Monthly Archives: March 2019

Financial Planning is About Making Your Life Plan a Reality

Often, clients who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about Pensions, ISA’s, or how much you’re saving. Instead, we begin by talking about you, not your money.

Putting your life before your financial plan.

As Life-Centred Financial Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.

Our job is to work with you to build a financial plan that will help you make your life plan a reality.

Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximise your return on investment. But we also believe that maximising your Return on Life is just as important, if not more so. Some people feel like they will never have enough money whilst others, who have learnt to view money as a tool, start to see a whole new world of possibilities open in front of them.

Feeling free.

One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next pound, you’ll start exploring what more you can get out of life rather than just more money.

Feeling free to use your money in ways that fulfil you is going to become extremely important once you retire. After all, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.

So, having money and building wealth is a part of the plan. But it’s not THE plan.

The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.

And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.

What’s coming next?

So, when does the planning process end?

If you’re like most of the people we work with, never.

Life-Centred Planning isn’t about hitting some number with your savings, investments, and assets. We’re much more concerned about how your life is going than how the markets are performing.

Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.

Some transitions we’ll be able to anticipate, like a child going to University, a big family holiday you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big move for work, we’ll help you adjust for as necessary.

In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start your own company.

Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centred Planning can help you get the best life possible with the money you have.

 

Spring Statement 2019

Philip Hammond, the Chancellor of the Exchequer, delivered his Spring Statement 2019 to Parliament on 13 March. Set against continuing uncertainty over Brexit and just hours before MPs were due to vote on whether to exit the EU without a deal, Mr Hammond devoted much of his speech to the possible effects that leaving the European Union could have on the UK’s finances.

The Chancellor announced that the UK economy continues to grow, with wages increasing and unemployment at historic lows, providing a solid foundation on which to build Britain’s economic future.

With borrowing and debt both forecast to be lower in every year than at last year’s Budget, the Chancellor set out further investments in infrastructure, technology, housing, skills and clean growth, so that the UK can capitalise on the post-EU exit opportunities that lie ahead.

The Chancellor also confirmed that the government will hold a Spending Review which will conclude alongside the Budget. This will set departmental budgets, including three-year budgets for resource spending, if an EU exit deal is agreed. Ahead of that, the Chancellor announced extra funding to tackle serious violence and knife crime, with £100 million available to police forces in the worst affected areas in England and Wales.

Keeping your financial plans on track

In our ‘Guide to Spring Statement 2019’ we reveal the key announcements made by the Chancellor. If you would like to review what action you may need to take to keep you, your family and your business on track – or if you have any further questions – please contact us. We look forward to hearing from you.

Brexit – The potential impact on your investments

As we fast approach the date of the UK’s impending withdrawal from the EU and due to the continued uncertainty around the terms of this withdrawal, we have been contacted by several of our clients asking us about the possible impact on their investments.

Therefore, this week I thought it might be useful to share with you the basis of those discussions.

What effect could Brexit have on my investments?

The actual impact will be dependent on the terms under which the UK leaves the EU. But it is important to remember that all investments can go up and down in value over time and returns are not guaranteed.

Most investments are designed to be held over the medium to long term and we would caution against making any decisions on whether to encash or retain particular investments based on the potential impacts of Brexit alone or any short-term fluctuations in the value of your investments.

In short, no-one can accurately predict how investment markets will be affected by Brexit or what the precise implications will be.

What about investments that I hold that are provided by non-UK companies?

If you hold money in funds/investments that are provided by a non-UK company that is based within the European Economic Area (EEA) then you should still be able to continue holding these investments even in the event of a ‘no deal’ Brexit. This is because the Government and the Financial Conduct Authority (which is responsible for regulating the conduct of all UK authorised financial services firms) have put in place special measures that will enable these companies to continue offering services to you.

Will Brexit affect the consumer protection I receive on my investments?

There will be no changes to consumer protection for most individuals.

The Financial Services Compensation Scheme (FSCS) will remain available to UK consumers post Brexit. It is designed to deal with claims from (and in the event of a successful claim, provide compensation to) consumers who have previously dealt with a UK financial services firm that has since gone out of business. The compensation limits are per person, per institution and currently set at £85,000 (deposit accounts), £50,000 (investments) and 100% of a claim with no upper limit (pensions and life assurance.)

EEA based firms doing business in the UK are not typically covered by the FSCS and instead the compensation scheme in their country of origin will usually deal with any claims against the firm. Brexit could result in a loss of access to these EEA compensation schemes if no deal is reached. This loss of access is dependent on the terms of withdrawal and at this stage, is far from certain.

In the event of an issue with the provider, or advisory business the Financial Ombudsman Service settles disputes between consumers and UK financial services firms where these arise. This service will continue to be available post Brexit, meaning that if you have a dispute with a UK based financial services firm that is authorised by the Financial Conduct Authority, you will continue to be able to refer a complaint to the Financial Ombudsman Service (FOS) if a dispute arises. It is also proposed that you will be covered by the FOS for the activities of EEA based firms that provide services into the UK.

Will product providers with whom I hold investments be updating me in relation to any potential impacts Brexit may have?

