Category: Financial Adviser Blog

Another great insight to the world of financial markets is now available from OMNIS.

 

 

Please click here to go to the in-depth article

A fantastic insight to the world of financial markets is now available from OMNIS.

 

 

Please click here to go to the in-depth article

 

A letter sent out to my clients recently, offering some perspective on the recent turbulence in financial markets. It’s the time in the market that counts, not ‘timing’ the market. With a long term view, short-term gyrations are uncomfortable, but should not detract you from the plan. If you’d invested £1 in UK equities in 1925, it would be worth £9,100.00 today. That £1 investment will have been through world war 2, high inflation, dot com crash, 2008 financial crisis, referendums, plus many more events that cause a seismic shock to the markets.

—

It would be wrong to suggest that the news from the financial markets is not uncomfortable and concerning. The media has reported daily and we can all see what is happening and the uncertainty created.

At periods like this it is sometimes healthy to do what the standard investment disclaimer tells you never to do – and to look at past performance. History tells us of previous times of disruption and uncertainty on financial markets and, within our own experiences, the recession of 2008 is a relatively recent memory. On each occasion the financial market recovered. The chart below goes back to 1926 and provides helpful context. Financial markets rise and fall – it is the actions of investors and their investment professionals that determines the long-term impact on individual outcomes.

Already we have seen encouraging shifts from those countries which first experienced COVID19 and are starting to emerge from the peak spread of the virus. While we do not expect a smooth or fast return to a more normal market environment, we do expect that a return will happen.

It is the view of our investment experts that the current period of intense disruption will pass. Moreover, if the authorities succeed in containing the spread of the virus, and if increases in bankruptcies and unemployment are limited, our experts believe the stimulus being put in place by central banks and governments could fuel an exceptionally strong economic recovery in the second half of the year. In 6 months’, time we will hopefully have entered a new phase of market stability with every possibility of new investment value and opportunity. Based on our experience it is best to stay in the market, and not incur the cost of missing on active periods of market recovery. This can have a negative effect your long-term returns.

Our Investment Approach

While we are in the current environment our principles of investment management hold firm.

Understand attitude to risk: As your adviser I have worked closely with you to make sure that your portfolio is closely matched to your own view of risk and comfort with loss. The current markets will be giving you pause for thought but I trust that we have matched your investment position to your individual situation. If you are finding that your attitude to risk is changing let’s talk and make the appropriate changes at the right time.

Invest for the long term: Our position, that value is driven by time in the market rather than a moment in time, is unchanging. Now is admittedly, a moment in time of extreme disruption but we hold our position. Economies and financial markets will steady and recover, and a longer-term approach to investing delivers better returns over time

Diversification is vital: Our investment principles are underpinned by a structured and disciplined approach to diversification. Your Omnis portfolio is designed to ensure diversification of investment, asset class, fund manager and fund without any effort on your behalf.

A rigorous and focused Governance process:  We have built a robust governance process. Every aspect of the current market turbulence is being monitored with experience and care. Our investment team only work for the clients of advisers within the Openwork network. They are only managing your money and the money of other people like you. Their sole priority is your financial well-being in every aspect of their work.

Our approach to investing is designed to insulate your money from the full turbulence of today’s markets. To ensures that you are well placed to be protected from impact during market turbulence and poised to take advantage of market opportunity when markets recover.

The portfolios that we recommend are matched to your appetite for risk and to your desired outcomes over the long term. Early indications even at this point show that this approach is working. Omnis investments, who manage some of our core portfolios, are providing performance updates on the Omnis website. If you would like to talk about your portfolios specifically, I am here to talk with you at any time.

Changes to how we work

It is our responsibility to support the continuation of good health across our community, while providing you with the support you need. So, we have taken the following steps within our practice to preserve our availability and service to you (to adjust as needed):

• Face to face advice is a cornerstone of our practice but your health is more important. We are now working remotely and practicing reduced social contact across the team.
• To stay in touch with you we have a range of technologies available – from the simple telephone call to online video chats using any one of (skype/ teams/ facetime) we can connect with you without requiring travel or close contact.
• Some of our processes may be a little slower at times due to remote working or absence within the team, but we have confidence that you can still expect the same levels of care and diligence in every aspect of our work for you.

