In your 40s: Protecting an inheritance and planning for the future

Tony and Sarah had inherited some money and invested it with a Discretionary Fund Manager without taking financial advice.

Why did Tony and Sarah come to us for advice?

Tony and Sarah had inherited some money and invested it with a Discretionary Fund Manager without taking financial advice.

As Tony’s father wanted when he left them the money, the plan was to withdraw a sensible and sustainable amount each year to pay for some luxuries, such as holidays, which they wouldn’t otherwise be able to afford. This would also leave a lump sum of money which Sarah could use to provide an income in her retirement, seeing as she had very little pension provision.

However, Tony and Sarah hadn’t reviewed the amount they were withdrawing, or their investment, for years. They were concerned that the value of their investment was being depleted too quickly.

What did we recommend?

Tony and Sarah didn’t fully understand their current levels of income and expenditure. We therefore carried out a comprehensive fact-finding exercise, which highlighted that they had more regular expenditure than income.

Therefore, despite receiving a substantial inheritance, they were actually living beyond their means and had built up debt on personal loans and credit cards.

We started by recommending that Tony and Sarah withdraw money from their investments to repay the credit cards and personal loans, on which they were being charged a relatively high interest rate. This meant that their income now matched their outgoings.

Next, we turned our attention to the remaining investment.

We discussed the level of risk they were prepared to take and recommended the amount which could be sustainably withdrawn each year to pay for holidays and the like, while maintaining the capital balance for Sarah to use in retirement.  We also discovered that the existing investments were exposed to a significantly higher risk than they were prepared to take. We therefore recommended a far more cautious approach to match their actual attitude to risk.

Finally, we agreed to review their financial situation, including the existing investment, at least once each year to ensure that the money being withdrawn remained at sensible levels and their short, medium and long-term goals remain on track.

How did Tony and Sarah benefit from our advice?

Most importantly, Tony and Sarah are now no longer spending more than they earn.

Furthermore, they are now withdrawing a more realistic and sustainable level of income each year, which will allow them to achieve their twin aims of enjoying life now, while making provision for Sarah’s retirement.

Finally, their financial affairs are now reviewed on a regular basis, with the plan tweaked and changed as necessary, to ensure they remain on track.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

The Financial Conduct Authority does not regulate tax advice.

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