Holly Guscott: What’s Actually Making People Rich in the UK Right Now

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

[00:00] Sammie: So, Holly, welcome to the show.

[00:01] Holly: Thank you. How are you? Yeah, I’m good, thank you. How are you?

[00:04] Sammie: I’m really well, thank you. Yeah, I have had the pleasure of having Lisa on before from LCH12.

[00:13] Holly: Yes.

[00:13] Sammie: And it was one of our best episodes, so I’m quite excited for today.

[00:17] Holly: My hopes.

[00:19] Sammie: For people that don’t know you, give us a quick version if that’s okay.

[00:21] Holly: Yeah, of course. So yeah, I’m Holly. I’m a financial advisor. I’ve been doing this for nearly five years now, so definitely not as much experience as Lisa, but hopefully a bit of a fresh perspective as well. I’ve been at LCH Wealth for nearly two years now.

[00:39] Sammie: And what got you into it? Because you were a BT graduate, so you didn’t start in financial planning. Was it part of the career path? Did you look up and want to do that, or did you do something different?

[00:51] Holly: Yeah, no, definitely not. I did law at uni. So kind of thought that was where my career was going to end up, but decided to take a different route. I think I didn’t really know about financial advice or financial advisors as a career, really, because, you know, no one that I knew had a financial advisor. It wasn’t really spoken about as a career option when I was at school or at uni, so I really didn’t know about it as a career. And one day I actually got put in touch with a financial advisor, spoke to them, and just thought that actually sounds like a really interesting, practical career. And yeah, spoke to a few different people and then decided to give it a go. So I guess I fell into it, which I think a lot of financial advisors say.

[01:37] Sammie: And you are bucking the trend because it’s a very male-dominated industry and an aging industry. A lot of advisors are now retiring, so there’s actually going to become less and less of them.

[01:47] Holly: Yeah, exactly.

[01:49] Sammie: Standing out.

[01:49] Holly: Yeah. I think that was also a thing. It was kind of a unique and kind of a good opportunity for me to come into this career because I was young, a female, and I look very different to the average financial advisor, like you say.

[02:02] Sammie: Which is cool, right? And I suppose it’s kind of giving you your own sort of USP when you’re coming into having these conversations.

[02:09] Holly: Exactly. And I think, yeah, sometimes you feel like you have to prove yourself and improve your kind of experience and knowledge. But the way that I look at it is, some of these people that are my clients are in their 40s, 50s, older. If you’ve got someone that’s your financial advisor that’s the same age as you, you’re probably going to want to retire at the same time, right? Whilst if you’ve got someone that’s a bit younger than you advising you, hopefully I’ll be kind of seeing them through that whole retirement period as well. So I think that’s kind of a positive. Yeah.

[02:38] Sammie: I never thought of it like that actually. So you kind of grow with them, but then they outlive you.

[02:43] Holly: Exactly.

[02:44] Sammie: Hopefully.

[02:47] Sammie: So when you first got into this world, were your finances in good shape? You went to uni?

[02:54] Holly: Yes, I went to uni. I think I definitely came out of uni with a bit of debt. I think most people probably go into their overdraft a little bit. But I was quite good, in that I wasn’t earning loads of money when I first moved to London and when I first started working, but I also didn’t spend loads of money either. So I was quite good at saving. I wouldn’t say I knew much about investing or anything like that, but I’d say my finances were in an okay shape for someone in their 20s.

[03:22] Sammie: Did you grow up quite good with money then, do you think?

[03:25] Holly: I think I used to pay my sister for her leftover Easter eggs. So I don’t know if that’s smart. I love that.

[03:35] Sammie: Chocolate first, that’s like the most important priority.

[03:39] Holly: Yeah. But they do say that you establish kind of these habits from a really young age. So I think, yeah, it was probably ingrained on me from quite a young age to save money and just be a bit careful with your money as well.

[03:51] Sammie: It’s so interesting. They say you learn your own money habits by the age of seven.

[03:54] Holly: Yeah.

[03:55] Sammie: Which I find absolutely wild.

[03:56] Holly: Yeah.

[03:57] Sammie: How do we pick that up? I know. But we do somehow, and it sort of stems over into life. And everybody’s different. So I love asking that question to every guest that we have on, because every answer I get back is completely different. And someone that might be unbelievably great at investing or good with money now could well be absolutely horrendous with their spending when they were younger.

[04:18] Holly: Yeah.

[04:19] Sammie: Like me. Or you could be a saver now, and they struggle to get into investing or take risks because they’re inherently, you know, have this sort of low-risk mentality, which they may have picked up when they were super young, which I just find super fascinating. We’re all different with personal finance, right?

[04:38] Holly: Yeah, it’s really interesting. And I think they do say financial advisors often need financial advice as well. So, it doesn’t mean that we’re definitely all amazing with our money and know what to do. You need that outside perspective as well.

[04:50] Sammie: Yeah, we’ve had my financial advisor on the show. And it’s important for me because I talk about this all day long, but then I go to do my own money, and I still have that same little man in the head telling me that I should go and do this, or this idea, or new shiny object is a good thing. And just being held accountable to your goals and your original plan is super important.

[05:14] Holly: Yeah, no, it’s really good.

[05:16] Sammie: So let’s get practical, shall we? That’d be fun. I was thinking about essentially someone who’s perhaps listening to this because, you know, we start young. Are you in your 20s?

[05:28] Holly: 30s.

[05:29] Sammie: You’re in your 30s, yeah.

[05:30] Holly: Wow, young.

[05:31] Sammie: You do, yeah, fair play.

[05:33] Holly: Only just.

[05:34] Sammie: Yeah, no, I love that. Okay, so someone’s listening, let’s say late 20s then. They’ve auto-enrolled into a pension at work. They’ve first got that sort of paycheck coming through and they’re seeing that, but they’re not quite paying attention at that point. What would you tell that individual?

