Dearly departed

When someone passes away in the family, it hits hard. Harder than you would ever expect. But once the trauma of announcing the news, conducting the funeral, and saying last goodbyes is over – you’re left with the second round of grief. Sorting through your loved one’s personal affairs and finances to work out ‘what’s next’.

It might be that your dearly beloved has been forthright in preparing his estate for his inheritors. Or (and as is so often the case), they might not have felt ready, or even found the time to prepare a will, let alone set up the necessary ‘pots’ for the family to rely upon. From my own personal experience, I am very lucky that my dear father had the foresight to plan ahead for his demise. Perhaps it was different for him. He was very unwell for over a decade, and with the whisper of loss always on the horizon, the grim reality of it all must have dawned on him long ago. But I’ve always wondered at how brave he must have been to face death head on, whilst still brimming with life. I don’t know if I could do it for my own children. Although, having seen the lengths Dad went to for us, I really hope I find that bravery in me one day.

Apart from Mum, none of us really knew how much Dad had prepared his estate for us until we all sat down with our newly appointed financial adviser. The documents had all been kept safely in their filing cabinets (giant grey monoliths that we consistently side-stepped for fear of being explained what was in them). Those cabinets teemed with reams of paper that we never fully understood the importance of, until this day.

We felt so reassured when we were told that Dad had thought to arrange as much as he could to make this horrible time somehow more manageable. Aside from the extensive joint will, there was life insurance, business cover, trusts for each of us, you name it. Our minds boggled a bit on hearing the explanations of how everything would work. And at the same time, we were tearfully at peace when we heard how the family home, and the business our parents had built up over the years, were now protected. Protected by various clever mechanisms Dad and his team had thought up. We truly never gave him credit for everything he thought of. But then, that’s so often the case for loved ones. We don’t see them for the stars that they are until their light is gone.

I think we all were so grateful that we didn’t have to sit there, whilst still in the throes of grief, and work out all the money and legal documents needed to just ‘carry on’ for now. Dad had taken away that exhausting stress for us. Just one of his many parting gifts. It gave us the space to breathe and plan the future, and to say our proper goodbyes in our own time. No probate breathing down our necks. No unnecessary calls back and forth with official bodies. It was all in place with a few signatures and registrations.

So I guess, thanks Dad, we miss you beyond words. You really did think of everything. I’m off to buy a filing cabinet. Because, I want to be just like you when I grow up…Love, Your Daughter (mother of two, 35).

Our guest contributor is Thasha Aly. Thasha was born and brought up in Kent, after her parents emigrated from India to teach here. She has worked in the law, the third sector and in special educational needs during her career. She and her husband live in London, and when she’s not running around after their toddler, she enjoys travel, learning, and eating (a lot).


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What to look for in a financial adviser. An insider’s take.

Apparently, those who benefit from financial advice have seen their overall wealth increase by £47,000 over the previous 10 years according to a study commissioned by Royal London which was conducted by the International Longevity Centre. When I first came across this study, I paused, reflected and thought “nonsense”, it must be a lot more, but admittedly it’d be incredibly difficult to quantify.

I mean, how do you quantify the advice that identifies cost-effective protection needs for a client that 15 years down the line results in a now single parent having enough funds to support the education of her children, maintain a roof over their heads whilst being able to grieve the loss of a spouse without the pressure of needing to worry about money?

How do you quantify the value add of maximising the growth of your surplus income and savings by appropriately choosing the correct tax wrappers and then tailoring the underlying investments? 

How do you quantify the value add of knowing how and when to access those investments in the most tax-efficient manner possible?

How do you quantify the value add of structuring your wealth in such a way to benefit your children and your grandchildren?

How do you quantify the value of the advice given to a director of a business that goes on to protect the jobs of their employees and the valuable services they offer to their customers by putting in place effective succession plans in the event of their death? 

How do you quantity the value of the advice given to stop you from making a ridiculous decision several years prior?

I don’t know, admittedly it’s beyond me.

Financial advice has come a long way in the UK; advisers are better qualified than ever before, and the industry is more closely regulated than ever before. Admittedly there’s a tug of war between the industry and the regulator, but in my opinion, it’s a healthy one. 

