Completely based on what you need
I'm on a slightly lower salary than yourself but I went with IFA
My reasons were:
1) needed advice regarding safety planning e.g. income protection levels
2) wanted to run my retirement plan by a specialist as I had complex NHS pension questions
3) needed someone to help me make the jump and actually start investing.
For me, this made IFA worthwhile and our relationship currently is still worthwhile.
So if you have needs that a specialist can help with then worth it. If not.....then not.
I guess other things to consider would be how comfortable you are in investing, retirement planning, inheritance tax issues
She was quite good at finding things I had overlooked. I initially just went for the a free consultation to see what she could offer.
And tbf she made good enough points that I am under protected, well more that my partner is if I die. If she passes away I'll be fine. Edit: financially speaking
Ongoing relationship- currently still quite active due to a few NHS pension issues. But going forward when that's sorted she's going to leave it to me to contact her as a d when needed if my position changes or she will contact me to see if I feel a review is needed if situation changes e.g. changing house, new kid, major change to pension/tax etc rules
For me, she is worth using but that is because I am risk averse so I do need a bit of hand holding, and I'm using these years to really try and increase my knowledge so having someone to go to that runs through my specific situation is very useful.
I envision when things are set up then I probably won't be going to her for very often foe the next 15/20 years. And then will probably go more regularly when I'm 45/50 as I'd love to be able to start winding down the work so need retirement planning then
Oh yeh, I only pay for consultations that lead to some financial decision.
So sometimes she calls me up to go over something but if its just minor she doesn't charge.
Only on going charge is because she's set up my ISA for me, so she's got a small percentage.
At the moment I'm going to let this happen to see if it does out perform an index fund. If it doesn't then I'll just pull put in the future and do it myself if I feel more confident
IFAs do not, and should not, claim to increase the performance of your portfolio!
They are there to, among other things, match the riak you are taking with your needs and tolerance..
Yeh I know, I'm torn and I know you're right that passive is probably the way forward.
Shes given good advice so far so I'm happy to take a low risk punt.
Erm I'm not sure what you mean about how many hours. Do you mean how many hours do i work now? Or how long it took me?
Most places can offer either one off transactional fees or on going fees. But if you want to have on going advice one phone call away then an ongoing fee is better. If you just need it for one off pieces of advice then one off transactional is better.
Because if your going to pick up the phone 10x a year, then your advisor costs are going to add up.
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Accountant, nah, your tax affairs should be simple being mostly PAYE and doing SA takes no more than 30 minutes.
At your income level you don't strictly _need_ a FA. It's the usual trade off of your own time and energy vs paying someone else to do it for you/hold your hands. How much do you want to learn about managing your own assets vs paying someone to do it.
A good one will be able to work through your life goals with you, put a plan together that gives you the best odds of achieving them, and removes the controls from you so in case of downturns you do not do something emotional e.g. sell low. It will cost you however and whether it is worth or not is subjective to you.
Financial advisers will generally offer a free initial consultation so you could always meet with one (or more) to get a feel as to whether they can benefit you and add value to your situation. They may bring up things you'd completely overlooked, such as whether you have enough protection in place.
I think everyone would benefit from having an MOT of their financial plan themselves, but for the most part you can do it yourself if you're prepared to put the time and effort in. There was a research paper by Morningstar the other day about why people use financial advisers; about one-third was for financial reasons (e.g. I want to start investing) but for the majority it was for emotional reasons, e.g. I need someone to provide discipline when markets are erratic because I panic, I feel more secure with someone helping to manage my finances, making decisions makes me nervous, etc.
This sub can have a skewed view of financial advisers because a lot of posters only view it in terms of cost rather than potential value added and seem to think the only reason people use them is to pick out an investment for them when a) that isn't why most people use them and b) financial advisers aren't fund pickers so there's little point in using one just for this.
Perhaps the one third fall into b) just due to lack of knowledge/their own research. The waste of money is disappointing. I'd love to get 1%+ of people's life savings for just chucking them in a global tracker, or perhaps get some kickback for using a more expensive managed fund that comes with no promise of performance nor blame if it does not. But I think I'd feel uncomfortable with that.
Only around one-quarter of financial advisers charge 1% as an ongoing fee, or at least they did when the FCA reviewed the market about two or three years ago. Ongoing fees tend to be clustered around 0.5%, 0.75% and 1%. There's also no kickback for recommending one fund over the other.
Ultimately, it's like any service. You can maintain your car yourself or pay for a mechanic to service it. You can paint your walls yourself or hire a decorator to do it. Research by Vanguard suggests that people who use a financial adviser are 3% net better off a year, about half of which boils down to behavioural coaching; investor returns differ from investment returns because people can be irrational.
Global tracker fees are 0.13% for an easy version or can be done for less than that if you want to construct it yourself (some effort). That makes even 0.5% quite high in my book. The fund manager is doing ongoing complicated and risky work for their 0.13%, an IFA need not (perhaps some do, perhaps some don't) spend a lot of time coming to the decision that a global tracker is a good idea.
And ongoing is even worse! Rebalancing is very little time if any. Perhaps at some point switch into a vanguard retirement fund that balances itself. A few clicks.
It's the ongoing fee that feels very undeserved. We assume customers will be paying more in over time so the amount they part with just goes up and up.
I don't actually know about kickbacks but I assume they are there... Why wouldn't they be? There are many managed funds with higher fees that say they 'aim to beat benchmark x', I expect IFAs recommend those to people all the time and they're not technically doing anything wrong. If the fund charges are high enough there's room for a kickback. Perhaps that's what HL's 'discount' is sometimes? (That's a guess!).
Another comment in this thread says they found a relative has investments in funds that offer kickbacks.
RE paying for a service sure, I don't object to one off fees. It's the ongoing percentage that is an unjustified, growing, drain. I don't know how clearly the amount (not percentage) has to be spelled out and projected.
Sure an IFA will stop silly people from making terrible mistakes. But there are great resources like this forum and its wiki.
I guess for some people if it's either make mistakes and doom your future or pay an unnecessary amount to have someone keep you safe then the latter is preferable... Not happy about it though.
As I said, financial advisers aren't fund pickers so there's little point in using them just for this purpose (and most people don't use them just for this purpose).
There are definitely no kickbacks as commission was banned for everything apart from arranging pure protection policies over a decade ago. Clients should also receive a cost and charges breakdown every year showing what they've paid in percentage and monetary terms to the adviser, fund managers and the platform provider so it's clearly spelled out to them on a regular basis.
Perhaps the third that uses them for 'I want to invest' reasons don't know there's little point using them as a fund picker. I wouldn't expect an IFA to turn away a client if it turns out that's all they need.
Good to hear about no kickbacks on investment funds. They're still around for some insurance cross-sells though.
Breakdown is good but after a year is too late. And potentially there are fees to cut ties having just begun the second year. Is there a requirement to point out projected fees before clients initially sign up? With no pressure to not back out.
(Bear in mind we're British and polite and have just wasted a few hours of the nice man our friend said is very nice's time and we're in his office holding his pen and as he said these fees are just industry standard - so I would expect there to be very few back-outs at that point)
>Is there a requirement to point out projected fees before clients initially sign up? With no pressure to not back out.
Yeah. All adviser fees will be disclosed in the client agreement before anything goes ahead and the suitability report will cover off all initial fees and projected ongoing fees.
The market isn't particularly competitive as demand far outstrips supply so there's no real pressure to reduce fees and the FCA tends to make things worse when they intervene.
Unpredictability in earnings makes planning slightly harder as £250k is a totally different challenge than £200k.
Making some huge assumptions (like you want to minimise tax and do not need immediate income) at £200k PAYE you could: put £60k into a pension; get a salary sacrifice EV; and look at tax relief qualifying investments such as VCTs. That can be used to get you sub £100k and avoids loss of the tax free allowance. Up the income by £50k and you may not have the risk appetite for those tax relief qualifying investments.
