Alex Thomas: Investing For Your Kids and Passing On Wealth Without the Tax Traps

This transcript is auto-generated and lightly edited for readability, it may contain errors.

[0:00] Sammie Ellard-King: Hello and welcome back to the Money Gains Podcast. This is your host, Sammie Ellard-King. And today I’ve got a financial advisor on the show. Ooh. His name is Alexander Thomas. He has a wicked Instagram channel called Wealth by Alex. And we go deep into everything about putting money away for your kids. Where should it go? A junior ISA. Should it go into a junior SIPP? Changes to the ISA rules. We’ve discussed inheritance tax. We discussed family trusts, all of the juicy stuff that you want to know about putting money away and what happens when you pass, all of that type of stuff. How is money handed down to your children? Where should it be going? And different nuances. And everyone is unique. That’s what we’re going to take away from this episode. I absolutely loved it. If you’re listening on Spotify or Apple, make sure you give us a follow, share this episode with a friend. And let’s get started on somebody. So, Alex, welcome to the Money Gains Podcast, man. How’s it going? You well?

[1:16] Alex Thomas: Thanks, Sammie, for having me. Yeah, really good. Thank you. How are you? I’m very well. Thanks for joining us on a very hot Sunday afternoon. I really appreciate it. It’s suddenly like Britain is back. Yeah, it’s uh it’s something we’ve all been waiting for, isn’t it? I know, yeah. We usually get like one or two days like this, and then it’s just back to like normality of cold, wet, and grey, but that’s the country we live in. But if you wouldn’t mind bringing people up to speed and uh give them a little 411 into you and everything you do. Yeah, so I’m uh a financial advisor. I work for a little firm in Oadby in Leicestershire. Uh been qualified for about two and a half years, but worked for the firm for four years. Uh I’m 29, so not always working in finance, but my very first job in finance was in Barcelona, which is a uh a weird story. We’ll get onto that a little bit later if you like. Um but I’m now working towards being chartered, so just passed my first exam yesterday in trusts, which was gripping.

[2:17] Sammie Ellard-King: Talk to us about that, man. Barcelona. Yeah, so well, I I finished my master’s uh at Loughborough University, and I basically just had no idea what I wanted to do, as I think a lot of students don’t. And I got headhunted on LinkedIn for a firm called the DeVere Group, who are essentially they’re like the world’s largest international wealth management firm, and they’re they they headhunt all their uh people as graduates. So they reach out to me. I’m a 21, 22-year-old student, and they say, Do you want to work internationally in finance, in the sun? And you know, it all these thoughts go through your head, it sounds amazing. So I go down to London, the interview goes, Great, excuse me, and uh I I get off of the role. So I go for three weeks training in Malta, which is exciting enough as it is, and they they really throw you in the deep end. It’s me and about 32 other people, and they basically just want to make sure that you you’ve got the grit to do this kind of role. So they made us become recruitment cold callers for three weeks. Oh my god. So, yeah, really weird. So the way that we got the role uh initially was we watched up a webinar to find out more about the role, so they got us to cold call people and try and hook them into watching this webinar, and it was basically whoever got the most people to watch the webinar won. But that was also like a qualifying part of getting the job in the end. So, out of the 32 people that went to Malta, only about seven actually ended up getting the job. It was it was crazy. But uh in Malta, there was like 10 different countries you could choose to go from, so there was this huge incentive to actually get the job. So some people went to Switzerland, some went to Dubai, some went to America, I went to Barcelona with three other guys. It it was a really cool and wild ride, but also you know, such a roller coaster because some days it would go great, some days it would go bad. It’s like any recruitment or sales role, really. But also, I think my role is almost like that, you know, as a financial advisor because it comes in peaks and troughs. So I then ended up flying out to Barcelona, much to my uh mum’s dismay. She she thought I was joking when I came home and told her about Saturday. I wasn’t, and it was a whirlwind. It it was a bit like a mix of Wolf Wolf of Wall Street, you know. The high flies there were living the Wolf of Wall Street life, you know, all the good elements of it and most of the legal elements of it. Um but me as a 21-year-old, if I assume you’ve seen the film, yeah, yeah, you know the the part of the film where the guy’s got his goldfish, and Donnie goes over and grabs his goldfish and just eats it. I was basically the kid with the goldfish. Because you know, me and all the new recruits were just we’re so uncomfortable in this new environment, and it’s we’re 22-year-old kids at the end of the day, and everyone there is doing these crazy things. So we did it for about six months. We we were studying for a qualification called the uh Chartered Institute of Securities and Investments, which is one of the routes you can go down to become a qualified advisor. But they want you to become a salesperson as well as study, because anyone essentially can learn finance, but if you haven’t got those core communication skills as a salesperson, you’re never really going to cut it. So they handed you a list of names, a phone, and just said get calling. So we were cold calling people in Germany and France and Italy, people with huge pensions. And I was a 22-year-old graduate, and I’d say, Hello, hello, Mr. Mr. Bill, can I can I speak to you about your pension, please? And he would say things that I’m not gonna say on this call. He would say no in a future. Exactly, exactly that. Yeah, so it was uh demoralizing for a 22-year-old. But it was my introduction to finance, and I wouldn’t change it because it made me realise what finance could be. So did it for six months, came back to the UK, uh, the the lovely weather that we have. Although today’s pretty good. Um, so essentially I basically realised at that point I needed to get better at sales, really, and communicating, things like that. So I did do sales jobs. So I worked for a leasing company, I worked for a charity, I worked for a software company, did all kinds of sales roles, uh, some good, some bad, but that got me the communication skills essentially I needed to step into a finance role. And then in June 2020, I started working at the firm right now, started from the very bottom as uh a financial administrator, stepped up into a paraplanning role, did all my exams, six of them, and then by January 22, I was advising.

