Q&A

Dominic Coyle answers your financial queries.

Making most of inheritance sum

I have recently received €500,000 through a legacy. I am 62 years old and have no knowledge of the financial markets or investments.

I intend to continue working part-time for the next three years. Then it will be my sole source of income for the future.

Is it a good idea for me to invest this money in a pension and/or invest in a property or stocks and shares?

I would very much appreciate any advice you can give me.

Ms A.G., email

Being absolutely honest, the best advice I can give you is that you should contact a professional investment adviser. I know that might sound flippant, but it's not meant to.

The truth is that I am neither trained nor licensed to give specific advice on choosing between one investment and another.

As a general rule, it is a good idea to invest in a pension, but you indicate that you do not already have a pension and you have only three years left before retirement.

While there is generous tax relief available on contributions to a pension plan, you are limited on the proportion of your earnings that you can claim relief on.

On the other side, there are costs involved in pension fund management. Pensions are also designed to be a long-term investment, with fund managers shifting your money to less risky but generally less lucrative investments as you approach retirement.

Unfortunately, as you are so close to retirement, such an investment strategy would be of limited benefit.

Property, while still flavour of the month these days, also presents problems. In the first place, you would be investing at or close to the top end of the market.

More importantly, you say that this will be your sole source of income for the future. Putting it into property means investing in a relatively inflexible asset - in other words, it won't be easy to get your money as a regular income stream.

Again, of course, there are costs involved in property investment - including stamp duty on the purchase and income tax on any rent received.

Direct investment in stocks is risky without some advice, a large enough sum to create a portfolio that spreads the risk and an ability to weather short-term falls in value. The older one gets, the less time one has to wait for a market recovery after a dip.

Ultimately, you are probably going to be looking at some form of pooled investment that spreads the risk, gives you certain guarantees and pays more than the limited return you can expect on bank deposits in the current environment.

Given the significant sum involved here and the fact that you will have to rely on it for your retirement, you really do need to talk to an investment adviser.

I am conscious that many people like yourself who don't boast in-depth knowledge of investments are wary of intermediaries after a number of mis-selling scandals in recent years.

However, the truth is that brokers are tightly regulated and the vast majority of them are reliable. Ideally, you should opt for fee-based advice, which removes the lingering suspicion that commissions are driving recommendations, but this can be hard to find.

If you can find a broker in your area prepared to operate on such a basis, you can expect to pay about €200 an hour.

For someone in your position looking for a full assessment and recommendation, you could expect to pay somewhere between €1,000 and €1,500.

That might sound like a lot of money, but in the context of a €500,000 investment, limited knowledge of investment options and reliance on the sum to fund your retirement, it would be money well spent.

If you have trouble finding a broker prepared to deal on a fee basis, it is worth remembering that even brokers working on commission are obliged to sell you a product that best suits your needs.

They are broken into three groups - authorised advisers, multi-agency intermediaries and tied agents.

Authorised advisers are supposed to be abreast of all products on the market and so be able to offer you the widest and most appropriate choice from the full range .

That is some challenge. As a result, many brokers have opted for the less onerous multi-agency intermediary, where they can sell products from a number of different providers.

The secret here is to check how many companies they can represent - the more, generally the better.

Tied agents are linked to one institution and can sell only its products. This category includes the investment advisers based in the various banks around the State and are best avoided in your position.

At the end of the day, it comes down to trust. You have no way of knowing a good adviser from one who might be inclined to direct you a certain way on the basis of commission or soft bonuses simply by looking at an advertisement - and there is no such thing as a league table of adviser performance.

Ultimately, word of mouth is probably the best way to decide whom to entrust your windfall with - much the same as it is for many of us when it comes to choosing a doctor, solicitor or other key personal advisers.

Revenue stock transfer forms

The Revenue Commissioners tells me I am incorrect in my understanding that people can obtain a stock transfer form from the stamping office of the Revenue at Dublin Castle if they want to transfer shares without going through the formality of dealing with a stockbroker.

The Revenue tells me you would need to get the form from a legal stationers.

It should be returned to the office in Dublin Castle or stamping offices in Cork or Galway within 30 days of the transaction. I understand you can also get the forms from a stockbroker, a solicitor's office or a bank.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries.

All suitable queries will be answered through the columns of the newspaper.

No personal correspondence will be entered into.