[05:50] Holly: So, yeah, I think 20s are definitely about establishing good habits really early on, because I think when you’re in your 20s, it’s not that pensions and things like that aren’t a priority, you just probably don’t know much about them. I definitely didn’t when I was in my early 20s. So, yeah, the auto-enrolment’s great because it means you’re automatically saving into the pension from early on. But I think probably the key thing that’s on your side is just time. Because it’s probably going to be, you know, 40 years, probably 40 plus, by the time they get there before they can even touch their pension. So time is definitely on their side. I’d say educate yourself. Know exactly who your pension is with, log on to the portal, check what you’re invested in, because a lot of people will just be in the default fund. And this is probably the key time to actually increase and take risk with your pension pot, knowing that you’ve got all of that time before you’re going to touch it. So I’d encourage people to look into the different options, potentially switch funds to something maybe a bit riskier if they feel comfortable to do that.

[06:57] Sammie: What does that look like?

[06:59] Holly: So, I mean, I can’t say specific funds, obviously, but kind of at that age, you’d want to be aiming for as close as 100% into global equities, essentially. Because yes, it might be volatile, but you’ve got such a long time before you’re going to be touching the pension anyway. And what else would you do in your 20s?

[07:21] Sammie: So, how would you check the pension then and where it’s invested? Let’s say I’m with Nest or a People’s Pension, what would I do in that case?

[07:30] Holly: In that scenario, log on to the Nest portal, for example. And then you should be able to look, it will just say what fund you’re in when you first log on. And then you should be able to look at your other investment choices. So, Nest, they don’t have loads of different fund choices available on Nest, but what you can do is basically take the different options and put them into a website called TrustNet. And it will essentially tell you the breakdown of what’s in equities, what’s in bonds. It might tell you the performance history as well over the one, three, five year period. It will tell you the cost on that fund as well. It’s an ice cream truck.

[08:11] Sammie: Yeah, no, I love that, we’ll leave that in as fun. And so that’s going to tell you what the investment returns are, what the breakdown of it is, what risk score?

[08:22] Holly: It won’t give you a risk score as such because everyone measures risk differently. But it will tell you that breakdown. So if you’re thinking you want to aim for something that’s more like closer to that 100% equity content if you’re in your 20s, then it will tell you that breakdown and whether that fund is achieving that.

[08:41] Sammie: So that’s really interesting. And people think that because they’re in one fund, they can’t move it, but they can, right? They can move this around and they can move it back to a less risky fund later.

[08:50] Holly: Yeah, exactly. And I wouldn’t be encouraging anyone to be changing it all the time. You kind of want to take a stance in an investment strategy and think of it as a long-term thing.

[09:03] Sammie: Like a decade or something.

[09:04] Holly: Exactly. And then if something massive changes in your life, then yes, maybe you want to look at it. But if we think a pension is a long-term investment, you actually can’t touch it, then you have to think of this as a long-term strategy and choose something that you’re hopefully going to stay invested in for a long time as well.

[09:22] Sammie: Okay, so let’s take this individual. They were 27, they got in over the 27 club. Well done, you.

[09:29] Holly: Yeah.

[09:29] Sammie: They’re 32 now, they’re earning a little bit more. Maybe thinking about a house or kids at this point, and they perhaps still feel the pension could wait. How do we convince them it can’t at that point?

[09:43] Holly: So 30s, yes, this is my decade now, which sounds weird to say. But you’re kind of balancing different priorities. So you probably know about pensions at this point in time, but as you say, it’s probably slipping down on the priority list because you might have a mortgage, you might have kids, and you just feel like you can’t afford to be doing everything. In your 30s time is still on your side. So there’s definitely that rule where they say take your age, halve it, and as a general rule of thumb, that’s kind of how much you should be putting as a percentage into your pension. So if you’re 30, 15% of your income should be going into your pension. So as your income increases in your 30s, I’d be trying to look at getting closer. You don’t have to be perfect, you don’t have to put 15% in if you’re 30, but the closer you can get to that, the better you are going to be for the future. You’re lining yourself up for success that way.

[10:45] Sammie: Okay, so let’s say, as an example, I get paid and I put 3% to my pension right now, and my employer puts 3%. Would you call that 6%? Or would you still call that 3%, would you say?

[10:56] Holly: So 6% still, yeah, that’s still going into the pension. It can be a mixture between you and the employer. And that’s another good thing, and this could be in your 20s as well, but definitely something if you haven’t done it yet and you’re in your 30s, is to write off to HR, find out how your money is going into the pension. It might be that they offer something called salary sacrifice, and it just might be that you’re not putting into your pension that way. So it might be that you can then opt in to do it by salary sacrifice, and that’s going to be a good thing. What’s that do then? So essentially, say you earn 80,000 pounds, which is quite a big number, and we want to get you back down to 50,000 pounds. You can sacrifice 30,000 pounds of your salary into the pension, and it means you’re basically taxed as if you earn 50,000 pounds. So you’ve got that tax and National Insurance saving, and it happens automatically, which is really great.

[11:56] Sammie: Nice, plus potentially your employer matches up to a certain amount, or yeah, exactly.

[12:01] Holly: So that’s another thing you want to find out, is well, if I increase my contribution, will the employer match that? So auto-enrolment rules are just, the employee puts in five percent and the employer puts in three percent. But some employers are more generous, so they might match it and put in five percent. If you increase yours to 10%, they might match it and put in 10%. So it’s definitely worth finding these things out and seeing what they’ll offer you.

[12:26] Sammie: Friend of mine’s got 15%.

[12:28] Holly: That’s really good.

[12:29] Sammie: It’s nuts, isn’t it? And I was like, that’s incredible because you’re literally getting 115% of your salary. That’s the way you have to look at it, it’s like really extra money. And he’s in a good position where he doesn’t necessarily need that 15%, he’s happy saving it. And now he’s basically got that 30% pension contribution, which is putting him in a really powerful position later.

[12:54] Holly: Yeah, it’s amazing. And I think people don’t think about pension contributions that much when you, you know, move jobs or anything like that, but it’s actually an amazing benefit to have. So it’s always worth, if you are looking to move jobs, checking what the pension contributions from the employer are going to be.

