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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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:
UncomfortableBadger · 19/02/2022 20:36

Everything that @PennyDeFuckwit says, times a million.

I’m a Chartered Financial Planner & Fellow (with several other relevant further qualifications/memberships) who runs a fully independent firm. I absolutely despair at the quality of the bulk of the other advisers I’ve met on my travels. I despise going to seminars (for CPD purposes) as it’s full of odious salesmen in shiny suits who have the bare minimum in qualifications and no technical knowledge. I massively resent the fact that I have to pay six figures each year in insurances, regulatory fees & compensation scheme levies because of poorly-trained advisers who flog absolute rubbish - it’s the good guys who end up paying for the shysters.

There ARE some brilliant planners about and they tend to be far better qualified, with a greater technical focus, understated (I don’t advertise my services at all - I’m kept busy with word of mouth referrals from happy clients) and less slick. Run at the sight of glossy brochures and client seminars in posh hotels! As others have said, St James’ Place are a well oiled sales machine. Better to ask around and find somebody trustworthy via word of mouth referrals from friends, colleagues etc.

You need a planner with the heart of a teacher, who can explain to you in layman’s terms why a particular route may or may not be a good idea for your circumstances. Quite often I’ll meet potential clients for the first time and after a long discussion, we’ll decide that the right route for them ISN’T to use our services but to plump for something very simple or to direct them to other specialists (e.g. a solicitor for a Deed of Variation).

OP, if you’re seriously considering property investments then do some reading on the upcoming EPC changes in 2026-2028 - I suspect the market will be flooded with older, less energy efficient properties in the coming few years as landlords try to avoid the £30k fines. Do also speak to a trusted accountant to work out the real likely net yields once you’ve taken into account ALL potential costs, void periods, maintenance/repairs and taxes.

Again, take appropriate advice (legal and accounting) if you’re considering trusts also - there are completely different tax treatments depending on the type of trust you use. A bare trust can seem more attractive initially but would be vulnerable if the children were to later divorce/be made bankrupt and could prove problematic if they wanted to buy their own properties down the line (as they would be precluded from any FTB incentives and may be subject to the additional rate of SDLT). Discretionary trusts offer more flexibility but tend to suffer a more penal tax regime. Make sure that the solicitor & accountant carefully set out for you the responsibilities in terms of reporting, entry charges, ongoing taxes, periodic charges and exit charges.

Tigersonvaseline · 19/02/2022 20:49

@Winter2020 @Porfre

Excellent posts.

Winter point about potentially ruining future relationship is excellent.

I'm a fan of vanguard and index funds.
Mine and DC seem to be around 35

Allergictoironing · 19/02/2022 21:05

@PennyDeFuckwit

Oh nooooo, your poor friend! Rotten snakey bastards. Nobody is allowed to write such letters or facilitate that kind of shit here.

All the trouble around occupational pension transfers is coming home to roost at the moment, regulator has gone mad on it.

I'd have to word the AMA right or the first question will be "why would anyone care" haha.

The guy I DID refer my friend to happend to be a DB specialist - and didn't recommend transferring friend's big fat DB pension. Just worked with the lump sum friend had from the pension and left over from the house sale.
Duntelchaig · 19/02/2022 21:11

He sounds like an SJP salesman. Avoid. Get a recommendation from someone who uses one.

Porfre · 19/02/2022 21:17

@oneswallow

Vanguard is a business that provides investments-you can buy online via their website, mainly funds you can invest in. Similar to Hargreaves Lansdowne/ A J Bell.

You can invest in an ISA wrapper, they have multiples funds depending on what you're looking for, their lifestrategy funds have specific dates on when you're hoping to retire.

The main draw is their very low fees.

Tigersonvaseline · 19/02/2022 21:21

I buy vanguard products through Hargreaves but will move to vanguard soon.

Jack Bogle set it up.

Low fees generally sell products that are full of stuff....so your money is well spread.
I've got some life strategy funds for my sipo And ISA And also in the DC ISA.

Kite22 · 19/02/2022 21:23

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

The thing is, until the A level results are published, you won't know which University your dc are going to. Even if you have done research in the City they have as their first choice, and you know the City really well or have done lots of research about Buy to lets / student accommodation in that City, and there are properties up for sale, it still takes months to then go through, and, when it does go through they will be tied in to a contract in halls.
So you would have two years left that (most) students are there - unless they are doing architecture or medicine or another longer course, or a Masters at the same University. Then you would have to furnish it. You would have to spend a lot of time managing it yourself or a lot of money getting someone to manage it.
Unless you have a lot of time on your hands, this isn't a great choice, IMO.

Bootikin · 19/02/2022 21:30

Seriously recommend you read “meaningful money” book by an IFA who says most people don’t need IFAS and he also rails against how shit most IFAS are … also research how women handle investments vs how men do this - important to understand the difference.

