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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To be wary of trusting this (or any) financial adviser with my inheritence

112 replies

frammlinton · 19/02/2022 17:08

I'm inheriting a substantial sum from the sale of my mum's house. I want to use the money to help our children (currently aged 18 and 15) onto the housing ladder at an appropriate time. Some ideas I had are:

  1. Buy a rental property in my name, mortgage free, and rent it out. (Pro: Hedge against inflation. Con: tax, fees, hassle).
  2. Ditto, but buy the property via a trust in our sons' names, so I am effectively gifting the money to them now. (Pro: Hedge against future inheritance tax and rental income tax).
  3. Ditto, but buy property in location where DS1 can live during uni (Pro: Will reduce uni expenses and capital gains tax)
  4. Invest the money until the DC's need it. (Pro: Liquidity, growth prospects. Con: Risk of losing money).
I consulted with a financial adviser recommended by a friend. He very quickly dismissed options 1-3 and homed in on option 4 on the grounds that over time investments tend to rise above inflation. I get that in principle, but they can obviously go down as well as up. This adviser claims to be independent, but is nevertheless recommending the funds offered by his own company (for which he will receive a commission), which rings an alarm bell. Am I being too cautious? I know that none of you can tell me whether or not to trust this person or the organisation they work for, but my question is ... how does anyone ever trust any financial adviser? If you use a financial adviser, how did you go about vetting them in the first place? I know the website 'Unbiased.com' is widely recommended for finding independent advisors, but independence still doesn't guarantee that the advice is any good.
OP posts:
3beesinmybonnet · 19/02/2022 17:36

I have 2 family members who are/were financial advisers. Neither of them are particularly intelligent but they're smooth talkers and quite manipulative by nature ie the sort of people who seem OK at first and only show their true colours once you know them better. Their aim was to sell their companies products and thereby get commission for themselves. I'm sure they're not all like that but that's my personal experience. I would rather put my money into property, but freely admit I'm no expert.

I would look at Money Saving Expert to see if there's investment advice on there.

Mummadeze · 19/02/2022 17:38

I think the best way to find a good financial advisor is to ask around friends with money to see if they have one they highly recommend. Finding one through the internet feels too risky and agree he sounds like he might have had an agenda.

LeilaDarling · 19/02/2022 17:40

Sounds suspicious and your instincts are probably right. Please don’t go ahead with what they suggest. Property and premium bonds are always a good option, no need to involve a third party.

Elphame · 19/02/2022 17:44

Retired IFA. Without knowing much more about what he advised no one can possibly tell you. I can however take a pretty good guess at which company you are talking about! Commission was replaced by fees years ago.

However property ownership is not as low a risk investment as people think. We have had plenty of crashes in the past and there will be crashes in the future. Houses are illiquid and indivisible as well. That is not to say that they are not suitable investment vehicles in some circumstances but they carry risks of their own.

yoyo1234 · 19/02/2022 17:46

I love option 3. Purely as I know a number who had this done for them as students by their parents.

Hoppinggreen · 19/02/2022 17:47

Well 1-3 doesn’t earn the FA any commission does it?

yoyo1234 · 19/02/2022 17:47

If you could get one with a spare room or 2 that is their money for bills/going out etc.

AnneElliott · 19/02/2022 17:51

Agree that you need recommendations from other people. Ours is a family friend so was relatively easy to find.

Getoff · 19/02/2022 17:53

Since the money is likely to be very useful to children in a lot less than ten years, the time is to short for it to be invested.

(If you are going to invest, then it would be best to learn how to do it yourself. Investing is a odd area of expertise, while in general in life it makes sense to rely on experts for things we don't want to master ourselves, there are a multiplicity of reasons that mean this isn't generally a good idea when it comes to investing. )

I vote for buying a property now, with some adult holding the younger child's half in trust for them.

MatildaTheCat · 19/02/2022 17:55

@LeilaDarling

Sounds suspicious and your instincts are probably right. Please don’t go ahead with what they suggest. Property and premium bonds are always a good option, no need to involve a third party.
Premium bonds are only a good option if you are happy with a 1% return on average. And a maximum holding of 50k.

I was very nearly stung by a financial advisor- the costs involved can be very high indeed. Fortunately I asked my DB for his opinion as he is a banker and he has helped me self invest which is quite easy and the fees are comparatively low. And obviously use all your ISA allowances. Many people don’t know that most investment funds can be used as ISAs.

Luredbyapomegranate · 19/02/2022 17:57

Take step back and spend a couple months educating yourself by reading the personal finance pages (mail, telegraph), following people like Miss moneypenny and money magpie and read a couple of books

And then consult 3 advisors

GeneLovesJezebel · 19/02/2022 17:59

Are you married ?

