If I were a rich man…

We tend to assume that wealth is accumulated over time, often growing fastest in the later working years. Yet, in a broader sense, we are all born with wealth in the form of human capital, which represents the value of the earning potential that we have over our working lifetime.  As younger people have a long time to go before they will need the money, the advice they receive is often that excess earnings should be invested predominantly in equities.  A subtler approach considers the attributes of each person’s human capital which ranges from bond-like to equity-like in nature.  How assets are invested should, ideally, take this into account.  Cash-flow modelling can help those in the accumulation phase of investing to understand the financial impact of changes to their human capital.  Owning sufficient life cover to protect the outstanding human capital should also be an important part of the discussion.

If I were a rich man…

‘No man is an island, Entire of itself, Every man is a piece of the continent, A part of the main.’ John Donne, 1624

We are all born rich

Most of us have held a newly born child – our own perhaps, or that of a relative or a close friend – and in its fragile, dependent state wondered what life has in store for him or her. We perhaps frame these thoughts in terms of the current state of the world and the tough climate for young people struggling to get onto the housing and jobs ladder.  According to the Resolution Foundation[1], the younger generation is the first in living memory to be worse off than their parents.  Yet perhaps we should frame our thoughts in a more positive manner, starting with how rich every child is at birth.

We tend to see wealth as accumulated financial assets, large houses, nice cars and the freedom and time to do the things that are important to us. Yet on the very day we are born we are wealthy in terms of our human capital, or in other words, the present value of all the future earnings that we can accumulate over our working lives.  Part of those future earnings are turned into financial assets, which ultimately deliver income in our retirement.

From a financial perspective, our lives can be divided into three distinct phases:

  • Phase 1 – growing up and getting educated: this phase is of enormous importance to our financial lives; there is plenty of evidence to show that investment in education at a tertiary level can have a big impact on future earnings. Investing in education may well have a far larger impact on wealth than the rate of return achieved if the money spent was invested instead.
  • Phase 2 – working: this phase presents investors with a range of choices, not least how to invest excess earnings and protect their human capital from sickness or even premature death.
  • Phase 3 – retirement: this phase possesses its own challenges, particularly how to invest assets to deliver stable retirement income, without running out of money.

Today, investors must take far more responsibility for their financial assets than ever before and maybe need to think a little more deeply and subtly about how to structure their investment assets.

Today is not like yesterday

Up until the mid-1980s the conversion of human capital into retirement income was far more straight forward and considerably less risky than it is now, as companies offered their employees generous defined benefit pensions, i.e. a percentage of final salary that would be paid monthly on retirement, usually with some form of inflation protection. This income, coupled with the state pension, provided a stable, inflation-proofed, risk-free income for life.  Excess earnings could be squirrelled away into extra savings, paying down debt quicker or the purchase of a second home.  Today, £50,000 of inflation-proofed income, purchased at age 65, would cost over £1.5 million via an annuity.  Rejoice if you have a defined benefit pension!

However, for those still working today – and some more recently retired – such income security does not exist. The demise of defined benefit pensions – a sad story of government and corporate mismanagement – is too long a subject to be explored in this short note.  However, the impact of these changes, including the transfer of income risk from corporations to the individual, combined with a more flexible, fluid and entrepreneurial work environment are worth noting.  These changes have a material impact on the process of turning human capital into financial capital.  How one invests these assets, protects the value of human capital and secures a stable retirement income matter.  These are not easy decisions to make without the help of a good financial planner.

Human capital slowly converts into financial capital across a working life

At the start of a person’s life, human capital represents the major part of his or her total wealth, when wealth is viewed in this broader context. As they progress through their working lives, some of their earnings will be converted into financial assets in the form of payments into defined contribution pensions (by employer and employee), other investments and a family home.  At retirement, human capital is exhausted, unless the retiree does some part time work.  Financial assets then take over the financial burden of delivering income, supplemented by other sources such as a state pension and rental income, if they exist.  The schematic below illustrates this relationship in a generic form.

