Client trends April 2019:
Property woes and portfolio diversification are top themes

A plethora of factors motivate people to seek wealth management advice, from those purely related to investments to wider financial planning concerns. This April, the housing market and hidden fees join diversification at the top of the agenda for High Net Worth Individuals.

Frozen housing market sparks credit enquiries

One significant consequence of all the Brexit uncertainty is that the property market has stalled in London, and freeze has started to spread to the rest of the UK. While some have resolved to wait it out before attempting to sell their existing property, others are more anxious to secure their next one and are exploring ways wealth managers might help them buy their dream home before their current one is off their hands.

You may be surprised to find that wealth managers are often able to offer significant bridging loans – which cover an interval between two transactions – as part of their suite of private client lending services. Lombard lending, where loans are secured against an investment portfolio, could be a good option if the chill of the housing market is scuppering your plans.

You may be surprised to find that wealth managers are often able to offer significant bridging loans – which cover an interval between two transactions – as part of their suite of private client lending services

Elsewhere, we are seeing users explore private client mortgages to take advantage of the buyer’s market. Private banks are often able to offer mortgages on far more favourable terms than mainstream lenders – and are much better able to understand the circumstances of those whose incomes, while perhaps large, do not fit typical patterns.

Bargain hunting begins

There seems no end to the UK’s tribulations over leaving the EU, but amid all the catastrophising, it seems that brave equity investors are scenting opportunities to add fundamentally strong companies to their portfolios at a Brexit discount.

Many do believe that now is a good time to bargain hunt, but it’s been heartening to see that people are looking for professional advice on how to do it sensibly, rather than charging right in. Aside from the need to pick the right stocks, DIY-investors can tend to have a strong “home bias” in their investment portfolios which means that adding even more UK-listed ones to their holdings could result very great concentration risk.

Aside from the need to pick the right stocks, DIY-investors can tend to have a strong “home bias” in their investment portfolios which means that adding even more UK-listed ones to their holdings could result very great concentration risk

As one of our expert commentators pointed out in March’s Investment Bulletin, a global portfolio should reflect the fact that the UK only makes up 2.25% of global GDP and is inhabited by less than 1% of the planet’s population. Solid regional diversification is an essential part of managing portfolio risk.

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Top Tip

While it might seem simple on the surface, properportfolio diversification can be a lot trickier than it seems – particularly when the underlying holdings in funds are taken into account. Concentration risk (investing too much in certain sectors or regions) is something DIY investors commonly uncover once they show their portfolio to a professional.

Lee Goggin - Co-Founder

Lee Goggin

Co-Founder

New research gets investors thinking about diversification

On a related note, broadsheet coverage of some very interesting new research on diversificationhas really got our users thinking.

This new analysis shows that over the last 20 years no asset classhas been top-performing two years running, underscoring how difficult it is to predict what will be the winners each year. In 2018, government bonds were best performing, but in 2017 and 2016 emerging markets and US equities topped the tables respectively.

We’ve been getting varied enquiries off the back of this story, but investors are asking themselves two key questions. The first is, “Am I diversified sufficiently across asset classes and regions?”  The second is, “What proportions of these should make up my portfolio?”

These are highlynuanced questions, with much depending on your individual risk-profile, investment time-horizons and goals, so talking things through with a professional is likely to be a very wise move indeed. Solid diversification really is the only way to invest sensibly, and it’s extremely easy to make expensive mistakes working on your own – as many of the DIY investors who come to us have found.

Hidden fees shock to finally hit home

Media attention on wealth management fees has been ratcheting up recent months, and stories warning of the fee shock soon to hit investors has driven a lot of traffic to our site.

Under new regulations, clients must be presented with fees in pounds and pence terms (as well as a percentage of assets) at the end of each charging period, meaning that many people will be getting a true notion of the hidden charges they’ve been paying for the first time this month. What’s more, it is expected that many people will also be seeing pretty dire returns due to difficult trading conditions – a perfect storm of value for money doubts.

Media attention on wealth management fees has been ratcheting up recent months, and stories warning of the fee shock soon to hit investors has driven a lot of traffic to our site

Clients have been asking us for guidance on how to unpick costs and charges, and we would urge anyone not totally convinced they are getting good value to read our guide, What to expect from wealth management fees.

Even if you are happy with the service and investment returns your wealth manager is delivering, it is healthy to periodically review providers to compare costs. Excessive fees are a huge drag on long-term portfolio returns and shaving off even a relatively modest amount could make a huge difference to your financial position.

What are your wealth worries?

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Whether you are entirely new to wealth management, feel like you could be getting a better deal or just want to know what you could be doing to reach your goals more quickly, why not see which advisers would suit your needs?

Our fast, free matching service can line up a life-changing wealth management relationship in just a few minutes. Join the thousands of wealthy individuals who have met their best-matched advisers in a few quick steps

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