Nick Bruining Q+A: We have $100,000 left after using inheritance to pay off our home. What can we do with it?

Question My husband and I are both 40 with two small children aged under 6. We both work full-time. We recently received a sizeable inheritance from the UK and have used the bulk of the money to pay off our home loan. We are not sure if we now need financial advice to determine what we can do with the remaining $100,000. We are concerned a large percentage of that would disappear immediately in fees to draw up a financial strategy. Can you suggest some alternative options? Answer Unfortunately, the compliance and other unavoidable costs associated with drawing up a comprehensive financial plan are considerable and a major reason why the cost for a financial plan typically exceeds $3000. When it is less, the advice is often associated with the sale of financial products or services. The typical percentage-based fees paid to the adviser can create a conflict of interest, which could mean tainted advice. Some independent and other advisers will provide general verbal guidance for about $500, which may be all that you need. You should visit the moneysmart.gov.au website which provides an excellent starting point on issues to consider in the “how-to-invest” section. The website also provides a process on selecting a suitable financial adviser. Genuinely and legally independent advisers can be found at the Certified Independent Financial Advisers Association (cifaa.asn.au) and other financial advisers at the Financial Advice Association of Australia (faaa.au). At this stage in life, issues to consider would include ensuring that wills and other estate planning documents are in place. With a young family, financial risk management through low-cost life and income insurance should be looked at closely. Purchasing this cover via superannuation is normally very cost effective and most funds have excellent online “how-much-cover-do-I-need” calculators. With the mortgage paid off, the freed-up cash flow could be used to build an investment portfolio. At this stage in life opt for one that is highly flexible and liquid. After setting aside an emergency sum in a high-interest online bank account of at least three months of expenses, you might consider a regular investment savings program that purchases blue-chip shares, possibly through an exchange-traded fund (ETF). ETFs are essentially pooled investment funds that invest in a broad selection of ASX-listed shares. If purchased through an online share broker, transaction costs are minimal. These funds are highly flexible, allowing you to suspend, cash-in or adjust your regular investment program as required. Once the pool has grown, you might consider broadening your investment portfolio with the possible inclusion of other asset classes such as property. Preferably, keep your home separate from all investing. As you get older, you might also consider increasing your contributions to superannuation but the biggest risk at the age of 40 is that the rules may change significantly between now and your retirement age. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association