Figure 1:  Human capital, financial capital and total wealth

2017 02 07


Source: Albion Strategic Consulting

It is interesting to note that in many instances, toward the end of a person’s life, residential property may well be the principle asset, as other financial assets have been depleted.

Careers can be bond or equity-like

When it comes to saving and investing for retirement, i.e. the accumulation phase as it is sometimes known, advice has often been quite generic suggesting that as the investor has a long time horizon, they should invest more in equities to obtain a higher rate of return than holding bonds or cash. In general that makes sense for many.  However, the risks associated with each person’s human capital will vary widely.  This is plain to see looking at three different career paths:

  • Low risk: A tenured professor at a university has great job security and a regular, inflation-linked income that will rise in a predictable manner. Her or his human capital acts like an index linked bond.
  • Higher risk: A salesperson, whose high remuneration is based on commission, and who faces the threat of being fired if targets are not met, has higher earnings risk. His or her human capital acts more like a high yield (lower quality) bond, delivering strong returns when times are good but doing poorly when times get tough.
  • High risk and correlated: An entrepreneur launching an online retail equity trading platform has even more earnings risk. His or her income and rewards are both variable and uncertain and, more importantly, income is likely to be correlated with equity markets. Human capital, in this instance, acts like an equity.

So, if they are all 40 years old and have the same level of financial capital, should they all invest in the same way? Intuitively, the answer is no.  As Burton Malkiel stated in his seminal book A Random Walk Down Wall Street:

‘The risks you can afford to take depend on your total financial situation, including the types and sources of your income exclusive of investment income’

Those with more bond-like human capital could well take on more risk and those with more equity-like human capital should, perhaps, take on less risk with their financial capital. Ironically, it is also possible that those who choose steady, stable jobs may have lower tolerance to losses than the entrepreneur, and vice versa.  One can see the risk of this scenario.  Additionally, two partners may also have different levels of risk in their human capital. Imagine a professor married to an entrepreneur; together they form a balanced portfolio between bonds and equities and their investable portfolio of financial capital should reflect this.

Figure 2: How human capital attributes influence asset allocation

Lower equity content in portfolio Higher equity content in portfolio
Low job and earnings stability High job and earnings stability
Low earning flexibility High earning flexibility
High correlation of earnings to equities Low correlation of earnings to equities
Low earning capability High earning capability (replenish losses quickly)

Source: Albion Strategic Consulting

In effect, investors should invest their financial assets in a way that provides both balance to, and diversification of, their human capital during the accumulation phase. In some extreme circumstances, it might be necessary to adjust an investment portfolio to avoid the specific industry risks that relate to a client’s human capital.

Human capital should be treated like any other asset class; it has its own risk and return properties and its own correlation with other financial asset classes.

Ibbotson, Milevsky, Chen and Zhu (2007)[2]

As an example, one of the saddest outcomes of the Enron collapse in the US in 2001 was the fact that many Enron employees held Enron stock in their pension plans making their human and financial capital highly correlated with devastating consequences.

Protecting human capital risk

As part of a comprehensive financial planning process, two key forms of protection exist that will need to be discussed. The first is protecting human capital using income protection and life insurance.  The second is protecting retirement income through the purchase of annuity.  The astute reader will spot the fact that these are exact opposites; one is a bet on dying early and the other is a bet on living a very long time.

Purchasing life insurance, which is a perfect hedge for human capital risk, needs to be modelled based on the outstanding level of human capital, which reduces with time as human capital is converted into financial capital. Fortunately, when most life insurance is needed (young and with a family), it is relatively cheap to obtain.  In a simple sense, the life insurance cover needs to fill the gap between accumulated financial assets today and the target level of assets at retirement.


The true value of cash-flow modelling by a financial planner is the ability to take both human and financial capital into account and to run severalp scenarios for each. It is difficult to see how a stockbroker or investment manager can structure a portfolio sensibly, particularly where the investor still has substantial human capital, without the insight into, and modelling of, the client’s total asset picture.  No financial portfolio is an island.

so, The next time you hold a baby, remember just how valuable and unique he or she is in so many ways, not least in terms of human capital.



Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

[1]     Resolution Foundation (2016), Millennials facing ‘generational pay penalty’ as their earnings fall £8,000 behind during their 20s, www.resolutionfoundation.org

[2]    Ibbotson, Milevsky, Chen and Zhu (2007), Lifetime Financial Advice: Human Capital, Asset Allocation and Insurance, Research Foundation of CFA Institute publication.

Tax efficient saving – right place, right time and right order

Tax-incentivised, tax-free, or potentially tax-free are some of the savings choices on offer. Failing to make the most of these will mean you may pay unnecessary tax on income and savings. However, saving into the right tax wrappers at the right time, and crucially in the right order, can limit the tax paid.

The introduction of new tax-free allowances means that there is now greater scope to save and pay little or no tax on those savings. The new £5,000 dividend allowance and £1,000 personal savings allowance bring the total tax free allowances available in 2016/17 to £33,100.

Tax-incentivised savings such as pensions, and tax-free wrappers such as ISAs, are clearly preferable to savings which are potentially taxable. Consequently, when deciding where to save these should always be the first choice.

But pensions and ISAs come with a savings cap. The tax relief on pensions funding is controlled by earnings, the annual allowance and lifetime allowance. There is also a maximum subscription limit of £15,240 (rising to £20,000 from 2017/18) on ISA saving.

Once these pots have been maximised it may still be possible to achieve similar tax efficient returns on other investments with a little bit of careful management of allowances of course.

Unit trusts and OEICs The new dividend allowance creates an opportunity for virtually tax-free saving by building up a collective portfolio where income tax and capital gains tax can be ‘managed out’ by using the respective allowances.

This can be achieved by keeping dividend income to below £5,000 a year, and realising capital gains annually from the portfolio within the annual CGT exemption (£11,100 for 2016/17).

The portfolio value at which no tax will be due will, of course, depend on investment returns, but they could look something like this if allowances are fully used:

Portfolio size Dividend Yield Tax free income Cap. growth rate Tax free growth
£200,000 2.5% £5,000 5.5% £11,100
£400,000 1.25% £5,000 2.75% £11,100
£500,000 1% £5,000 2.22% £11,100

The order of saving For those who use their tax incentives and allowances efficiently, the order in which they are most likely to fill their savings pots is:

  1. Pensions The combination of tax relief on contributions, no tax on income/gains within the pension fund and 25 per cent tax-free cash make pensions difficult to beat as a means of long-term saving.
  2. ISAs Similarly, investments within an ISA do not suffer tax on income and gains. In addition, the ISA can be accessed at any time without giving rise to a tax charge.
  3. Unit trust/OEICs Building up a portfolio so that dividends and gains can be kept within the available allowances can create a fund which is potentially tax free.
  4. Offshore Bonds Income and gains within an offshore bond enjoy gross roll up and are tax-deferred rather than tax free. But there is the potential for them to be tax free if gains can be taken when clients’ or their intended beneficiaries are non-taxpayers.

The tax saved helps to optimise returns and this, combined with reducing the management charges for investment, means that you keep more of what you’ve saved to spend or pass on to your families.


Why sissies make great investors

I was recently forwarded this article by Robin Powell of Regis Media and thought it was worth sharing the contents.

A funny thing happened the day after Christmas.  An unknown rookie basketball player by the name of Chinanu Onuaku stepped up to the free throw line and threw the ball underarm, or “granny style”, towards the hoop. The crowd gasped and then erupted as he scored the point.

Now, I’m less than six foot with a very rudimentary knowledge of basketball. But I’m reliably informed there is academic evidence that throwing the ball underarm gives the thrower the best possible chance of making a free throw. Until now, though, it hasn’t been seen in an NBA game since retirement of granny-style pioneer Rick Barry in 1980.

