Category: Financial Planning

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Set Specific Financial Targets to Achieve Lifestyle Goals

If you’re creating a financial plan, with a view to achieving certain ambitions in life, you need to include details.

For instance, if you want to travel more in later life, you can’t simply say you’ll put money aside for holidays.

Or if you want to retire early, simply putting money into a pension isn’t enough.

In the first example, you need to consider how much income you’ll receive in later life and your likely outgoings, so you can estimate how much disposable income you’ll have to pay for trips abroad.

And in the second scenario, you again need to have a rough idea of your income, so you’re able to both meet basic living costs and enjoy the kind of lifestyle you want to have.

In short, a financial plan needs to include specific goals, based on real numbers that can be tracked and measured as each year passes. And this is where a financial adviser can make a big difference.

If you’re able to be specific about exactly what you want to achieve, a regulated, professional adviser can work with you to determine the route to your destination. They’ll look at everything from your pension and investments to what tax allowances you may be eligible for, and help you prepare a clear plan that outlines how you can achieve your objectives.

Ultimately, being specific puts you in control of your finances, and helps you plan ahead with a sense of purpose, direction and optimism.

Keep an Eye on Your Finances

Planning ahead with confidence relies on you having a good awareness of your current financial situation. You probably know how much you’re earning, but do you know how much you’re losing in tax, bills and other general living expenses?

That’s why it’s so important to track your income and outgoings, so you have a clear idea of how much money you have available to you.

This can help you highlight where money might be being wasted. Perhaps you’re paying for a streaming subscription service you don’t really use, you’re on a more expensive phone tariff than you actually need or paying over the odds to service a debt.

Or perhaps technology has changed your relationship with money to the point where you’re not really aware of what you’re spending overall. In this age of contactless payment and being able to buy items online in just one or two clicks, it’s so easy to spend large sums without actually thinking about how much you’ve got left in the pot, so it’s essential you look at what you’re spending and how.

Once you’ve worked out where you’re haemorrhaging money unnecessarily, you could perhaps use this cash more effectively, with your lifestyle goals firmly in mind.

Perhaps you could invest it in a revenue-generating asset, put it in a savings account or increase your pension payments. How you use the money you’ve freed up depends on your specific objectives, but if you know how much you have to work with, you’ll be in a better position to achieve it in the future – and a financial adviser can be with you every step of the way.

Getting to grips with every aspect of your finances and planning ahead can seem daunting, but a professional adviser can help you navigate this maze and make sense of the many different options available to you.

Sources
https://www.irishnews.com/business/2022/03/28/news/stay-focused-on-your-goals-and-aspirations-creating-a-financial-plan-will-help-you-2624159/
https://www.wellandgood.com/retirement-planning/

Let Your Head, Not Your Heart, Guide Your Investment Decisions

Many of us will have spent the last two years longing for the time when most of the UK population had a good immunity against Covid-19, and pandemic restrictions were either being eased or completely dropped.

And although the pandemic isn’t over, these wishes have come to pass, and we’re closer to normal now than we have been for a long time. So why do we not feel like celebrating?

Well, the headlines still make grim reading. From soaring inflation to Russia’s attack on Ukraine, it’s clear that the global economic recovery from the pandemic isn’t going to be smooth, and this volatility is making many investors jittery.

However, we’d urge you not to panic in the face of international uncertainty. Hold firm, stick to your investment plan and don’t let emotions guide your decisions.

Keep a Lid on Your Emotions

Being an investor is like being a football fan, as you can face the highest of highs, crushing blows, and a regular struggle to process the dizzying range of feelings that comes with riding this rollercoaster.

But there’s a key difference with investors, as there can be a big financial cost to you if you go into panic mode as soon as the market falls.

You should be taking a long-term approach to your investments, rather than acting emotionally and impulsively.

Simply sitting tight until the markets recover from whatever has caused them to drop could be a much more lucrative approach than panicking as soon as things don’t go the way you want.

Markets Rise and Fall

Watching the value of your investments plummet as an international crisis escalates will naturally be a cause for worry.

But the markets rise and fall every single day, and while tough times might be difficult to swallow, the value of your investments will eventually bounce back. And that’s why it’s so important to be resilient and stick to your long-term strategy.

You could even use this opportunity to pick up some new investments while prices are low, with the expectation that their value will also rise at some point in the future.

This could be a great way to diversify your portfolio if you’re worried about keeping all your eggs in one basket, but as ever, you should research potential investments thoroughly before making any commitments.

How often do we see investors paying too much for stocks at a time when they are doing well? If you’re prepared to wait, perhaps for several years, for the markets to recover at some point in the future, it could pay off handsomely.

