Category: Financial Advice

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Do I Really Need to Make a Will?

What happens to your assets when you die? Doesn’t everything automatically go to your partner or spouse?

Well, no, and this mistaken belief might explain why so many people in the UK haven’t taken out a legally binding Will.

According to a survey by Will Aid, 49 per cent of people in the UK don’t currently have a Will in place, while 14 per cent of those who haven’t made a Will think their loved ones will automatically inherit when they die.

But that’s not what the law says, so if you die without a Will, your wealth won’t be distributed according to how you wish, even if you’ve made it known what you want to happen upon your death.

What Happens if I Don’t Have a Will?

The Rules of Intestacy govern what happens to a person’s Estate if you die without leaving a valid Will.

These state that once any tax and debts have been paid, the first £250,000 of what remains, your personal possessions and half of any outstanding wealth will go to your spouse or civil partner, and the rest will go to your children once they’ve turned 18.

So what does this mean in reality?

Firstly, it means that if you’re not married to your partner, they could receive absolutely nothing, even if you’ve lived together for many years.

Secondly, it means that if you’re separated but not divorced, your ex-husband or ex-wife will have a legal claim to part of your Estate.

Next, the rules mean that if your entire Estate is worth less than £250,000, the surviving spouse or civil partner will inherit everything, so conceivably, your children might not receive a penny.

And if you don’t have any living family members, all your assets will go to the state, whereas with a Will, you could have left it to an organisation or charity that you support.

So it’s in the best interests of both you and your loved ones to draw up a legally binding Will, so you can be sure your assets will go to your chosen beneficiaries and that nobody is left out.

A Will also lets you give clear instructions on other matters, such as whether you want to be cremated or buried, and who you want to be in charge of organising your Estate.

Take Charge of What Happens to Your Estate

Once you’ve taken out a Will, it’s then crucially important that you keep it up to date. Otherwise, it might not reflect changes in your life that may have happened since the original document was written, such as a marital separation, the death of a named beneficiary or the birth of a new child or grandchild.

Taking out a Will can also make a big difference to those loved ones you’ve left behind. For instance, if you’ve clearly laid out your wishes and these are legally binding, there’s no room for dispute over who gets what and what should happen to your money.

A Will also allows you to make sure you’re not paying more Inheritance Tax than is necessary, which again could be a great relief to your family and save them unnecessary stress at what’s already going to be a difficult time for them.

Ultimately, the advantages of taking out a Will are many, and it lets you be in control of your money and where it goes – and that can provide invaluable peace of mind to all concerned.

Sources
https://www.which.co.uk/money/wills-and-probate/passing-on-your-money/reasons-for-making-a-will-a4mzh4b503jc
https://www.slatergordon.co.uk/wills-trusts-tax-probate/will-writing/reasons-to-make-a-will/
https://www.willaid.org.uk/latest-news/14-uk-wrongly-assume-loved-ones-will-automatically-inherit-after-death

Lasting Power Of Attorney: Why It’s An Issue You Can’t Ignore

Ageing and death aren’t easy subjects to think about, but as we get older, they’re topics that it would be foolish to ignore.

The average life expectancy in the UK is continuing to increase, which means many more of us might struggle to manage our own affairs and remain independent in the future.

That in turn means steps must be taken to make sure the right decisions are made on our behalf in later life.

While you may be of sound mind right now, this might not be the case in the future, and you might need to have a difficult conversation sooner rather than later about arranging a Lasting Power of Attorney (LPA).

An LPA means a trusted person has the legal right to make important decisions on your behalf if you become unable to do so yourself.

There are two types of LPA in the UK.

Property and Finance

This includes paying bills, selling a property and managing a bank account.

Health and Welfare

This concerns issues such as medical care, making decisions on life-sustaining treatment and taking care of a person’s daily routine, such as washing and dressing.

Most Britons Haven’t Planned Ahead

Worryingly, many of us haven’t made any preparations for the future. In fact, figures from the Office of the Public Guardian (OPG) show that less than 1% of adults in the UK have an LPA.

OPG data also revealed that nearly half of over-45s didn’t actually know anything about LPAs, and when given more information, nearly two-thirds weren’t interested in setting one up in the future.

That’s particularly interesting in light of a separate study by Solicitors for the Elderly (SFE) and think tank the Centre for Future Studies, which revealed 70% of the British public want a family member to make crucial healthcare and welfare decisions for them.

Yet nearly eight in ten have failed to even discuss their care or end-of-life medical wishes with family members, while almost two-thirds mistakenly believe their next of kin will automatically get the right to make decisions on their behalf.

Only an LPA can ensure this is the case, with chosen loved ones acting in your best interests if you’re unable to make life decisions independently.

Taboo Subject

So why are we avoiding or putting off dealing with this issue? Well, for many of us, death, disability and illness are uncomfortable subjects to discuss or even think about.

Yet it’s something that affects all of us at some point, so it’s something that can’t be left to chance.

Interestingly, an estimated 40% of adults in the UK have a Will, according to the OPG, which means many of us are happy to think about what happens to our finances and assets after our own death.