[13:11] Sammie: So I want to ask you this question because we’re talking about pensions, right? As someone in their early 30s, and I struggle with this in my mid, I’m mid to late now. More closer to mid than I am to late.

[13:22] Holly: Okay.

[13:22] Sammie: Yeah, closer to 35 than I am to 40, but there we go. I still struggle with the word pension now and the fact that it’s 30 years in the future, and I think pensions could do with a rebrand entirely and just be called something completely different, or a decent way of being able to pull some of it to supplement your life, like a property or something that’s just going to help you earlier, just so people are more engaged.

[13:47] Holly: Yeah.

[13:47] Sammie: How do you feel about it personally? And do you, knowing what you know, see it differently?

[13:53] Holly: I think so because, yeah, like you said, because I know what I know now. Before I was in this industry, it was just completely alien to me. And I definitely wouldn’t have wanted to increase what was going into the pension because it just feels like such a distant thing. But yeah, I speak to my friends a lot about this as well, because I’m just always trying to encourage them to get as much into their pensions as they can afford at this age, because yeah, you do have things to balance. So you might not be on the property ladder yet, but looking to do that. So you don’t want to be locking your money away. But I think that’s where you have to find the balance. And in your 30s, even increasing your contribution slightly is going to have a big impact over time. And it might be that you then balance that with something else like savings or a stocks and shares ISA that you can access before. So you’re still investing, but you can access it for something that’s more medium term.

[14:52] Sammie: Yeah, like a 1% increase compounds massively over the course of a lifetime, right?

[14:57] Holly: Yeah.

[14:58] Sammie: So engagement into your pension early, try and get it sorted out. And does this stuff take long to sort out?

[15:04] Holly: Yeah, no, it’s super quick. I think what can take time is often people just don’t even know who their pension provider is. But once you’ve got all the login details, you can literally go on and change your contribution levels really easily. You can probably email HR and get them to change the contributions as well. Some companies might let you flex it every month, some companies might have a benefits window where you can change it once a year. But yeah, it will just be through the employer, basically.

[15:37] Sammie: And what about if I’m self-employed? What do I do in this regard?

[15:41] Holly: So, I mean, hardly any people that are self-employed put into pensions, I think it’s under 20%, really. So in that scenario, I’d be really encouraging you to open up a pension. Again, super easy. You can go to some of the big name providers, like Hargreaves Lansdown, AJ Bell, Vanguard. It’ll be like a few clicks. You need a National Insurance number, so if you don’t know that off by heart, you need to find it.

[16:07] Sammie: Do you know yours? I do. Yeah, same.

[16:09] Holly: Yeah, it’s the one number I’ll never forget.

[16:11] Sammie: Yeah.

[16:12] Holly: And yeah, it’ll be really simple to open it. You choose the fund that you want to be invested in. So again, if you go with something like Vanguard, you’ve got their self-managed funds, so that could be a really easy way to just open and choose one of their funds. You might want to check on TrustNet again, the performance and cost. And yeah, you can open it up and then start contributing. And it might be that you start with just a small amount each month and then increase it over time.

[16:44] Sammie: It’s like one of those things, isn’t it, it’s a self-invested personal pension, so a SIPP in that regard, right?

[16:50] Holly: Yep. So yeah, you can have a SIPP or a personal pension there.

[16:53] Sammie: And there’s loads as well, if you Google like self-employed personal pension, there’s some really good options that come up, and you can go on Money Saving Expert as well and have a look at the best ranked ones and work it all out from there. Because it’s important as well, especially if you’re self-employed, to be putting some of that money away too. But let’s say, for example, we mentioned it earlier, we’ve talked about salary sacrifice. Now they’re someone in their 40s, but they still haven’t done anything. They’re still struggling. They’d been meaning to sort this out now for 15 years and they never did.

[17:29] Holly: Yeah.

[17:30] Sammie: I get this question all the time. Is it too late for me to start investing into my pension?

[17:35] Holly: Absolutely not. Yeah, it’s definitely the wake-up call decade. We get a lot of people that come to us in their 40s, and I mean, and 50s as well. They’re definitely thinking, is it too late? But yeah, 40s, I think they’re starting to think, okay, retirement’s actually not that far away now, I really need to make sure I’m on track. Or if I haven’t started, I really need to start doing something about it. And in your 40s, you could be at the peak of your career and your earnings. So this is where pensions become a really powerful tool to manipulate how much tax you pay. If you really plug a lot into the pension over that time frame, you might have to take slightly more risk if you’ve not been investing. You might have to really go for it and put a lot into your pension in order to achieve what you want in the future. But it’s definitely not too late. And I think this is where financial advice can become really valuable as well, because we do this thing called cash flow modelling. So I mean, you’ll know what it is, but it’s a really good way to visualise where you’re at now and what more you might need to do. And I think 40s is, you have to be intentional and you have to work out what’s actually important to you. So I had a couple the other week, and to start with, we were saying, you earn 140, let’s put 40,000 into your pension to be as tax efficient as we possibly can be, and then that way you can retire by 55. But then they went away and thought, actually, that’s not the priority. I don’t want to, I could put 40,000 into my pension, but I’m going to be sacrificing some of the holidays with the kids now. And yeah, they decided they’d actually rather work maybe five, 10 extra years and not make those sacrifices now. And I think that’s definitely fine, it’s just knowing what the impact of that decision is.

[19:34] Sammie: Yes, absolutely, it’s opportunity cost, yeah, and just factoring that into your decision making.

[19:40] Holly: Yeah.

[19:40] Sammie: And there’s no right or wrong answer. Exactly. For example, you could really dislike your job and not be okay if someone turned around to me and said another five years, and you’re like, no chance, I just can’t.

[19:55] Holly: Yeah.

[19:56] Sammie: And I’m okay with taking less, and then you’ve understood that opportunity cost at that point.

[20:00] Holly: Yeah, exactly.

[20:02] Sammie: How do you model that with someone? Do you go into the human side of it too?

[20:07] Holly: Yeah, so we always ask a few questions at the beginning of the meeting to truly understand what’s important to that person. We get a lot of people cry at these questions as well. Really? Yeah, they’re called Kinder questions, if you want to have a Google after.