An interesting study by JP Morgan highlights exactly why it’s worth taking a long-term approach to investing. According to the study, an investor who was out of the market for just ten days between January 4th 1999 and December 31st 2018 would have seen their returns fall from 5.62 per cent a year to 2.01 per cent a year. And if you had missed the 60 days in which the market was performing at its best, you would have seen a 7.5 per cent loss per year on your investments.

This puts into context exactly why at times like these, investors should simply do nothing and hold onto their investments. Hopefully, the markets should pick up in the coming months or years, and work in your favour.

Diversifying Reduces Investment Risk

If you’re concerned about the level of risk you face from your investments, it may be time to consider diversifying, rather than selling up.

If you’ve invested solely in one company or one industry, the strength of your portfolio heavily relies on the specific problems and issues facing that particular sector. That means a diverse portfolio, covering shares, bonds and property in different countries and sectors could be more resilient in the face of global economic problems, and international crises such as the current Ukraine invasion.

Ultimately, the message to take away from this article is that now is not the time to panic and sell up. Sit tight, stay calm and stick to a long-term strategy, as that’s more likely to reap rewards for you in the future.

Sources
https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/market-updates/on-the-minds-of-investors/why-should-i-stay-invested/

How Planning for Retirement Can Boost Your Health and Wellbeing

Retirement is one of those major life events that can throw up all sorts of emotions, from excitement to blind panic. But your reaction to this looming milestone can depend largely on how you deal with it in advance.

If you’re prepared for retirement and have taken the right advice, you can look forward to your post-working life with confidence rather than anxiety, which benefits both your physical and mental health as the years pass. And this doesn’t have to be complicated…

Financial Advice Can Make a Huge Difference
You shouldn’t need to be a financial expert with a detailed understanding of every product, rule and regulation to make good decisions. But the complexity of the marketplace does make the very idea of financial planning extremely daunting and overwhelming.

That, in turn, can lead to people putting off getting their finances in order and kicking the can down the road.

But ultimately, that doesn’t cure the underlying anxiety people will have about funding their retirement. That’s why it’s so beneficial to speak to a qualified specialist financial planner as soon as you can.

An expert in pension and retirement planning can work with you to identify what you want from life, and from your retirement in particular, and offer advice tailored to your specific needs.

If you know an expert is acting in your best interests and considering your unique wishes and circumstances, you can live your life with confidence, safe in the knowledge that you’re taking the right steps to enjoy a fulfilling retirement.

Get into Good Financial Habits
This is something that any financial planner will tell you early on, as getting to grips with how much you’re earning, spending and saving will put you in a better position to achieve your goals, both in the long and short term.

When it comes to funding your retirement, paying a regular amount into a pension scheme as early as possible will pay off further down the line, particularly as it’s a tax-efficient way to save for the future.

Our finances are coming under unprecedented pressure right now, with rising inflation, energy prices and tax hikes coming together to create a cost of living crisis for many.

But knowing that you’re taking care of your future will help to give you vital peace of mind during these tough times.

Pension Planning Doesn’t Have to Be All-Consuming
As we said earlier, getting your finances in order can seem overwhelming, and even with the best will in the world, you might prefer simply putting it off rather than spending your precious free time going through complex documents.

But it’s actually less of a chore and a drain on your time if you deal with it early, and made much easier if you have a financial planner taking care of all the complicated aspects.

So once you’ve got your plans for retirement in place, you can spend the coming years and decades concentrating on those things that actually make you happy.

The short message to take away from this is that putting off retirement planning isn’t good for you, and planning for the future doesn’t have to be complicated if you work with a financial planner.

Sources
https://www.pensionbee.com/blog/2017/may/4-reasons-why-sorting-your-pension-is-important-for-your-health
https://www.sjp.co.uk/news/the-wellbeing-benefits-of-smart-retirement-planning

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

The Pensions Triple Lock: what does the Government’s broken promise mean for Pensioners?

At the last General Election the Conservative Government made a promise, a so-called “manifesto commitment.” That pledge is commonly known as the “pensions triple lock:” that the state pension will be increased each year by annual price inflation, average earnings growth or a guaranteed 2.5%, whichever is the greater. 

For pensioners this has been good news. It meant that pensions would keep pace with wage growth and inflation and, if both those were low in one particular year, pensioners would be a little better off. 

That, of course, was before the pandemic, the enormous cost of it and the financial juggling the Chancellor will need to do to pay for all the support measures put in place, and the consequent sharp rise in Government borrowing. 

In early September, as had been widely rumoured, the Government broke not one, but two manifesto pledges. It increased national insurance to pay for social care and, crucially for pensioners, it suspended the triple lock for a year. 

This was obviously bad news, and the move begs an immediate question. If the Government has suspended it for one year, could it do it for another year? After all, the bill for Covid-19 is not going to be paid any time soon. 

