Investors are looking ahead to potential tax rises later in the year and are also seeking ways to diversify their investments and trim costs to better cope with how world events may affect their wealth.
Investors’ desire for diversification continues to grow
The awful humanitarian costs of global events are all too apparent, and it now seems inevitable that the financial costs are going to reach right across the world too and filter down to hurt us all in the West. Though the price is doubtlessly worth paying, we are naturally getting enquiries as to how individuals can mitigate the worst effects.
Though we can continue to hope that a brutal global recession won’t actually occur, white-hot inflation aggravated by soaring commodities prices and supply chain chaos bode ill, and mean that thoughts are urgently turning to what might be safe havens for wealth in these turbulent times.
The savvy investors we are speaking to recognise that the corrosive effect of inflation means that excessive cash holdings are likely to prove self-defeating (although holding back some to buy on market dips may be a sound strategy)
The savvy investors we are speaking to recognise that the corrosive effect of inflation means that excessive cash holdings are likely to prove self-defeating (although holding back some to buy on market dips may be a sound strategy). They are instead seeking ways to diversify their holdings so that they can both insulate themselves from what are manifold – and highly difficult to read – risks, while hopefully capturing some upside too.
The difficulty is of course knowing what a good diversification plan looks like for you as an individual – considering that a judicious mixture of asset classes, markets, sectors, instruments and perhaps currencies too is called for. That “recipe” really is something to discuss with a professional who has the backing of institutional-grade research and you should be wary of anyone offering guidance that isn’t tailored specifically to you and your existing investments. What we can offer solid advice on, however, is how to go about finding your perfect adviser.
Spring Budget seen as more of a stay
Chancellor Rishi Sunak’s cuts to fuel duty and basic rate income tax (by 2024) announced at the Spring Budget may have gone down well, but our users are highly aware that they rest on recent improvements to the public finances which may be very short lived in the context of the war in Ukraine. There is a deep sense that relative largesse now may be replaced with painful rises later.
In particular, commentators are speculating that increasing Capital Gains Tax and slashing pension tax relief remain as tools in the toolkit which could play well to the general public, but which would significantly affect affluent Britons who, it should not be forgotten, tend to suffer disproportionately in an inflationary environment. An increase in dividends tax is already upon us, which will see higher rate taxpayers pay 33.75% (up from 32.5%) and additional rate taxpayers levied 39.35% (up from 38.1%) for the 2022/3 fiscal year.
Much depends on the performance of the UK economy in an environment which quite frankly nobody can predict even in the short term amid geopolitical strife
Much depends on the performance of the UK economy in an environment which quite frankly nobody can predict even in the short term amid geopolitical strife. While we should certainly hope for the best, it always pays to plan for the worst, and that means being ready to alter your financial planning strategy as rapidly as the government can roll out changes to the tax regime. This, in turn, means it is invaluable to have an adviser on hand who knows your financial affairs intimately and who can proactively propose action as soon as developments arise. The Autumn Budget could force many to alter their wealth management plans.
Excessive costs are back in the spotlight
A cost-of-living crisis coming off the back of surging inflation is hitting even the wealthy hard, so a flurry of recent news stories about high costs and sharp practices among retail players seem to have really hit a nerve. Investment costs and charging structures are right back at the top of the agenda when we speak to High Net Worth Individuals keen to ensure they aren’t being hit with unjustifiably large costs.
In recent weeks, financial pages have exposed several big brand banks and brokers (notably these being ones which tend to focus on retail or DIY investors, rather than clients in the wealth management space) for massively overcharging on simple tracker products and “double dipping” by simultaneously charging clients to hold their cash while not passing on any interest payments onto them. The latter is a classic example of hidden costs lurking behind low headline rates for managing your money; the former underscores the need to shop around on both the product and provider fronts.
Whether you suspect your current provider is charging more than their rivals or you just want to make a periodic check against the market our free service can help you make those like-for-like comparisons fast
It is perhaps only natural to think first about investment performance when assessing investment management providers, but deeply scrutinising their costs and fees is just as important as these can really eat into your returns over time. Whether you already suspect your current provider is charging more than their rivals or you just want to make a periodic check against the market (as we all should) our free service can help you make those like-for-like comparisons fast.
Early action is the key
While we certainly do encounter many individuals who have done a very good job of growing and protecting their wealth alone, these are the kinds of times when people start to really feel the need for professional advice. This might be on the asset allocation and diversification front, for financial planning and tax mitigation, or indeed both.
Nobody can precisely predict the future, and certainly not in these circumstances. What wealth managers do excel at, however, is running scenarios and implementing strategies that will help protect your wealth come what may. Making proactive plans is what the smart money is doing currently, so why not join those who are probing their portfolios for weaknesses and anticipating changes to the tax regime well ahead of time?
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.