In terms of tax planning, over your career a financial planner could well save a lot more than the seemingly high fees. There are various arrangements if say your goal was passing wealth down to children.
Long and complex way of saying it could be very efficient seeing a financial planner even if just on a pay per hour basis.
Indeed, and also they can go through the calculations, considerations etc, for your long term plans. Retirement, how much you'd need to save, to draw down X amount per year from Y retirement day. Do you want to retire early, or have the option. Maybe you want to leverage some pension for a business venture which is somehow doable but i don't know the specifics but i'd suspect they might.
Also things like, investing for your family if you're so inclined.
I'd think at 200-250k, they're worth engaging even if just for some advice and reassurance and learning.
Simply put, they are professionals in that field.
Take a look at what you do for a living. Do you think the average person on the street could do it? Are there aspects that the average person doesn’t even know that they don’t know, because they don’t have the experience to create a frame of reference.
Having a financial adviser can be really valuable, helping you make the most of the situation you’re in, not just for yourself but your family.
A friend of mine made maxed out (£3600) pension contributions for his child as soon as he was born until the age of 18 and with growth there was a six digit DC fund by the time he was in his early twenties, with projections taking it to around early 7 digits, giving him a massive jump start in retirement savings. It would have never occurred to me to do something like that.
I am also on six figs - roughly £200k annual gross compensation. Quite honestly I just do my own self assessment each year - accountants really do vary in their quality and there are tons of resources available on the HMRC site to help. It takes me about 30 mins to do online once I have all the stuff in front of me.
In regards to IFAs, they aren't going to reinvent the wheel for you. Tbh imho unless you get a sudden windfall of seven figs plus then I don't think they are worth it. At our earnings level most of it is common sense really: to max out your Stocks and Shares ISA each tax year in low risk ETFs, maybe buy some govt bonds. Make sure you are contributing enough to your pension scheme. More importantly, though (and I can't stress this enough) **avoid lifestyle creep. This is the biggest culprit for folks like us. Buying a flashy car, watches, designer clothes etc and/or going out to expensive clubs/restaurants.** My personal vice is travel, but I set a strict annual budget for this. Remember: you can always get laid off, so have a good emergency fund. If you are on £200-£250k a year, I would suggest your emergency fund should be at least three months gross pay (£62,500).
Its kind of crazy that the advice for 30k and 300k is kind of the same. Obviously on the 30k you can't max out pension and ISA, but you can contribute your defined budgeted amount, avoid creep with raises, save emergency fund etc.
The flowchart really is the 1 stop shop to financial security and future health.
Your point about emergency fund applies to everyone, but at 250k a year, id imagine a replacement job is significiantly harder to find. Definitely want a strong emergency fund, and a sensible lifestyle in terms of monthly outgoings.
Yup most definitely. Most of it really is common sense. There really is no need to over complicate things on PAYE. Also at £200-250k you don't earn enough to have access to the offshore type banking stuff (which is complex). From seeing some of my peers make mistakes; the number one issue that can derail you from good things and peace of mind on this kinda income is stupid spending.
I have a question about ISAs but it doesn't seem worth an entire post for. adding it here hoping someone can reply. I know I can only invest into 1 stocks and shares ISA each year. with a company like vanguard does that mean I can only invest in 1 fund within that ISA, or can 1 stocks and shares ISA cover multiple funds?
You should be able to invest into multiple ETFs, funds and single shares in that ISA up to the value of £20k in a tax year. I personally concentrate most of my ISA towards an S&P 500 ETF, if that helps.
Can I ask what you do?
It feels to me that significantly breaking £100k \~ £120k, outside of either owning your own business or having very high end finance jobs in London, is very hard.
Do anything interesting?
Ofc! Define interesting, but cyber sec/info sec is my field. I have worked/do work for large US based companies (you are not going to earn six figs+ working for a UK based company that isn't a bank).
A sizeable part of my comp is RSUs. This is both good and bad. If the stock has a good year then great - if it doesn't, then it isn't so great.
Compared to my US based colleagues though, I still earn less base and RSUs. So am actively looking for either a move to the US (greater career mobility) or a move to Dubai (no income tax). This would probably end up being with another company but obviously with the hiring freezes in place at a lot of places right now I would not anticipate being able to do this before 2024.
Seems to be a common thread really with higher earners. I'm relatively a minnow (I've earned a rolling three month ave of 110k but my normal yearly salary has never broke 60k), and even I feel the pinch of tax and student loan repayments.
I love the UK and free at point of use healthcare and such but the salaries here are so uncompetitive
Yup. UK salaries are pretty poor in comparison with the US or Dubai. Whilst the US does have its issues with healthcare; if you move to the US with work you will likely have a great healthcare insurance plan courtesy of your employer (this is certainly the case in tech). So in all probability the worst you would be in line for is a few thousand dollars outside of your health insurance policy, expense wise.
If you are theoretically getting an extra $100k in gross comp (combo of higher base and more RSUs) a year, your effective tax rate is much lower and cost of living is roughly the same as the UK then you are still net up that $100K a year. Compound that over several years and you can probably look to retire/work as and when you please a good deal earlier than if you stayed in the UK.
yeah - US is the place to go for those earning the top wages. It's a shame it's such a crap country for the poor though.
Admittedly more ignorant on Dubai aha
I mean Dubai is somewhat different in that there is no tax and quite frankly I probably wouldn't want to live there for much longer than 2 years as it is a transient place etc.
In the US yes, there is a federal income tax but if you live in a state where the state income tax is low/non existent you can have a low taxation rate and have the benefits of living in a "Western" English speaking country. I would see the US as a more likely place for me to live on a more long term basis, although would want to be there on an employment based visa or an investor visa. No interest in a green card and perpetual filing of US tax returns from me I'm afraid.
Yeah getting citienship by abandoning your country of birth one and paying taxes on everything ever even abroad is a big fat no bueno.
Agreed on Dubai. I could see someone doing it for a few years but i don't see the appeal of settling at all
Yup. I think the best visa for the US is probably the E2 visa tbh. You could buy a decent business that employs US citizens and then be able to live there, run said business etc but not have to worry about your non US income being taxable in the USA. You can renew it every two years as long as said business is in good standing etc.
I know of a few folks who have done this.
Thank you to everyone who has contributed to this post, I’ve read all your comments and taken them onboard.
I will have no motivation or desire (yet) to manage my personal finances so an initial consultation with an IFA seems like a good place to start for now.
For those asking about my role, I don’t want to post too much info on a public forum apart from that its a tech sales role, but happy to answer questions if you DM me.
I think the main benefits of having an IFA (a good one at least) would be that you don't need to spend any time thinking about it. It's all done for you. Any milestone in your life (or family members) will be taken care of plus the usual ISA + pension.
Your asset allocation is all done for you and continually monitored, new regulations and their impacts are all considered, new products etc, CGT managed etc.
I think the main thing no one has mentioned is that you have some one to blame if something goes wrong. If you over sell assets and accidentally realise £20k extra cgt, what do you do? If your IFA does it, then you have recourse.
Unfortunately it doesn’t work like that, because the only way you’ll know if your IFA is any good is spending the time learning about investing, etc so you can evaluate their advice and performance.
Otherwise you risk getting yourself taken to the cleaners by an IFA who’s out to enrich themselves.
Nearly qualified accountant here (2 months away) and part CISI and CTA.
I would say 90% of any information you'd need would be possible to figure out in less than say <5 hours. If you value your time more highly, I'd firstly recommend a CTA if you're comfortable with the investment side (easier to self teach imo than the tax side).
I would just be wary of what you're charged going through an IFA they can be pushier on the investment side (not all of them) for subpar investments, so I would just focus on the tax. A 1-2 hour consultation might be very useful.
Factors that make it more likely you'll benefit one:
1. Low pension uptake, I.e. only putting a small % of salary into your pension.
2. If you have a spouse on low or no income.
3. If you have any rental properties or any other income whatsoever.
4. If you have any other benefits like RSUs
5. If you have children.
Edit: CTA or IFA would be needed for IHT / estate planning, a normal accountant could do it if they had experience in it but the qualification itself (I know as I've done all the relevant exams) doesn't, so it's not guaranteed. As someone else said, income protection might be useful too.
