Financial Planning: should I engage a financial planner?

Brie

what about paying off the mortgage?  That will save you a lot of interest in the future as well as reduce the amount paid to any money manager you decide on.  It also feels so nice to not have to make those payments every month and having to renegotiate your mortgage every few years.

Pay off any other debts.  Do that bit of home improvement (but don't go wild).  Stick £50k into premium bonds and the rest in a few scattered high interest accounts while you gather your thoughts.  

I got a tiddly inheritance from my dad (it was a token gesture with the majority going to mom) and it was nice to use that to sort out our kitchen.  I could think of him whenever I remembered how rotten the kitchen was before.  That and I bought a hebe bush from Aldi for the garden.  Simple things are nice.

Sourpuss84

Thank you, Brie. 

dunstonh

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

Caps are increasingly common (as is tapering).   However, a cap at £10k seems very high. Many are at around £3k-4k unless there is a particular high risk issue involved.

1% pa. advice fee is common for small values but again, many advice firms taper their charge based on the value they are looking after.  i.e. someone with £100k may be on 1% but someone with £500k may be on 0.5%.  £350k would typically fall somewhere between those two.

Based on the value of 350k, the initial fee seems very high and the ongoing fee above average.

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.

There are only two types of classification.  Independent or restricted.  Any other variation or title is marketing.   IFAs will make a point of highlighting that they are independent.    No adviser is going to refer to themselves as a restricted adviser.  They will tend to use other names. Sometimes using phrases that may give the impression they are independent when they are not.    Wealth managers and financial planners are just name variants.

 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. 

So, pretty much what all IFAs would be expected to do (although some do it face to face or via other means depending on what you want).   

What you have told us indicates a pretty standard IFA service.  However, the costs are a concern. You can do better on that front.   Indeed, quality of service is not a major issue with IFAs or even FAs.  Most do the job as expected.   The main issue is that some are greedy.  But that is no different to any walk of life.       

Alexland

+1 for giving serious consideration to using some/all of it towards the mortgage. If you are savvy it can be possible to make investments that outperform a mortgage rate but it's not without risk and £350k is a very large amount of money to come into with no experience managing on that scale and paying down mortgage could make the amount more manageable. Of course when to do it will depend on the interest rate you are currently paying, when any fix expires and if any early repayment fees apply.

wjr4

Sourpuss84 said:

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! 

This sounds like how they should work. Do they provide financial planning services, so a cashflow model and they update this every year with you? Do you know which platforms and providers they tend to use? Who is your family friend’s money with (eg Fidelity, Aviva, etc). 

The initial fee is far higher than I’d charge. You should be looking at half of that as a maximum. Ongoing is high too. 

Do they look like a dynamic company and one that won’t sell to a consolidator any time soon? 

wjr4

tacpot12 said:

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. 

You mean FCA

wjr4

Sourpuss84 said:

. This money is emotionally very important to me following the unexpected death of both of my parents. 

Also, I am so sorry for your loss. 

boingy

Definitely look at the mortgage. If you are not on a low fixed rate then it probably makes sense to pay some or all of it off. If you have a low fixed rate then look ahead to when it ends because the new rate is likely to be much higher. You could put the money in a savings account between now and then.

NHS pension definitely allows AVCs so that is something to look at.

Then make sure you are using your full 20K ISA allowance each year and also consider 50K into Premium Bonds - the prizes are tax free.

I agree with some others on here that the IFA you met seems expensive. Talk to some others but also consider doing it yourself. It doesn't have to be complicated and you'd get plenty of help on this forum. It could be as simple as investing a chunk of it into a single global tracker fund and the rest into one or more savings accounts and gradually migrating the money into ISA(s) each year to save on tax. It would pretty much be a set and forget option. Review it once per year but don't change anything without good reason. The balance of cash savings vs investments is a personal choice. 

dunstonh

NHS pension definitely allows AVCs so that is something to look at.

The AVC is not great.  The additional pension can be good value though on a £ cost vs £ benefit

wjr4

boingy said:

It could be as simple as investing a chunk of it into a single global tracker fund and the rest into one or more savings accounts and gradually migrating the money into ISA(s) each year to save on tax. It would pretty much be a set and forget option. Review it once per year but don't change anything without good reason. The balance of cash savings vs investments is a personal choice. 

There’s no point just investing money if you have no financial plan though. That’s what the majority of people don’t understand. What their actual objectives are, what they are saving for, what they are aiming for etc. That’s where a decent financial planner will come in and not just a product selling old school financial adviser.