The business model

In saying that it’s important you know how the industry works. For instance, an adviser’s performance is based on two metrics, and they are rarely standards of service. These two metrics are one, assets under management (AUM) and two, the initial advice fee.

The AUM is a good measure of the ongoing income that’s likely to be generated by an adviser who charges an ongoing advice fee. This fee is usually between 0.5 – 1% per year; therefore, £1,000,000 under management on which there is a 1% ongoing advice fee, earns the practice, £10,000 per year. Of that amount, a portion will go to the adviser as per his/her contract, i.e. self-employed or employed. Where protection is put in place, a good measure would be £1,000 commission for every £50 premium. The commission that is paid to the adviser may apply a loading to the premiums you pay, for the entire term of the policy. 

Advisers who’ve accumulated enough AUM can effectively sit back and service only those clients and the odd referrals that come out from them. Their motivation is to provide quality customer service to a manageable client base but also to have a better work/life balance.

The AUM is crucial because it is the most significant factor in determining the value of the financial advisory business which is important when the Director of the practice wants to exit, that is to sell up and retire. But many may simply decide not to take on any further clients.

Most advisers tend to be self-employed, so in the early years, their income is driven largely by the initial advice fees charged. Standard fees being 3% of the amount invested. Employed advisers, on the other hand, need to justify their salary, so if an employed adviser is on a basic salary of £60,000 per year, he/she would need to usually validate this income by a factor of 3. This means he/she would need to generate £180,000 of fee income to incentivise his/her employer, which would, in turn, allow the adviser to earn bonuses over and above the validation figure.

My biggest problem with the remuneration structure, despite the internal compliance checks, despite the regulation, despite consumer access to the Financial Ombudsman Service, is the simple fact that the adviser’s income or their job security is overwhelmingly dependent on an investment being made. This is contingent charging.

Now, in my opinion, a fairer model would be to negotiate a fixed fee based on the complexity of the work, even if that means them issuing you with a report simply explaining your situation and then concluding ‘take no action’. I’d even go as far as to say, that the ongoing advice fee should be fixed rather than being dependent on the AUM. However, this is often not feasible – I discuss why here – Why do advisers charge on a percentage basis? 

Where it is, pay that fee via standing order and not from your underlying investment funds, which could risk encashing your investments to pay for said fees at the wrong time.

A financial adviser doesn’t grow your investment, that’s the job of your fund manager(s), however your adviser would’ve adopted an investment strategy for their firm and should be able to justify it. It’s important to have an investment strategy as opposed to relying on a stockpicking strategy every year which is no different to listening to stocktips from a tiktoker. 

That being said, it’s in fact more important your adviser advises on a tailored investment product and tax wrapper in light of your current circumstances and longterm needs especially if it’s creating a funding source for your business, managing different types of tax, and even ways optimum ways to pass your accumulated surplus wealth down to your children – yes – a will is not always sufficient and not the only mechanism. In fact the underlying investment strategy although important is not anywhere near as important as ensuring the overall structure in place is appropriate for you and your family.

It’s knowing the big picture where the value of financial advice or more correctly, wealth management, really plays a huge part. The more competent your adviser is in understanding trusts, family investment companies, structuring protection policies, tax implications as well as regulated investment solutions, the more priceless your adviser is. They may charge at least 1% per year and require £500,000 in assets under management to you for the privilege. Where larger sums are involved they may be willing to work on a fixed fee basis. Such advisers are rare, so understand the dynamic with such advisers is different but provided you both get along the value-add to the family would far outweigh any charges.

  • They won’t care about earning commission from recommending an exotic investment product.
  • They will avoid unregulated investment solutions
  • They will not attempt to offer you investment solutions via their unregulated company
  • They won’t promise you market leading investment returns – they already know and by then you will know, that investing in the stockmarket is there as a better place to park your funds, than keeping it in cash.    

QUICK TIP: Every time you have a meeting with your adviser, keep a meeting record of what was discussed, who was present, how long the meeting lasted, and what the outcome of the meeting was. If your adviser does this anyway, just request a copy and make any edits and return.