So, why did no professional basketball player until now try to replicate Barry’s success by perfecting the technique that is proven to deliver the best results?  According to Adam Kilgore in the Washington Post, “players uniformly resisted it, afraid of looking foolish, standing out as childish or unmanly”. Wilt Chamberlin, who briefly flirted with underarm free throws in the early 1960s, apparently reverted to the conventional style because he “felt like a sissy”.

There’s a very similar phenomenon to this in football. Ten years ago, Ofer H. Azar, an economist at Ben-Gurion University of Negev in Israel, conducted an experiment involving professional goalkeepers. What he wanted to find out was how they dealt with a high-stakes decision, namely what to do at a penalty kick, and whether it helped to explain the behaviour of investors faced with making similarly big decisions under pressure.

Azar’s research team analysed more than 300 kicks and concluded that the action that was most likely to prevent a goal being scored was, perhaps surprisingly, to stand in the middle of the goal and do nothing until the trajectory of the ball can be seen. This resulted in a success rate of one in three — far higher than the average.

But goalkeepers very rarely do that. Instead, they typically try to guess which way the ball is going to go before the player’s foot has actually made contact with it, diving left or right, to try to be in the right spot when the ball arrives. The researchers found that diving left resulted in success 14 per cent of the time, and diving right only 12.6 per cent.

Crucially, when they asked why the goalkeepers who took part in the experiment why they didn’t just stand and wait more often, it emerged that the overriding reason was the fear of what others would think of them. In particular, they didn’t want to give the impression to the crowd or their teammates that they weren’t trying or taking the situation sufficiently seriously.

What fascinates me is how analogous these two examples from the sporting world are to the response that many people have to evidence-based investing. It doesn’t matter how many times you tell them that this is a good way to invest or that is a bad way; some people will always act irrationally.

Humans are very much social animals. We pay huge attention to what others are doing, and to how other people perceive us. As a result, we’re often scared to do the opposite, even though we know, on a rational level, that’s just what we should be doing.

No, buy-and-hold indexing isn’t cool, it isn’t macho and it won’t make you the most interesting guest at a dinner party. But the evidence overwhelmingly tells us it’s the best way to invest.

Go on, be a sissy. And, as William Bernstein would say, “Let them laugh. The joke’s on them.”

Making Tough Decisions in an Uncertain World

Donald Rumsfeld, the former US defence secretary, certainly added to the lexicon of the concept of uncertainty with his infamous ‘known-knowns; known-unknowns; and unknown-unknowns’[i] interview, when describing the link between Al Qaeda and the Saddam regime in Iraq. While it confused many, it does provide us with a useful framework for understanding the uncertainty that we all face as we seek to put in place sensible plans for our finances, not least how to invest our liquid assets.

We face a number of critical decisions on our life journeys from young, family and career-orientated adults, through the inflection point of leaving the workforce and hopefully onto a happy, healthy, long and financially secure retirement. These include decisions such as: when to retire? How much is enough? How much can we spend? What should we invest in? Can we afford to gift the children some capital at this point?

The challenge we face is that these decisions are made against the backdrop of great uncertainty – in our lives, the capital markets and the rapidly changing world we live in. However, we must make those decisions if we are to give ourselves the best opportunity to achieve the things we aspire to do, with the wealth that we have. These sorts of decisions would be easy if we knew that we were going to die at the age of 99 and could obtain a return, year-in year-out, of say, 4 per cent above the rate of inflation!

But that is not the real world – our lives and the markets contain much more uncertainty than that. Perhaps the most valuable contribution that a good, unconflicted advisor can play now, and in the years ahead, is facilitating you to feel empowered to make the best decisions that you can in the face of this uncertainty. Let us take a look at this with a little help from Donald Rumsfeld, the former US defence secretary.

What are the ‘known-knowns’?