[7:07] Sammie Ellard-King: Amazing, dude. Like it comes across in your content. Like, I love your content and your style. And I must say, one of the things that I really like, and uh you’ve got you’ve got to talk to us about this, is your like seriously suave, like double-breasted pinstripe suits. Mate, there is like endless amounts of colour schemes you’ve got going on. How I probably do take uh inspiration from the Wolf of Wall Street, quite frankly. I’ve uh I’ve always been a fan of not only you know that kind of era, but also you know, the noir era from sort of the the 20s, 30s, 40s, always always been a big fan of that that time period. Uh I took a lot of inspiration from my grandad as well. When he he used to dress, you know, if you think of like a stereotypical grandparent, you know, it can be the sunniest day of the year, they’d still put on a shirt and tie. That that was the kind of thing that I really liked. So I’ve I’ve ever since I was probably about 18, me and me and a friend used to go go out to a bar or something, and we’d we’d whack on a shirt and tie. It was just something we used to do, and people used to say it’s got a lot of good comments, a lot of bad comments, but yeah, we enjoyed it.

[8:14] Sammie Ellard-King: It opens myself up for some of the more like people in the added ass jacksuits to take the real piss out of you for sure. Yeah, yeah, absolutely that. But uh, we didn’t mind so it it makes me laugh because sometimes I I’ll see things uh on social media and it’ll be like, oh, the stereotype of an investor is the guy in the pinstripe with the briefcase, and I think I own a pinstripe and a briefcase. And I’m not I’m not trying to be the stereotype, it’s it’s just uh you know, it’s a fashion look that I personally like. I love it. Yeah, it’s uh anyone could be an investor, can’t they? You know, guy, girl, black, white, anything. It’s just I personally like that that style. Well, I think you pull it off, mate. Absolutely. Like, uh definitely encourage people to go and check out um it’s wealth by Alex, isn’t it? The the channel. Yeah, yeah, it’s it’s great fun. And just like every time you pull up, I’m like, how God, he’s got another bit of thread on today, he’s looking suave. I’m enjoying it, mate. I’m loving it. But look, we could talk about fashion all day long, uh, no doubt. And uh I um would love to sort of dive into I think the main cuts of this podcast episode today, something which I’m getting a lot of questions about. And with you being an expert in this space, I really wanted to kind of dive in deep and kind of everybody’s wondering at the moment about what to do for their kids. And yeah, when I’ve been putting stuff out online, one of my best videos is the junior ISA videos. And a lot of the questions within there is like, oh, well, I’ve got a child trust fund. Should I keep that? Or what should I do? Should I move it over to a junior ISA? And I suppose what I wanted to do really is kind of like with your knowledge in this area, I wanted to kind of like you treat me like I am your client here. And I’m walking in and I’m like, I want to start putting away, let’s say, 250 pounds a month for my child number one, for example, they’re just being born. I don’t know anything about Junior ISAs or trust funds, but I’ve heard about them from this bloke called Sammie Online and I don’t know what to do. Like, what are you cool guy? Well, yeah, cheers, mate. But what do we do from there? Like, how how would you kind of run them through that process and explain the differences?

[10:22] Alex Thomas: Okay, well, if we just go you know right back to the basics, we’ll assume that they’ve got a child that was born in that criteria for a child trust fund. So they will have been born between 1st September 2002 and 2nd of January 2011. So they would have qualified for child trust fund. So depending on on the household income, they would have either got £250 or £500 put into the Child Trust Fund, and then potentially they would have got a second payment at age seven as well. So they would have either got £250, £500 or £500 and £1,000 in the Child Trust Fund, and it’ll either have been put in cash, a stakeholder plan, or stocks and shares. And that’s quite important because that will really vary how much it’s going to have grown by by the time the child gets older. So the money belongs to the child, ultimately, that’s quite important, important for the uh for you, Sammie, to understand as the client. Um because the the people quite often will want to have some element of control over it, and you know, frankly, they can’t. They can have control over how and where it’s invested while they are a child, but as soon as they do turn 18, the money belongs to the child, and that’s something that I try and stress quite heavily as well with Junior ISAs. So their their long-term goal for the child, let’s say it’s to either help them buy a car, help them to get a house deposit, or pay for university fees, things like that. They’re putting money into the Junior ISA, but quite a heavy caveat with it is that the money belongs to the child and the control is with the child at age 18.