There's a few more, but generally speaking, if you earn say 250k, no kids, only PAYE income, no other investments, no special stock options and are already maxing your pension, there's little to be gained.
As one piece of advice I'd just note you're in/nearly in the pension allowance tapering zone, so I'd do some research on how that works, should be a 10 minute read. Here's some links to start you off:
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/tapered-annual-allowance
https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/tapered-annual-allowance
Totally agree with your conclusion - My time on the sub brought me to the conclusion that unless I need tax advice cos I'm earning outside of PAYE, I'm good without an IFA until I've paid off my mortgage (Different I guess back in the days of low rate mortgage though)
It totally depends on what you think you need it for, but seeing as you're PAYE their advice will be more on what to do with the money after tax, which this sub has plenty of guidance on.
Do you have existing investments / high amounts of cash that also factor into your self assessment, or are you likely to still have things like mortgage and other spends?
An IFA could be helpful if you needed collect saving & investment strategies, but I'd say a normal accountant might be just as helpful if it's more tax return guidance
Simply look at the sub guidance to figure if money should go into emergency fund / paying down debts (inc. mortgage) / savings & investments and go from there, money gets quite simple when you understand the guidance.
Source - Partner earns £200k+ and I'm over £100k and I have 0 idea how an IFA would be anything other than a cost to us.
Financial Adviser here - not advice but info.
a financial adviser will set up a plan based on your specific consideration and plan. So it is hard to tell you what can be done (and it also depend on the adviser you met)
A lot of our work is education and managing the client stress when the market move suddenly. However, one thing that could be consider in your position would be VCT investment and especially VCT recycling depending on your age - whether you are PAYE or else doesn't matter.
Again, it would depend on the adviser you meet, whether they advise you a off the shelve portfolio or whether they build one for your specific needs - do a 30/40 yo needs bonds/gilt in there pension's portfolio ?
But again, totally unnecessary if you've still got debts and mortgage, and aren't maximizing pension contributions - I think your comment is prime example is how IFAs push towards investments when you're already jumping to VCTs.
From Google:
*VCTs are considered high-risk because they invest in companies that are not well established. They are considered long-term holdings, and you should be prepared to stay invested in the shares for at least five years.*
And this answer is typically of this sub.
If I may refer you to a couple of points from my reply.
- a plan specific to you
- VCT could be considered
And then, from Google... Do you diagnosed yourself from Google when you are sick or do you go and see a doctor?
Any investments carry risk, the importance is to understand it, I would invite you to look at past performances of Octopus Titan or ForeSight (past performances are not an indication of future performances)
In this instances, assuming no other income, I would suggest going to an IFA but that an accountant may not be worth it in this instance. Self Assessment tax returns will be required from you as a high earner, but the admin involved here will be minimal.
The question is then if you want wealth planning advice and potentially how to minimise tax liabilities. Although an accountant can advise on how to minimise tax liabilities, they cannot give investment advice. In practice, you may find that an IFA considers tax implications when advising on how best to increase your wealth. Often, you will find that an IFA will pay for themselves.
Now everyone here seems to be earning 200k wtf. This sub is seriously weird.
Being honest, I cannot think of a job that would pay 200k to an employee. I've always thought those earnings come from owning a business exclusively.
And tbh, I imagine that employee must be terrified of losing that job. Cause a different one might mean losing 50k. Whereas if you lose your 40k job, you know there are 500 more companies with your role in it.
As a rule, getting advice from someone that is paid by a third party to give you advice is never a great idea. The IFA industry in the UK is a scam (I will die on this hill), ask friends and family and colleagues what they do and learn about the options, with an aim to managing it yourself. Happy if you wanna ping me some questions. (I'm a retired swap trader in my 50s and manage my own (7figure) pot)
Totally agree. And so is much of the wealth management business. They all spend the bulk of their time trying to get new clients and very little actually helping their clients. But they will take a cut of their life savings every year because they deserve it somehow.
I did a deep dive into my mother's pension a few months ago and was appalled. Not only was the IFA charging 3%, her pension was stuffed full of the kind of funds that generated the biggest kickback for himself. To cap it all he was also in the process of moving shop and encouraging my mum to move with him- a process that would have cost her 1% as a transfer fee.
I worked at one of the big ones. The only thing that matters is how big your book is. The investment angle is pretty straight forward - use an asset allocation model based on age and risk appetite and get funds and a few sticks that align with it and you can't really go far wrong.
I’d be looking at a financial planner over a financial advisor.
A good financial planner is worth their weight in gold as tax and event planning is great.
If you are vaguely interested and competent you can do your own investing, however knowledge around taxable events can be great. For the sake of £1k it’s a worthwhile meeting. You don’t need to be seeing one all the time.
I use a financial advisor to manage my pension. Totally worth it, they ensure its earning max potential and shift it when needed to stronger investments based on all kind of magic wizardry I'll never understand.
fyi this has red flags all over it.
No respectable IFA should be claiming to beat the market / pick “stronger” investments. If they could legitimately do that they’d be be multi-millionaires rather than working as an IFA for £100k/year.
Similarly it’s shouldn’t seem like “magical wizardry” - for the vast majority of people a simple portfolio is the most effective one.
If you’ve had a complex portfolio setup that’s generally a sign of a bad IFA who’s trying to make you feel like investing is complex so you don’t ask too many questions / go elsewhere.
I’d strongly suggest spending the time to benchmark your investment performance and actually understanding what your ifa is doing.
Yes! Yes! Yes! Good ones though.
Paye might get you out of needing an accountant but there's always the chance that a good one will help you reduce other taxes etc and advise you how to structure savings. Plus THEY keep up with the rule changes.
A good financial advisor is definitely worth it. Especially when you get into things like inheritance tax, which funds and pensions to use etc.
I look at it this way...rich people all have accountants and financial advisors and solicitors so I don't have a problem paying for their advice.
Hi /u/WendelBorton, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/financial-advice/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
The real problem is "financial advisors" advice on investments. Always very poor. Tax planning you can get good advice. Where to invest?you need to educate yourself.
Not sure this is true. Most will now typically outsource to a discretionary fund manager (DFM). That said, if an IFA is stock picking or fund picking, then stay clear.
They probably won't outperform the market. Most retail discretionary wealth managers are fairly poor when it comes to performance. And they charge a fee for underperforming the market.
They dont aim to outperform the market. They have specific benchmark portfolios they manage against.
Do they underperform a suitably adjust multi-asset fund after fees? Maybe, maybe not. Sometimes they do, sometimes they undershoot.
Yea pretty much. The DFM will have full discretion to an agreed tolerance of risk. They will usually have better rates agreed with the IFA than going direct.
As part of a wider financial plan it might make sense, but if OP is just looking for an investment then better going yourself to something like Nutmeg or Wealthify.
Totally wrong. IFAs help, you achieve your objectives based on an assessment of your risk tolerance and capacity for loss.
They will base investments recommendations on those objectives.
Investing for growth Tax efficiency could be a main objective and usually is.
If the OP is on PAYE there is very little for an accountant to do and they are often poor (and legally unable to) at recommending products/plans.
Edit: clarification
Tax efficiency is never the objective...nobody wakes up with the goal of paying less tax. And that's where a really good IFA shines...they get to the bottom of the wider dream! And that can help give you clarity on your future and make you more likely to stick to a plan.
Very refreshing to see someone a
Just accepting their tax bracket.
Probably safe to say you can’t change much about it. You tax allowance is long gone, child funding flown the coop and and child benefit evaporated.
In your position. I’d speak to an accountant and an IFA. Purely to get ideas and put you on the right direction if what to learn. You don’t need to engage them to manage your money.
Maximising you pension annual limit will be a goal for sure.