[20:22] Sammie: Kinder questions.

[20:23] Holly: Yeah, they’re American, so I think you have to adapt how you say it. Yeah.

[20:27] Sammie: Is that why?

[20:28] Holly: Kinder.

[20:29] Sammie: Right, right.

[20:31] Holly: But that really helps us at the start of the meeting to understand what the priorities are, what’s actually really important to that person. And we can model different scenarios as well. So we can model the dream scenario where you get everything that you want, that’s why we want people to dream big in a way. But then we might make a more realistic plan as well of, okay, well, you might be able to retire then, but you might have to spend less money in retirement. If it’s really important for you to spend more, then you might have to work a bit longer, you might have to spend less now. There’s lots of different levers that you can pull. But yeah, we’ll model different scenarios for people.

[21:56] Sammie: And how do you get past, like, this is becoming more and more prevalent, especially on the videos that we put out, a lot of people just go, look, what’s the point in having a big investment portfolio when you could get hit by a bus tomorrow? How do you handle that? Because things are getting more expensive and it’s getting harder for people, they are becoming a lot more like, oh, sod it, we’ll do it now. And we’ll live for now because the future’s not looking too bright.

[22:27] Holly: Yeah.

[22:27] Sammie: They see it that way. When they look forward, they can’t imagine twenty, thirty years then.

[22:32] Holly: Yeah.

[22:32] Sammie: How do you deal with that individual and what would you say to someone if they said that to you?

[22:37] Holly: I think the first question I’d be asking is, is it just an individual or do they have a family? Do they have a partner? Do they have kids? Because you might die, but what are you leaving behind in that scenario? And then, also, who knows what the state pension’s going to be like, so we can’t rely on that either, I don’t think. So, yes, you might die tomorrow, but you also might not. You might live until you’re 110. So it’s just about, that’s highly likely now with AI, right?

[23:10] Sammie: Because you’ve seen all of these things happening, they’re saying you could live into your 130s and 140s, it’s mental.

[23:16] Holly: I think I saw that I had a one in four chance to live until I’m age 100, on the ONS website.

[23:23] Sammie: There’s David Sinclair, he came out, he’s a doctor, if anyone, I encourage everybody to go and watch this, it’s incredible, it’s a bit like, does that actually exist? So basically, they take aging cells and they completely regenerate them. So, number one, it can reverse things like blindness and it can do all of these types of things, but equally, it can reverse age.

[23:46] Holly: Oh my gosh.

[23:47] Sammie: So, like, Benjamin Button getting younger, that’s actually a real thing. And that’s only going to get better and better and better. And they’ve done this now, it exists. And so us actually living quite a long life now is probably more likely.

[24:00] Holly: Yeah.

[24:01] Sammie: Which is crazy when you come to think about it. Are we going to be working until we’re a hundred? How’s that work? I know.

[24:08] Holly: Yeah, so on our cash flow we do till age a hundred.

[24:12] Sammie: Do you?

[24:12] Holly: Yeah, and I keep saying I think we need to maybe increase this even more. But most people you speak to will say, there’s no way I want to live until age 100.

[24:21] Sammie: So I’m 80, I do 80 and I’m done. I think past 80 it doesn’t look too fun.

[24:28] Holly: Yeah, but yeah, we’ve got to plan that that could happen. And we want to make sure that your money doesn’t run out before you do. So yeah, we just want to plan, we don’t want you to die with too much money, but we also want to make sure that you don’t run out of money. So we’re cautious in the modelling.

[24:47] Sammie: So for that individual that’s spending, spending, spending, spending, live for today. And it comes back to that old cliche saying of like, you can be 30,000 and wealthy or 100,000 and completely flat broke, yeah, it’s just what you’re doing with it. But how do you balance those with them? So I’m a spender and I just want to go on a holiday, Holly. Just want to go on the holiday.

[25:06] Holly: So again, it’s about being intentional. We have to show the impact of them doing that now and how that’s going to potentially affect their future, because they could get there. And then we don’t want them to just be in a rubbish situation. So I think it’s really important to understand the budget in the first instance. So what’s your essential spending and then what’s your discretionary spending? So the holidays and the things like that, they might be important, but you could potentially go without them. And then with those sorts of people, what we try and do is, you know, take away the spending a little bit by automating what goes into the investments. So interesting.

[25:47] Sammie: Cool.

[25:47] Holly: Yeah, so when they get paid, we’ll say, well, straight away money goes into the pension, you know, they say like pay yourself first, pension, ISAs, whatever it may be, savings. And then what’s left is then for them to spend, essentially. So I think that’s a really good way for people that struggle with spending, just to automate everything, because a lot of the time you won’t even realise that it’s gone.

[26:12] Sammie: I understand this is totally harder for some people than it is for others because of how their life is and the amount they earn, and they could be shoveling or whatever. But what I’ve done recently is I’ve called it the anti-budget, and it’s basically 400 pounds a month, and within that 400 pounds a month, I can literally do whatever the hell I want with it. Everything else is very well meticulously laid out, and at 400 quid I just don’t care.

[26:37] Holly: Yeah.

[26:37] Sammie: And if it goes in two weeks, well, that’s my fault. But it doesn’t blow everything else apart, and I think that having that separation, even with a small portion of your money, just allows you to sort of live a bit freer and spontaneous, and not everything is so formulaic and like we have to do all of this all of the time with all of our money, and every penny has to be counted. Because then there does need to be an element of, yeah, I’ll come for a drink.

[27:04] Holly: Yeah.

[27:04] Sammie: Do you know what I mean? Otherwise, what are we doing? Yeah. And I get some people way more regimented than others, but largely they’re not.

[27:11] Holly: Yeah, yeah. You need to have guilt-free spending because it is true to some extent. Like, we just don’t know how long we’ve got left. So you still want to be able to enjoy your life now. But there’s definitely a balance with also planning for the future as well. And yeah, we have couples where they’ve got completely different financial personalities.

[27:32] Sammie: That was my next question. That was my next question. Because you get the spender or the saver, or sometimes they’re both savers, and that’s equally as hard.

