Financial Planning: should I engage a financial planner?

Sourpuss84

Hi, 

I need some advice. I am about to come into an inheritance of around £350k. Should I engage a financial planner? I met with someone last night and was very impressed. Managing money like this is not something I have experience of. 

Fees: initial 3% capped at £10k with room to negotiate, followed by 1% p/a

I feel this would take a lot of worry away from me about managing the money well longer term and the personalised approach seemed very encouraging. 

Is this a way to grow my inheritance? 
What experience is out there? 

Thanks!

Hoenir

I'd suggest doing nothing fast. There's much you can do yourself without incurring a huge upfront fee. Baby steps as they say. 

Sourpuss84

That's sound advice. 

ColdIron

3% initial and 1% ongoing sounds high on £350k. You might have a meeting with some Independent Financial Advisors. The first hour will be free and allow you to compare charges and a selection of options

tacpot12

Bear in mind that typical returns from investments are 5-7% so paying your adviser 1% per year is given them 15-20% of your returns so you need to be convinced that they are able to improve your investment returns by more than their fee. If they can't do this, then you might as well just invest via a large tracker fund.

As you are not used to having to manage investments, using an Independent Financial Adviser (IFA) is probably a very good idea, but you should shop around to ensure that you are paying a resonable fee and that the IFA seems good. The best way to find an IFA is via personal recommendations, but through careful research and meetings, you can usually see who is any good. I would tend to recommend looking for a small to medium sized firm in your local area so that you can meet them face to face. I would avoid one-man bands just becuase they will also retire at some point in the furture. It would be better to be being looked after by a firm with at least 3 IFAs.

The IFA will look at what you want to do with your inheritance and what your attitude to risk is. It is fine to have a very low tolerance to any risk. Such inheritances might only occur once in your lifetime, so you need to be sure that you don't lose it all.

Be very careful if there is any suggestion that you invest in anything other than a Fund, Investment trust, or Exchange Traded Fund that isn't regulated by the FSA. THere are lots of asset classes that you might invest in, but with your history, you do not need anything esoteric. 

Sourpuss84

Thanks for your post. I wasn't clear enough there, I am only seeking to potentially engage independent advice/planning services. 

Hypothetically though, what are the benefits and pitfalls of working with independent financial advisors, financial planners, wealth managers etc? I'm thinking there is a fair bit of interchangeability with the terms.

jimjames

The key word is INDEPENDENT. Many that sell financial advice are rather cagey about whether they are independent or not and if they're not it means they can only sell you products from their company or a restricted list which might not be the best options for your situation.

When some index tracker funds are charged management fees of under 0.1% per year that means you'd be paying 10x that fee to the person telling you which funds to use.

Benefits are having someone to hold your hand and guide which products eg pension, S&S ISA etc would suit your personal situation. Pitfall is paying a large fee for something that you might not need. 

Albermarle

Is this a way to grow my inheritance? 

The more you go for growth, the more risk you have to take with the investments. So do you really want growth, or would just keeping up with inflation and more stability be good enough?
This is the sort of question that an advisor would explore with you, and they will try and pin down what your objectives are for the money. To pass on as inheritance? Spend it on enjoying yourself? buy a bigger house , fund early retirement? etc
Only when all these facts are known will they then think about the type of investment portfolio that could be suitable.
Their job is not to just grow your money, but to invest it in a way appropriate for you. Which could be quite different for different people and circumstances.

Fees: initial 3% capped at £10k with room to negotiate, followed by 1% p/a

£10K seems a bit high as does 1 % ongoing. You have to be careful to be aware of all ongoing advisor and investment costs. Typically it will look something like this.
Advisor cost 0.75%
Investment platform cost 0.2%
Investment funds cost 0.1% to 1 % 

Sourpuss84

These replies are so useful, thank you for sharing your thoughts and experience. 

My situation is that I am 39, have an NHS pension and a mortgage on my home. 

The IFA came round to the house last night and spent lots of time with my partner and I. She was very sensitive to what I want to do with my inheritance and completed a risk assessment around my personal views here. We also talked at length about life goals etc. It is a small family run firm based locally (Glasgow) and I have discovered that a family friend is a client, so I have reached out to them for some insight. 

They will advise and manage all aspects of my finances in terms of ISAs, managing capital gains, investments etc. They also meet in person at home with clients regularly. 

My sense upon leaving the meeting was one of being reassured that someone would take care of this on my behalf and I would learn a lot along the way. Ultimately that it would be a smart move and that I would intend to negotiate the costs as the conversation with them progresses. This money is emotionally very important to me following the unexpected death of both of my parents. 

I am also worried about being naïve to this marketplace and situation and making a costly decision in haste. That said... I do not want the money sitting in my bank! 

Albermarle

One of the most common points for IFA discussions is pensions. However with an NHS pension you already have one of the best. They may suggest a separate smaller personal pension, that could be used to help to retire early. However if there are ways of boosting your NHS pension with additional contributions that might be better. 

Eyeful

You should educate your self on the basics of money management even if you are thinking of using an Independent Financial Advisor (IFA).

Ask them straight out "are you an Independent Financial Advisor".

If they are not an IFA, it means that whatever they like to call themselves, they are restricted to advising you only on the products their company can offer you. 

Check that any advisor is on the FCA register:-
https://register.fca.org.uk/s/

There are a number of good websites where you can get the basics of money management for example:-
https://www.kroijer.com/
https://www.which.co.uk/money
https://www.moneysavingexpert.com/banking/