Common mistakes wealthy people make with their money

ABBA’s Slipping Through My Fingers is about watching a daughter grow up and drift away, but the lyrics work uncomfortably well for money, too.

One day your wealth is sitting at the breakfast table; the next, it’s waving goodbye with an absent-minded smile – off to the taxman, quietly eaten away by inflation, or sunk into another buy-to-let that turns out to be a millstone.

Sometimes fortunes slip away because of simple mistakes: relying too heavily on property, hoarding too much cash, or leaving tax wrappers and inheritance planning for ‘another day’ that never quite comes.

Below, we look at some of the most common ways fortunes quietly slip through people’s fingers – and how to stop yours making a silent exit.

Over-investing in property

Britain's rich aren't just house-proud: they're house-obsessed. Decades of rising prices have hardwired the belief that property is the safest bet.

The numbers prove it: around 40% of UK household wealth sits in bricks and mortar, climbing to around 60% if you strip out pensions.

By contrast, US households keep about 28% of their wealth in property. The UK has the third highest proportion of wealth held in property in the G7, a club of rich countries.

Even at the very top, the pattern holds. For the wealthiest 10%, property makes up about two-fifths of their assets, with a median £624,000 locked in bricks and mortar. The wealthiest 1% show the same tilt: 40% of their wealth is tied to property, worth a median £1.4 million.

That's a lot to have riding on one market that doesn't always play ball.

Property feels solid, yet it's more like a whale edging into shallow water: slow and suddenly stranded when the tide shifts.

House prices do fall: the crash of 2008–09 wiped out values by double digits, and the 2022–23 rate hikes left parts of the market stuck fast.

The obsession runs deep. Affluent families keep doubling down on buy-to-lets and holiday homes, piling risk into the same corner of the market.

But the mood is changing. Buy-to-let lending has been sliding for years as higher costs and tougher tax rules squeeze returns. Plenty of landlords are heading for the exit, like Londoners legging it in 1666 (minus the wheel of Parmesan cheese Samuel Pepys buried in his garden).

This narrow focus can bleed into other parts of wealthy investors' portfolios.

Just as they double down on British bricks, they often double down on British stocks, overweighting domestic holdings far beyond their slice of the global market. The result? Their portfolios have about as much worldliness as a map of Britain drawn on the back of a Wetherspoons beer mat.

Keeping a stay-at-home portfolio

The UK stock market is only 3% of global equity, yet many affluent portfolios hand it 30–33%.

That's more concentrated than a martini poured by a bartender who's three drinks ahead of you.

Retail investors are even more skewed: only 8% of their non-pension wealth is in equities, the lowest in the G7. The rest is largely UK property and about 15% parked in cash in sterling, leaving their fortunes clinging to the domestic economy like a bungee jumper to a cord that's starting to look frayed.

Institutions have been cutting back. Pension funds once put half their Defined Contribution (DC) assets into UK shares; now it's around 8%. Private Defined Benefit (DB) schemes have dwindled down to 11%. Wealth managers have trimmed their exposure from 70% in 2000 to around 33% today (still miles above the index weight).

Since Brexit, roughly £100 billion has fled UK equity funds in search of better returns elsewhere.

You could hear a pin drop... right before it booked a one-way ticket to New York.

The price of staying close to home

The cost of this bias is easy to see. Although past performance is no indicator or future results, US equities have returned 15.5% annually over the past decade, while UK stocks scraped 6%.

The domestic market is narrow (finance, oil, and mining dominate), so when those sectors cough, home-heavy portfolios catch a cold and get sent to bed with a hot water bottle and a mug of Lemsip.

Not taking full advantage of tax wrappers

When it comes to tax efficiency, many wealthy Britons manage to miss an open goal, the kind where the keeper's on the floor and the net is yawning. The UK offers generous shelters: ISAs, pensions, Venture Capital Trusts... the list goes on.

Yet countless investors fail to use them fully. The result? Handing possession to HMRC in the dying minutes when victory was theirs to claim.

ISAs: an umbrella in a storm

An Individual Savings Account (ISA) lets you tuck away up to £20,000 a year where HMRC can't touch the growth or the income.

If someone stood on a street corner handing out umbrellas in a monsoon, you'd expect a stampede. Instead, with ISAs, many investors stroll past and decide to enjoy the soaking.

