Twice in the last week I have delivered some advice that in many people’s minds goes against what they expect from an IFA.
I know that because they have told me so.
My advice was “Don’t invest your money”. Why was that suitable advice?
In both cases we had a very detailed conversation that focused on their financial planning needs.
We examined what it was that they wanted to do with their money in the short, medium and longer term.
Both sets of people (husbands and wives together) had children who they wanted to assist in the short term.
They wanted to make money available to their off-spring to pay off University costs so that the children could enter the next stage of their life without carrying burdensome debt with them.
In my view educating children is usually one of the best investments any of us parents can make.
The second use of the money was to help children to get onto the housing ladder; admirable because let’s be honest housing in south east England is hardly cheap and yet owning property is still aspirational for many young people.
Both of these desires were short term and thus the obvious answer was not to take any investment risk with the money.
The prospect of a market correction in even a quite cautious fund would probably be more disappointing than inflation eroding the value of cash.
I know, interest rates on cash accounts are pretty dire at the moment and in most case well below the rate of inflation and yes, in many instances the interest is taxed as well.
But rubbishy circumstances like that done automatically mean that these clients should invest their cash.
As I put it to both couples “How would you feel if we were sat at this table in a year’s time and the £100,000 you had invested was only worth £79,000?”
In both cases it was abundantly clear that would not make for a comfortable review meeting (and I certainly wouldn’t have had the tea and biscuits I was enjoying at these meetings!).
It is not wrong to invest money with purpose.
It is, in my view, wrong to invest money when you don’t have to.
So if you have enough income, can afford to gift to the next generation, spend a little and have enough in an emergency fund, and not much more than that the answer to the question “How should I invest my money?” is “Don’t”
Why was that advice unexpected from an IFA?
Both parties had experienced the product sales pitch from IFAs before, both were surprised that an adviser could say “don’t buy a product”.