[11:55] Alex Thomas: Yeah. So for me, a big part of it is making sure that you instill financial education in your child and you know, some level of financial responsibility in your child. Because when I I don’t know about you, Sammie, when I was 18, my financial priorities probably weren’t paying off my tuition, probably weren’t buying a house. I I I quite enjoyed the pub when I was 18. And uh I know that you know my sister’s a bit younger than me, she quite enjoys the pub. I imagine most kids do. And if if an 18-year-old suddenly came into 10,000, 15,000, 20,000 pound, they they might be, you know, they might consider it prudent to put half of that away, but they they’d quite happily, I imagine, spend a significant amount of it, whether it’s on a holiday, whether it’s on a lavish car or something like that. And actually that amount of money could significantly set them up for the future. So I think the first thing is is having that conversation with them.

[12:51] Sammie Ellard-King: So this is what they this is what a lot of people seem to get run. They think seem to think like obviously child trust funds are still around and active, but actually you have to have had been in that threshold. I think it’s because they see it online. And let’s say, for example, okay, I’m gonna go back into role-playing mode here. Yeah, that sounds great, but like, yeah, I am still worried about my kid, even if I install loads of stuff into them and they’re 18 and like they just go, Oh, yeah, whatever, dad, and they want to fly out to Ibefra and have the time of their life. What’s my options here? Like, where can I go? And you know, are there other uh things that I can consider that perhaps might not necessarily mean that they get all of the money when they turn 18?

[14:17] Alex Thomas: Well, this is something that I’ve really been thinking about only for about the last five weeks, interestingly enough. Okay. So this this is where the question expands for me. So where where we’ve got child trust funds and we’ve got Junior ISAs, uh you you, Sammie, will know this, but you role-playing Sammie won’t know this. The ISA rules changed as of the 6th of April, which means that you can now have more than one of the same type of ISA in the same tax year. So you can open and contribute to more than one cash ISA, more than one stocks and shares ISA. So, you know, two, three, ten, as many as you want, essentially. The the overall allowance stays the same. So, regardless of how many you’ve got, you can still only contribute £20,000. But it means that for the first time ever, you could contribute to more than one cash ISA or stocks and shares ISA in the same tax year. Whereas before, for me, the main reason someone would have a Junior ISA was so that you could differentiate the money you were saving in, for example, your stocks and shares ISA, and the money you were saving for your children, which was their junior ISA, you know, you could differentiate that because you’ve got different risk, risk attitude for risk, you’ve got different goals, things like that. So you’re putting £100 a month in your pot and £50 a month in their pot, and it’s it’s separate separated. But now, the fact that you can have two in your own name, retain control over them both, and you could just mentally allocate one for your child, but keep it in your own name, I don’t necessarily think that’s a bad thing. No, it’s not yes, it’s not legally belonging to your child, it’s still your money, you’ve still got access to it. As long as you can you know tell yourself, don’t touch that money, it’s allocated to the child, you know, hypothetically. I don’t think that’s such a bad idea. Because there’s always that element of risk that you know, one, the child could become irresponsible. Two, who’s to say that you’re still going to get on with your child when they’re 18? Anything can happen. Your families get broken at any point. So that’s a conversation that I’ve started having with clients a lot over over the last five weeks or so, when they are talking to me about setting up money for for the children for the future, because having control over money is something that clients care a lot about, and especially, you know, if you’re putting if you’re in the fortunate position where you can put say nine grand a year away for your child, by age 18, they’re going to be something like I can’t think right now, but let’s say 150 grand or something with growth, it’s a it’s an insane amount of money. And for an 18-year-old to have that and that level of responsibility, it’s not necessarily a good thing. Whereas if it’s still in your control, you can then choose how you drip feed that to them, how whether it’s spent on university fees, car, house deposit, it’s nice to still have that level of control. So that’s something that that I’m now considering with people.

[16:51] Sammie Ellard-King: Okay, this is really interesting, and I suppose this kind of will actually lead on to the second part of this, really, was like, let’s say, for example, in this case, I take out, I keep everything in the stocks and shares ISA, I take control, and then even though you know I’m paying in quite a considerable amount and I have, let’s say, 50 grand to give to X, Y, and Z child number one in this case. Yeah. Can I just take that out and just give it to the child? Is there any tax implications I need to be aware of here? Yeah, so so now we’re getting to the realms of inheritance tax, which is interesting my favourite subject. Okay. So when it comes to gifting, there’s uh a lot of people get confused about this. And you can understand why, because you see a lot of stuff online, uh, and it’s just uh a widely undiscussed topic. So one thing people do seem to know about is the £3,000 gifting allowance. So every year, broadly, you can gift £3,000, and that is in inheritance tax-free. I don’t know why I’m doing that because you can’t see it. But uh you can also use last year’s gifting allowance if you haven’t used that. So essentially, if you didn’t gift anything last year, you could use last year’s £3,000 plus this year’s £3,000, so £6,000, and that’s inheritance tax free, essentially. But the the easier way to think about it is you can actually gift anything you want and any amount you want, and it’s considered what’s called a potentially exempt transfer or a pet for short, you know, not a casual dog, but a pet. And what happens, excuse me, is a seven-year clock starts. So a lot of people are familiar with the seven-year clock as well, but might not fully understand how it works. So let’s say you, Sammie, really liked me. You know, this podcast is going well, and you’ve become very fond of me. You want to give me £10,000. Obviously, it exceeds the £3,000 allowance, but it doesn’t matter. You can bank transfer me £10,000 today. There’s no tax liability of any kind whatsoever. All that happens is it’s considered a pet, a potentially exempt transfer by HMRC, and a seven-year timer starts from today.