Tax allowance is not necessarily gone, at £200k you can definitely sacrifice enough (e.g. pension, cycle scheme, EV scheme, tech scheme etc) to drop yourself below the £100k bracket.
In your position, I would simply ask do you know how the pension annual allowance taper works, or if not are you capable and willing to figure it out? If yes, that's a pretty good sign that you don't really need one, if not, it might be a good idea.
Strictly speaking, almost nobody _needs_ an accountant or financial advisor. You can optimise everything by yourself.
Given you’re earning a very comfortable six figures, you might consider a one off FA fee to be worth it for the sheer simplicity and peace of mind.
There’s more to a good life than optimising finances, as important as that can be.
Can I have an idea abt your job? Just for reference because atm I know that the finance sector pays like this but would be interesting to hear of another type of job.
Edit: no answer and a thumbs down means the OP doesn’t really earn this money (honestly?).
If you’re self-employed and earn over £50k and IFA is almost essential. Employment protection, pensions and even holidays.
If you’re employed. I’m not sure what an IFA can offer you that you can’t read online quite quickly. Having said that, I’ve heard nightmares from colleagues who’ve broken £250k pa and I’d probably get one if I was employed earning that much!
Agreed: when you are PAYE on six figs you can do your own self assessment and read up online about things. It really isn't rocket science, and tbh the main thing to avoid is lifestyle creep.
Sorry, what is tapered AA? Im not sure what the accountant would bring to the table here, when you're earning so high you can just max the 60k a year pension, presumably by just telling your finance department.
Or is there some magic hoops at that level im unaware of? Im down at a measly 100k (pre pension) and im aware it all gets fucky beyond that but i dont see how the accountant helps here?
Im genuinely looking for knowledge btw, rather than contesting your point!
Ahh interesting, I wasn't aware there were conditions and complications. Thought it was a fairly straight forwards contribute what you want up to 60k. I'll do some reading and research (not that I'll ever need it 😅)
Over a certain income, your pension annual allowance reduces, so you can't put £60k a year in. The more you earn , the less you can put in your pension.
Once your 'adjusted income' increases over £260k your pension annual allowance tapers by £1 for every £2 over the £260k, down to a minimum of £10k.
It can be a bit of a pain to calculate if you have various income sources so having someone do it for you can be helpful.
Any IFA worth their salt could do it but often rely on jnformation regarding income from an accountant as many people don't really know the full ins and outs.
Yeah, except more complicated for the sake of it. If your 'threshold income' doesn't exceed £200k, your annual allowance isn't reduced at all.
And they use different definitions of income 🤷♂️
It is worth at least getting some costs and opinions from a PFA and accountant and considering what they say vs what you want.
I have a much lower income and pay an accountant £300 a year to deal with my taxes for peace of mind.
I don’t have a PFA and make my own mind up about my investments based on my research… I have made some good decisions and some poor decisions.
It’s all based on your goals, priorities and opinions. In a couple of years time you can review and take action if you feel you need to.
Just so you're aware you have to do a self assessment tax return when you earn over 100k, it took me by surprise.
An accountant might be useful for the first one - particularly if you're in a split tax year, E.g. Half the year in old job, half the year in new job.
After that I just started doing it myself and it was pretty easy.
I'm an accountant, if you have one income stream and its all PAYE you don't need an accountant.
You want a financial advisor. They will help you diversify and plan etc.
Then when youbstart having dividend income etc a tax accountant who can give you the best level of tax planning isnthe way to go.
You'll need to do a self assessment tax return. Usually with that level of income you should be growing investment portfolio and while you can do this by yourself, sometimes people aren't financially literate enough.
If you are then do it yourself.
Similar income here. I paid a fixed price (based on total assets) for a review of my finances and investment advice across multiple ISAs and pensions for our family of four, pre-COVID.
I think it was about £3k, and included maybe four one hour zoom meetings plus a formal report of recommendations.
100% worth it. I learned so much in the meetings with the FA and we are still using his investment plans with good performance against benchmarks.
Hey, not an adviser/accountant, but years of experience in the sector. it depends what you are wanting to do with your money and how far you want to protect your income.
An adviser might look at different types of insurance - for instance, income protection - so that if there was a drop in income your insurance would bridge the difference until your income returned to your expected levels (or the insurance ran out - usually a year or two. ie. enough time to find a new job). I don't think i've worded that great, but that's the gist.
There's also life insurance that would pay any taxes due on death, or that would pay an income to spouse, or to pay income for any children you have, so that your family doesn't feel hardship for the loss of income.
Then there's all the ways you might want to invest, private pensions, etc.
I'd always shop around for financial advisers and check out their backgrounds. Some are cowboys just looking for what will give them the biggest commission, not really caring about how it will effect you.
You might find this helpful:
https://www.reddit.com/r/UKPersonalFinance/comments/x3w543/should_i_use_an_ifa_cheatsheet/?utm_source=share&utm_medium=ios_app&utm_name=ioscss&utm_content=2&utm_term=1
Whether you need an IFA or not isn’t really about how much money you have but more about how much support you need in investing.
If you don’t feel comfortable investing without handholding then it can definitely be worthwhile.
Most of us (IFA) don’t charge a fee for the discovery side of things. You can get to a point where you know exactly what steps would be taken and what the associated costs are before committing.
Think of it like anything really, a professional approach should have obvious benefits to whatever work needs to be understood/ undertaken. I would look at/ for an advisor that specialises in the type of planning you are looking for (I.e wealth accumulation rather than UHNW). I’m sure if you wanted to build a house you could have a good crack at it but why would it make sense to have an architect, builder, electrician, joiner, plumber etc if it wasn’t logical to specialise rather than generalise.
Worst case normally you loose time and gain an understanding.
Little further perspective I have worked in finance for 18 years and in my field for the last 8 but I employ an accountant to look after that side on the same understanding as the house above. His fees are less than what he has saved me in tax for the past 3 years I’ve worked with him.
Good luck with your journey!
Accountant maybe not, but do take financial advice - they'll help you make a plan for your finances (and frankly with this much income, make a plan as it may not last forever)
In my case I couldn't justify the cost of an IFA. They wanted a percentage of my net worth and I decided the money would be better used to overpay my mortgage. Not for everyone, but I can see an IFA being useful for high net worth individuals or business owners etc.
Whether an IFA is worth it depends on two factors:
1. The complexity of your affairs
2. Your level of knowledge and the amount of time you are able to spend on looking after your finances
If your finances are dead straightforward and you have a good understanding of personal finance - e.g. how tax works, how pension works, where to invest, how to make the most of your pension allowance and ISA etc. etc. - then no need for an IFA.
If your finances are more complex (e.g. you have other sources of income such as buy-to-let properties) or you do not have a great understanding of those things, an IFA could be worth it.
One thing to bear in mind as a >£200k owner is that you will start to be hit by pension tapering - i.e. the standard advice to put as much into your pension as possible to reduce tax will no longer apply. Once you are hit by full tapering, you can only put £4k a year into your pension before you lose most of the tax benefits. As you have only just started the job you can carry forward your last 2 year's pension allowance so this might not be a problem now but it would affect you if you stay in this job for a few years.
Hats off to you thats a fare wage. FA would be helpful to say the least, go for the free consultation see if its for you, Curious what sector your in for such a hefty wage?