You may also receive communications from providers updating you with regards to the impacts of Brexit, although again given that the position is still unclear, they may not be able to provide definitive information. We are more than happy to discuss any questions you may have received from correspondence with any providers and to assist where we can.

What next?

For our existing clients, we will, of course, be happy to discuss the performance of your investments with you during your next ongoing review with us and we can also discuss any concerns you may have on issues that could affect your investments, such as the impact of Brexit. Where necessary, we will of course adjust your portfolio, based on your circumstances, preferences and risk appetite.  Of course, if you want to speak to us beforehand, please do give us a call.

Whilst we are always happy to chat to you, we should stress that at this stage, we cannot accurately predict nor give you any definitive answers in terms of what the impact of Brexit will be, or even if Brexit will happen; but then, if we could …….

notes and risk warnings

Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Errors and omissions excepted.

 

 

Déjà vu all over again!

Investment fads come and go. Letting short-term trends influence your approach may be counterproductive to pursuing your financial goals.

Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities. Over the years, these approaches have sought to capitalise on developments such as the perceived relative strength of particular geographic regions, technological changes in the economy, or the popularity of different natural resources. But long-term investors should be aware that letting short-term trends influence their investment approach may be counterproductive. As Nobel laureate Eugene Fama said, “There’s one robust new idea in finance that has investment implications maybe every 10 or 15 years, but there’s a marketing idea every week.”

What’s Hot Becomes What’s Not

Looking back at some investment fads over recent decades can illustrate how often trendy investment themes come and go. In the early 1990s, attention turned to the rising “Asian Tigers” of Hong Kong, Singapore, South Korea, and Taiwan. A decade later, much was written about the emergence of the “BRIC” countries of Brazil, Russia, India, and China and their new place in global markets. Similarly, funds targeting hot industries or trends have come into and fallen out of vogue. In the 1950s, the “Nifty Fifty” were all the rage. In the 1960s, “go-go” stocks and funds piqued investor interest. Later in the 20th century, growing belief in the emergence of a “new economy” led to the creation of funds poised to make the most of the rising importance of information technology and telecommunication services. During the 2000s, 130/30 funds, which used leverage to sell short certain stocks while going long others, became increasingly popular. In the wake of the 2008 financial crisis, “Black Swan” funds, “tail-risk-hedging” strategies, and “liquid alternatives” abounded. As investors reached for yield in a low interest-rate environment in the following years, other funds sprang up that claimed to offer increased income generation, and new strategies like unconstrained bond funds proliferated. More recently, strategies focused on peer-to-peer lending, cryptocurrencies, and even cannabis cultivation and private space exploration have become more fashionable. In this environment, so-called “FAANG” stocks and concentrated exchange-traded funds with catchy ticker symbols have also garnered attention among investors.

The Fund Graveyard

Unsurprisingly, however, numerous funds across the investment landscape were launched over the years only to subsequently close and fade from investor memory. While economic, demographic, technological, and environmental trends shape the world we live in, public markets aggregate a vast amount of dispersed information and drive it into security prices. Any individual trying to outguess the market by constantly trading in and out of what’s hot is competing against the extraordinary collective wisdom of millions of buyers and sellers around the world.

With the benefit of hindsight, it is easy to point out the fortune one could have amassed by making the right call on a specific industry, region, or individual security over a specific period. While these anecdotes can be entertaining, there is a wealth of compelling evidence that highlights the futility of attempting to identify mispricing in advance and profit from it.

It is important to remember that many investing fads, and indeed, most mutual funds, do not stand the test of time. A large proportion of funds fail to survive over the longer term. Of the 1,622 fixed income mutual funds in existence at the beginning of 2004, only 55% still existed at the end of 2018. Similarly, among equity mutual funds, only 51% of the 2,786 funds available to US-based investors at the beginning of 2004 endured.

What Am I Really Getting?

When confronted with choices about whether to add additional types of assets or strategies to a portfolio, it may be helpful to ask the following questions:

  1. What is this strategy claiming to provide that is not already in my portfolio?
  2. If it is not in my portfolio, can I reasonably expect that including it or focusing on it will increase expected returns, reduce expected volatility, or help me achieve my investment goal?
  3. Am I comfortable with the range of potential outcomes?

If investors are left with doubts after asking any of these questions, it may be wise to use caution before proceeding. Within equities, for example, a market portfolio offers the benefit of exposure to thousands of companies doing business around the world and broad diversification across industries, sectors, and countries. While there can be good reasons to deviate from a market portfolio, investors should understand the potential benefits and risks of doing so.

In addition, there is no shortage of things investors can do to help contribute to a better investment experience. Working closely with a financial advisor can help individual investors create a plan that fits their needs and risk tolerance. Pursuing a globally diversified approach; managing expenses, turnover, and taxes; and staying disciplined through market volatility can help improve investors’ chances of achieving their long-term financial goals.

Conclusion Fashionable investment approaches will come and go, but investors should remember that a long-term, disciplined investment approach based on robust research and implementation may be the most reliable path to success in the global capital markets.

 

notes and risk warnings

This article is distributed for educational purposes only and must not be considered to be investment advice.  Past performance is not indicative of future results and no representation is made that any stated results will be replicated. The value of investments can go down as well as up.

Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Errors and omissions excepted.