On the hunt for income - investment top tips from unbiased.co.uk's independent financial advisers

20 Feb 2012

In the current low interest rate environment investors are increasingly looking for alternative sources of income. Unbiased.co.uk has asked its panel of independent financial advisers for their top tips on the best income generating strategy.

Karen Barrett, Chief Executive at unbiased.co.uk comments:

“The three year anniversary of the 0.5% base rate is approaching and there is no indication that this is going to change any time soon.  This, combined with stock market volatility affecting markets around the world, means that investors can no longer simply stick to the tried and tested when it comes to their investment strategy.

“A discussion with an independent financial adviser about your investment strategy and goals can be a good starting point.  An IFA will be able to review your individual circumstances and advise you on the best savings and investment options to fit your short and long term financial goals.  To find a professional adviser go to www.unbiased.co.uk and enter your postcode.”

Patrick Connolly, AWD Chase de Vere:

“As a starting point you need to understand exactly what you are trying to achieve, over how long and the risk you are willing to take. This will dictate how you structure your savings and investments.  The most cautious investors should remain in cash, focusing on achieving competitive rates of interest and paying as little tax as possible, while accepting that the value of their savings may continue to fall in real terms.  However, other investors should look at alternatives to try and generate a higher level of return.  The right approach for them will depend on their circumstances, objectives and attitude to risk.”

Danny Cox, Hargreaves Lansdown:

“Withinterest rates at record lows some investors are looking to take more risk with some of their capital in search of alternative sources of income.  At first glance, focusing on the highest yielding shares could therefore be tempting.  A high yield can also be indicative of a low share price.  There is also potential for capital growth.  Shelter these shares in an ISA and there is no capital gains tax or further income tax to worry about. Yield is therefore just one factor that should be taken into consideration.”

Ian Williams, Ridgeford Consultants:

“Are you clear as to precisely what type of income you need?  Not all income is the same!  So, do you need tax free income or taxable income?   Would you be better off undertaking a little careful planning first, before parting with any hard earned savings?  Indeed, given current economic circumstances careful planning is probably the only way anyone is likely to generate a real return in the short term; interest rates after income tax are just not sufficient to show a real return after inflation.”

Joss Harwood, Eldon Financial Planning:

“Our approach with income portfolios is to consider the total return above inflation that we can reasonably expect over the long term and then set a realistic regular withdrawal.  This gives a steady income, which most people need.  The income ‘tap’ can be turned up or down to reflect the need or otherwise to protect capital, or to erode it at a rate that is both understood and accepted.  This means that we can keep our portfolios diversified and risk adjusted.”

Jonathan Hill, Milford & Dormor Solicitors:

“Top tip has to be for investors to maximise the use of their ISA allowances. This provides investors with a wide investment choice; an ISA is tax efficient and does not affect age allowance.  They can be used to build an effective and efficient portfolio to meet objectives i.e. rising income to help take account of inflation.”

Damien Fahy, Dennehy Weller & Co:

“If you want to achieve growing income through a long retirement you have to embrace equity income funds.  Income investors wanting to achieve long term growing payout to combat inflation will need to move away from an obsession with the day to day moves of the capital value.  More importance should be placed on the lack of volatility and relative predictability of income.  Think of an income portfolio like your heart pumping out blood - the heart continually changes shape as it pumps out a steady stream of blood.  The capital value of your income portfolio will also vary from day to day, but there will be a steady flow of growing income.”

Adrian Lowcock, Bestinvest:

“Commercial property is another ‘real asset’ where income is a significant part of the total return and there is potential for income growth.  During economic slowdowns the rental income usually declines, although this is smoothed by the prevalence of long leases with upward-only review clauses.  We should point out that property funds generally are valued as illiquid so there can be times when investors will be unable to sell their holdings.”

Anna Sofat, Addidi Wealth:

“While it’s not advisable to go out too far on a limb in search of more attractive yields, it’s certainly worth considering the different paths you can take to boost your returns.  I would recommend a mix of low cost passive funds and actively managed funds with proven track records of potential for outperformance, with a 60 / 40 split creating a good balance.  However, any investor seeking to maximise their investment income, especially in light of the current market volatility, should weigh up the best combination of asset classes to match their risk profile.  My recommendation would be 20% fixed interest, 50% equities and 30% alternatives.”

Jason Witcombe, Evolve:

“If you are at the accumulation stage, rather than retired, your focus needs to be on building the right level of assets to provide for your spending requirements in retirement.  You are investing so that you can achieve the desired level of after tax income in retirement.  If you draw the portfolio’s income now, and spend it, you are eating into your retirement fund.  Build a plan that focuses on getting the most out of tax breaks, pensions and ISAs to start with, as well as making sure that you are mortgage free at retirement.  That will put you on the right track to accumulating sufficient capital to provide you a decent retirement income.”


For more information contact:

Karen Barrett, Chief Executive, unbiased.co.uk: 020 7833 3131

Lisa Grando/ Emily Falla/ Maddy Morgan Williams, Lansons Communications: 020 7294 3682

For expert commentary or case studies from over 150 media-friendly IFAs, journalists should visit www.unbiased.co.uk/bluebook.

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About unbiased.co.uk, the professional advice website

The unbiased.co.ukportal is a free and confidential UK-wide search matching consumers with local professional advisers: ‘find an IFA’, ‘find a mortgage adviser’, ‘find a solicitor’, and ‘find an accountant’. These searches enable consumers to find professional advisers by postcode, area of specialism, qualification and payment method. In 2011, unbiased.co.ukfulfilled around 450,000 searches for local, professional advice. 

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