The Scenario: Victor and Jean Fleming Victor Fleming is a 56-year-old engineer earning £48,000 a year who works with an established national company based in Edinburgh. He and his wife, Jean, live in West Lothian, where they brought up their three children. Jean works as a part-time special needs assistant and earns £12,000 a year. Their eldest son, Craig, is married and lives with his young family in Midlothian. Their middle daughter, Ellen, works in New Zealand. She and her boyfriend are getting married next year and plan to continue living there. Victor and Jean's youngest daughter, Susan, is in her first year at university in England. Her parents help with her expenses and course fees, which cost them around £10,000 per annum. Susan has two more years of her course to go. Victor is looking forward to retiring at 65 and spending more time with his family and grandchidren. He also wants to go to language classes and use his new skills when he and Jean do some globe trotting. They certainly want to seemore of their future son-in-law's country and their daughter's surroundings. Victor and Jean have a mortgage on their home of £87,500, and the property has been recently valued at around £345,000. Jean's mother died and left her holiday home in Portugal to Jean. The property was valued at £395,000. The couple are uncertain what to do to secure a comfort- able future. Should they sell the Portugal property and clear their outstanding mortgage? Should they be increasing their pension pot? Victor's personal pension fund is currently valued at around £400,000, and is in his current provider's With Profits fund. He has never felt confident about dealing with financial issues and now he and Jean feel they must seek the services of a professional IFA who can give them solid advice on pensions, inheritance tax and their whole financial future. Our five independent financial advisers below will invest Jean and Victor's funds and report monthly on their progress. The IFA whom the judges decide has done the best job wins. Nicola Ellis, Sinclair Wood Asset Management Ltd From my understanding of Victor and Jean's circumstances and their existing investments, I have determined that their attitude to investment risk most closely matches our "moderately cautious" risk profile. This means that although they are concerned with preserving their wealth and reducing the effects of inflation, they do not want to lose the benefits of potentially superior returns by investing in "real" assets. They have to consider: can they tolerate temporary falls in the value of their portfolio so long as this does not materially impair their standard of living in the longer term and the likelihood of meeting their financial and lifestyle goals? Portfolio construction today seems more difficult than ever. Anticipated returns from the main asset classes are not as reliable as they were. We can no longer expect market forces to simply lift all assets together in a tidal swell. Taking a tactical approach as well as a strategic core position is essential when trying to achieve above-average performance. Dividends are an important way to help secure returns above inflation. Over the past 100 years, they have proven themselves an important component of long-term returns. My portfolio avoids the biggest potholes on the road by allocating to all asset classes (property, shares, bonds, cash and alternatives including infrastructure and some hedge strategies). Diversification is the key to effective portfolio construction. Russell Provan, KPW Investments Victor and Jean have never felt confident dealing with financial matters so the first thing they need to do is discuss with me their immediate goals and tolerance to risk when it comes to investing their money. Having recently inherited the property, would it be more beneficial to sell this, clear their mortgage, top up their retirement savings, loosen the burden of Susan's university fees, potentially allow Victor to retire earlier and pursue their goals of global travel? Given how close Victor is to retirement, is it sensible to invest much more money into his pension or use other tax wrappers such ISAs for retirement income? Given the size of Victor's pension pot, I need to ascertain what type of retirement plan he wants. Is he aware there are many ways to create a retirement income apart from the traditional annuity route? It appears his pension is 100 per cent invested in a with-profits fund, which requires immediate remedy, as it's unlikely to be the best place for investment and provides very little diversification. At present, with uncertainty surrounding the global economic picture, I have a low-risk approach to investing their money. The bulk of the portfolio is currently in various types of bond and absolute return funds. Until there is a clearer picture on the outlook for Europe, the upcoming US elections and the impact slowed growth in China has had, we will remain cautious. These situations will be monitored closely to see what impact they have. Graeme Robertson, AWD Chase de Vere Victor and Jean's cautious attitude to risk must be reflected in my recommendations. Their future financial wellbeing is at stake as well as their ability to help support their children. So unnecessary risks shouldn't be taken. Before we consider any investments there are many sensible financial steps to make. Firstly, put aside cash savings to cater for short-term requirements such as Susan's university costs and travel costs to New Zealand. These cash savings, over and above any ISA allowances, should be held in Susan's name as she is the lower-rate taxpayer. Victor and Jean should also look to repay their mortgage. This is a no-risk way save interest payments and add disposable income every month. They should review Victor's pension to see if their current with-profits fund is the best choice. They should make any new investments as tax efficiently as possible and in particular aim to utilise pension and ISA allowances. The investments themselves should be split into a combination of UK and overseas shares, fixed interest and property, in order to diversify risks. The breakdown of these assets should reflect their cautious approach. Stock markets are currently volatile and the global economic outlook remains uncertain. While there is long-term value in riskier assets such as shares, there is no guarantee that they won't fall in the short-term and so other investments must also be held to cushion any impact if this happens. Stewart Siegal, Principal and Prosper The main challenge is to ensure that the Flemings" investments do not succumb to the present volatility in markets while retaining the flexibility that any new client would require. With significant uncertainty from many quarters, broad diversification across asset classes and markets will be key. Managing their investment capital in a way which will enable them to supplement their future retirement income is of particular importance. Despite more positive news over the summer, the European situation, and its potential impact, requires monitoring. I do not recommend Victor and Jean make any specific eurozone investments. America may still prove problematic later this year with the potential impact of political risk. While the UK economy is far from healthy, the knock-on effect of European and American issues may be the primary factor in how markets perform. Fundamentally, many companies look very healthy, however, and corporate earnings in some sectors have remained very positive; this would suggest there is still potential for further upside in equity markets. I will take a reasonably cautious approach with the Flemings" affairs, taking into account their inheritance, and we aim to provide a solid financial base for their future rather than chasing returns from assets which may carry too much risk. I am recommending Victor and Jean invest in a flexible strategy including exposure to Absolute Return funds and Strategic fixed interest. David Thomson, VWM Wealth Investment Strategy Our investment strategy is built around a relatively diversified and actively-managed portfolio designed to maximise potential returns over the longer term yet minimise investment risks consistent with a cautious attitude to risk. For clients like Victor and Jean, there is a significant bias towards lower-risk fixed-interest assets and modest exposure to equity markets. Consequently, fixed interest forms a significant part of the portfolio representing 40 per cent of the asset mix. Our recommendations are for a wide spread of equity investments, with a slight bias towards smaller companies and technology. We have sought to further diversify the portfolio by investment style, for example, by including both growth and value-focused funds. Although increasing the exposure to overseas assets and more adventurous funds would increase the exposure to currency and equity market fluctuations, we would recommend that the portfolio holds a significant exposure to lower-risk fixed-interest to mitigate these risks. It is also worth mentioning what we have not included. Little cash is currently held, other than within the underlying funds themselves, due to prevailing low-interest rates. In addition there is little exposure to Japan as the market remains difficult to call and with an ageing population, we believe that growth will be lower than in some other regions. Likewise we have avoided Europe while the situation remains in a state of flux.