What to expect

A financial adviser is not there to make you wealthy and achieve financial freedom. If they say they are, they don’t mean it, and it’s probably based on very poor ‘sales’ training. The only person who is going to make you wealthy, is you, along with your entrepreneurial efforts.

The role of a financial adviser is simply to manage your wealth better. What you get out of a financial adviser is dependent on where you are in your life, how complex your affairs are and even how resourceful your adviser is. Now, when it comes to determining the complexity of your affairs, leave that judgment to your financial adviser – you don’t know what you need to know to make that assessment.

Recommendation: Have a financial health-check at least every two years and negotiate a fixed fee with an adviser.

During an initial meeting, expect a conversation about all aspects of your life, I’m talking, lifestyle, career, family; parents and children, property, retirement, aspirations and concerns which will allow the adviser to get a good picture of your world and consider what solutions would be most appropriate for you. For instance, some investment solutions won’t be suitable if you are planning to leave the country. Or if you expect to receive an inheritance whilst in a difficult marriage it could lead to advice around structuring any windfall in a certain way to ensure it’s protected from a divorce settlement claim.

Remember you’re not only tapping into technical advice but also the adviser’s resources and professional connections.

A good initial meeting could last around 2 hours, although I’ve had initial meetings where it’s been over 4hrs. Some advisers will offer that initial meeting for free, especially if you’re closely connected to an existing client. If your parents have a financial adviser, I’d suggest you reach out to them first.

What to appreciate in an adviser and what to look for (not in any order of preference):

  1. Integrity; difficult to assess this in an initial meeting, but it’ll either come across or won’t over the more ‘touches’ you have. An adviser with integrity may not know the immediate answer but will go out of his/her way to find it before recommending any course of action and thereby being closer to any ‘sales target’.
  2. Technical competency; once upon a time, many years ago, I still remember a senior manager saying technical competency didn’t matter, only that you needed to know how to sell. Utter nonsense. Smart advisers will have a broad understanding of investments, tax, law, different financial structures and will be able to add immeasurable value as a sounding board for some ingenious ideas some entrepreneurs come up with, that with a few tweaks could work.
  3. Resourcefulness; a very good adviser will also be very well connected to other quality professionals who can add value to you personally and in terms of your business.
  4. Good fact-finding skills; you’ll get an idea of this from the initial meeting based on the questions they ask and comments they make. You should get a few ‘ahaa!’ moments and ‘I didn’t know that!’.
  5. Likeability; you need to like your adviser. This is someone who will be in a very privileged position to know about your personal financial affairs and someone with whom you’ll be in regular contact with. Liking your adviser will make the relationship so much better.
  6. Transparent Fees; if you don’t know how much you are paying; you can’t appropriately measure value. I would also extend this to include the disclosure of any fees they get for recommending a certain product or even a third-party professional.

Goodluck and hope the above helps.

Mohammad Uz-Zaman is a chartered private client wealth manager who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also an associate member of the Society of Trusts and Estate Practitioners (STEP). He works closely with financial advisers, general practice solicitors, accountants and investment managers from several major practices.

Should you like to book an initial slot with Mohammad Uz-Zaman directly, please contact us and request scheduling a slot with him personally.

How financial advisers can add more value

The need for quality financial advice is increasingly important due to several factors, notably poor financial education, lifestyle creep, and inheritance windfalls. In a nutshell, we have a society that lacks basic financial competency to manage their own personal budgets, who seek and pay for a lifestyle beyond that which they can realistically afford on credit cards and personal loans and then ultimately expect to pay off the said accumulated debt by way of an inheritance windfall.

Financial advisers pay little attention to these matters, largely because they tend to focus on individuals who’ve managed to escape the above and into financial solvency, which often equates to having at least £100,000 in investible assets or in accumulated pensions. In this climate, there’s an argument for much needed financial coaching to sit alongside other service offerings such as financial planning and wealth management.