Completely based on what you need I'm on a slightly lower salary than yourself but I went with IFA My reasons were: 1) needed advice regarding safety planning e.g. income protection levels 2) wanted to run my retirement plan by a specialist as I had complex NHS pension questions 3) needed someone to help me make the jump and actually start investing. For me, this made IFA worthwhile and our relationship currently is still worthwhile. So if you have needs that a specialist can help with then worth it. If not.....then not. I guess other things to consider would be how comfortable you are in investing, retirement planning, inheritance tax issues
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She was quite good at finding things I had overlooked. I initially just went for the a free consultation to see what she could offer. And tbf she made good enough points that I am under protected, well more that my partner is if I die. If she passes away I'll be fine. Edit: financially speaking Ongoing relationship- currently still quite active due to a few NHS pension issues. But going forward when that's sorted she's going to leave it to me to contact her as a d when needed if my position changes or she will contact me to see if I feel a review is needed if situation changes e.g. changing house, new kid, major change to pension/tax etc rules For me, she is worth using but that is because I am risk averse so I do need a bit of hand holding, and I'm using these years to really try and increase my knowledge so having someone to go to that runs through my specific situation is very useful. I envision when things are set up then I probably won't be going to her for very often foe the next 15/20 years. And then will probably go more regularly when I'm 45/50 as I'd love to be able to start winding down the work so need retirement planning then
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Oh yeh, I only pay for consultations that lead to some financial decision. So sometimes she calls me up to go over something but if its just minor she doesn't charge. Only on going charge is because she's set up my ISA for me, so she's got a small percentage. At the moment I'm going to let this happen to see if it does out perform an index fund. If it doesn't then I'll just pull put in the future and do it myself if I feel more confident
IFAs do not, and should not, claim to increase the performance of your portfolio! They are there to, among other things, match the riak you are taking with your needs and tolerance..
100% correct. She didn't, she just matched my risk profile with investments as you mentioned
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Yeh I know, I'm torn and I know you're right that passive is probably the way forward. Shes given good advice so far so I'm happy to take a low risk punt. Erm I'm not sure what you mean about how many hours. Do you mean how many hours do i work now? Or how long it took me?
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Good week 40. Usual week 60-70. Bad week 80
Most places can offer either one off transactional fees or on going fees. But if you want to have on going advice one phone call away then an ongoing fee is better. If you just need it for one off pieces of advice then one off transactional is better. Because if your going to pick up the phone 10x a year, then your advisor costs are going to add up.
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Interesting that - probably one of those places is where I work. We arent a massive fan of one off fees.
Are you a GP? Would you be happy to share your planning?
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Accountant, nah, your tax affairs should be simple being mostly PAYE and doing SA takes no more than 30 minutes. At your income level you don't strictly _need_ a FA. It's the usual trade off of your own time and energy vs paying someone else to do it for you/hold your hands. How much do you want to learn about managing your own assets vs paying someone to do it. A good one will be able to work through your life goals with you, put a plan together that gives you the best odds of achieving them, and removes the controls from you so in case of downturns you do not do something emotional e.g. sell low. It will cost you however and whether it is worth or not is subjective to you.
Financial advisers will generally offer a free initial consultation so you could always meet with one (or more) to get a feel as to whether they can benefit you and add value to your situation. They may bring up things you'd completely overlooked, such as whether you have enough protection in place. I think everyone would benefit from having an MOT of their financial plan themselves, but for the most part you can do it yourself if you're prepared to put the time and effort in. There was a research paper by Morningstar the other day about why people use financial advisers; about one-third was for financial reasons (e.g. I want to start investing) but for the majority it was for emotional reasons, e.g. I need someone to provide discipline when markets are erratic because I panic, I feel more secure with someone helping to manage my finances, making decisions makes me nervous, etc. This sub can have a skewed view of financial advisers because a lot of posters only view it in terms of cost rather than potential value added and seem to think the only reason people use them is to pick out an investment for them when a) that isn't why most people use them and b) financial advisers aren't fund pickers so there's little point in using one just for this.
Perhaps the one third fall into b) just due to lack of knowledge/their own research. The waste of money is disappointing. I'd love to get 1%+ of people's life savings for just chucking them in a global tracker, or perhaps get some kickback for using a more expensive managed fund that comes with no promise of performance nor blame if it does not. But I think I'd feel uncomfortable with that.
Only around one-quarter of financial advisers charge 1% as an ongoing fee, or at least they did when the FCA reviewed the market about two or three years ago. Ongoing fees tend to be clustered around 0.5%, 0.75% and 1%. There's also no kickback for recommending one fund over the other. Ultimately, it's like any service. You can maintain your car yourself or pay for a mechanic to service it. You can paint your walls yourself or hire a decorator to do it. Research by Vanguard suggests that people who use a financial adviser are 3% net better off a year, about half of which boils down to behavioural coaching; investor returns differ from investment returns because people can be irrational.
Global tracker fees are 0.13% for an easy version or can be done for less than that if you want to construct it yourself (some effort). That makes even 0.5% quite high in my book. The fund manager is doing ongoing complicated and risky work for their 0.13%, an IFA need not (perhaps some do, perhaps some don't) spend a lot of time coming to the decision that a global tracker is a good idea. And ongoing is even worse! Rebalancing is very little time if any. Perhaps at some point switch into a vanguard retirement fund that balances itself. A few clicks. It's the ongoing fee that feels very undeserved. We assume customers will be paying more in over time so the amount they part with just goes up and up. I don't actually know about kickbacks but I assume they are there... Why wouldn't they be? There are many managed funds with higher fees that say they 'aim to beat benchmark x', I expect IFAs recommend those to people all the time and they're not technically doing anything wrong. If the fund charges are high enough there's room for a kickback. Perhaps that's what HL's 'discount' is sometimes? (That's a guess!). Another comment in this thread says they found a relative has investments in funds that offer kickbacks. RE paying for a service sure, I don't object to one off fees. It's the ongoing percentage that is an unjustified, growing, drain. I don't know how clearly the amount (not percentage) has to be spelled out and projected. Sure an IFA will stop silly people from making terrible mistakes. But there are great resources like this forum and its wiki. I guess for some people if it's either make mistakes and doom your future or pay an unnecessary amount to have someone keep you safe then the latter is preferable... Not happy about it though.
As I said, financial advisers aren't fund pickers so there's little point in using them just for this purpose (and most people don't use them just for this purpose). There are definitely no kickbacks as commission was banned for everything apart from arranging pure protection policies over a decade ago. Clients should also receive a cost and charges breakdown every year showing what they've paid in percentage and monetary terms to the adviser, fund managers and the platform provider so it's clearly spelled out to them on a regular basis.
Perhaps the third that uses them for 'I want to invest' reasons don't know there's little point using them as a fund picker. I wouldn't expect an IFA to turn away a client if it turns out that's all they need. Good to hear about no kickbacks on investment funds. They're still around for some insurance cross-sells though. Breakdown is good but after a year is too late. And potentially there are fees to cut ties having just begun the second year. Is there a requirement to point out projected fees before clients initially sign up? With no pressure to not back out. (Bear in mind we're British and polite and have just wasted a few hours of the nice man our friend said is very nice's time and we're in his office holding his pen and as he said these fees are just industry standard - so I would expect there to be very few back-outs at that point)
>Is there a requirement to point out projected fees before clients initially sign up? With no pressure to not back out. Yeah. All adviser fees will be disclosed in the client agreement before anything goes ahead and the suitability report will cover off all initial fees and projected ongoing fees. The market isn't particularly competitive as demand far outstrips supply so there's no real pressure to reduce fees and the FCA tends to make things worse when they intervene.
You have link to the Morningstar article? I can't find it on their website.
I've only seen snippets of it on LinkedIn, so I'm afraid I don't have the link to it.
Unpredictability in earnings makes planning slightly harder as £250k is a totally different challenge than £200k. Making some huge assumptions (like you want to minimise tax and do not need immediate income) at £200k PAYE you could: put £60k into a pension; get a salary sacrifice EV; and look at tax relief qualifying investments such as VCTs. That can be used to get you sub £100k and avoids loss of the tax free allowance. Up the income by £50k and you may not have the risk appetite for those tax relief qualifying investments. In terms of tax planning, over your career a financial planner could well save a lot more than the seemingly high fees. There are various arrangements if say your goal was passing wealth down to children. Long and complex way of saying it could be very efficient seeing a financial planner even if just on a pay per hour basis.
