IFA case study: Victor and Jean Fleming

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Victor Fleming, a 56-year-old engineer with an Edinburgh company, earns £48,000 a year and lives with his wife, Jean, in West Lothian. Jean is a part-time special needs assistant and earns £12,000 a year.

They have three children. Their eldest, Craig, is married and lives with his young family in Midlothian. Their middle daughter, Ellen, works in New Zealand, where she is getting married next year. Susan, the youngest, Susan, is in her first year of a three-year course at the University of Kent. Her parents contribute around £10,000 a year to her expenses and course fees.

Victor looks forward to retiring at 65, spending more time with his grandchildren, improving his French and Spanish, and globe trotting, especially to New Zealand.

Victor and Jean’s mortgage is £87,500, and their home was recently valued at around £345,000. Jean recently inherited her mother’s Portuguese holiday home worth about £300,000.

Victor and Jean want to secure a comfortable future. They have sold the Portugal property and have invested the proceeds while they decide what to do next. Should they clear their outstanding mortgage? Should they increase their pension pot? Victor’s personal pension fund, in his current provider’s With Profits fund, is worth £400,000.

He has always felt unsure about financial issues but now he and Jean hope a professional independent financial advisor who can advise them on pensions, inheritance tax and their financial future.

The competition Over the course of the next eight months, our five competitors will face the challenge of constructing an investment portfolio for our fictitious couple, Victor and Jean Fleming from West Lothian. Each IFA contestant will aim to achieve the Flemings’ long-term objectives and reflect their risk profile; and each will have to react appropriately as the Flemings experience the odd life-changing event along the way. The judges (Craig Hendry, director of Johnston Carmichael, and Bill Jamieson, former executive editor of The Scotsman and current editor of business website Scot-Bizz) will peruse each IFA’s investments and each contestant must justify their recommendations. Whoever produces the most effective investment report for the Flemings, based on the information provided in the case study, will be crowned IFA of the Year 2013 next July.

IFA eye view Graeme Robertson’s investment rationale

Jean and Victor’s circumstances haven’t changed and so there is no need to alter their current investment strategy.

I have established their portfolio with a long-term perspective and will only look to make significant adjustments if their circumstances change, if any of their investments significantly out-perform or under-perform or if there is a radical change in the investment environment.

 Their investment portfolio has risen slightly in value and there have been no big rises or falls in any of their underlying funds or asset classes. This is what I would expect. I have constructed this portfolio in a fairly cautious manner to provide consistent long-term returns and effectively manage risk.

 There are some major threats to the global economy and world stock markets, particularly related to the eurozone, US fiscal cliff and growth prospects in China. These concerns are reflected in stock prices and shares should currently represent reasonable value. However, I will continue to manage risk by investing across different regions and with proven managers with different styles.

 There are also concerns that some fixed interest investments are over-priced, particularly UK gilts and some other sovereign bonds. This is a worry, but is largely mitigated by selecting flexible funds, as I have done, where managers are able to invest in different fixed interest assets, providing good diversification but avoiding areas where they see the greatest risks.

 I will continue to monitor Jean and Victor’s portfolio closely. Ideally there will be little need to make changes, but I will do so if I believe it is in their best interests.

• Graeme Robertson is a chartered financial planner at AWD Chase de Vere