[18:49] Sammie Ellard-King: Right. As long as you survive seven years, then it’s considered a successful pet, potentially exempt transfer. There’s there’s no tax, no inheritance tax, nothing. It’s it’s what? It’s outside your estate for good. If you pass away within those seven years, then when they are adding up your estate for probate to calculate inheritance tax, they will say, right, how much is in his estate and what gifts has he made in the last seven years? Right. And then they will add that gift back to your estate, and it will be called a failed pet or a failed potentially exempt transfer. So let’s say your estate was £100,000, you made that gift of £10,000, they would add it back in because it failed and say, actually, your estate should be £110,000 because you didn’t live the seven years. But there’s also tapering relief on that seven years. So if you live for at least three to four years, you won’t pay the full 40% inheritance tax, it goes down to 32 and then 24 and then 16 and then 8% and then zero. The closer you get to seven years. On that’s hard to on that gift, yeah. So if you got to year six, for example, at seven, they’ll understand, you know, he’s trying to make a gift. We’re not going to penalise him and make him pay the full inheritance tax because he almost lived the seven years. HMRC on that wash. We’ll just make him pay eight percent instead of 40% inheritance tax because he almost made it the whole way. Now there is a there’s a there’s a funny case in in royalty somewhere, I can’t remember the exact date or amount, but they they made a gift uh some some time ago, and I think they were about 92 when they made the gift. They had to live seven years for it to be IHT free, and they they literally did it. They got to like seven years and three days and then died. So they they just beat it. It was you know, you couldn’t write it, they just beat it, didn’t pay a penny for inheritance tax. But yeah, you you I I’ve got clients who make gifts of £100,000. Uh you can gift any amount. There is no upper limit. As long as you’ve survived the seven years, you can make them gifts. Because I speak to a lot of clients who are older people, you know, let’s say they’re in their 60s, 70s, and they’re hoarding these huge amounts of money when really, you know, they don’t need it. Really, it’s probably more beneficial to give that money to their loved ones now, their children or the grandchildren, and watch them benefit from it now. You know, they need it to buy a house now, they need it to pay for their bills now, and then the grandparents can watch them enjoy it while they’re alive rather than wait another 15 years till they die when they’re older and probably have already bought a house and don’t need it anymore. Give it to them now, survive the seven years, no inheritance tax anyway, but they just don’t because they don’t understand that they can do that.

[21:29] Sammie Ellard-King: That’s so so interesting. Okay, cool. This is this is blowing my mind. So let’s say, for example, I’m 50s, 60s, uh, you can just give the money, live the seven years, everything’s kosher. We’re good to go. Absolutely kosher. Yeah. Okay, so let’s step this up a notch then. So let’s say, for example, I have a property, and then let’s say example one, I have one property, paid off mortgage, and what happens with this in this case, so estate building essentially. And let’s say what happens if I have multiple properties, and what happens about handling that down and how do we get around this? Um yeah, let’s do this. Yeah, okay. Properties are significantly more complex for inheritance tax because properties, whenever you gift an asset, it is deemed what’s called a disposal. So it’s the same as selling, really. So unless you’re gifted between spouses, so let’s say you’re married Sammie and you make a gift to your spouse, then that is a spousal transfer and there’s there’s no penalty. You can gift freely between spouses, no problem, no thanks. But if you were to gift to me or to your children or anything like that, and and this is a common misconception, a lot of people assume they can gift properties to children tax free, can’t do that. So I I went to see a Sri Lankan family down in down in London last year, and they had about three and a half million pounds in property because it’s you know sounds like a lot, but it was only in London. They only had like four properties. Yeah, yeah. They wanted to just gift them down to the children to get random inheritance tax. But they bought these property 20 years ago. They bought them all for about £150,000 each. They were now about £700,000. So the gain is about £550,000. If you gift that property, you are what’s called disposing of the property, which immediately incurs capital gains tax.