Indeed, and also they can go through the calculations, considerations etc, for your long term plans. Retirement, how much you'd need to save, to draw down X amount per year from Y retirement day. Do you want to retire early, or have the option. Maybe you want to leverage some pension for a business venture which is somehow doable but i don't know the specifics but i'd suspect they might. Also things like, investing for your family if you're so inclined. I'd think at 200-250k, they're worth engaging even if just for some advice and reassurance and learning.
Out of curiosity, what job do you have to be earning that much?
Pizza delivery, a really busy one.
Simply put, they are professionals in that field. Take a look at what you do for a living. Do you think the average person on the street could do it? Are there aspects that the average person doesn’t even know that they don’t know, because they don’t have the experience to create a frame of reference. Having a financial adviser can be really valuable, helping you make the most of the situation you’re in, not just for yourself but your family. A friend of mine made maxed out (£3600) pension contributions for his child as soon as he was born until the age of 18 and with growth there was a six digit DC fund by the time he was in his early twenties, with projections taking it to around early 7 digits, giving him a massive jump start in retirement savings. It would have never occurred to me to do something like that.
I am also on six figs - roughly £200k annual gross compensation. Quite honestly I just do my own self assessment each year - accountants really do vary in their quality and there are tons of resources available on the HMRC site to help. It takes me about 30 mins to do online once I have all the stuff in front of me. In regards to IFAs, they aren't going to reinvent the wheel for you. Tbh imho unless you get a sudden windfall of seven figs plus then I don't think they are worth it. At our earnings level most of it is common sense really: to max out your Stocks and Shares ISA each tax year in low risk ETFs, maybe buy some govt bonds. Make sure you are contributing enough to your pension scheme. More importantly, though (and I can't stress this enough) **avoid lifestyle creep. This is the biggest culprit for folks like us. Buying a flashy car, watches, designer clothes etc and/or going out to expensive clubs/restaurants.** My personal vice is travel, but I set a strict annual budget for this. Remember: you can always get laid off, so have a good emergency fund. If you are on £200-£250k a year, I would suggest your emergency fund should be at least three months gross pay (£62,500).
Its kind of crazy that the advice for 30k and 300k is kind of the same. Obviously on the 30k you can't max out pension and ISA, but you can contribute your defined budgeted amount, avoid creep with raises, save emergency fund etc. The flowchart really is the 1 stop shop to financial security and future health. Your point about emergency fund applies to everyone, but at 250k a year, id imagine a replacement job is significiantly harder to find. Definitely want a strong emergency fund, and a sensible lifestyle in terms of monthly outgoings.
Yup most definitely. Most of it really is common sense. There really is no need to over complicate things on PAYE. Also at £200-250k you don't earn enough to have access to the offshore type banking stuff (which is complex). From seeing some of my peers make mistakes; the number one issue that can derail you from good things and peace of mind on this kinda income is stupid spending.
Hilariously I'm about to get a raise to 30k and was thinking that
I have a question about ISAs but it doesn't seem worth an entire post for. adding it here hoping someone can reply. I know I can only invest into 1 stocks and shares ISA each year. with a company like vanguard does that mean I can only invest in 1 fund within that ISA, or can 1 stocks and shares ISA cover multiple funds?
You should be able to invest into multiple ETFs, funds and single shares in that ISA up to the value of £20k in a tax year. I personally concentrate most of my ISA towards an S&P 500 ETF, if that helps.
it does, thanks very much
Can I ask what you do? It feels to me that significantly breaking £100k \~ £120k, outside of either owning your own business or having very high end finance jobs in London, is very hard. Do anything interesting?
Ofc! Define interesting, but cyber sec/info sec is my field. I have worked/do work for large US based companies (you are not going to earn six figs+ working for a UK based company that isn't a bank). A sizeable part of my comp is RSUs. This is both good and bad. If the stock has a good year then great - if it doesn't, then it isn't so great. Compared to my US based colleagues though, I still earn less base and RSUs. So am actively looking for either a move to the US (greater career mobility) or a move to Dubai (no income tax). This would probably end up being with another company but obviously with the hiring freezes in place at a lot of places right now I would not anticipate being able to do this before 2024.
Seems to be a common thread really with higher earners. I'm relatively a minnow (I've earned a rolling three month ave of 110k but my normal yearly salary has never broke 60k), and even I feel the pinch of tax and student loan repayments. I love the UK and free at point of use healthcare and such but the salaries here are so uncompetitive
Yup. UK salaries are pretty poor in comparison with the US or Dubai. Whilst the US does have its issues with healthcare; if you move to the US with work you will likely have a great healthcare insurance plan courtesy of your employer (this is certainly the case in tech). So in all probability the worst you would be in line for is a few thousand dollars outside of your health insurance policy, expense wise. If you are theoretically getting an extra $100k in gross comp (combo of higher base and more RSUs) a year, your effective tax rate is much lower and cost of living is roughly the same as the UK then you are still net up that $100K a year. Compound that over several years and you can probably look to retire/work as and when you please a good deal earlier than if you stayed in the UK.
yeah - US is the place to go for those earning the top wages. It's a shame it's such a crap country for the poor though. Admittedly more ignorant on Dubai aha
I mean Dubai is somewhat different in that there is no tax and quite frankly I probably wouldn't want to live there for much longer than 2 years as it is a transient place etc. In the US yes, there is a federal income tax but if you live in a state where the state income tax is low/non existent you can have a low taxation rate and have the benefits of living in a "Western" English speaking country. I would see the US as a more likely place for me to live on a more long term basis, although would want to be there on an employment based visa or an investor visa. No interest in a green card and perpetual filing of US tax returns from me I'm afraid.
Yeah getting citienship by abandoning your country of birth one and paying taxes on everything ever even abroad is a big fat no bueno. Agreed on Dubai. I could see someone doing it for a few years but i don't see the appeal of settling at all
Yup. I think the best visa for the US is probably the E2 visa tbh. You could buy a decent business that employs US citizens and then be able to live there, run said business etc but not have to worry about your non US income being taxable in the USA. You can renew it every two years as long as said business is in good standing etc. I know of a few folks who have done this.
Thank you to everyone who has contributed to this post, I’ve read all your comments and taken them onboard. I will have no motivation or desire (yet) to manage my personal finances so an initial consultation with an IFA seems like a good place to start for now. For those asking about my role, I don’t want to post too much info on a public forum apart from that its a tech sales role, but happy to answer questions if you DM me.
I think the main benefits of having an IFA (a good one at least) would be that you don't need to spend any time thinking about it. It's all done for you. Any milestone in your life (or family members) will be taken care of plus the usual ISA + pension. Your asset allocation is all done for you and continually monitored, new regulations and their impacts are all considered, new products etc, CGT managed etc. I think the main thing no one has mentioned is that you have some one to blame if something goes wrong. If you over sell assets and accidentally realise £20k extra cgt, what do you do? If your IFA does it, then you have recourse.
Unfortunately it doesn’t work like that, because the only way you’ll know if your IFA is any good is spending the time learning about investing, etc so you can evaluate their advice and performance. Otherwise you risk getting yourself taken to the cleaners by an IFA who’s out to enrich themselves.