SirGawain · 19/02/2022 21:38

This adviser claims to be independent, but is nevertheless recommending the funds offered by his own company (for which he will receive a commission).
I'm not sure that this is even legal.

frammlinton · 19/02/2022 21:41

@Bootikin

Seriously recommend you read “meaningful money” book by an IFA who says most people don’t need IFAS and he also rails against how shit most IFAS are … also research how women handle investments vs how men do this - important to understand the difference.
I'm reading another book which says similar. It also says that tracker funds are great, so long as you don't invest in them just before they take a nosedive. I started watching some trackers a month or so ago, just as the post-covid bubble started to burst, reports of high inflation became rife, and tensions started to build on the Russia/Ukraine border, so I can see it's a nervy time to invest. Even the Financial Advisor said markets might be choppy for the next few months, so it doesn't feel like a great time to be putting a lump sum at risk.
OP posts:
MissConductUS · 19/02/2022 21:45

what is vanguard

It's an American financial services and investments company that completely upended the industry by offering investments at very low fees. It is actually owned by its investors and run for their benefit. I've been investing with them in the US for 30 years and the service and the company are brilliant.

www.vanguardinvestor.co.uk/

This is a fund that's appropriate for a 10 year timeframe:

LifeStrategy® 60% Equity Fund - Accumulation

You cannot go wrong with Vanguard. Here's some further information on the firm:

en.wikipedia.org/wiki/The_Vanguard_Group

Tigersonvaseline · 19/02/2022 21:48

You usually don't put a lump sum at risk And drip feed in to begin with.
Then you are safer against rise's although COVID dip was a great time to buy.
I wish I had some cash to buy right now tbh.

Check any index funds agaisht morning Star rating and trust net for their rating.

Tigersonvaseline · 19/02/2022 21:50

Sorry I meant to say I like choppy markets And would be buying now.

Frankley · 19/02/2022 21:50

I know someone who has had money invested with SJP for over 10 or more years. He seems to think his advisor has done well for him. A lot of people must use SJP, why if everyone on here advises against them?

PrincessNutella · 19/02/2022 21:52

If you are looking for the most common sense way to invest the money, I agree that you could get ripped off by the financial advisor. But I also think property is risky. How do you know where the child will go to university, etc. I would invest the money in index funds, which have very low overhead and spread out the risk. I would use as simple a strategy as possible such as the one below. And then I would not fuck with it. (warning, this strategy was devised in the US and these are US funds, but I don't know why the same economic principles would not apply in the UK) (google the three-fund portfolio or www.thebalance.com/comparing-three-fund-portfolios-over-time-5115820

SirGawain · 19/02/2022 21:59

You cannot go wrong with Vanguard.
Avoid any investment which says something like this. There is no such thing as a risk are investment!

RainingYetAgain · 19/02/2022 22:03

The weekly Boring Money newsletter is worth a look. It is very readable and quite educational.Which? Did a book on investments while back, I don't know whether it is still published.
MsE has a money course which covers investment I think. DS found the house buying chapter helpful.
I would see another couple of advisors when you have done some reading around.
Be prepared to pay for advice.

MissConductUS · 19/02/2022 22:06

@SirGawain

You cannot go wrong with Vanguard. Avoid any investment which says something like this. There is no such thing as a risk are investment!
I didn't mean to imply that investing with Vanguard was free of risk. Any investment in shares and bonds will go up and down with the markets. My point was that Vanguard will not try to make a fast profit off you or take advantage of you. With their index funds you will never underperform the market.

It is incumbent on the investor to pick funds that match their risk tolerance and investing timeframe.

EmmaH2022 · 19/02/2022 22:07

@Hoppinggreen

Well 1-3 doesn’t earn the FA any commission does it?
This.
BernadetteRostankowskiWolowitz · 19/02/2022 22:08

I'd buy a two bed in an university city. Dc can stay there if they attend the uni, and they can rent the second bedroom out to cover the cost of all bills.

sanbeiji · 19/02/2022 22:13

@Frankley

I know someone who has had money invested with SJP for over 10 or more years. He seems to think his advisor has done well for him. A lot of people must use SJP, why if everyone on here advises against them?
@PennyDeFuckwit I'd ve interested to know this too, can I DM you? The people who invest with them aren't what I'd called naive as well quite the opposite.
Trolleedollee · 19/02/2022 22:14

I was strongly advised against SJP but others have been very happy with them. I have an IFA who has worked with our family professionally and personally for many years and yes worth his weight in gold. Happy to share details if you want to DM me. Also advised against BTL but explained why and I think he advised me well

WhiteJellycat · 19/02/2022 22:32

I have no real advice except that a friends dm skipped his kids and left her estate to the grandkids. I dont think there will anything left for a deposit. I'm thinking if I get any inheritance I want to pass most of it to my kids but I dont think from what I have seen, having a young adult knowing they have a very large sum of cash guaranteed is a good idea.

sanbeiji · 19/02/2022 22:42

@WhiteJellycat

I have no real advice except that a friends dm skipped his kids and left her estate to the grandkids. I dont think there will anything left for a deposit. I'm thinking if I get any inheritance I want to pass most of it to my kids but I dont think from what I have seen, having a young adult knowing they have a very large sum of cash guaranteed is a good idea.
There are lots of options.. like leaving it in trust until X age, or that the money's used for a specific purpose
mjf981 · 19/02/2022 22:45

If you need it in the next few years, just stick it in a bank account.
If its 2+ years, I'd invest in index funds which track the stock market; yes it may go up and down buy you'd have dividends paid as well. But I'd avoid the US market atm - if any of the stock markets are in a bubble, it is the US.