For example – as you can see from our chart below – only around 40% of ISA holders who earn over £150,000 per year fill their ISA.

Even more shocking still, we've run the numbers on the UK government's official stats and found that one-third of top earners who hold an ISA didn't contribute to it at all during the year, as of the most up-to-date figures at the time of writing.

Those who ignore ISAs face the full sting of tax on savings and investments: dividends above the £500 allowance are hit at 33.75% for higher-rate payers or 39.35% for additional-rate, while capital gains over the exemption are taxed at 24% for higher-rate bands, whether the profit comes from shares or a second home.

And the allowances themselves are melting away: capital gains tax relief chopped to £3,000, the dividend allowance whittled down to £500, and potentially more cuts on the way.

Holding investments outside tax wrappers now feels like storing biscuits in the bath and wondering why they've gone soggy.

Pensions and other wrappers

Pensions offer even bigger perks.

Contributions (up to £60k a year, with tapering for high earners) get income tax relief. This is the government effectively handing back up to 45% while the pot grows free of capital gains tax. Yet business owners cashing out, or heirs sitting on lump sums, often park money in taxable accounts instead of feeding their pensions.

This might be because they don't realise how generous the relief is or, more likely, because leaving hard-earned cash for a wrinklier version of themselves decades down the line feels abstract.

That's a choice they may only notice years later when that future self drifts in, towing a shopping trolley full of old holiday brochures and asking where the retirement plans went.

Then there are Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS). These are much riskier, but they offer serious tax relief. VCTs, for example, give 30% income tax relief on investments up to £200k and pay tax-free dividends. HMRC figures show only 24,000 investors claimed VCT relief in 2023–24, a tiny slice of the high-net-worth crowd.

These schemes are not as obvious a play as maxing out your ISA and pension, given the early-stage businesses involved, but they can be powerful tools for those comfortable with more risk.

Not knowing when to get professional advice

Some wealthy Britons treat investing like assembling flat-pack furniture without the instructions: how hard can it be? Quite hard, as it turns out.

First-generation wealthholders (the business owner who has just sold up, or the heir with a fresh inheritance) often assume managing millions is just a bigger version of managing thousands. Taking an interest is good. However, thinking you can outsmart the market armed only with gut instinct and a trading app is less so.

When going it alone backfires

The data is brutal. A UK survey by Legg Mason found self-directed investors earned around 5.9% annually, while those taking professional advice earned 7.5%.

That's a gap of more than 25% over time. Even after adviser fees, the advised portfolios came out ahead, and over decades that difference snowballs into a fortune.

Why the gap? Behaviour. DIY investors hoard nearly half their savings in cash, compared with around 30% for those with advisers. Sitting on that much cash in an inflationary environment is like running up an escalator the wrong way.

In fact, data released by Vanguard in July 2025 indicates that 42% of UK adults have more than £10,000 sitting in cash, most of which - 59% - could be better off invested, even accounting for emergency savings.

DIY investors also under-diversify, putting only 3% into alternatives like hedge funds or commodities, while advised investors hold closer to 12–13%. Less diversification means more risk tied to fewer bets.

The FCA points out that self-directed investors often suffer from overconfidence and behavioural biases, especially after a windfall. They hold too much cash out of caution, or jump headfirst into risky trades out of bravado. The result is the same: weaker returns.

The price of overconfidence

Historical data makes it clear that skipping even a handful of the market's strongest recovery days can slash long-term gains. When prices fall, many DIY investors lose their nerve, sell out, and fail to reinvest until it is too late, locking in losses they might have avoided.

Research repeatedly finds that self-managed portfolios trail the market by around 1.2% annually, a gap big enough to cancel out any money saved on adviser fees.

RAW Capital Partners found less than half of UK investors were satisfied with their portfolio over 12 months, with 45% blaming inflation. High fees on retail platforms also eat into returns, like seagulls stealing your chips while the tide carries off your wallet.

To be clear, we're not talking about the age-old active vs passive investing debate here. Many DIY investors do use low-cost index funds, but still fall into behavioural traps like panic-selling, trying to time the market, or sitting in cash for too long. These mistakes drag down returns, not the passive approach itself.