Importantly our firm is part of Openwork which is a partnership that has collectively provided financial advice for over 45 years. Together we have seen many changes in financial markets and provided support and guidance to two generations of clients, in good times and in bad.  Operationally this gives us strength and there are contingency plans operating across both our office here and everyone in Openwork to maintain that strength on your behalf.

The challenges we currently face will pass, and our main hope is that our team here, our clients and our communities emerge in health and strength.

Your sincerely

Adam Cockerham FPFS

Chartered Financial Planner

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested. 

Past performance is not a reliable indicator of future performance and should not be relied upon.

Providing a retirement windfall for your child

Planning ahead and starting early can really help when it comes to building up a financial future for the children in your life. The Junior ISA (JISA) is a popular choice for many, but one often overlooked investment option is the ability to open a pension for your child, to help set them up for retirement.

Increasingly popular choice
Although retirement is a very long way off for your child, putting some money aside now means they can be one step ahead when they come to plan their retirement. Any parent or legal guardian can set up a pension, which will automatically transfer to your child once they reach the age of 18, at which time they can continue to contribute or leave the savings invested. Under current rules (which may be subject to change in the future) they can access the pension from age 55.

A valid option, worth considering
In addition to your own pension contribution allowances, people often don’t realise that they can also put money into someone else’s savings. If the recipient is a non-taxpayer, as most children are, they are still entitled to tax relief on any contributions made. Pension rules allow anyone to pay contributions on behalf of a child, so other family members such as grandparents can get in on the act too.

HMRC data indicates over 60,000 families have opened pension plans for their children. As personal pensions come with no minimum age restriction, many people opt to open one when their child is born.

Know the numbers
Current pension rules allow you to put up to £2,880 a tax year into a pension for a child. Tax relief of 20% means that this is then topped up to £3,600. No further Income Tax or Capital Gains Tax will be payable on the investments held in the personal pension, until your child starts taking benefits, (which currently cannot be before age 55). If you start pension contributions once a child is born and used the full allowance, the contributions would cost just under £52,000 over 18 years, and this, under current rules would be topped up by around £13,000 in tax relief.

Assuming growth in investments over the period, when the child reaches age 55 currently, they would have a sizable pension pot to draw upon, the spending power of which will of course depend on the passage of inflation over the intervening years.

Getting the balance right
Aside from retirement provision, you also need to consider providing financial assistance for more pressing priorities, such as university fees or money for a house deposit, or a wedding perhaps. Any pension savings won’t be available to help children with these financial priorities earlier in their adult lives. So, ideally a pension for your child should be regarded as part of a wider plan, rather than the only investment embarked upon.

Start a pension for your child today
With the full State Pension currently £168.60 a week, this is certainly not enough on its own to provide a comfortable retirement, so why not set the wheels in motion to provide a retirement windfall for your child? It’s also a great way to introduce your child to the concept of long-term saving. Families thinking about how to save and invest most efficiently during 2020 shouldn’t overlook pensions for children. Even if the full allowance isn’t contributed, any money saved could still provide a valuable nest egg at retirement.

If you would like to know more about investing for children, please get in touch.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

If you weren’t sure how Financial Advisers added value to your financial wellbeing, then this graphic might just help you visualise it.

As yet another general election looms over the UK population, you could be forgiven for not quite feeling in the festive spirit. I think we can all agree no one really wants to be thinking about politics and the future of the country in December. I’m sure we would all much rather be sipping mulled wine and searching for the perfect Christmas tree.

With more uncertainty in the air we know that many of you might be concerned about what may lie ahead for your investment. It can be tempting at times like these to make short term decisions in an attempt to protect your money from the prospect of adverse market conditions. As understandable as this is, it goes against a basic principle which all investors should endeavour to follow – ‘time in the market, not timing the market’.

What do we mean by this? Well, it is quite normal for markets to rise and fall and Omnis strongly believe that with any uncertainty comes opportunity. They are both active and agile in approach and well positioned to be able to take advantage of these opportunities as they arise. Simply put, the Omnis aim is to use market fluctuations to buy low, sell high. By being an active investor, we are always looking for these opportunities.

As always, diversification – the concept of not having all your eggs in one basket – is a key investment principle which all investors should follow. Diversification is central to the Omnis approach when managing your money and key to protecting against unfavourable market outcomes. Omnis fund ranges, and portfolios are spread across a multitude of top tier fund managers, sectors, geographies and investment types. So, you can rest assured that your Omnis investments are being carefully managed with your long-term investment goals in mind.