Unsurprisingly, a poll showed that two-thirds of pensioners were against the suspension. Interestingly though, the research carried out by ComRes suggested that the move would be largely forgiven by the next General Election. 

In this instance the triple lock has been watered down and become a “double lock,” with the wages element removed. But as we hinted above, we might well see other elements removed in the future, now that the precedent has been set. Many commentators expect inflation to hit 4% by the end of the year, could the Government remove that element in the future, too? 

It will be interesting to see what Chancellor Rishi Sunak has to say when he delivers his Budget speech on October 27th. He will presumably be setting out plans for starting to repay the enormous cost of the pandemic. Given the cost of servicing all the new borrowing the Government is vulnerable to a rise in interest rates, and nothing, including the triple lock, can be ruled out. The next Election is not due until December 2024 and the Government may gamble on the pandemic and the measures taken to counter it being a distant memory by then. 

The uncertainty for pensioners means that your ongoing financial planning becomes more important than ever. It is important that your existing savings and investments are arranged as tax-efficiently as possible and that you make use of all your available allowances.

Sources
inews.co.uk/news/uk/state-pension-older-people-wait-imminent-announcement-future-triple-lock-reports-1184161 
https://inews.co.uk/news/uk/state-pension-triple-lock-tory-manifesto-broken-pledge-general-election-1188492 
https://www.bbc.co.uk/news/business-58665538 

“Flexible” careers will increase the need for financial planning

In days gone by, life was relatively simple. You left school or university, you found a job and barring moving away or your employer going bust you stayed with that employer until you retired. 

Today, and especially after the pandemic, that situation has changed significantly. Employees want flexibility, they want the ability to work from home, they want an employer that understands their work/life balance, and one that shares their ethical values. Job security, and the prospect of thirty or more years with one employer, seems to be low on the list of what employees want. 

It is a well-documented fact that millennials – those people who came of age around the turn of the century – will make up 75% of the global workforce by the middle of this decade. They want to work for employers that foster innovative thinking, develop their skills and make a contribution to society. 

But do they want a career? 

According to a study by Aviva, 47% of employees are now less career-focused following the pandemic, with two in five people claiming “they could never switch off” from work. 

24% of women said the pandemic had had a negative impact on their work/life balance as they tried to juggle work, a home, a family and a relationship – compared to just 16% of men. 

Inevitably the impact of technology means that it will become harder to separate work and home life, especially if you work at home and the “office” is only a roll out of bed away. A few years ago France introduced a “right to disconnect ” – a law stipulating that companies with more than 50 employees establish hours when staff should not send or answer emails in a bid to prevent burnout and set a clear barrier between work and home life. We can suspect it won’t be the last country to take such action. 

While a desire for flexibility, home working and career breaks is understandable it does, however, pose some financial planning questions. People will still need mortgages – which are clearly more difficult to obtain without a consistent employment history. People will still need to plan for their retirement which, again, becomes more difficult with career breaks and frequent changes of employer. 

Throw in savings and investments and it becomes clear that while the workforce of the future may want flexibility and everything that goes with it, what it will most emphatically need is consistent, long-term financial planning from experienced advisers. 

Sources
https://www.bbc.co.uk/news/business-57798908 
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-dttl-2014-millennial-survey-report.pdf
https://fortune.com/2017/01/01/french-right-to-disconnect-law/

Financial planning in a post-pandemic world

‘Fail to plan, plan to fail.’ It’s an expression that anybody who has worked in management or the military must have heard a thousand times. Like all oft-repeated clichés, it carries a kernel of truth – and in no aspect of human life is the phrase more apt than in financial planning. 

Unless you have a financial plan; for retirement, for saving, for long-term investment, for buying your home, for estate planning; then you cannot realistically expect to achieve your financial objectives. 

Sceptics may ask ‘What’s the point of financial planning? What’s the point of any planning? We’ve just lived through the most turbulent, changeable year in any of our lifetimes.’ 

At first glance, it’s a valid point. On March 23rd last year the UK – like so many countries around the world – went into lockdown. Further lockdowns followed. Tens of thousands of people lost their jobs. Businesses which had taken years to build were wiped out overnight. Stock markets around the world experienced tumultuous times. 

But 13 months later a vaccine programme is being rapidly rolled out. The economy is rebounding. Many of the world’s leading stock markets actually gained ground in 2020. All the world’s leading markets – with the exception of China, which fell 1% – made gains in the first quarter of this year. 

What the last 13 months illustrates is not that there’s no point to financial planning: rather the reverse – that it is more important than ever. Pandemic or no pandemic, house sales continue, we still have to save for our retirement and – with a hefty bill for Covid to pay – the Government is still going to tax us on our savings, investments and our final estate. 