[27:39] Holly: Yeah, exactly. So that’s a really good way, in a couple where you have got someone that wants to make sure that everything’s going into the investments and working as hard as it can be, and that they’re also saving loads of money. And you’ve got the other person that is the spender in the relationship. And by allocating a certain amount each month that is like fun money for them to do whatever they want with, it just allows them to have a bit of that guilt-free spending and enjoyment as well.

[28:04] Sammie: Totally, I completely agree. The anti-budget, I love it. But you said something earlier, and I don’t think we’ve spoken about this, and it’s actually quite interesting when I did the research on it, about ISA millionaires, because there are now over 5,000 ISA millionaires, and that’s more than National Lottery millionaires.

[28:24] Holly: How on earth is that possible? Showing that kind of discipline, consistency beats luck, essentially. I’m not saying I don’t want to win the lottery either. But yeah, it’ll be people that have kind of stayed consistent, used their allowances each year, and have invested over a long term period, essentially.

[28:48] Sammie: So the average took them 22 years, and the average ISA millionaire is the ripe old age of 73. Young age, ripe young age, I should always say young, you’re 73 years young. But that’s considerably older, that it’s generally past retirement at that point. For someone in their 20s and 30s listening to that, what can they take away from that? Is it actually achievable for the normal person?

[29:14] Holly: Yeah. I think you’ve also got to be telling that person in their 70s that they need to start spending some money if they’re an ISA millionaire. But yeah, I think when you’re in your 20s, even small amounts, so you might not be using your full ISA allowance because, you know, 20,000 pounds is a lot of money, especially in your 20s, so to use that every year is probably not achievable for everyone. But even starting small when you’re in your 20s, so 50 pounds, 100 pounds a month, it’s going to compound over that time frame. And I think, yeah, it depends on the investment growth as well. But you could still definitely, by the time you’re in your 80s, have a million-pound pot if you stay consistent. And as your income increases as well, that’s when you can look to increase those contributions.

[30:06] Sammie: That brings me on to a very good question. Inflation is playing there, so, yeah, I might be 30 now, but a million pounds when I’m 80 is going to be considerably a lot less. So, when you’re working with clients, do you factor that into the calculations within your cash flow model?

[30:21] Holly: Yep. So, I mean, when we speak to clients, we talk about everything in today’s terms, because I feel you just can’t comprehend, basically, with inflation, how much things are going to be worth. So, if we start talking in those numbers, I think it becomes not very realistic for the person. But yeah, we build inflation, we build inflation at about 3% over the long term, I know it’s been much higher than that in recent years, but that’s kind of the long-term average. So yeah, that’s built into everything. And then each year, the amount that people want to spend in retirement will increase that as well, to adjust it for inflation. So yeah, it’s definitely built in.

[31:01] Sammie: At least you said a number, I think it’s been like one or two percent you guys run off after you factor all of your calculations in in terms of growth, right? Is that still the case?

[31:09] Holly: Yeah, so we’ve got inflation at 3% and then investments at 4%. So yeah, 1% above inflation.

[31:16] Sammie: So do you do that just to be realistic? Or do you do that because, I mean, if you look at, say, for example, global equities or the S&P 500, you’re pushing nine to even above 10%. So that’s a considerable gap between four and nine.

[31:33] Holly: Yeah, which is what a lot of people say as well. I think the point is that yes, you might be invested in 100% global equities in your 20s, 30s, I mean, some people will do it 40s, 50s, 60s. But the point is that once you hit retirement, you’re probably not going to feel like you want to take as much risk with your investments. And that’s the point where you’re not going to be getting those sorts of returns. And I think you find, if you put 10% into the model, it just shows so many people are going to be completely fine. And we never want to rely on that, essentially. So we go cautious, we know it’s cautious, but we do that on purpose, just so that we’re still building in those really good habits over time. And it just means that if we get a few bad years, then it’s not going to have a massive impact on the plan.

[32:25] Sammie: You’re better off doing it like that than necessarily saying you’re going to retire at 65, and, oh, suddenly you’re in that position at 59, well, that provides you options and choice at that stage, which is just kind of like a nicer outcome, right?

[32:39] Holly: Exactly. And each year you’re building certainty into the plan, right? Because if you have achieved 10% growth, then we put that new figure into the model anyway in the next year.

[32:48] Sammie: Oh, and it reflects when you do your catch-up.

[32:50] Holly: Exactly. So you’re going to have had that 10% growth, but then from then onwards, we’re still modelling that 4% investment growth. So you do get more certainty each year that you do it. But yeah, in terms of a long-term outlook, we like to do that, yeah, just to be cautious, and because you don’t know what sort of risk appetite you’re going to have in the future either.

[34:20] Sammie: You’re totally right. To go back to this, the sort of ISA conversation, because I think you said something which is really interesting there, it’s only 11% of the country in 2024, I don’t know what the latest stat for 2025 is, I don’t think it’s been released yet, but only 11% maxed out their ISA. So it’s actually a considerably low number. And it’s only 17% of UK adults have a stocks and shares ISA. That number has increased slightly, but accounts opened went down, which is really quite startling because we’re trying to become a nation of investors, but doing a horrible job of that, but making ISA changes, in my opinion. But what do you think, why are people so afraid of stocks and shares ISAs and pensions, do you think?

[35:04] Holly: I think it’s probably a lack of understanding about investing. I still think it’s crazy that they don’t teach you this in school. I mean, hopefully it’s changing, but I definitely wasn’t taught anything about pensions or investments in school. So I think you just see this thing of risk and the fact that your money might go down, and you just get scared to put anything in it. And you don’t really have the knowledge to know that the past will tell us that these things do rise over time. I think you just think about the fact that you could lose your money, essentially.

[35:45] Sammie: Yeah, and risk involved in that too, right? It’s riskier if you’re investing for a few days or a year versus 10, 20 years if you were to zoom out. But there’s always risk with investing, but there’s also risk of doing nothing.

