Annabelle Williams explains when it’s worth enlisting the help of a professional
Getting your affairs in order is complicated and many people will have considered enlisting the services of a wealth manager, either on an ad-hoc or more permanent basis. But when do you need one, and what should you sort out first?
DO I NEED HELP?
It’s worth getting the basics in place before looking at paying a professional for help. People should first have savings of at least three to six months’ expenditure, says Tony Wellby of wealth manager Saunderson House. If the individual has children, they should also take out a good private life insurance policy – even if a workplace policy is already provided. “You may have £400,000 worth of cover through work, but what would happen to your partner and children if you weren’t here? It’s very cheap to take out further life cover,” he explains.
Once these are in place, people can look at how much they actually have left over to invest and manage. “At this stage, you should consider the other options and that’s a case of what is tax efficient, whether it is pensions, Isas or using capital gains tax,” Wellby adds.
HOW WEALTHY SHOULD I BE?
This is not as simple as having a good salary.
Both advisers and wealth managers have “minimum asset” requirements, which is simply the amount of savings a person has to have for them to consider taking you on. This needs to be savings held in bank accounts, Isas, a Sipp or trust, which a wealth manager could look at and give investment advice on.
The difference is important as people with high salaries may also have big mortgages and school fees to pay, which will leave their overall level of investable assets lower.
It may also be more useful to focus on overpayments to a mortgage first, rather than trying to build up an investment portfolio. “With mortgage rates so low, it is very cost effective to pay it off rather than invest,” says Wellby.
“Paying down a mortgage quickly can be a very effective way of building up assets.”
For those with sums of money to invest, wealth managers vary greatly in the minimum amounts they require. Private banks have the highest hurdles, so anything with “bank” in the name will likely require at least a million in assets to start with. But specialist wealth managers tend to have lower mini mums, and for people with a minimum of £20,000, it is worth searching a website such as FindAWealthManager.com.
Even once this minimum is met, the levels of services will differ. People with savings well over the minimum level will be given a bespoke investment service. They will need advice tailored to their family’s individual needs, which will take into account issues such as estate planning and preserving wealth for the next generation.
MAKING THE MOST OF TAX BREAKS
This is where professional advice can really help. “Everyone knows about the tax advantages of Isas and pensions, but there are lots of other strategies a wealth manager can recommend to minimise your tax obligations. In fact, the government offers compelling tax incentives on certain types of investment – such as enterprise investment schemes and venture capital trusts – which can really get your tax bill down,” says Lee Goggin of advice website FindAWealthManager.com.
FOR THOSE WITH FEWER ASSETS
People with lower levels of investable assets will not need to think about estate planning and the like. Their focus will be more on preserving and increasing their savings pot. They will likely be offered “model” investment portfolios, which are set investments appropriate for a person’s goals, whether it be growing the savings pot rapidly, investing it in a very cautious way or taking regular income from it.
Those with less to invest may also wonder if the fees charged by a wealth manager will be worth it. They each have their own “rate cards” for different services. Fees are always a big consideration with money matters, but a wealth manager may be more adept at helping someone increase their wealth, than if they try to go it alone.
“Reaching the level of wealth you are targeting, in the timeframe hoped for, may well depend on you engaging a wealth manager earlier than you might think. Having your investments and tax liabilities managed efficiently will make all the difference to meeting your financial goals,” says Goggin. Moreover, many wealth managers will offer a free consultation. It is worth going along to discuss your situation or show your rudimentary plan and have it checked by a professional.