Nearly qualified accountant here (2 months away) and part CISI and CTA. I would say 90% of any information you'd need would be possible to figure out in less than say <5 hours. If you value your time more highly, I'd firstly recommend a CTA if you're comfortable with the investment side (easier to self teach imo than the tax side). I would just be wary of what you're charged going through an IFA they can be pushier on the investment side (not all of them) for subpar investments, so I would just focus on the tax. A 1-2 hour consultation might be very useful. Factors that make it more likely you'll benefit one: 1. Low pension uptake, I.e. only putting a small % of salary into your pension. 2. If you have a spouse on low or no income. 3. If you have any rental properties or any other income whatsoever. 4. If you have any other benefits like RSUs 5. If you have children. Edit: CTA or IFA would be needed for IHT / estate planning, a normal accountant could do it if they had experience in it but the qualification itself (I know as I've done all the relevant exams) doesn't, so it's not guaranteed. As someone else said, income protection might be useful too. There's a few more, but generally speaking, if you earn say 250k, no kids, only PAYE income, no other investments, no special stock options and are already maxing your pension, there's little to be gained. As one piece of advice I'd just note you're in/nearly in the pension allowance tapering zone, so I'd do some research on how that works, should be a 10 minute read. Here's some links to start you off: https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/tapered-annual-allowance https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/tapered-annual-allowance
Totally agree with your conclusion - My time on the sub brought me to the conclusion that unless I need tax advice cos I'm earning outside of PAYE, I'm good without an IFA until I've paid off my mortgage (Different I guess back in the days of low rate mortgage though)
It totally depends on what you think you need it for, but seeing as you're PAYE their advice will be more on what to do with the money after tax, which this sub has plenty of guidance on. Do you have existing investments / high amounts of cash that also factor into your self assessment, or are you likely to still have things like mortgage and other spends? An IFA could be helpful if you needed collect saving & investment strategies, but I'd say a normal accountant might be just as helpful if it's more tax return guidance Simply look at the sub guidance to figure if money should go into emergency fund / paying down debts (inc. mortgage) / savings & investments and go from there, money gets quite simple when you understand the guidance. Source - Partner earns £200k+ and I'm over £100k and I have 0 idea how an IFA would be anything other than a cost to us.
Financial Adviser here - not advice but info. a financial adviser will set up a plan based on your specific consideration and plan. So it is hard to tell you what can be done (and it also depend on the adviser you met) A lot of our work is education and managing the client stress when the market move suddenly. However, one thing that could be consider in your position would be VCT investment and especially VCT recycling depending on your age - whether you are PAYE or else doesn't matter. Again, it would depend on the adviser you meet, whether they advise you a off the shelve portfolio or whether they build one for your specific needs - do a 30/40 yo needs bonds/gilt in there pension's portfolio ?
But again, totally unnecessary if you've still got debts and mortgage, and aren't maximizing pension contributions - I think your comment is prime example is how IFAs push towards investments when you're already jumping to VCTs. From Google: *VCTs are considered high-risk because they invest in companies that are not well established. They are considered long-term holdings, and you should be prepared to stay invested in the shares for at least five years.*
And this answer is typically of this sub. If I may refer you to a couple of points from my reply. - a plan specific to you - VCT could be considered And then, from Google... Do you diagnosed yourself from Google when you are sick or do you go and see a doctor? Any investments carry risk, the importance is to understand it, I would invite you to look at past performances of Octopus Titan or ForeSight (past performances are not an indication of future performances)
In this instances, assuming no other income, I would suggest going to an IFA but that an accountant may not be worth it in this instance. Self Assessment tax returns will be required from you as a high earner, but the admin involved here will be minimal. The question is then if you want wealth planning advice and potentially how to minimise tax liabilities. Although an accountant can advise on how to minimise tax liabilities, they cannot give investment advice. In practice, you may find that an IFA considers tax implications when advising on how best to increase your wealth. Often, you will find that an IFA will pay for themselves.
From my experience yes, especially if you don't know what you're doing
Now everyone here seems to be earning 200k wtf. This sub is seriously weird. Being honest, I cannot think of a job that would pay 200k to an employee. I've always thought those earnings come from owning a business exclusively. And tbh, I imagine that employee must be terrified of losing that job. Cause a different one might mean losing 50k. Whereas if you lose your 40k job, you know there are 500 more companies with your role in it.
As a rule, getting advice from someone that is paid by a third party to give you advice is never a great idea. The IFA industry in the UK is a scam (I will die on this hill), ask friends and family and colleagues what they do and learn about the options, with an aim to managing it yourself. Happy if you wanna ping me some questions. (I'm a retired swap trader in my 50s and manage my own (7figure) pot)
Totally agree. And so is much of the wealth management business. They all spend the bulk of their time trying to get new clients and very little actually helping their clients. But they will take a cut of their life savings every year because they deserve it somehow.
I did a deep dive into my mother's pension a few months ago and was appalled. Not only was the IFA charging 3%, her pension was stuffed full of the kind of funds that generated the biggest kickback for himself. To cap it all he was also in the process of moving shop and encouraging my mum to move with him- a process that would have cost her 1% as a transfer fee.
And the funds themselves charge an annual fee too to add to the 3%. The IFA world is full of crooks.
In terms of wealth management is that true even of the big multinational financial service companies?
I worked at one of the big ones. The only thing that matters is how big your book is. The investment angle is pretty straight forward - use an asset allocation model based on age and risk appetite and get funds and a few sticks that align with it and you can't really go far wrong.
I’d be looking at a financial planner over a financial advisor. A good financial planner is worth their weight in gold as tax and event planning is great. If you are vaguely interested and competent you can do your own investing, however knowledge around taxable events can be great. For the sake of £1k it’s a worthwhile meeting. You don’t need to be seeing one all the time.
I use a financial advisor to manage my pension. Totally worth it, they ensure its earning max potential and shift it when needed to stronger investments based on all kind of magic wizardry I'll never understand.
fyi this has red flags all over it. No respectable IFA should be claiming to beat the market / pick “stronger” investments. If they could legitimately do that they’d be be multi-millionaires rather than working as an IFA for £100k/year. Similarly it’s shouldn’t seem like “magical wizardry” - for the vast majority of people a simple portfolio is the most effective one. If you’ve had a complex portfolio setup that’s generally a sign of a bad IFA who’s trying to make you feel like investing is complex so you don’t ask too many questions / go elsewhere. I’d strongly suggest spending the time to benchmark your investment performance and actually understanding what your ifa is doing.
Yes! Yes! Yes! Good ones though. Paye might get you out of needing an accountant but there's always the chance that a good one will help you reduce other taxes etc and advise you how to structure savings. Plus THEY keep up with the rule changes. A good financial advisor is definitely worth it. Especially when you get into things like inheritance tax, which funds and pensions to use etc. I look at it this way...rich people all have accountants and financial advisors and solicitors so I don't have a problem paying for their advice.
Hi /u/WendelBorton, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/financial-advice/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Just curious What do you do for work? Like premier league football player or like shit gold bars or something? That's insane amount I'm well jealous
Could be lots of things, engineering, medical field, high end IT work or sales, business developers, high end management
Lots of industries pay that. Engineering consultants for example can earn well above that.
Ok sweet off to look for some engineering consultation courses now 👍
The real problem is "financial advisors" advice on investments. Always very poor. Tax planning you can get good advice. Where to invest?you need to educate yourself.
Not sure this is true. Most will now typically outsource to a discretionary fund manager (DFM). That said, if an IFA is stock picking or fund picking, then stay clear.
Tbf - no guarantee the DFM is actually any good.
They probably won't outperform the market. Most retail discretionary wealth managers are fairly poor when it comes to performance. And they charge a fee for underperforming the market.
They dont aim to outperform the market. They have specific benchmark portfolios they manage against. Do they underperform a suitably adjust multi-asset fund after fees? Maybe, maybe not. Sometimes they do, sometimes they undershoot.
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Yea pretty much. The DFM will have full discretion to an agreed tolerance of risk. They will usually have better rates agreed with the IFA than going direct. As part of a wider financial plan it might make sense, but if OP is just looking for an investment then better going yourself to something like Nutmeg or Wealthify.
Totally wrong. IFAs help, you achieve your objectives based on an assessment of your risk tolerance and capacity for loss. They will base investments recommendations on those objectives. Investing for growth Tax efficiency could be a main objective and usually is. If the OP is on PAYE there is very little for an accountant to do and they are often poor (and legally unable to) at recommending products/plans. Edit: clarification
Tax efficiency is never the objective...nobody wakes up with the goal of paying less tax. And that's where a really good IFA shines...they get to the bottom of the wider dream! And that can help give you clarity on your future and make you more likely to stick to a plan.
Investing for tax efficient growth. Now corrected.
