Quora Answer: After an Inheritance, Which Banks are Best?

The following is my answer to a Quora question: “After receiving an inheritance, which banks and bank accounts are wise to invest in?” 

If you have a substantial inheritance, it would be prudent for you to engage the services of a competent financial services advisor.  This gives you options beyond simply parking funds in the bank, which is low risk, but also low yield.  In the case of a savings account, that interest earned is not even above the rate of inflation, meaning that you are losing purchasing power. 

If you have sufficient funds, you may consider a fixed deposit at the bank, which locks in funds for a specific period of time, usually between three months to around four years, where you earn a higher interest rate.  The problem you face is a lack of liquidity, since the funds are committed for that period, and early withdrawals have severe penalties. 

If your inheritance is above US$100 million, you may consider a fund placement exercise, which is sort of a fixed deposit on steroids.  You are, essentially, lending money to the financial institution, and the rate of interest is substantially higher, and is credited in periods of weeks and months. 

A more reasonable option is to invest in mutual funds, index funds, or similar collective investment schemes.  This is where you do require the services of financial advisor to discover your risk profile, your investment horizon, and your preferences.  Your funds are spread across various debt and equity instruments.  The weightage is dependent on many factors that are methodically addressed in the discovery process of the financial health review. 

Yet another option is insurance as financial instruments.  This is normally done in tandem with the pure investments, because there as to be some level of coverage to mitigate against the cost and risk of illness and disability.  A life policy also creates an immediate estate upon your demise, meaning you do free up more funds for investment.