If we look at the ‘known-knowns’ we can come up with a list that acts as both a starting point and platform for making decisions. It includes:

  • How much wealth you have today, where it is and who owns it
  • Your current income and expenditure
  • Your current rates of income tax and potential inheritance tax liability
  • Your vision of what you want your money to achieve for you (financial security, help for the children, philanthropic works)
  • The principal options for investing it, which are simply being either to lend it to someone (bonds) or to become an owner of companies (equities)
  • The returns that have been exhibited on an historical basis for investing in bonds and equities of different kinds
  • The fact these returns do not come in straight lines
  • Some basic principals of investing that we know to work effectively.

What are the known-unknowns

Now we step into perhaps less comfortable territory, not least because we are faced with thinking about our own mortality:

  • We know we are going to die, but we do not know when, either in our own case or in the case of our partners or other family members
  • We know that life takes many turns and that the future that we envisage for ourselves may well not to be the one that we experience. As the old adage reminds us ‘Life is what happens to you when you are busy making plans’
  • We know that investment returns do not come in straight lines, but we do not have much of a clue as to what the returns on investment will be this year, next year or indeed over the lifetime for which we will be investing. We can make some sensible estimates, but these are by no means guaranteed
  • We know that there are some really smart investment professionals out there who could manage our money for us. The unknown is that we have no reliable means of identifying, with any certainty, who they are today
  • We know we could do with some help, but do not necessarily know who to turn to or who we can trust.


What are the unknown-unknowns

Well if we knew what they were, they would be ‘known-unknowns’. In the financial world, these potential events have become known as ‘Black Swans’. The phrase was coined by Nassim Nicholas Taleb in his insightful book Fooled by Randomness[ii], which makes the point that just because most swans are white, it does not means that black swans do not exist. He describes a Black Swan event as “being beyond the realms of regular expectations; carrying extreme impact; and which is prone to us concocting spurious explanations as to why it happened and how it could have been predicted.”  Interestingly, he also views it as being the inverse – i.e. the non-occurrence of events that seem highly likely. What could these be?

  • A computer virus that wipes clean all electronic records of stock ownership?
  • A nuclear explosion at Fort Knox’s gold reserves (as was nearly experienced in James Bond’s Gold Finger).
  • That all financial assets deliver negative returns in the years ahead.
  • Others? Your guess is as good as ours.

How we incorporate these events into our thinking is taxing, but we must try and do what we can to ensure that we incorporate robustness and flexibility into our planning

Is there any help? (the quick answer is yes)

It is all very well working out our own Rumsfeldian list, but how does that help us to manage the uncertainty? The short answer is that it helps us to identify where the risks lie as we try and plan and to put in place sensible strategies to mitigate the unknowns that we face. It also illustrates the need to run a range of scenarios, in some instances, so that we can form some insight into what the various possible outcomes may be, where we draw our red lines, and what choices we face in these circumstances. This is where a professional financial planner adds considerable value.

Carpenter Rees exists to help its clients make these decisions with clarity and confidence in the face of the uncertainty of life and markets.

Insightful, structured, and yet flexible financial planning process, combined with a robust investment process, are the essential ingredients for maximising the chances of enjoying a financial outcome. This is turn provides a lifestyle, that is not only acceptable, but hoped for – ‘Yes you can still go to South Africa to play golf, again, this year.’

A sound process that helps to frame the problems that we face correctly helps us to make better decisions as a consequence.

The essential blend of financial planning and robust investment process

 Making Tough Decisions in an Uncertain World

Sound financial planning is, somewhat surprisingly, one of the best-kept secrets in the world of private finance. Akin to the preparation of a balance sheet, profit and loss statement and forward-looking management accounts, which allow companies to manage their assets, liabilities and cash flow into the future, financial planning does the same at an individual level.

Life-time cash flow modelling tools can help to gauge quantum and direction of decisions, and assist with scenario planning as needed. However, numerical precision needs to be avoided as it sets a false sense of certainty in an uncertain world.