[35:59] Holly: Exactly. And I think that’s the part that people don’t really understand, is you think, I’ll keep my money in cash because then there’s no risk of losing money. But people don’t factor in inflation and the fact that that is actually losing money. So I think it is just the lack of understanding about all of those different concepts, because you’re never taught about it at school.

[36:21] Sammie: Yeah, and it’s been a weird time because we’ve had interest rates from the bank of like five, six percent and CPI at like three-ish. So we’re looking at it going, yeah, actually, we’re making money, 2% growth. But I think people should take those numbers with very much a pinch of salt.

[36:39] Holly: Yeah.

[36:39] Sammie: Because the actual inflation in your own life, my inflation and your inflation, it’s going to be completely different based on what we’re buying, where we live, all of those things, right?

[36:48] Holly: Yeah, exactly. And I think, yeah. I’ve got friends that have put money into stocks and shares ISAs and they’re like, oh, I’ll just try it out, I’ll put a bit in. And then the markets have gone down and they’ve panicked and taken it all out. And I’m like, that’s the worst thing that you can do. Yeah. Because then you are actually losing money. So I think you have to go with the knowledge of what this investment’s going to be for, and know that if you don’t need to touch it for 10 years, then it doesn’t matter if it goes down. You’ve got time to wait out because you don’t need to use it until year 10.

[37:22] Sammie: So, yeah, the cash ISA allowance as well, that’s dropping to 12k from April 2027. What should people be doing about that now, before the rules change, do you think?

[37:35] Holly: So yeah, I think, I mean, the reason that they’re doing it is to try and encourage people to invest more of their money, essentially, which I think, the idea, I mean, whether it actually works, but the idea behind it is, it’s a good thing to try and get younger people to invest more money. I think with a lot of our clients, it’s not really going to cause that much change, because we’re already encouraging them to use most of their allowance into a stocks and shares ISA anyway. I think the ones that it does impact is anyone that needs short-term savings. That’s when I’m encouraging them to use that cash ISA allowance whilst they can, get the full £20,000. But for everyone else, I’m not really seeing it as a big impact, because I’m telling them that they should be putting it all into the stocks and shares ISA anyway.

[38:22] Sammie: Yeah, and when you actually look at the numbers, let’s say you’re saving each month into a cash ISA and you’re hitting that 12k, that’s a thousand pounds a month.

[38:31] Holly: Yeah.

[38:32] Sammie: Which is quite a lot of savings for a large number of the country. If you’re earning an average salary, that is pretty much half your wage, which is quite nuts, right? When you think about it. So I think what the government do with these things is they try and make them more simplified and easier and encourage this over here. And then the average person just looks up there and goes, 12 grand for that, four grand for the Lifetime ISA, 60 grand for a pension, what? Just tell me one thing. Do you know what I mean? Just make it simplified for everybody. And I think that causes issues, would you agree?

[39:07] Holly: Definitely. I mean, it keeps us in a job if they keep changing all the rules and keep it complicated. But no, yeah, I think they try and make all these changes to make it simple, but it actually just means that people lose faith in these products. So, you know, making pensions so complicated means people don’t really trust them. Again, changing all these rules with ISAs means people are just like, I’m just going to stay away from that, it’s too confusing, and I don’t even know what the rules are. So yeah, they’re trying to make it simple, but I think it just actually puts people off.

[39:37] Sammie: And what’s the salary sacrifice change that’s coming for 2029?

[39:41] Holly: Yeah, so I think people are really scared by this one, but it’s actually not as scary as it seems. So at the moment, the pension allowance is 60,000 pounds, you could essentially sacrifice 60,000 pounds into your pension. The rule that they’re changing is the National Insurance savings. So that thing that I was talking about earlier, in terms of if you put 60,000 in, you basically take that off your salary and then you don’t pay National Insurance on the rest, and you only pay tax on that remaining amount. The rule is going to be that the National Insurance saving is only on that first £2,000 that you sacrifice. So you can still sacrifice beyond that, and you still get all the tax savings and the other benefits, you just don’t get that National Insurance saving. So yeah, still going to be encouraging people to put more than that in.

[40:38] Sammie: Still works out better for you.

[40:39] Holly: Exactly.

[40:40] Sammie: But it’s just complicated, isn’t it?

[40:42] Holly: Exactly. Yeah, I think for most people it might be like they’re losing that 2% National Insurance saving.

[40:49] Sammie: So yeah, but hopefully getting a much bigger uplift and saving in tax still.

[40:55] Holly: Exactly.

[40:55] Sammie: Yeah. How are you handling AI with your clients? Because we’ve had the likes of Elon recently say, don’t put money into a pension because it’s not going to exist. But they didn’t give much context, and they sort of just throw these statements out there. And someone like Elon is the biggest, richest man on the planet, has a bloody social media platform. He’s fine. Yeah, he’s fine, right? Exactly. So for the average person, it’s, I feel like it can be quite damaging, especially when there’s a plan.

[41:27] Holly: Yeah.

[41:27] Sammie: We have no idea what 10, 20 years look like, so what we’re going to do, just stop? How are you dealing with that? And have you had that come up with any clients?

[41:36] Holly: Yeah, I think luckily not really with our current clients, because a lot of our job is this kind of coaching thing. So we’re trying to tell them to ignore all of the noise that you hear and stick to the plan, because none of us know what’s going to happen in 10, 20 years’ time. We do get it with some of the new clients coming in and asking. We also get a lot of questions just in general on the funds and things because they’ve got this big AI bubble as well and everything like that. So we do get a lot of questions on that. I think I would always take it back to the plan in terms of, let’s just go back to basics and see what we’re trying to achieve, based on that cash flow plan. If I need to be putting, you know, £20,000 a year or £10,000 a year into an investment to achieve my goals, then I just need to stick to that plan and keep doing that and just ignore the outside noise. So a lot of our job is coaching, I’d say.

[42:34] Sammie: Just especially if you’re in global equities, you already have quite a lot of AI exposure in Nvidia and some of the big companies that are within the top, even the top 10 of the S&P 500.

[42:45] Holly: Yeah, exactly.