Of course, there are exceptions: some retail investors on platforms like Interactive Investor have matched or beaten the pros, returning 12.6% over three years versus 10.7% for managers. But these are outliers, often younger and hyper-engaged; and these stats don't include the opportunity cost of the time spent self-managing their portfolios.

For those unsure whether their strategy is really working, speaking to a qualified adviser can help cut through the noise, or even just provide the reassurance needed to hold your nerve in choppy waters.

Failing to plan for inheritance

Some wealth mistakes nibble at the edge; this one is more like dangling your legs overboard in shark-infested waters. Not planning for inheritance invites a 40% bite out of everything above the allowance.

That's a meal HMRC is more than happy to take, while your heirs are left with what's left floating.

The tax that keeps growing

Inheritance tax (IHT) is a flat 40% on estates above £325,000 per person, with an extra £175,000 if you pass on a home to your children. That threshold has been frozen for years while property prices climb, meaning more families are being dragged into the taxman's sights.

Not only that, but the government is also tightening reliefs on business and agricultural property, and from 2027, some pension pots will be brought into the scope of IHT for the first time.

Key inheritance tax stats

• Only 4% of estates paid IHT in 2021, but the OBR reckons one in 10 will by 2030
• Around one in eight people will eventually have IHT due on either their estate or their spouse's.

Without planning, that's nearly half of everything above the limit gone.

Simple steps (a valid will, lifetime gifts, using trusts or life insurance) can cut the bill dramatically. But leave it too late, and the sharks have already clamped their jaws before you can haul your wealth back on deck.

Have the awkward conversations

Many wealthy families avoid talking about inheritance at all, leaving their heirs to swim blind.

A 2025 Irwin Mitchell survey found only 15% of parents over 55 had discussed inheritance with their children. This lack of communication breeds unspoken expectations, confusion, and disputes circling at the worst possible time.

Already, one in 20 people have been dragged into a legal fight over a will or estate.

The sharks are already circling. Ministry of Justice data shows there were 11,362 inheritance disputes in the past year, up by a third in just four years, as families increasingly challenge wills in court. Higher property prices and complex family structures are drawing more blood in these battles, with stepchildren and others lodging claims to block probate.

With trillions set to pass between generations in the coming decades, lawyers warn the waters are only getting more perilous.

Year	Will disputes (caveats lodged)
2020	8,543
2021	9,926
2022	9,154
2023	10,409
2024	11,362

If you want to avoid family fallout and expensive legal battles, the only real solution is to bite the bullet and start the conversation early.

It doesn't have to be awkward – Damien shared some great tips in this video on Damien Talks Money:

Outrunning the three-generation curse

Around 70% of families lose their wealth by the second generation, and 90% by the third. That's not just because of tax; the main cause is heirs with no guidance, no plan, and no shared purpose.

The elixir is preparation: teach children how to handle money, involve them early, and set clear goals for the wealth, whether that means philanthropy or keeping a business alive.

At the same time, the technical side needs to be sorted out. More than half of UK adults have no will, and even among the wealthy, many wills are outdated or fail to use available reliefs.

Dying 'intestate' (without a valid will) can leave stepchildren excluded, partners unprotected, and assets tied up in court.

Acting early can unlock strategies that shrink the tax bill: from lifetime gifts that fall out of IHT after seven years to business property reliefs that exempt certain shares after two. If you delay, those options disappear just when they're needed most.

IHT planning can be tricky to navigate alone. A good financial planner or estate specialist can help use the available reliefs and avoid costly errors.

Find out more about IHT planning (including details on trusts, family companies, business reliefs, and using life insurance to offset IHT bills) in our guide: How to preserve wealth across generations.

Bottom line

From houses that swallow half your wealth to pensions left untouched, the biggest mistakes are the quiet ones.

They lurk in property obsessions, home-biased portfolios, unused tax shelters, shaky DIY trades, and inheritance plans that never quite materialise.

Each slip hands a little more to the taxman, the market, or family disputes until the fortune you built is gone.

ABBA sang that money must be funny in a rich man's world, but for those who fall into these traps and see their wealth frittered away by the second or third generation, the laughter is more hollow than happy. Avoid these mistakes, and your wealth is more likely to stay centre stage instead of fading out before the encore.

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