If one of your clients has received an inheritance, it’s likely to be an emotional time. They may be processing the loss of a loved one and suddenly face the prospect of dealing with, in some cases, a life-changing sum of money.
As a result, clients may find an inheritance difficult to deal with, especially when they may be expected to make significant decisions.
So, to help you counsel clients who may have received an inheritance, here are five important things for them to think about.
1. Don’t make any big decisions straight away
If a client has received an inheritance they may feel as if they must make decisions immediately. However, that is very rarely the case. Indeed, it’s often a good idea to do nothing, and for your client to process their grief before they make any potentially significant financial decisions.
It’s important for a client to be in the right frame of mind before they decide what to do next. So, placing the inheritance into a cash savings account can be a good place to begin.
The money will be secure and earning a small amount of interest while your client thinks more carefully about what they would like to do with their inheritance.
Remember that the Financial Services Compensation Scheme (FSCS) protects a saver for up to £85,000 per person per authorised provider. If the inheritance is larger than this, it may be worth a client considering splitting it across several banks or building societies, although they are likely to benefit from the FSCS “temporary high balance” limit of £1 million for up to six months.
2. Think about what they (not the benefactor) want the money to do
Your client may have a clear idea of what they might want to do with their inheritance. Despite this, they may still be conflicted and worried whether it’s what their loved one would have wanted them to spend the money on.
It can be easy for clients to fall into the trap of dealing with an inheritance in the way they think the benefactor would have wanted, not what might be best for them.
While it’s natural to want to take a loved one’s goals into consideration, it’s important that your client’s aspirations come first. Encourage them to take time to think about what they want to achieve, without worrying about the expectations of others.
3. Think long term
Clients with an inheritance might be tempted to make impulse spending decisions that will improve their life straight away. Of course, there’s nothing wrong with that!
However, they should also consider their future. Could the inheritance mean that they will be financially secure in retirement? Could it improve their lifestyle for the rest of their life? Could it help them to pass on money to their family?
Any financial decisions a client makes now could have a long-lasting impact. Short-term decisions could place a client’s life goals out of reach despite having the means to meet them.
4. Work out how the assets fit with their own
If a client has inherited a range of different assets, it can pay for them to establish how they fit with their own savings and investments.
For example, they may have inherited a sum of cash savings, which leaves their overall risk profile as too cautious. Alternatively, they may have inherited a lot of shares in a single company, which means they don’t have the diversity of assets they might need to reduce risk.
Furthermore, inherited assets may not align with a client’s ethical or environmental priorities.
It can pay for a client to review their overall holdings and consider what changes need to be made in line with their tolerance for risk. Changing the asset allocation into something more suitable is likely to be a sensible first step – considering both their own wealth and the inheritance.
5. Work with a financial planner
Inheriting assets from a loved one can be financially transformative. It can also sometimes feel like an additional level of stress at an already emotional time.
This is where working with a professional can add real value.
A financial plan can help your client to balance their short-, medium-, and long-term goals. Working with the right financial planner can also help them to create a blueprint for how they want to use their inheritance to reach their aspirations.
As well as practical advice concerning where and how any money might be invested, we can work closely with your client to ensure they make the most of their windfall.
We can also provide ongoing advice to regularly review your client’s assets and plans to ensure they remain on track.
If you have clients who have received an inheritance, it can pay to take financial advice. We can help. Email email@example.com or call us on 0118 987 6655.