[42:46] Sammie: It’s just kind of like, I think people are always trying to look for the edge and the next thing. But I always liken this back to, it’s like you can always tell when the top of something is, is basically when my mum starts asking me whether she should buy gold or Bitcoin. And I’m like, whoa, get out. Do you know what I mean? Like, that’s, I know that’s not okay. You’ve definitely heard that from somewhere, and now my mum knows who definitely shouldn’t be having that conversation. Yeah, not that she shouldn’t, but I’m just saying, if you met my mum, you’d understand. That’s not a normal conversation to have. I think that’s when you know tops are, and worries about these types of things, right? And that’s like when your mate Dave down the pub tells you you should buy AI or Bitcoin or something like that.

[43:30] Holly: Yeah.

[43:30] Sammie: And then they probably come to you like, should we buy Bitcoin? What do we do?

[43:35] Holly: A lot, yeah, it’s all the crypto. And I think that’s, like, if someone has, going back to this fun money thing, if someone has fun money and they want to buy some crypto, then do that. But we want them to stick to the plan in terms of investing in things that, yes, have risk because it’s an investment, but it’s safe in the grand scheme of things.

[43:57] Sammie: Versus a crypto.

[43:59] Holly: Versus the crypto over that long-term period as well. And if we go back to the ISA millionaires as well, most of these ISA millionaires, they haven’t invested into one stock, or it’s not these crypto investments that they’ve been doing. They’ve invested in, yes, equities, but it’s diversified in that it’s global. And they’ve just invested over a long period of time, and that’s how they’ve got there. It’s not by taking huge amounts of risk. Yes, they’ve had to take some risk, but yeah, in the safest way possible.

[44:34] Sammie: So, I’m banging my drum here and I’m saying, no, no, no, I definitely want to take a little bit more risk. How do you then do that? Do you test the water with them and say, okay, what about 5% or what about 10%? What do you do in that regard?

[44:53] Holly: Risk in what way? In terms of, like, they want to put some into crypto or something like that.

[44:57] Sammie: Like an AI ETF or something where it’s just like, I’m 100% sure this is what I want to do. How do you handle those types of conversations?

[45:07] Holly: Yeah, so we definitely have had some clients that want to take their whole pension out and put it into one stock because they’ve heard this stock is the next big thing. And to be honest, if that is 100% what that client wants to do, we can’t stop them. We probably wouldn’t want to be looking after them, though, on an ongoing basis, because we can’t have that kind of liability.

[45:30] Sammie: Yeah, yeah.

[45:31] Holly: So we’ve had clients in that instance as well that have taken some of their pot to invest in this thing that they want to. But the rest has stayed in global diversified funds. And I think at that point, again, it’s about understanding the impact of that decision. So if you do that and it all goes wrong, then what’s that going to mean for your plan? Are you going to have to work until you’re 80 in order to achieve what you want to? Does it mean that your spending is going to be massively, massively reduced? Because we have to essentially not include that in the plan because it’s such high risk and you could lose it all.

[46:08] Sammie: Another one for me is premium bonds.

[46:12] Holly: Yeah.

[46:12] Sammie: We get this question all of the time. What do you advise clients on premium bonds? Do you talk to them much? I’m sure you get that question because they’re very popular.

[46:20] Holly: Yeah, I think the returns on premium bonds for most people, like the average person, are not going to be good. You’d be better off having your money in a high interest savings account, a cash ISA. I have some premium bonds because it’s quite fun to log on and check to see if you’ve won the prize each month. But it’s definitely not because I’m getting, I haven’t won a prize. So it’s definitely not because you’re getting.

[46:41] Sammie: Have you won anything?

[46:42] Holly: No, nothing. Nothing.

[46:43] Sammie: Oh, really? Oh no. I know. Oh, that’s right. So why am I there? I’ve never bought one, by the way, I refuse to. Yeah. But I see it with some people, and a lot of people, I actually thought about this and I was like, actually, that’s not a bad idea. Like, for example, your emergency fund is locked away, so three, six months or something, whatever you’ve managed to get. Yes, you could have it in a savings account, and yes, you could be getting three to four percent of it, but also, if you’re really confident about premium bonds and you’re going to win, then it could be a good use of it.

[47:15] Holly: I think premium bonds have a place. So if you are a higher or an additional rate taxpayer, then premium bonds can be really useful because it’s a prize, so you don’t pay tax on those prizes that you win.

[47:28] Sammie: True, yeah.

[47:28] Holly: Whilst you will probably be paying tax on a savings account. So that’s when you might look to cash ISAs or premium bonds. But for other people, you’d probably be better off having your money in a high interest savings account and getting a higher rate of interest, especially at the moment.

[47:46] Sammie: I can’t tell you how many friends have, like, I asked someone what’s in their savings account, and I asked them what’s in their premium bonds account, and I’m like, what? They’re like, yeah, I know, but we could win that. We won 25 quid the other day. I’m like, mate, what are you doing? Yeah. But I get it, because they’re preying on the fact that we’re a nation of gamblers, right? That it’s the potential, it’s the National Lottery of safer savings. It’s wild. I’d love to talk to you about inheritance tax because there’s some changes happening to that. We’ve been talking heavily about pensions and growing our wealth.

[48:24] Holly: Yeah.

[48:25] Sammie: When we do come to laying the ground, inheritance tax is a key thing, and the pensions are being brought into IHT estates from April 2027, and that’s a massive change that a lot of people don’t know about.

[48:37] Holly: Yeah.

[48:38] Sammie: What are you talking to your clients about with that at the moment?

[48:41] Holly: So I think it’s a bit of a change in strategy in terms of, if inheritance tax was important to you, then we might have been spending the pensions last. Now we’re looking at spending those earlier in your retirement and using pensions and ISAs to be as tax efficient as possible in retirement. So it’s a bit of a change in strategy. Who knows whether they’ll change the rules again? We just don’t know. But for now, for those people that are approaching that age, it’s a bit of a change in strategy of when we’ll start touching the pensions.

[49:17] Sammie: And there’s thresholds, right? Because people think that, oh, when I pass away, all of it’s going to get taxed, but that’s not the case. And that changes, right?