What is interesting is that the fundamentals of financial planning have been completely unaffected by the pandemic. If the last 13 months have taught us anything, it is that what we previously thought couldn’t happen can happen – and in many cases happen very quickly – so we need a plan, we need savings: we need a buffer.

It has also reminded us that saving and investing is a long term commitment, and that there will always be short term fluctuations. More than anything though, we have been reminded how important regular contact between a financial adviser and a client is. Plenty of our clients have needed reassurance over the last 13 months: plenty have had questions that needed answering. We have been happy to do both. 

There will undoubtedly be changes in the future, whether those are what Harold Macmillan famously called ‘events’ or clients drawing on the last year to re-evaluate what they want from life and their financial planning. We will always make sure that your financial planning is flexible enough to cope and to adapt. But make no mistake: the old adage ‘Fail to plan, plan to fail’  still rings true.  

Sources
https://www.marketwatch.com/tools/marketsummary

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

How much should I be saving towards my pension?

Research shows that we put ambitious targets on our retirement income and then underestimate how much we need to save to get there.

Before we delve into how much you should be saving, here’s a quick overview of the two main types of pension schemes:

In a defined benefit scheme your employer promises to deliver you an income in retirement. You’ll most likely have to contribute each month too, putting in a required amount.

These ‘gold-plated’ schemes are increasingly rare.

The other type of scheme is a defined contribution scheme. If you have this type of scheme, you will save into this and get contributions from your employer too. The money is invested to build a pot which will then fund your retirement.

If you have a defined benefit scheme, you just need to save as much as your employer says. But with a defined contribution scheme things are a little more complicated… The onus is on you to deliver the money you need in retirement – the more you save, the more you get.

How much will I need in retirement?

In retirement, your outgoings are likely to be lower. For instance, most people will be mortgage free and not supporting children. In the finance industry, there’s a vague rule that some currently aged 40 would need around 50% of their current income to have the same standard of life in retirement.

You should also factor in the state pension. Under the new flat-rate scheme this is worth £155.65 per week (£8,094 per year). So, someone targeting a retirement income of £23,000 would need to contribute £16,000 from their own pensions.

How much should I be saving?

Naturally, the amount you need to save depends on the size of the pension you want. However, it also depends on your age.

For instance, putting 12% of your salary towards your pension might be enough if you start in your 20s, but if you leave it until you’re 40, you might need to pay in closer to 20% to get the same level of income.

It’s sometimes said that the rule for working out what percentage of your salary needs to be going into a pension is half the age from when you started saving. So, if you started at age 30 it would be 15%.

This said, given the variation in salaries and personal circumstances, it can be a good idea to get a slightly more profound insight into your finances. 

You could use some sort of pension calculator. There are plenty of different calculators online that let you play around with the numbers. A quick search on Google will reveal plenty. 

All things considered, this can’t give you quite as clear a view on your financial retirement scenario as speaking to an independent financial adviser. They should have the knowledge and experience to help you get both a clear view of your current situation and the changes you could make so that your money works harder towards your goals.

Sources
https://www.thisismoney.co.uk/money/howmoneyworks/article-3177112/How-money-need-save-pension.html

Why even financial planners need financial planning

You may find it surprising to learn that even financial planners use financial planners. Surely, they know it all already, don’t they? Don’t they just follow their own advice?

Let’s look at why advisers sometimes find it helpful to sit on the opposite side of the desk.    

To clarify goals 

Setting clear goals is hard, no matter who the person is! If you’re doing it on your own, it’s all too easy to set vague objectives that don’t really challenge you. After all, who will know, or care, if you reach them? You can also easily let the timeframe drift – one year, five years, never. 

Another independent professional, however, will bring your goals into sharp focus and make sure you really consider the level of risk and the possibility of failure. But they’re also likely to push you a bit and encourage you to commit to challenges that you might never have even considered if left to your own devices.     

Goals are also likely to involve other people; spouses and families. So financial planners can often welcome using someone experienced in facilitating these discussions, just as they moderate them for their clients.        

To be held accountable

Just being aware that someone is going to review your progress on a regular basis means you’re more likely to take it seriously. It’s human nature. Think back to school when you had to present something in class, or if a parents’ evening was looming. Or at work when a project is going to be analysed in a meeting.            

It’s invaluable to know that a third party is going to review your goals. Knowing you’re accountable to someone keeps you on track and helps performance. It’s also useful to know there’s someone reminding you of what you deemed important at the outset. 

To stop emotions getting in the way   

No matter how qualified an adviser may be, when it’s their own situation it can be difficult not to get too close but to stay detached. Doing the financial stuff may be relatively easy for them; it’s what they’ve trained for and become qualified in. The harder part can be making sure they don’t get emotionally involved in their own investment decisions, which is where having an independent third party can be invaluable.

Sources

https://medium.com/@behaviorgap/between-me-and-stupid-2947498ddad4