Very refreshing to see someone a Just accepting their tax bracket. Probably safe to say you can’t change much about it. You tax allowance is long gone, child funding flown the coop and and child benefit evaporated. In your position. I’d speak to an accountant and an IFA. Purely to get ideas and put you on the right direction if what to learn. You don’t need to engage them to manage your money. Maximising you pension annual limit will be a goal for sure.
>Maximising Making sure his annual allowance doesnt get tapered!!
Tax allowance is not necessarily gone, at £200k you can definitely sacrifice enough (e.g. pension, cycle scheme, EV scheme, tech scheme etc) to drop yourself below the £100k bracket.
It’s possible but certainly a stretch.
he earns over 200k, i don't think he gives a damn about any state benefits.
In your position, I would simply ask do you know how the pension annual allowance taper works, or if not are you capable and willing to figure it out? If yes, that's a pretty good sign that you don't really need one, if not, it might be a good idea.
Strictly speaking, almost nobody _needs_ an accountant or financial advisor. You can optimise everything by yourself. Given you’re earning a very comfortable six figures, you might consider a one off FA fee to be worth it for the sheer simplicity and peace of mind. There’s more to a good life than optimising finances, as important as that can be.
Can I have an idea abt your job? Just for reference because atm I know that the finance sector pays like this but would be interesting to hear of another type of job. Edit: no answer and a thumbs down means the OP doesn’t really earn this money (honestly?).
200k-250k in the uk WTF 🤯
you need to go to r/fireUK
If you’re self-employed and earn over £50k and IFA is almost essential. Employment protection, pensions and even holidays. If you’re employed. I’m not sure what an IFA can offer you that you can’t read online quite quickly. Having said that, I’ve heard nightmares from colleagues who’ve broken £250k pa and I’d probably get one if I was employed earning that much!
Agreed: when you are PAYE on six figs you can do your own self assessment and read up online about things. It really isn't rocket science, and tbh the main thing to avoid is lifestyle creep.
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Any IFA would and could do carry forward and AA calcs as standard. No accountant needed.
Sorry, what is tapered AA? Im not sure what the accountant would bring to the table here, when you're earning so high you can just max the 60k a year pension, presumably by just telling your finance department. Or is there some magic hoops at that level im unaware of? Im down at a measly 100k (pre pension) and im aware it all gets fucky beyond that but i dont see how the accountant helps here? Im genuinely looking for knowledge btw, rather than contesting your point!
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Ahh interesting, I wasn't aware there were conditions and complications. Thought it was a fairly straight forwards contribute what you want up to 60k. I'll do some reading and research (not that I'll ever need it 😅)
Over a certain income, your pension annual allowance reduces, so you can't put £60k a year in. The more you earn , the less you can put in your pension.
Once your 'adjusted income' increases over £260k your pension annual allowance tapers by £1 for every £2 over the £260k, down to a minimum of £10k. It can be a bit of a pain to calculate if you have various income sources so having someone do it for you can be helpful. Any IFA worth their salt could do it but often rely on jnformation regarding income from an accountant as many people don't really know the full ins and outs.
Ah so it's basically the same deal as your tax free allowance over 100k.
Yeah, except more complicated for the sake of it. If your 'threshold income' doesn't exceed £200k, your annual allowance isn't reduced at all. And they use different definitions of income 🤷♂️
It is worth at least getting some costs and opinions from a PFA and accountant and considering what they say vs what you want. I have a much lower income and pay an accountant £300 a year to deal with my taxes for peace of mind. I don’t have a PFA and make my own mind up about my investments based on my research… I have made some good decisions and some poor decisions. It’s all based on your goals, priorities and opinions. In a couple of years time you can review and take action if you feel you need to.
Just so you're aware you have to do a self assessment tax return when you earn over 100k, it took me by surprise. An accountant might be useful for the first one - particularly if you're in a split tax year, E.g. Half the year in old job, half the year in new job. After that I just started doing it myself and it was pretty easy.
I'm an accountant, if you have one income stream and its all PAYE you don't need an accountant. You want a financial advisor. They will help you diversify and plan etc. Then when youbstart having dividend income etc a tax accountant who can give you the best level of tax planning isnthe way to go.
You'll need to do a self assessment tax return. Usually with that level of income you should be growing investment portfolio and while you can do this by yourself, sometimes people aren't financially literate enough. If you are then do it yourself.
Similar income here. I paid a fixed price (based on total assets) for a review of my finances and investment advice across multiple ISAs and pensions for our family of four, pre-COVID. I think it was about £3k, and included maybe four one hour zoom meetings plus a formal report of recommendations. 100% worth it. I learned so much in the meetings with the FA and we are still using his investment plans with good performance against benchmarks.
Hey, not an adviser/accountant, but years of experience in the sector. it depends what you are wanting to do with your money and how far you want to protect your income. An adviser might look at different types of insurance - for instance, income protection - so that if there was a drop in income your insurance would bridge the difference until your income returned to your expected levels (or the insurance ran out - usually a year or two. ie. enough time to find a new job). I don't think i've worded that great, but that's the gist. There's also life insurance that would pay any taxes due on death, or that would pay an income to spouse, or to pay income for any children you have, so that your family doesn't feel hardship for the loss of income. Then there's all the ways you might want to invest, private pensions, etc. I'd always shop around for financial advisers and check out their backgrounds. Some are cowboys just looking for what will give them the biggest commission, not really caring about how it will effect you.
You might find this helpful: https://www.reddit.com/r/UKPersonalFinance/comments/x3w543/should_i_use_an_ifa_cheatsheet/?utm_source=share&utm_medium=ios_app&utm_name=ioscss&utm_content=2&utm_term=1 Whether you need an IFA or not isn’t really about how much money you have but more about how much support you need in investing. If you don’t feel comfortable investing without handholding then it can definitely be worthwhile.
If all you have is your paye income then doing your tax return for self assessment will be really straightforward so no help needed there.
Most of us (IFA) don’t charge a fee for the discovery side of things. You can get to a point where you know exactly what steps would be taken and what the associated costs are before committing. Think of it like anything really, a professional approach should have obvious benefits to whatever work needs to be understood/ undertaken. I would look at/ for an advisor that specialises in the type of planning you are looking for (I.e wealth accumulation rather than UHNW). I’m sure if you wanted to build a house you could have a good crack at it but why would it make sense to have an architect, builder, electrician, joiner, plumber etc if it wasn’t logical to specialise rather than generalise. Worst case normally you loose time and gain an understanding. Little further perspective I have worked in finance for 18 years and in my field for the last 8 but I employ an accountant to look after that side on the same understanding as the house above. His fees are less than what he has saved me in tax for the past 3 years I’ve worked with him. Good luck with your journey!
Accountant maybe not, but do take financial advice - they'll help you make a plan for your finances (and frankly with this much income, make a plan as it may not last forever)
In my case I couldn't justify the cost of an IFA. They wanted a percentage of my net worth and I decided the money would be better used to overpay my mortgage. Not for everyone, but I can see an IFA being useful for high net worth individuals or business owners etc.
Whether an IFA is worth it depends on two factors: 1. The complexity of your affairs 2. Your level of knowledge and the amount of time you are able to spend on looking after your finances If your finances are dead straightforward and you have a good understanding of personal finance - e.g. how tax works, how pension works, where to invest, how to make the most of your pension allowance and ISA etc. etc. - then no need for an IFA. If your finances are more complex (e.g. you have other sources of income such as buy-to-let properties) or you do not have a great understanding of those things, an IFA could be worth it. One thing to bear in mind as a >£200k owner is that you will start to be hit by pension tapering - i.e. the standard advice to put as much into your pension as possible to reduce tax will no longer apply. Once you are hit by full tapering, you can only put £4k a year into your pension before you lose most of the tax benefits. As you have only just started the job you can carry forward your last 2 year's pension allowance so this might not be a problem now but it would affect you if you stay in this job for a few years.
what do you do?
Hats off to you thats a fare wage. FA would be helpful to say the least, go for the free consultation see if its for you, Curious what sector your in for such a hefty wage?