[23:17] Sammie Ellard-King: Right. So unless you have got the cash to pay the capital gains tax on that £550,000 gain, which right now would be 24% on almost all of it because it makes you a higher rate taxpayer, you know, you’re looking at paying like £150,000 capital gains immediately. And they they didn’t have that money and they were quite shocked when I told them they’d have to. So it depends how long you’ve had the property, how much the gain is. If this is very little gain and you’re not had it long, gifting it is fine because you might only have to pay five, 10,000 pounds capital gains tax. But the the what a lot of people will tend to do is just sell them because yes, you’ve got to pay the capital gains tax, but at least you’ve got the cash from selling it to pay the capital gains tax. And once you’ve got liquid cash, it’s significantly easier to deal with inheritance tax. Because then you can look at using trusts, you can look at using aim policies and things like that. It’s much easier to manage. And you can put property into trusts, okay, but when you do that, you will have to relinquish or give up essentially the rent. So because the property now belongs to the trust, you you essentially aren’t entitled to receive the rent anymore because that would be like a gift with reservation. So the rent has to go into the trust, otherwise, you haven’t you haven’t given up all the benefits of the asset, essentially. So you know, you’re putting the capital, you’re putting the property into the trust, but you’re still benefiting from it. So HMRC will say, Well, he hasn’t really given it up, has he? You know, if he’s still benefiting from the income. So a lot of people might have three buy to let they’re living off the income, and they think, oh, I’ll just put it all into trust, then it’s it’s fine. But no, you know, they put it into it, into a trust, then they realise they have to give up the income, and then suddenly they can’t afford to live because they haven’t got the income anymore. So yeah.

[25:01] Sammie Ellard-King: Okay, this is really interesting. Because we I this is uh what I wanted to ask you about because family trusts it’s like such a nuanced conversation. So when is the benefit of having a trust versus not? And what benefits does a trust provide and not? And you know, where do you fall on the fence with this? So trusts have a variety of benefits, you know, the the main one being inheritance tax, the the secondary one being making sure that the right people get the money at the right time. For example, if you just leave your assets in a will, then yes, you’ve directed it to go to the right place, but anything can change at any time. If you lose mental capacity, for example, let’s say you’re 50 years old, you write your will, and then you lose mental capacity. Well, you can’t change the will at that point. It’s always very, very difficult to do so. If you’ve put your some of your assets into a trust, then the trustees who are in charge of the trust, they have got discretion to make changes depending on the type of trust. They can change who the beneficiaries are depending on who they think is is most appropriate, because they will always act on the best interest of the beneficiaries and the settler as well to make sure that it goes to the right place. So when you’ve got things like disabled beneficiaries or you know, beneficiaries that are under 18 years old, things like that, the trustees are able to make sure that the assets go to the right place. Uh, again, the obvious one is inheritance tax. So where you have got an inheritance tax problem and you want to deal with that, yes, giving the money away is an easy solution, but actually, a lot of people, although it’s an easy solution, a lot of people aren’t comfortable just handing over £300,000 to their children. They like to be able to deal with the inheritance tax but still retain some sort of control. And a trust is a nice way to do that because they can put the asset in a trust, it’s still considered a a pet for context. So the seven-year rule still applies when you put the money into a trust. Depending on the type of trust, sometimes you can get beneficial treatment on the uh the seven-year ruling and things like that. Different types of trusts have different rules that apply, different tax treatments. Yeah, so essentially the settlor who so the settlor is the person who puts the money or the capital or the assets into the trust. It allows them to retain a level of control. And also, there are various different types of trusts. They’re they’re wonderful and weird and varied. So you can put money into a trust, and depending on the type of trust, you might be able to retain an income for the settlor. So you could, let’s say, put £300,000 into a trust, which is then going to be left for the beneficiaries essentially, at a specified time and date. So you might say when the beneficiary is 25 or when they’re 30. You know, you might not want them to get it as soon as they’re 18 because you think they’re financially responsible potentially at that age. So you can specify a date and time or an age. But the settlor might also need income. So well, I said yes, just gift money away to get an inheritance tax. Well, that puts you potentially at risk of not having the standard of retirement you want in the future. Right. So you don’t want to necessarily detriment yourself or jeopardize your future by doing that. So if you you you put money into a certain type of trust, then you can put the capital in there but still retain an income or the option for an income. So you can use things like lifestyle trusts, exactly. Yeah, so the settlor can still have the option to either take the capital back or an income. And some of them have an option where you can accrue build up like an accrument of income but not take it if you don’t need to, which is then useful because if you don’t ever need to take the income, well, it’s outside the estate, so it’s good for inheritance tax. But if you do need the income, let’s say your bills increase in the future, or you retire earlier than expected, or any sort of scenario like that happens, you’ve got the option to then stop taking an income from the trust, and you can set all that up from the outlay. So that they’re useful. It’s quite useful.

[29:02] Sammie Ellard-King: I suppose this is where like financial advisors become handy, really, because based on what you’re telling me, it will be very unique to each individual family. Everyone’s circumstances are so so different, and it’s it’s based on what their plans are in the future. And a big thing is that people’s plans change all the time. You know, we could we could set up a financial plan for someone based on today’s circumstances, based on the fact that their children are going to, they might have 15-year-old children. We can make assumptions that they’re gonna go to uni, get a job, and move out, but seven years from now, when they’re 22, they might end up moving back home. So the family unit’s bills are £500 a month higher than expected. Well, actually, the thing we planned for seven years ago doesn’t work anymore. We’ve got to completely tweak and change everything we’d pre-planned for. Your retirement plan’s not now gonna work. You might have to work X number of years later, the trust might have to be changed. There’s there’s so many changing eventualities that you have to factor in for, and it’s it’s very hard to plan in advance, but that’s why you have to factor everything in. I just say everyone’s predicaments and circumstances are unique, which makes makes it interesting, frankly, because you know it’s it’s never two days of the same.

