you loan them Martin Hawes or Alex Elder? Personally, unless you know your friends well and they already have some knowledge and are determined to invest in high-risk, spec shares, I would steer them towards a very conservative starting point with Martin Hawes or Mary Holm or some such.
- Help them - if you are really in so deep that you feel obliged to help them with specific investment recommendations, then be very careful. Professional advisers are now required to "Know Your Client" and anyone giving more than the most basic advice should try to meet this standard. I don't think there are any legal constraints on giving well-meaning advice to a friend (might be wrong), but it still doesn't hurt to try and give professional-quality advice. I would say, in general, that if dealing with with someone who needs specific advice, then they are probably not ready for high risk-return investment. So despite what you yourself might choose to do with that amount of funds, it pays to remember that you will not be able to exercise control. Therefore it is probably best to take a low-risk balanced/diversified approach. This may mean keeping a portion in liquid fixed-interest/cash investments or using a suitable mix of managed funds for those who want to set and forget. No matter how much they want to set and forget, I would encourage them to review their investments either quarterly, six-monthly or at least annually and make some suggestions as to how they might go about doing this - maybe help them to draw up a form they can use for review and decision-making
In the end, the goal with friends is not to choose them the best tickets out of a raffle book, but to lead them towards the tools they need to manage their long-term financial situation with as little help from you as possible!