We ensure your portfolio is only taking on as much risk as you are comfortable with, to meet your long-term financial goals. That’s why our partnership with your Omnis is so important to us.

Omnis are a long term active investment manager, and consider the wider, longer term impact of short term economic or political events. There will always be changes and challenges – it’s important to remember, that investing should not be considered with a short-term view.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

 

I’m not one for written musings. At least not in a professional capacity. I’ve had an experience in my work as a Financial Adviser recently, that left me feeling compelled to write it down and share it with others. If it changes just one life, it will be worth my time.

 

I met a family earlier this year for the first time. Husband had good household earnings, pension planning opportunities as a higher rate taxpayer to be considered, a company Director and above all, father of three. Fairly typical structure, it would seem.

 

We talked about health, dependents, and the future, as you would expect, and I was informed that the client (the husband and father), had been diagnosed with a rare heart condition back in 2017. The condition had meant he would be on medication for the rest of his life.

 

‘Do you have any cover in place?’ I asked them.

 

‘I’m not sure, I think there was something we took out with the mortgage 5 years ago, but I have no idea what it is’ the Gentleman’s wife replied.

 

I responded, ‘Let’s try and find it and see, just in case there is any illness provision on there, you never know’.

 

After some searching, we came across some paperwork from a well-known life insurance provider. I won’t mention who, for reasons that will become evident shortly. Having assessed the paperwork, it turned out that the gentleman’s condition was listed under a critical illness segment of his policy. Six figure potential pay-out.

 

With a cause for cautious optimism, I told them that I think they may have a legitimate claim, but not to get their hopes up as it has been over two years since diagnosis. After a number of weeks of scrambling for medical information from consultants who had moved around hospital trusts, the provider eventually had everything they needed.

 

Due to some intricacies in the policy wording, the client’s claim had been rejected because the condition was not yet severe enough to trigger the critical illness payout.

 

We appealed with further evidence to the contrary. We involved other consultants who had worked with client at various points in his health investigations. We fought, and fought, and fought.

 

It was rejected yet again as the heart reading was 1% healthier than what it needed to be, in order to trigger a claim and be deemed as permanent, despite meeting the diagnosis and all other parameters. It was described as a borderline case, a ‘grey area’. In my opinion, anything right on the line should give benefit of the doubt to the client, always. Otherwise, we risk deteriorating consumer confidence in the provisions they pay for. And rightly so.

 

At this point it was looking unlikely. I had calls with the Ops director, regional managers, underwriters, claims management teams and everybody in-between. I felt I was failing. I couldn’t stop thinking about it.

 

Having consulted my network, we tried one more appeal before embarking on an arduous process with the Financial Ombudsman Service which had no guarantee of being successful.

 

With various discussions ongoing, they agreed to reopen the case for yet another appeal. I felt like I was beginning to develop a heart condition of my own with this, who knows what it was doing to my clients. I was also awash with guilt for getting their hopes up in the first place.

 

After 5 months of battle, arguments, stress, highs, lows and guilt, I am pleased to confirm that in November 2019 the provider overturned their initial two assessments, accepted the claim and paid my clients a sum of money that will alter their financial security forever, should the delicate health position take a turn or slow down earning capacity in the future.

 

It was the biggest sense of professional pride I have experienced in my entire life. It blew any fee-yielding, or complicated case, out of the water. I called them as soon as I found out that it was all over. Coincidentally and rather beautifully, it was also their anniversary, and in fact, a Friday.

 

Worth every minute, although I’m probably not the favourite person at said insurer!

 

What I’ve learned from this:

 

• Financial protection is single handedly the most important financial foundation you can give your clients. Some will never claim and may feel you’ve cost them money. But for the ones that do, they’ll thank you for the rest of their lives that you had the difficult conversations and made them pay a monthly fee to something that isn’t tangible, nor exciting.

 

• Never back down from a battle. I will never take no for an answer if I believe the client has just cause.

 

• Consider policy definitions and policy structure just as importantly as any other factor such as costs, number of definitions. The simpler the definition, the better for all involved, including the claims handlers!

 

• The weight of a large network behind you can make all the difference when dealing with providers.

