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

[frammlinton]

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.

@PigletJohn

"The ETF has an ownership interest in the group. It is not a publically traded company."

doesn't marry up with "owned by the investors"

Perhaps this will help clarify:

corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/sets-us-apart/index.html

Vanguard is different from other asset management firms. We’re different by design—from our structure to our strategy.

Vanguard set out in 1975 under a radical ownership structure that remains unique in the asset management industry. Our company is owned by its member funds, which in turn are owned by fund shareholders. With no outside owners to satisfy, we focus squarely on meeting the investment needs of our clients.

The key point for investors is that there is no separate group of shareholders trying to maximize profits from customers. That conflict of interest has been eliminated by this ownership structure. That is also why the fees have gone down, not up, as more investors came in.

@PigletJohn

so, as an investor, why do I see no signs of "ownership?"

In other membership, mutual or shareholder-owned concerns, I receive a notice of the results and AGM and am invited to vote on proposals put forward.

My reading of the Vanguard website is that the company is owned by its US investors, rather than its UK investors. US investors apparently do get to vote, e.g. see here: www.reuters.com/article/us-vanguard-investors-idUSKCN1BU2G9

Extract from Vanguard document re ownership.

Thanks @sanbeiji

@Shortofspace

This is all fascinating. Have spoken recently with a FA from my union. He was recommending some form of investment as a pension fund and not adding extra on to our current pensions - we are both educated adults but beyond bank accounts and mortgages this was all Greek to us. I feel through this thread I have a start on where to go to financially educate myself, though I need to get a move on!

@Shortofspace I've been following a suggestion from another thread to check out Meaningful Money on YouTube, which is presented by an experienced professional financial planner. It seems very good.

I think the trouble that you will have is that even an ‘independent’ financial adviser isn’t qualified or able to provide advice on, for example, buy to let property. They can give you information (that it isn’t a very diversified investment, or possibly on the tax side of things) but not advice, as in ‘I recommend you buy this house in this street rather than invest in these shares’. So I am not sure that you are ever going to get someone to give you that sort of actual advice (that you pay for from a professional) rather than, say, an opinion from someone you trust.
IFAs generally can answer the question ‘how can I invest this money in liquid retail assets’ and not ‘how can I invest this money looking across every possibility’ nor ‘which of these options are best’ if one of them is an asset class on which they don’t advise.

This thread is fascinating.
In truth, what I really want is an account where the interest matches inflation, but as they don't exist, I guess I will have to do some self-educating.
Thanks to all who have offered advice around how to start educating ourselves.

@frammlinton

Extract from Vanguard document re ownership.

So it is perhaps owned by "some of" its investors.

But not us.

Vanguard funds are great--I personally hold some. But there are some other index funds that are available to investors as well. The point is that index funds are generally lower cost to an investor than an actively traded and managed fund, because they will follow a large segment of a market and just stick with it. Fidelity has index funds as well, and so do other companies.

Here is information about fidelity index funds. www.fidelity.com/mutual-funds/investing-ideas/index-funds?imm_pid=700000001009773&immid=100820&imm_eid=ep35276483795&gclid=CjwKCAiA6seQBhAfEiwAvPqu18hvuqNstccvzIqGY8bZyJVO1cvBxI61JBiyvowFiwco7cX3cZKFMxoCmOcQAvD_BwE&gclsrc=aw.ds

This discussion is bringing home the point nicely, that there are many, many options out there (exactly right in what an IFA can really do @Iknowitisheresomewhere) - there are dozens of ways to skin the investment cat and there isn't only one right answer.

@Shortofspace wearing my compliance hat I feel a bit uneasy about that suggestion from the union FA. Generally speaking - and unless you are very wealthy - the first and most obvious thing to do is use your available personal tax concessions (pension and ISA contributions) and top up existing contracts (particularly workplace pensions) first, before giving yourself extra investment charges and higher than average investment risk in some godforsaken unregulated investment.

Run a mile from anything "unregulated" unless you can afford to lose all the money, you have no regulatory protection (i.e minimal route to make a complaint and minimal chance of recompense). I say "minimal" because the FOS does some weird shit sometimes.

Did anyone see the AMA from someone at the Ombudsman? That was interesting.

We have a lot of investments including property. Never used a financial advisor, almost did but it was just a sales pitch so we declined. Instead we read lots and lots and educated ourselves enough for the level we are at. Pretty happy with our choices.