Discussing the issues with an advisor, running a range of scenarios and gaining a sense of the likelihood of achieving the outcome you wish for (and the risks to it), helps most clients to feel much clearer and more comfortable about their wealth, their future and the decisions they may face along the way.

A good financial planning process helps to identify the three components that define how much investment risk a client needs to take: the first component is how much risk can they tolerate, which is a psychological trait; the second is defining their financial capacity for losses, which is a function of their wealth and future lifestyle needs; and the third is the financial risk that they need to take to achieve their goals. Discussing how to align these three components is one of the most important financial conversations that anyone will ever have. Only once this is agreed, can a sensible and suitable investment portfolio be structured.

In investing there are no absolute right or wrong answers, only better and worse solutions. Better solutions are founded in process that encompasses insight into the problem (what should we invest in), are focused on reducing uncertainty (with as little risk as possible) and a robust and consistent decision making process (should we go right or left at this decision point?) As Albert Einstein stated “Make it as simple as possible but no simpler”, which has been our mantra as we have built and implemented our evidence-based approach to investing. In essence, it encapsulates the following core principles:

  • Capitalism works and we should use it to do the heavy lifting as we try to generate returns from our portfolio as either owners (equities) or lenders (bonds). Finding the right balance between the two is key
  • Markets work pretty well – they are a zero-sum game before costs. The evidence tells us that few professionals ‘win’ over the sorts of time frame we are interested in and they are well-nigh impossible to identify in advance. Using ‘passive’ funds that seek to deliver the return of the markets make sense
  • The mix of assets we choose to hold dominates the return journey that we will experience – it is what we focus on
  • We seek to take risks carefully that deliver adequate rewards over time
  • We diversify all portfolios broadly; at the security, geography and asset class levels
  • We keep an eagle eye on costs of all kinds to ensure that you receive as much of the return on offer from the markets as possible
  • We rebalance this mix of risks regularly, back to the level of risk that is most appropriate for your circumstances

Whilst many would argue over Donald Rumsfeld’s political contribution, his framework for thinking about the great uncertainty that exists in our world, our lives and the capital markets is a useful one. In the face of this uncertainty, we need to use the ‘known-knowns’ as our starting point and the ‘known-unknowns’ as a basis for analysis and scenario planning to get a tighter handle on the possible range of future outcomes. The ‘unknown-unknowns’ are a reminder of the limitations of our knowledge and our need for flexibility and resilience. Sound financial planning and robust investment process are two key elements for managing this uncertainty.

We hope that you have enjoyed this paper. Please do not hesitate to call if you have any questions or comments on it.

Priorities and Concerns of Family Businesses

A Happy New Year to you all.

At Carpenter Rees a great deal of our time is spent working with family businesses and therefore during 2016, to mark our commitment to the sector, we embarked on a research project with Manchester Metropolitan University’s Centre for Enterprise.

The initiative allowed us to gain a true insight into the aspirations of family businesses and will be instrumental in our work to help our clients reach financial freedom and achieve succession.

We are delighted that the research paper is now available to download from our home page. The research includes findings from a workshop held with some of our family business clients, as well as advisors that we often work alongside such as accountants, lawyers, finance and banking specialists, PR and marketing consultants and a management trainer.

We will continue to provide additional information in the area of family business over the coming months but in the meantime please do download the research paper, and of course, please share this with anybody who you feel would be interested.

Merry Christmas

We would like to wish you all a very Merry Christmas and a Happy New Year and also thank you for your support over the last 12 months.

The office will be closed from 5pm on Friday 23rd December and will re-open on Tuesday 3rd January 2016.

As in previous years, we are not issuing Christmas Cards but have instead donated to the Alzheimer’s Society.


The Financial Planners’ Group

We’re delighted to announce that we are one of the founder members of an exciting new group; the Financial Planners’ Group. As six like-minded independent financial planning businesses managing assets for clients of over £375m, we decided to work together to apply the best financial thinking for the benefit of our clients.