Ginger1982 · 19/02/2022 18:03

Could you have a deed of variation done to your mum's will transferring the house, and therefore the sale proceeds, directly to your kids to perhaps have some form of trust? That's what my mum did with my gran's house, although I was an adult and so was able to have the benefit immediately.

seekinglondonlife · 19/02/2022 18:05

Why would option 4 surprise you? He needs the commission no doubt. I tend to look at most FAs as a MLM.

Dragongirl10 · 19/02/2022 18:07

Personally l would never trust an financial advisor their livelyhood depends upon selling you products not on securing your Inheriatnce.

I think you have to( unfortunately) do a ton of research, in great detail yourself.....
I have had BTL for 30 years, it is not an easy option, (and l am exiting) but can still offer a good return, but again knowing the market inside out and really understanding all the commitments and many costs is very important.
It would help to buy something that he can live in during Uni as that is a big saving, especially if other rooms can be let out to cover costs and repairs etc...I would probably favour this option although with the caveat of, is the location required a good bet?

Longdistance · 19/02/2022 18:09

I suggest spending it on alcohol and loose men! hahaha! Only kidding.

My dh dabbles in stocks and shares himself. They seem to gain quite a bit over time. Separately, we have invested for dd2 a stocks and shares account as she missed out on the CTF. So we invested money in that and it had been gaining 12% at points, even though it went down during the pandemic it went back up. Maybe something like that for your dc.

Original poster
frammlinton · 19/02/2022 18:09

@GeneLovesJezebel

Are you married ?
Yes. I'm a basic rate tax payer, whereas DH is in the 50% band, so not a good idea to put anything in his name.
OP posts:
Polyanthus2 · 19/02/2022 18:13

Advice is usually to spread your money over property, shares, prem bonds, isas then they're not all in one basket- seems sensible!

Original poster
frammlinton · 19/02/2022 18:15

@Elphame

Retired IFA. Without knowing much more about what he advised no one can possibly tell you. I can however take a pretty good guess at which company you are talking about! Commission was replaced by fees years ago.

However property ownership is not as low a risk investment as people think. We have had plenty of crashes in the past and there will be crashes in the future. Houses are illiquid and indivisible as well. That is not to say that they are not suitable investment vehicles in some circumstances but they carry risks of their own.

@Elphame, I will dm you the name of the company.
OP posts:
Alexandra2001 · 19/02/2022 18:18

I was in a similar situation, i invested the money in a low/medium risk fund as i don't like the principal of BTL's.
Its far out performed my other option of buying two rentals and by using ISA allowances, i don't pay any tax, i don't have the costs of property mtce or dodgy tenants and i can release the money instantly.

Downside is that it does go up and down a lot, even though over 50% is in fixed interest stuff, 0.5% of a lot of money looks a large amount.

I went through a high street bank, the IFA's i looked at just wanted to sell you their products, none seemed interested in me, other than as a cash cow (on going fee's) and i wondered how i would access the funds should these companies go bust - of course a bank sells you their own stuff but they are unlikely to bust and their fees were far lower as i could negotiate with them and were one offs.

JackieCollinshasnoauthority · 19/02/2022 18:18

He's probably correct in that option 4 will get the best returns, for the least hassle, in a relatively short time frame.

OneSwallow · 19/02/2022 18:21

@Elphame

Retired IFA. Without knowing much more about what he advised no one can possibly tell you. I can however take a pretty good guess at which company you are talking about! Commission was replaced by fees years ago.

However property ownership is not as low a risk investment as people think. We have had plenty of crashes in the past and there will be crashes in the future. Houses are illiquid and indivisible as well. That is not to say that they are not suitable investment vehicles in some circumstances but they carry risks of their own.

How do you advise finding a good IFA? Also, are profits in premium bonds tax feee?
Hunderland · 19/02/2022 18:27

If your kids are going to uni I would definitely buy a property in that location.

A) you'll save a fortune in accommodation fees and B) if it's in a uni town you'll ALWAYS be able to rent it out.

Or sell after their three / four year course.

Property investment is such a good option and your kids are old enough (or very nearly) to hugely benefit from your windfall.

EmbarrassedAllOver · 19/02/2022 18:30

You get 3 quotes for any tradesman (or should) so why is this any different.

Speak to others. Do your research.

But also - go with your gut. If you lose a bit of it, well, it is inherited anyway so you haven't "lost" any really. No investment is 100%, it's all a risk. You have to accept that with any investment.

Personally - and I'm no expert - I would buy a property in a good location, near something that will hold its value (so near a decent school etc). I would rather buy a small flat somewhere nice than a bigger house somewhere riskier.

It's free money, mortgage free so if you're super unlucky and lose 10%, so be it. Thats life, most people receive zero inheritance.

earsup · 19/02/2022 18:34

mmmm option 1,2,3.....unless you find an advisor you can trust....?....i understand property so would do that....it wont dissapear over night...if price dips it will go up again....i bought a house for 12k and its been rented out for years and years with only one set of awful tenants and house now worth 750k.....