 

• To always involve myself centrally to any claim, whether I advised on the original policy or not. An Adviser involved can make all the difference to the client outcomes. Enthusiasm at point of advice, vigor and tenacity at point of claim.

 

• It’s not all about the intricacies of financial planning. The basics are just as, if not more, important. I will never skirt over discussing protection ever again.

 

 

 

 

 

Understanding inflation and its impact on your portfolio is important because rising prices can reduce the value of the money you get back from your investments.

What is inflation?
Inflation is a term used to describe a rise in prices. In the UK, it is measured by the Consumer Prices Index including owner-occupiers’ housing costs (CPIH), the Retail Prices Index (RPI) and the Consumer Price Index (CPI). CPI is the most commonly quoted measurement and tracks the changes in prices of several hundred household goods and services including food, clothing and recreation. The Office for National Statistics publishes CPI figures on a monthly, quarterly and annual basis.

Prices increase for a variety of reasons, such as a rise in the cost of the raw materials used to manufacture goods, or tax cuts which encourage consumers to spend.

In the UK, inflation has drifted above the Bank of England’s (BoE) target of 2% since the Brexit referendum as political uncertainty has caused sterling to weaken against other major currencies. Weaker sterling means goods imported from outside the UK become more expensive.

Most other major central banks set a similar target because a healthy level of price rises reflects a strong economy. If inflation races ahead for any reason, the banks can use interest rates to get it back under control.

Why does inflation matter to investors?
Inflation reduces what is known as your purchasing power. In short, when prices rise, you can buy less with your money. This effect does not just impact your day-to-day spending though, it also eats into the returns generated by your investments.

Say your portfolio increased in value by 5% in a year. This is your nominal rate of return. However, prices rose by 2% during that time, consistent with the BoE’s target. To determine your real rate of return, you need to subtract the inflation rate (2%) from your nominal return (5%). In this case, the value of your portfolio increased in real terms by 3%.

Inflation proofing your portfolio
An investment portfolio should ideally be designed to deliver returns that beat inflation over the long term (five to ten years), even if it does not achieve this aim consistently throughout the whole investment period.

Bonds play an important role in the diversification of risk in your portfolio, but they may underperform when prices rise because payments become worth less. Fixed interest payments received by bond investors stay the same regardless of inflation, while equity investors earn a variable return which they expect, to some degree, to reflect changes in inflation. Alternative asset classes such as commercial property and commodities might also benefit from rising prices. Conversely, with interest rates at record lows since the 2008 financial crisis, holding cash will generate negative returns.

The value of your investments can fall as well as rise, and you could get back less than you invest.

As you approach retirement, you probably want to know when you can afford to stop working. Having worked hard throughout your career you deserve to enjoy your retirement without having to worry about your finances. It may be worth reviewing your pension contributions to make sure you are taking advantage of the incentives offered by the government and your employer.

Make the most of tax relief…
The government tops up your pension contributions in the form of tax relief at your highest rate of income tax to encourage you to save. Basic rate taxpayers receive tax relief of 20%, while higher rate and additional rate taxpayers can claim back 20% and 25% respectively through their tax returns.

…and understand employer contributions
Since 2012, employers have been legally obliged to automatically enrol employees in a pension scheme, although you can opt out. As an incentive, employers top up employee contributions. The government increased the minimum contribution to 8% from April 2019 – at least 3% from employers with employees making up the balance. It is worth remembering that the employee’s contribution includes tax relief.

Are you saving enough?
There are no fixed rules about how much you should contribute to your pension because of course everyone’s circumstances are different. However, one rule of thumb is to take the age you started saving and divide it by two to give you the percentage of your salary which you might wish to put away each year. So, if you set up your pension at the age of 30, you could aim to pay in 15% of your salary.

Stick within the limits
There are rules covering how much you can contribute, and you could face a hefty tax bill if you break them. The annual allowance for the 2019/20 tax year is £40,000 or your full salary (whichever is lower).

There is also the lifetime allowance – the maximum amount you can withdraw from a pension scheme. It is currently £1,055,000 and likely to increase with inflation. It’s probably wise to keep a close eye on the value of your pension if it starts approaching this limit.

Deciding whether or not you can afford to retire is a significant consideration, and so it makes good sense to regularly review how much you are saving and ensure you are taking full advantage of any incentives.