"I've inherited £3 million. What should I do?"

The problem

Louis earns £55,000 a year as a scaffolder. His wife is not employed, being the primary carer for their two young children. The couple jointly own their £400,000 home on which there is a £200,000 interest-only mortgage. He is a committed saver and has cash savings of £100,000, ISA investments of £30,000 but no pension. His wife has £20,000 in an ISA.

Last year Louis’ grandmother died, leaving him £3 million in cash.

Louis, 33, seeks advice on what to do with it. He wants to invest in the stock market but isn’t sure how. He is passionate about the environment and does not want to support fossil fuels.

He plans to spend up to £50,000 on a car, pay off the mortgage and refurbish their home – and then invest the rest. He hopes to use the investments to supplement their income. However, they would like to have the flexibility to make lifestyle changes in the future. Louis is considering starting his own business at some point in the next few years.

Cazenove Capital’s solution

We worked with the couple to implement a comprehensive plan for their financial future, using cashflow modelling to help understand their requirements in the years ahead.

To meet their income requirement, we advised Louis to invest £1,700,000 in his wife’s name to use her personal allowance and basic rate bands. We advised them to invest £1,000,000 into an offshore investment bond. This will allow them to create a tax-efficient source of future income, while deferring taxation on capital growth and investment income. It could also allow the couple to pay university fees through gradual assignments to their children.

We set up a self-invested personal pension (SIPP) for Louis and paid in the maximum contribution. We also established ISA accounts and have agreed to maximise the contributions to these tax-efficient vehicles in future years on a regular basis.

The offshore bond, SIPP and ISAs have been invested using a high-risk mandate, given that the clients are comfortable investing over a long-term time horizon.

The remaining cash will be invested through a taxable investment account that follows a slightly lower-risk strategy, as the clients may want to access this money in the medium term.

All investments have been made using Cazenove Capital’s flagship Sustainability Diversified Strategy which invests in a broad range of impact and sustainable funds.

Impact funds invest in companies that can demonstrate how they improve outcomes in a specific field, such as environmental or social causes. Sustainable funds invest in companies that consider the interests of all stakeholders, including employees, the environment and the broader community.

Our “Ask an expert” series is based on real client scenarios, with names and certain details altered to protect clients’ identities.