[30:12] Sammie Ellard-King: Oh, 100%. And I think that’s one of the things that like I try to get across all the time is that like you’re even when you’re doing something as basic as a budget, like you just mentioned, you could line up a million people all on the same salary, and it’d be very difficult to find a budget which matches down to the last pence. Like it’s going out to be unique. So why would that be a family situation which let’s be honest, everyone’s got family, half sisters, brothers, all these days. Things are uh not the same as like the normal nuclear family. Is it nuclear nuclear family? The foot family of four. Um, you know, boy and gal, one house, you know, daddy’s done is retired, and like that doesn’t really exist as much.

[32:03] Alex Thomas: Yeah, it’s not it’s not the norm at all anymore, is it? Exactly. So it’s going to be different. So this is where financial advisor comes into play, do you feel? I think it’s probably more helpful when there are unique family setups. I agree. I think quite often we find scenarios where someone’s on their second marriage, or you know, husbands died, they’re remarried. Or quite quite often we’ll we’ll get men or women who are divorced, and the uh the the divorced spouse, the person who left them, dealt with all the finances. And it was more common in the past. Look, luckily now people are becoming more financially savvy, slowly. It’s it’s not happening. Did I say slowly? Is that slowly, whatever the word is. It’s it’s it people are becoming slowly and slowly more financially savvy. But yeah, we do still live in a world where quite often in households, one of the two people deal with the finances more, and if that person in the household leaves, the other person is at risk. And I’ve I’ve come across people more than a few times who don’t know how to pay a council tax bill, don’t know how to take an energy meter reading, don’t know how to set up direct debits, and it’s very simple stuff. But you know, when their husband or wife has left them and they’re left on their own, they’re they’re completely lost. And then they don’t know where to turn to. It’s and that’s that’s quite scary.

[33:35] Sammie Ellard-King: Oh, 100%. 100%. Yeah, no, I a lot of the people that you know we do, I do life coaching, and majority of my clients are divorcees. Majority of them. And they come to this point and they’re like now either you know they’ve come out of the workplace to bring up the kids and they’re moving back into the workplace and they’re like, Well, what do we do next? And it it’s really common, so that doesn’t surprise me that you say that at all. I think some financial advisors get a bad rep, let’s be honest. And I feel like it’s unjustified to a certain degree. Where do you feel like the line is right now? Because for someone who just wants to learn and start about basic investing, yeah, it can be quite difficult when you look at the fees that financial advisors uh sometimes charge versus say you know the 0.25% expert managed options that are out there in terms of investing. Um where do you fall in this line without being biased in it in any way uh towards towards you know your your your profession and firm, I suppose. Yeah.

[34:39] Alex Thomas: No, I I agree. I think I can I can try my best to offer a completely unbiased approach. I think if we if we tackle the the 0.25% fee thing, if we just just take a step back to you know the whole conversation we had on trusts and things like that, uh quite often when people think about an advisor’s fee, they will have this really strong association that an advisor’s fee is directly correlated to the investment side of it and the investment performance. And they’ll think you’re paying an advisor, let’s say you’re paying an advisor 1% a year, they’ll think all you’re paying for is for them to pick you some funds. But what they’re not thinking about is everything else that’s involved with that. Because for me personally, I would say the investment element of what I do makes up probably 10% of the financial advice that I give. If you think I’ve got someone who’s got an inheritance tax problem, who is a higher aid taxpayer, so needs you know, pension tax advice, who has a trust, who, you know, obviously that’s not everyone, that might only make up 40% of my clients. You know, if I’ve got some clients who I just do investments for, so you could argue that they are probably overpaying compared to someone who has got this whole suite of things that require advice, but it’s it’s a difficult situation because do you then lower the fee for someone else and increase it for someone else, or do you just have a blanket fee across the board? Maybe that’s uh something that the FCA should look at because no, there’s pretty much no advice firm that does that. But it’s a really interesting debacle, and it’s something that we we as a firm quite often look at. And we we reviewed our whole uh fee structure when consumer duty came in, which is something that the FCA introduced last year. So I think people shouldn’t get caught up so much on the fee side of things in terms of investment and should try and look at the wider parameter of it because people message me on Instagram all the time, and you know you can definitely appreciate this. The sheer amount of questions I get, I can’t bloody imagine how many you get on a daily basis with sometimes very simple questions. Yeah, and I think you know, you’re asking me things that the borderline Googlable, but I’m still very happy to answer your questions. Now imagine the level of complexity of advice that I have to sit down and spend my time going through with someone, and sometimes I will tell someone the same thing every single year when I go to see them because it just goes, you know, I I will patiently explain something. I’ll be drawing graphs and writing things out on pen and paper, I’ll leave them with an A4 sheet of something I’ve explained to them about how pension tax relief works or about how inheritance tax works, I’ll go and see them the next year and they’ve forgotten it and I have to go through it all over again. And yes, I might charge them 1% and it might end up being £2,000 a year, but if me by doing that I’ve saved them £40,000 over the course of five years in inheritance tax and added pension tax relief and investment growth and various things like that. As long as the ROI is there, then in any business sense, I don’t think that’s a problem. And then I’ve yeah, I did kind of spent along on that. To go back to your main question, I do think advisors often get a bad rep. I think sometimes it is deserved, frankly, because advisors over the last 20 years, an interesting stat for you that’s loosely accurate, there used to be about 200,000 advisors in the UK about 20 years ago. There’s now only about 20,000, just less than 20,000. And they are still all around 55 years old. There are slowly becoming more younger advisors, but the majority of them are still older. And if you look at the statistics of the number of advisors who work for independent firms, for example, versus restricted, it’s decreasing. There’s less and less independent advisors every year, which is problematic in itself, because it means that people aren’t getting a fair whole of market evaluation of their of their uh circumstances. Yeah. They’re just getting shoved in a okay, one size fits all, which as we we both know that’s not true.