We share many things in common – great people, exceptional client service and outstanding results. We realised we were all trying to achieve similar objectives for our clients and we face the same business challenges, so it made sense to join forces and share investment insights and knowledge. We call it ‘the power of more’.

Other members of the group include Beardmore and Company Ltd, DJH Wealth Management, Otus Financial Planning, Riverstone Wealth Management Ltd and Callisto Wealth Management. Have a good look round the group’s brand new website to find out more about us all. There’s a section on how the group came into being, the thinking behind the way we operate and the type of clients we all work with.

A Financial Plan is not Plain Sailing

Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan and there’ll be rough seas, but those who are prepared, flexible, patient and well-advised greatly increase the odds of reaching their destination.

A mistake many inexperienced sailors make is not having a plan at all. They embark without a clear sense of their destination and once they do decide, they often find themselves lost at sea in the wrong boat with inadequate provisions.

Likewise, in planning an investment journey, you need to decide on your goal. A first step might be to consider whether the goal is realistic and achievable. For instance, while you may long to retire in the south of France, you may not be prepared to sacrifice your needs today to satisfy that distant desire.

Once you are set on a realistic destination, you need to ensure you have the right portfolio to get you there.

  • Have you planned for multiple contingencies?
  • What degree of ‘bad weather’ can your plan withstand along the way?

Key to a successful voyage is a good navigator. A trusted adviser is like that, regularly taking coordinates and making adjustments, if necessary. If your circumstances change, the adviser may suggest you replot your course.

As with the weather at sea, markets can be unpredictable. A sudden squall can whip up waves of volatility, tides can shift and strong currents can threaten to blow you off course. Like a seasoned sailor, an experienced adviser will work with the conditions.

Once the storm passes, you can pick up speed again. Just as a sturdy vessel will help you withstand most conditions at sea, a well diversified portfolio can act as a bulwark against the sometimes tempestuous conditions in markets.

Circumventing the globe is not exciting every day. Patience is required with local customs and paperwork as you pull into different ports. Likewise, a lack of attention to costs and taxes are the enemy of many a long-term financial plan.

Distractions can also send investors, like sailors, off course. In the face of ‘hot’ investment trends, it takes discipline not to veer from your chosen plan. Like the sirens of Greek mythology, media pundits can also be diverting, tempting you to change tack and act on news that is already priced in to markets.

A lack of flexibility is another impediment to a successful investment journey. If it doesn’t look like you’ll make your destination in time, you may have to extend your voyage, take a different route to get there or even moderate your goal. The important point is that you become comfortable with the idea that uncertainty is inherent to the investment journey, just as it is with any sea voyage.

That is why preparation and planning are so critical. While you can’t control every outcome, you can be prepared for the range of possibilities and understand that you have clear choices if things don’t go according to plan.

If you can’t live with the volatility, you can change your plan. If the goal looks unachievable, you can lower your sights. If it doesn’t look like you’ll arrive on time, you can extend your journey.

Of course, not everyone’s journey is the same. Neither is everyone’s destination. We take different routes to different places and we meet a range of challenges and opportunities along the way.

But for all of us, it’s critical that we are prepared for our journeys in the right vessel, that we keep our destinations in mind, that we stick with the plans, and that we have a trusted navigator to chart our courses and keep us on target.

The US election: the one thing we can be sure about is uncertainty


We are somewhat loathe to put out yet another piece about what might happen in the markets, as it risks focusing long-term, sensible investors’ minds on short-term events. The referendum on Scottish independence, Grexit, China’s slowdown and most recently Brexit, have come and gone, in market terms, with most investors sitting on healthy increases in their portfolios since 2014, despite uncertainty at the time. However, it is not a bad thing to revisit the robust rationale for the structure of our client portfolios, particularly at such a time.

A Wine Lover’s Guide to Investing


I have no doubt that if you are like me you will have sampled some nice wine over the years. For me, vintage wine is one of life’s great pleasures. But often overlooked in the joy of consumption is the carefully calibrated journey from grape to glass. Similar levels of care are critical to good investment outcomes.