Investment management and financial planning need to be studiously aligned to make the absolute most of your wealth, but all too often people can neglect the tax, structuring, retirement and inheritance sides of things.
We see no signs of investors taking the traditional summer break and we’re also seeing users of our service getting very proactive on family wealth planning matters too.
The traditional wisdom for investors has been to “Sell in May, go away and come back at St Leger Day” due to the tendency for stock market performance to be very much weaker during the warmer months compared with the rest of the year (about 2% versus 7% on average). However, this summer is seeing plucky investors keen to take advantage of poor sentiment and snap up stocks in their target areas.
As we published in July, the beleaguered technology sector has been of particular interest to contrarians who see the potential for value in recent price falls which have affected firms both strong and weak. Yet our conversations with many users this month have been ranging far wider than that. In fact, relatively few investors seem to be taking the traditional holiday for their portfolio at all. Warren Buffet’s advice to “be fearful when others are greedy and greedy when others are fearful” seems to be being taken very seriously indeed.
Warren Buffet’s advice to “be fearful when others are greedy, and greedy when others are fearful” seems to be being taken very seriously indeed
With polls indicating that over half of investors plan to add more equities to their investment portfolios this yeari, we expect this trend to continue. The question we’re hearing more and more isn’t “Should I be building up my portfolio in this uncertain environment?”, but rather “What precisely should I be buying for the strongest future gains?”
The answer will of course depend on an individual’s current holdings, risk appetite and time horizon, the former being of particular concern for diversification’s sake. Our users have clearly been paying close attention to our panel wealth managers’ Investment Bulletin wisdom, however, with UK equities top of the shopping list for many investors.
So, certainly do think about powering up your portfolio and addressing any lack of diversification it may be suffering from this summer. As the second “Wall Street” film had it, “Money never sleeps”; for ambitious investors, it doesn’t take a holiday either.
As we assist users of our service to find their ideal wealth manager, it follows that we often build up quite an intimate relationship as their needs are explored; we often stay in touch over the years, in fact.
In recent times, we’ve noticed that wealthy individuals have really opened their eyes to the complexities around wealth and estate planning which can arise from what is increasingly a completely normal situation: “blended” families.
With the divorce rate half or more on some metrics, it is not uncommon for the older generations to have to grapple with what are often highly sensitive situations around passing down wealth to the next ones. If one partner brought significant wealth into a later marriage where there are children on both sides from the first unions, then thorny questions can arise about inheritance and the fair division of assets. Several high-profile legal disputes have really highlighted the dangers of not planning properly and documenting wishes in advance.
The sad fact is that large sums of money can bring out the worst of family tensions and the number of UK estates being left that are worth more £1m has risen by more than a third in the past five years as property and other asset valuations have boomed. Growing family complexity, along with the fact that a huge proportion of people still do not have a proper will in place, have helped fuel 2,300 High Court estate disputes between family members over the last decadeii.
The sad fact is that large sums of money can bring out the worst of family tensions and the number of UK estates being left that are worth more £1m has risen by more than a third in the past five years as property and other asset valuations have boomed
Estate planning services are offered by a great many of the firms on our panel and we can attest to both the excellent advisers available and the value they bring in helping to concretise wealth holders’ wishes. Crucially, having an objective third-party advising helps to take the emotional “heat” out of the situation. Experienced advisers really have seen it all too and can be invaluable in spotting potential beartraps in estate planning which could otherwise sour family relations to a significant degree.
You needn’t give any specifics of your situation, although we are of course happy to discuss your issues as much as you would wish as we match you to wealth managers. Just indicate that family wealth planning is a priority when completing our short matching questionnaire to start the process of putting your mind to rest.
User patterns for our matching service in recent times have come as some surprise. The pandemic, periods of poor market sentiment and now the traditional summer break have only seen enquiries grow – we’ve hit record after record, significantly building up our female user numbers too. This is all great to see. But there are still huge numbers of individuals in the UK who aren’t taking sufficient action to safeguard their financial plans; investigating thoroughly what professional advice can help you achieve is a good start, yet without buying those investments, or getting that financial plan in place, your dreams are likely to stay just that. Make sure you follow through on the investment themes which interest you, and tackle potential weaknesses in your planning as we highlight them. The leading wealth managers on our panel stand poised to help with it all– and with no charge to you from using our matching service at all.
On a similar point, we are starting to hearing more and more from divorcing couples who need holistic advice on how to make a clean break which is financially fair to all parties. This is really positive to see because although divorce is rarely a pleasant thing, it doesn’t need to lead to the kind of acrimonious legal proceedings that can only drag things out, cause a lot of distress and inevitably deplete the overall pot of assets available for both parties.
There have been some really significant developments on the divorce front recently: April saw the introduction of “no fault” divorces and HMRC recently accepted the Office of Tax Simplification’s recommendation that divorcing couples should have three years to pass assets to each other on a “no gain, no loss basis”, rather than being forced to do so at the end of the tax year of separation. This will mean that from April 2023 former spouses and civil partners will have a lot more breathing space to work out their financial affairs – and far more opportunity to do so in a way that won’t incur hefty tax charges. No gain, no loss transfers will also be available on an unlimited basis if an asset is part of a formal financial agreement and there has additionally been an extension to main residence relief so that the partner moving out is treated for tax purposes as if they had not.
April saw the introduction of “no fault” divorces and HMRC recently accepted the Office of Tax Simplification’s recommendation that divorcing couples should have three years to pass assets to each other on a “no gain, no loss basis”, rather than being forced to do so at the end of the tax year of separation
While it may seem strange to bring tax mitigation into divorce, we would urge all couples in this position to think hard about this and unite to mitigate taxes wherever possible, particularly if there are children involved. This is another example of where neutral third parties can be incredibly useful in making sure that emotions don’t cloud issues and that everyone emerges as well as they possibly can. Over the years, we have been able to help set up some advisory relationships which have proven invaluable in this regard and we can attest to just how emotionally intelligent such specialists are in these tricky situations.
As what might be a truly brutal global recession approaches and geopolitical tensions ramp up, it would be easy to slip into uncertainty-driven malaise about building your wealth. But rest assured that there is a great deal that you can do to protect progress towards your financial goals – and even accelerate.
Whether you are pondering how best to build up and diversify your portfolio, or have questions that are more financial planning orientated in nature, our matching service can help you find the advice you need fast and free. Dive right in if you have a clear idea of what you are looking for in an adviser and have a few minutes to spare, or, if you would like some guidance from our friendly team, please don’t hesitate to get in touch.
i DeVere Group
ii Forsters LLP
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.