[38:55] Sammie Ellard-King: Yeah. You know, one investment thing is. You see it with the likes of like um, you know, I’m not I’m not saying that they’re a bad option at all, but you see it with the likes of like St. James’s Place, for example, where they’re uh like they’re everywhere, and their advisors are only allowed to offer their own products and it’s not whole of market, which can be. Yeah, and it’s it’s not it’s not their fault, is it? Of course, but you know, but because of that, they’re they’re being forced to do that. And and SJP, credit to them, they they’ve made it the easiest way to become a self-employed financial advisor. Yeah. Because they will support you with with power planning, with back-end support. They’ve essentially removed all the barriers to entry to become a one-man band. Yeah. Well, you know, if I was to go and become a one-man band, I’d probably need to look for £25,000, something like that, for my FCA fees, insurance, stuff like that. It’s just not really feasible. But for then, you can go and do it almost overnight.

[39:44] Sammie Ellard-King: Yeah. So you can understand why so many people go to them, but the price is being restricted and other things that are questionable. Yeah. But we won’t get into that. No, um I think for someone listening to this, then they’re gonna there’s gonna be lots of things that they can take away. And there’s gonna be even from listening to you there, there’s gonna be things that people are confused about. Um for you that perhaps has someone that just wants to learn a little bit more and want to know whether or not a financial advisor is right, what’s kind of the process there? Do you then have to do you then, you know, is there like free consultations or do you send people in certain directions first before then coming to you?

[40:32] Alex Thomas: Sorry, can you can you just elaborate on that something? Yeah, so let’s say for example, I’m not totally sure whether I think a financial advisor is right for me, but I want to learn X, Y, and Z. Where’s where do you where do you come in? Do you do like a free consultation and perhaps send them to free guides? Or then, you know, do you just go straight in and say, look, I charge 1% sort of thing? I I just do a free consultation with everyone. You know, whether I think there’s something there, something not there, I I just essentially it’s probably not the most time valuable thing for me, but I you know, as cheesy as it sounds, I got in this industry and this this game and this social media world as well to help as many people as I can. So I’ve had you know one-hour calls with people from from Instagram multiple times in the last six months that’s gone nowhere, but I’ve been able to give them valuable answer questions. So it’s of it’s of no strain to me.

[41:23] Sammie Ellard-King: It’s a it’s a nice way of looking at it for sure. So I’ve really enjoyed this. I think what I’d love to know from you is having been in the industry a few years now, yeah. Where do you feel like most financial advisors go wrong with their clients? And where do you feel like you’re different? I’ll give you this with some context from what people have said to me. So I’ve had funnily enough, I’ve had a few clients in the last few weeks who have come to me from other advisors. So this probably helps to give more clarity than it being a biased opinion from me. So what happened recently? I’ll give you a story. Someone reached out to me and they told me that they were unhappy with their advisor, and you know, we went back and forth a little bit as to why. And they told me that they had a property, but actually they had a number of properties, and they said that they hadn’t been paying tax on these properties for the last few years, buy-to-let rental properties. And I said, Well, that’s very strange. What did your advisor say about it? And they said, Oh, he nothing. He doesn’t talk to us about them. And I said, Oh, you know, why why doesn’t your advisor talk to you about your your rental properties? And they said, Well, he only he only cares about our pensions and investments. And well that’s because he’s getting paid for the pensions and investments. He’s obviously not he can’t charge on the pen on the rental properties because he has nothing to do with them. But these clients have got like three or four rentals in London, they’re probably renting out for about £2,000 a month. So let’s say that’s what £75,000 a year over the last couple of years. They they had about a £40,000 tax bill that they had to pay. This advisor easily could have told them about that. He should have known about that, but he or she actually don’t know. I’m assuming there. He should have known their full situation. Why why was he not aware of that? Maybe he was and just didn’t talk about it, I don’t know. But for me, and I don’t think that’s a one-off, I think a number of advisors are laser focused on the things that they charge on and the things that they can personally benefit from, which is selfish, frankly, because it feels like they’re doing it for personal gain and not for the overall benefit of the person they’re working with. And that’s not as a collective, you know, in the industry. I would say there are 95% good I good advisors out there, and probably 5% not.