The value of a financial adviser should be to mitigate the impact of volatile economies, volatile markets and even volatile lives. This is done by carefully considering a clients’ life plan and financial context and putting in place tailored protection, investment and retirement plans. But unfortunately, too many financial advisers fail to recognise the threats to their client’s wealth, that doesn’t come from poor fund management or a lack of diversification or a downturn in the markets, but rather from:

  1. inheritance disputes that are increasing year on year
  2. increase in divorce settlement claims
  3. a poorly structured early inheritance
  4. a failure to inheritance plan
  5. a failure to gift cash and property to children efficiently during their lifetime
  6. a failure to advise due to a client’s loss of mental capacity

For the first time ever in British history, we will see a staggering £5.5 trillion pass from one generation to the next over the next 30 years. Poor planning or lack of planning will see financial advisers’ assets under management dwindle as they’ve failed to build a relationship with their clients nearest and dearest who need advice on how to best access any inherited wealth and to also improve their clients’ chances of receiving an inheritance that isn’t otherwise whittled away due to poor structuring.

Further, financial advisers need to become conscious of the plethora of claims that their clients’ estate could be facing as a result of inheritance disputes due to unresolved fracture lines coming to the fore post-death.

Ultimately there is no substitute for face to face advice, as financial advisers tend to see their clients every year to learn about their developments and tailor any plans; there is no other profession that offers the frequency of contact with a qualified and experienced professional about one’s circumstances.

But in order to strengthen their proposition for a time poor and cost-conscious market, advisers need to be aware of asset preservation needs where they can leverage the support of qualified practitioners who can solve the above pain points but also identify further regulated planning opportunities.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds a BSc (Hons) in Psychology & Sociology and an MA in Islamic Studies. He is also a member of the Society of Trusts Estate Practitioners, holding the STEP Advanced Will Writing Certificate. He works closely with financial advisors from several major practices.

Sources: (inheritance disputes)

Expecting the Unexpected: Protect Your Income

Looking to the future is something most of us only do in the short-term.  We think ‘it will never happen to me’, or ‘we’ve got better things to spend our income on’ and unfortunately planning for the worst is simply not a priority.

The sad truth though is that none of us are immune to illness or injury, which could keep us away from work and considerably impact our lifestyles.

Future-proofing – just in case.

At the very least look at your expenditure habits, be honest with yourself with regards to how long it would take you to return to work, even factor in the possibility of losing your job due to sickness and then looking for new work once you are better. That should give you an idea of how many months worth of income you will need to replace.

That figure should be your initial savings target, before you even think about investing a single penny into stocks and shares. There’s no point investing in stocks and shares which are long term investment vehicles if you have to disinvest at the wrong time, it could cost you and your family a lot of money.

Serious illness or injury that stops you from working is a real concern and affects hundreds of people each year.  Consider the following facts:

  • Nearly 1 million people a year are off work long term sick
  • Most common long-term work absence is stress, mental health and musculoskeletal injuries
  • Musculoskeletal injuries are more common for manual workers and stress is more common for non-manual workers.

You can read more here: 

What would you do?

If you were one of those 1 million, or maybe your willing to take that chance? Maybe your thinking population in the UK is around 64 million so it appears as if it’s a 1 in 64 chance. A chance that you are willing to take. BUT, the working population is 31 million, so, now that’s a 1 in 34 chance and we haven’t got to considering your current health, dietary habits, exercise habits and current mental health. If we were to factor those in, the statistics could look a lot scarier.

Income Protection

An income protection policy usually protects your income upto 50% of your gross salary. It’s at 50% primarily to encourage you to return to work and if it is used in conjunction with your savings it can be a useful way to help you manage your finances when things are not going so well allowing you to focus on your recovery. What’s more, is that it is permanent, this means once you have been underwritten you can make as many claims as you need to if you return to work and then become unwell again. The benefits are also tax free.





Disclaimer: The information contained within this article are provided as illustrative purposes only based on legislation at the time of publication. Nothing in this article should be construed as advice or guidance to one’s personal situation. The value of your investments may go up and down, similarly, other aspects of your wider lifestyle and financial context may impact on your objective. In a nutshell, don’t rely on blogs and the articles for personal advice, and always seek advice from a qualified professional.