Receiving significant wealth is undoubtedly a positive financial milestone. Whether it comes from the sale of a business, an inheritance, the sale of a property, a compensation payment, or years of saving finally coming to fruition, it can open up opportunities that simply did not exist before.
It can also create uncertainty.
Many people understandably focus on one question: “Where should I invest the money?” In reality, investment decisions are often only one part of a much broader conversation. The choices made in the weeks and months following a significant increase in wealth can have lasting implications for financial security, taxation, and the ability to pass assets efficiently to future generations.
Private Client Tax Partner Stephen Kenny, and William Godsave, Head of Financial Planning at Credo Wealth, explain why taking the time to build a clear and joined up tax and financial plan before making major financial decisions can be just as valuable as the decisions themselves.
Avoid rushing investment decisions after receiving significant wealth
One of the most common reactions following a liquidity event is the feeling that something needs to happen immediately.
In many cases, the opposite is true.
Holding proceeds in a suitable cash account while a financial plan is developed provides valuable breathing space. It allows time to understand future objectives, assess tax implications, and make considered decisions rather than reacting to the emotion that often accompanies a major life event.
A carefully constructed strategy is rarely built in a matter of days.
Financial planning considerations after an inheritance, business sale or bonus
Although every situation is unique, the financial questions that follow are often remarkably similar.
A business owner who has completed the sale of their company may need to consider how the proceeds can replace future income and support retirement. Someone receiving an inheritance may wish to preserve family wealth while balancing their own financial priorities. An individual receiving a large bonus or exercising share options may need to think about tax-efficient investing, pension contributions, and longer-term financial objectives.
The circumstances differ, but the underlying principle holds: understand your position first, then decide how to structure your wealth.
Why financial planning should come before investing
Investing is an important component of wealth management, but it should rarely be the starting point. Before deciding how assets should be invested, it is worth answering some more fundamental questions:
- How much capital will be required to support your lifestyle?
- Do you intend to retire earlier than originally planned?
- Should some of the funds be used to reduce debt?
- Are there children or grandchildren you hope to support financially?
- Could pension or ISA allowances be used more effectively?
Only once these broader objectives are understood does it become possible to determine an appropriate investment strategy. Rather than selecting investments in isolation, portfolios should reflect the role they are expected to play within an individual’s overall financial plan.
Tax planning considerations following a liquidity event
Significant changes in wealth often create tax planning opportunities, but they can also introduce unexpected liabilities.
Depending on the circumstances, there may be considerations around Capital Gains Tax, Income Tax, or Inheritance Tax. Decisions made shortly after receiving wealth can have consequences for many years to come, particularly where family wealth or succession planning is involved.
This is where joined-up advice proves most valuable. By considering tax planning, investment strategy, and estate planning together, individuals are often able to achieve better long-term outcomes than by addressing each issue separately.
How to protect and preserve wealth for future generations
Receiving significant wealth often changes more than a bank balance. It can alter retirement plans, create opportunities to support future generations, and provide greater financial flexibility than previously imagined.
Perhaps the greatest mistake is assuming that the objective is simply to preserve the money.
For many people, the real objective is to put that wealth to purposeful use: providing financial security throughout retirement, supporting family members where appropriate, and ensuring assets are structured as efficiently as possible.
A comprehensive financial plan provides the confidence to make those decisions with clarity, rather than uncertainty.
A moment to plan for the future
Significant wealth is usually the result of years of hard work, careful saving, or an important life event. It deserves the same level of care in deciding what happens next.
Whether it has arisen through the sale of a business, an inheritance, or another significant financial event, taking time to understand the available options before making major decisions can have a lasting impact on both personal financial security and the legacy ultimately left to future generations.
The first financial decision after receiving wealth is often not where to invest it. More often, it is deciding to step back, understand the bigger picture, and build a plan that supports both today’s ambitions and tomorrow’s goals.
Financial Planning FAQs
How PKF can help
Through our partnership with Credo, our Private Client team helps individuals plan for significant wealth events and achieve their long-term goals. For an initial conversation, please contact Stephen Kenny and William Godsave.
Important Notice
This marketing material has been prepared and issued in the United Kingdom by Credo Capital Limited (“Credo”). It is provided to you for discussion purposes only and does not constitute and should not be interpreted as either investment advice (including legal, tax or accounting advice) or a trading recommendation. This marketing material is not a solicitation to buy or sell any financial instruments or commodities, a recommendation to participate in a particular trading strategy or to invest into regulated or unregulated funds. The value of an investment can fall as well as rise and is not guaranteed, your capital may be at risk and you may not receive back your original investment in full.
PKF Littlejohn is not licensed to provide financial advice. Whilst Credo is independent from PKF Littlejohn, through a joint venture owned by PKF Littlejohn and Credo, PKF is entitled to a proportion of all fees arising from any advice given by Credo. If you have any questions about the relationship between Credo and PKF Littlejohn please contact your usual PKF Littlejohn contact or Stephen Kenny.
Credo Capital Limited is a company registered in England and Wales, Company No: 03681529, whose registered office is 8-12 York Gate, 100 Marylebone Road, London, NW1 5DX. Authorised and regulated by the Financial Conduct Authority (FRN:192204). © 2024. Credo Capital Limited. All rights reserved.