[49:24] Holly: Yeah, and I think people, so inheritance tax I’d say is probably quite polarising. And I think people think, oh, well, I don’t care about inheritance tax, it’s only for really rich people. But they’ve frozen the thresholds until 2031. And I think the residence nil-rate band, which I’ll go on to in a minute, has been, or the main threshold has been frozen since maybe like 2009, it’s been frozen for a long time. But yeah, so an individual will have 325,000 pounds that they can pass on that’s free of inheritance tax. If you’re passing on your main residence to direct descendants as well, so kids, for example, you get another £175,000. So, you know, most individuals will have £500,000, and if you’re a couple, that’s a million pounds, which is a lot of money. And a lot of people, depending on where you live in the country, might not have to pay any inheritance tax. But there’s also a lot of people, especially because they’re freezing these thresholds with house price increases, that are just going to fall into those brackets. And they think of themselves as quite normal people.

[50:36] Sammie: Yeah, because someone that’s got a, you know, 250 grand house now, in a nice area that’s been on the up, might well be worth a few hundred grand by the time it gets to that point. Exactly.

[50:49] Holly: Yeah.

[50:50] Sammie: They’re sneaky, aren’t they?

[50:51] Holly: They are sneaky.

[50:52] Sammie: There’s thresholds.

[50:54] Holly: Stealth tax.

[50:55] Sammie: Stealth taxes. Yeah, yeah, that’s so true. What’s the one thing every family should do with inheritance tax? How do they just plan ahead for this thing? And so, if their house is increasing, what would you do in that regard?

[51:09] Holly: Yeah, I think as a family, I’d say the one thing to do is actually talk about it. Because people hate talking about money. And I feel like we’re getting better, and I love talking about that. Yeah, but I mean, people are getting better at talking about money, but you’re probably dealing with people that are in generations that just don’t like talking about it as well. So it’s really trying to open up those conversations to see what is important. And it might be that it’s not important, but at least you’ve had that discussion and at least you’re going to be prepared for it. With our clients, there are things that we’re trying to get them to do during their lifetime so that it’s not something that just happens on, I mean, it will happen on death, everyone’s going to die as well. But it’s something that they can start planning for earlier in their life, earlier than they probably thought they would be planning for inheritance tax as well.

[52:06] Sammie: Yeah. Yeah. Well, the thing is with these things as well, is that it is the way now, and then a new government comes in, and one of their big manifesto points is to make it much more fair and change all the thresholds, and it all changes again, and then it goes up, down, left, right, and centre. But you do need to make a plan with what’s in front of you right now, and that’s what’s important. And those plans can change, right?

[52:29] Holly: Yeah.

[52:29] Sammie: And that’s why financial advisors are important.

[52:31] Holly: They are, and yeah, I think inheritance tax is, I think, also again important for those normal people, because people that are mega rich, they’re going to be able to gift away all this stuff because they just don’t need the money. So, inheritance tax, yes, they might have properties that are worth loads of money as well, but they’re also able to plan for it and gift away a lot of their wealth and use fancy trust structures and all of these other kind of more complex financial planning strategies to alleviate that as an issue. It’s kind of like the more normal people that need to do some of these easy tricks, but also that help plan to mitigate inheritance tax.

[53:11] Sammie: Yeah, yeah, 100%. LCH does financial diagnosis sessions, do you still do them?

[53:17] Holly: We do, yes. Me and Lisa do them. Oh, do you? Yeah.

[53:21] Sammie: How do you book one and what should people expect when they do it?

[53:24] Holly: So you can go on the website and then you’ll be able to email our colleague called Abby. She’ll be able to give you some dates to book into the session and tell you a bit more about them as well. But yeah, they’re with Lisa or myself. And essentially that cash flow plan that we’ve kind of talked about a little bit, during that meeting we’ll basically build you a cash flow plan. So we’ll be able to tell you where you’re at now, whether you’re on track, what more you might need to do. So we always say it’s about understanding that number. So, you know, what more might you need to save each year in order to achieve everything that you want to? What sort of investment returns might you need to achieve everything you want to? And also it’s a bit about understanding what those goals and objectives actually look like as well, which is why we always start with those questions as well, so we can help you understand what your priorities are.

[54:19] Sammie: I love that.

[54:20] Holly: The Kinder questions, the Kinder questions, yeah. Don’t cry though.

[54:26] Sammie: I might, I think I might. You need to invest more.

[54:31] Holly: I know, I feel like it becomes a bit of a game, like, can we make you cry?

[54:37] Sammie: Death and crying with Holly. Yeah, I love it. But if you could go back and tell your 21-year-old self, Holly, one thing about money, what would it be?

[54:50] Holly: Oh my gosh, that’s a hard question. I think it would just be that, you don’t need to make these big, massive changes. You can start really small and that’s going to have a huge impact. So yeah, I think 21-year-old me was probably a bit crazier, but even putting like 10 pounds a month into a stocks and shares ISA at that age is going to have a massive impact. And yeah, I think we think it needs to be these kind of overnight huge changes, but that’s not where the impact comes from. It’s about staying disciplined and consistent over a long period of time.

[55:27] Sammie: Yeah, 100%, that’s a fantastic bit of advice, I love that, very relatable. Yeah, honestly, this has been great, I’ve loved this, so much information for people in there. Where do you want to send people today?

[55:40] Holly: To our website. So, yeah, LCH12 is the company. If you go on our website, you can find out a bit more about us, a bit more about the financial diagnosis sessions, and about our services and who we help and everything. So, yeah, I think most of our clients have never had financial advice before either, so I think that means we’re really geared up to be able to explain things in a way that’s hopefully understandable, relatable. But yeah, you can go to our website to find out more.

[56:09] Sammie: Yeah, you’ve been great, and Lisa’s awesome as well. I will also pop the episode with Lisa up here as well, you can definitely dive into that too. But thank you so much, Holly, we’ll leave links to that in the show notes below. And it’s been a real pleasure.

[56:22] Holly: Thanks so much for having me.