The clients
Tom and Jane came to us for investment advice. Jane’s father had recently passed away and left her and her sister his property. The property had been sold and the cash split 50/50 between Jane and her sister. Jane wanted advice to how best to invest the money.
The couple have one daughter, Sarah, who is currently studying for her A-levels and therefore still living at home and financially dependent. Jane works for the NHS, so has an NHS pension scheme, and Tom is employed by a large company with a decent benefits package, including a pension he and his employer pays into. They were both comfortable with the financial protection they had in place.
What we did
We asked the couple to look forward 30 years and asked the question, “if all goes to plan, what might the highlights be?”. It’s never an easy question, but in our experience, once the first idea comes the rest follow much more fluently. After giving them some time to discuss and ponder, the result was:
- One last family holiday before Sarah is too old to holiday with mum and dad
- Sarah going to university
- Sarah getting married
- A trip to Australia to visit Tom’s brother
- Retiring and travelling around Europe in a campervan
So, the hard part was done, now we just needed to put a plan in place to see if we could help them achieve this.
Firstly, Tom and Jane didn’t have much in cash savings to cover emergencies or occasional spending, so we held back £15,000 in a savings account.
The ‘last family holiday’ would be planned for the following summer, after Sarah had finished her exams. They wanted to make it a special one, so we also held back £7,000 in cash for this purpose.
Sarah was intending to take a year out before going to university. John and Sarah didn’t want her to get into too much debt; they therefore reserved enough money to pay all of her university fees for the two years. This would still be a couple of years away yet, so we put the money into Premium Bonds. This ensured the money was not exposed to capital risk but stood a chance of earning a better return than a savings account.
The remaining objectives were all more than eight years away, so we recommended an investment portfolio. We would use their ISA allowances in full immediately, with the balance of the money invested in a taxable account alongside it. Each new tax year we would move money from the taxable account to the investment ISAs to make full use of their allowances. This would continue until all of their money was held within the much more tax-efficient ISAs.
We split the investments into two portfolios: one with a lower risk profile, with enough money to cover Sarah’s wedding costs and the Australia trip, as that money would likely be needed sooner. The other portfolio was taking slightly more risk and therefore had the opportunity for higher returns, seeing as the capital wouldn’t be needed for at least 15 years. Fluctuations in value therefore did not matter to them and they were comfortable that they understood how the investment might behave.
The results
Tom and Jane now feel they have a plan in place for their future and have used Jane’s father’s money to really benefit the whole family, just as he would have wanted.