But many people appear to be overlooking what would happen if we aren’t able to make financial or healthcare decisions while we’re still alive.

Have The Conversation Early

While we won’t pretend that bringing up the subject of Power of Attorney with loved ones is easy, it can be made far less stressful by doing it in good time.

Discussing the subject well before there is any need for it ensures all issues are addressed without urgency, with every family member having time to understand their roles and responsibilities.

Sources
https://wwf.co.uk/solicitors-for-the-elderly-warn-of-capacity-crisis-by-philippa-pipe/
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/359864/opg-lpa-infographic.pdf

More than half of UK adults now seek financial advice

As we look back on the 12 months since the UK first went into lockdown one thing is abundantly clear – financially, the last year has been good for some people. We’re not talking about the billionaires who have seen their shares rocket during lockdown but rather the many, many people who have saved money by not commuting, not buying lunch from the sandwich shop and not going on holiday. Depending on which paper you read, people in the UK have ‘accidently’ saved anywhere between £100bn and £125bn during lockdown. 

At the opposite end of the spectrum, lockdown has been hard for millions of people as businesses have failed, jobs have been lost and they have been forced to rely on their savings. 

In both cases there has been a need for financial planning advice. A year ago it might have been assumed that fewer people would need financial advice as a new money management or savings and investing app came out virtually every other day. 

However, according to a recent report from Prudential, the exact opposite is the case. More than half – 53% – of UK adults say that financial problems and changed circumstances over the last 12 months have caused them to seek financial advice. Of this figure, 33% have already sought financial advice, whilst the remaining 20% are planning to do so. 

For most of those responding to the survey the glass was, unfortunately, half-empty, with 85% of people saying they had concerns about the next twelve months, with the two concerns most frequently highlighted being: ‘having to use savings to make ends meet’ and ‘my investments losing money.’ 

Interestingly, the report revealed that the need for financial advice was felt most among the younger generations – Millennials and Generation Z, exactly the generations we might have assumed would shun traditional advice in favour of apps and online portals. 

Seventy-four percent of Millennials said that they had, or were going to, see a financial adviser, with 58% of Generation Z echoing those sentiments. The key drivers for these generations were ‘avoiding financial difficulties’ and ‘wanting to start [my] investment journey.’ 

Clearly the last 12 months have been difficult for everyone. What they have illustrated is that financial planning advice will always be required and that people – of whatever generation – will always value face-to-face advice (even if that has been face to Zoom advice recently…) 

Our clients can rest assured that whatever happens with the pandemic – and however long the restrictions stay in force – our commitment to providing the very best long-term financial planning advice will never waiver.

Sources
https://www.internationalinvestment.net/news/4028485/half-uk-adults-seeking-financial-advice-report

https://www.theguardian.com/business/2020/dec/07/uk-covid-savings-haldane-bank-of-england

What is the value of advice?

You’re not going to be surprised that, as advisers, our firm belief is that an advised client will get a better financial outcome than a non-advised client. How to prove, though, that we’re not just biased? What is the actual value of that advice? How can it be quantified?   

Most importantly, the value of advice is not simply tied to fund picking or performance.

A good example of this was when the FTSE 100 fell by over 26% in early March due to panic over the coronavirus outbreak and some advisers chose to move their clients’ investments out of equities into assets, traditionally viewed as ‘safe havens’. Although they may have moved them back into more equity-dominated funds in April, the FTSE 100 actually made its biggest recovery between 23 and 26 March so their clients’ money would have been out of the market at the optimum time. This is a clear sign that adding value by trying to ‘time the market’ does not work.

Advice, in our view, goes much further. It can cover: 

  • Behavioural coaching
  • Spending strategies
  • Portfolio rebalancing 
  • Tax-smart recommendations
  • Financial planning  

It’s all part of building a long-term relationship where the adviser really gets to know the client and understands their objectives for life.    

Behavioural coaching, in particular, can be useful in helping an investor to ignore market noise and to keep their emotions at bay so that they avoid expensive mistakes and stick to their long term goals. 

Research over a number of years by the International Longevity Centre (ILC) showed that using a financial adviser led to better financial outcomes in the following ways:

  • Taking advice added £2.5bn to people’s savings and investments,
  • The pensions of clients who received ongoing advice were worth 50% more than those who took one off advice. 
  • Those who took advice were likely to be richer in retirement.
  • The benefits of advice outweighed any costs associated with it 

In addition, the University of Montreal estimated that clients with an adviser would have a 2.73 times larger savings pot over a 15-year period than clients who hadn’t seen an adviser. If that time frame was reduced to five years, the savings pot would still be 1.58 times greater. 

Different investment companies quote different figures but on balance agree that advisers can generate between 3% and 4.4% per annum net returns for their clients.      

Set against this backdrop, it would seem financial advice does have a real value to offer.   

Sources

https://www.professionaladviser.com/opinion/4016222/tim-sargisson-insider-guide-value-advice?utm_medium=email&utm_content=&utm_campaign=IFA.Update_RL.EU.A.U&utm_source=PA.DCM.Editors_Updates&utm_term=QU