[43:50] Alex Thomas: Okay. Same with any industry, pretty much. You know, think about builders, electricians, accountants. There’s always I don’t want to bully all the trade. To be fair, I’ve I’ve had one builder and he was pretty bad. You know, let’s not slam the builders. I’m sure that’s I’m sure they’re pretty good. Yeah, but but essentially he didn’t have a holistic view of their overall finances. So, you know, they they ended up being stung by this tremendous tax bill that that could have been easily avoided if they just declared that that property income from the stock. They didn’t even know they had to declare property rental income, which for me is personally borderline obvious, not to disrespect them, but it was it’s his responsibility as their advisor to make them aware of everything to do with their personal financial circumstances, not to only give a shit, frankly, about the things that he can charge for and get paid for. So I think that’s where a bad advisor’s slipping up. Someone asked me last Saturday what’s some red flags you should look out for, and then the answer I gave was someone that’s not got your best interests at heart, and they might come across like they have, they might sound like they have, but don’t let their words fool you. It’s it’s the actions that count more, you know, it’s it’s them having this full holistic view of everything. It’s it’s them looking at you, it’s them looking at your family, it’s them looking at your future planning, it’s them taking everything into account to make sure they don’t miss anything.

[45:14] Sammie Ellard-King: So, how do you know that though? Like if you’re uh you know, average Joe, not much financial knowledge there, what’s the things you should look out for before going to search out for a financial advisor then? So that’s a really good question. That’s a really good question. Reviews, maybe? Yeah, so there’s there’s the obvious thing, it’s like you want to look for reviews, but at the same time, reviews can just be skewed either way, can’t you? You know, you can look at um, for example, you know, you you spoke about about SJP earlier, they’ve got uh loads of great reviews, and they’ve got loads of bad reviews. It’s who’s to say which ones are true and which ones are false. We just don’t know. Yeah, um, we’ve only got Five star reviews, but that’s because we’ve only got about 20 of them. So if we had if we had enough time and enough reviews, we’d probably get a few bad ones because people like to mourn about anything, don’t they? Yeah, they do. Every big company’s got good and bad reviews. Yeah, exactly. So yeah, reviews are a difficult one. Um obviously don’t go for something that’s got one star, but it’s the the I think as with any uh any financial advice business, you are you’re gonna get it through word of mouth. So if you know someone that’s got a good advisor, probably try and go through their first. If you don’t, then you can look on something called vouched for. So I’m on vouched for and vouched for is uh an independently uh used site where all mortgage brokers and financial advisors go, and they can get their clients to review them. So it’s not just like a Google reviewer, they get the uh questionnaire sent out to their clients and it gets them to answer a series of questions, including, you know, how what are you paying your fees? Do you feel like it’s fair? Do you feel like you understand the things your advisor says to you? Does your advisor send out the documentation to you quickly? It’s it’s a lot more in detail questions than just a Google review or something like that, and then it’s it’s rated uh one to five stars. So it’s it’s interesting.

[47:15] Sammie Ellard-King: Yeah, I it it sure is, and it it’s one of those things. I feel like there it’s hard to you, it’s hard to say like this one’s good, this one’s bad, this one’s not, this one’s is like you need to take a holistic view, and I always feel like the with these things, especially with the when it comes down to money, you need to have a personal relationship with them as well. You need to feel comfortable with that person, and so it’s just like for me, it’s just like shopping around when you when you need you know a coach or some form of one-on-one relationship of therapist, whatever that might well be, you have to have a little bit of connection with them and uh be able to kind of trust them with your life at that point, uh, because it is uh you know, it’s your money, it’s your hard-earned money. You need to be able to, you know, understand that you’re getting the right information yourself, and it comes down to personal relationships, I think, as well.

[48:06] Alex Thomas: Yeah, I fully agree, Sammie. It’s it’s always been no life and trust because there’s there’s no end of people that I know and like, but you know, would you trust them with your finance at the end of the day? And it’s it’s it’s your livelihood and it’s your future, and to be trusted with that by anyone is is a privilege, and you need to earn that privilege. 100% agree, 100% agree. Mate, I’ve absolutely loved this. I think we could keep going deep into some of these topics, but to save people, uh you know, I think if they want to get in touch with you, because you know, you’re clearly extremely knowledgeable about this, and I feel like there’s a lot there that we could go deeper on, and as we say, completely unique to everybody, and you know, it’s lovely that you do the free calls as well. So if they want to reach out to you, what’s the best place to do that?

[48:54] Alex Thomas: Yeah, follow me on Instagram, Wealth by Alex. That’s well, I’m the most active and I’ll reply to DMs. Wicked man. Well, thank you so much for coming on. This has been an absolute pleasure, man. Mate, thank you for having me. I’ve really enjoyed it.