Our team speaks to scores of High Net Worth Individuals each month, hearing all about their concerns – and financial goals – while guiding them through the process of finding the right wealth manager for their needs. Here is a round-up of what’s on our users’ minds this month.
Defensive portfolio positioning tops demand
The start of 2019 has seen fears ratchet up over Britain’s Brexit path, global trade wars and President Donald Trump’s policy moves, with dismal economic data coming out of China newly added to this toxic mix of concerns. General market volatility has spooked many people, but it is the UK’s future relationship with the EU that continues to dominate investors’ thinking: we’ve seen an appreciable 10% increase in potential clients seeking clarity over Brexit before dipping their toes in the market (from an already high base).
There are certainly risks to attend to and, as our latest Investment Bulletin outlines, now might be a wise time to be tweaking asset allocation and pruning vulnerable companies from portfolios. However, there may be big opportunities amid the gloom.
Bear markets are invariably far shorter than bull markets, and in truth drops of 15-20% can represent an excellent chance for those with cash to turbo-charge returns
True, we’ve come to the end of one of the longest bull markets in history. But while natural pessimism might make us fear valuations will continue to spiral down and down, history shows us this is unlikely to be the case. Bear markets are invariably far shorter than bull markets, and in truth drops of 15-20% can represent an excellent chance for those with cash to turbo-charge returns. UK equities and credit are tipped to become an absolute steal in the months to come and we hear that some wealth managers are keeping 20% cash in their portfolios so they are ready to swoop on bargain valuations.
Understandably, DIY-investors already fully invested are struggling with how to position their portfolios. Those that have accessed professional risk management through us have been able to breathe a big sigh of relief that their defences are already up at the start of what promises to be a dramatic year.
Fears of a Leftist government loom large
Users have been wondering what they’ll do if a socialist-leaning government seizes power for months now, with fears starting to feel very real indeed. The wise rightly recognise that a lurch to the Left could harm their health far more than any short-term dips in the market. The extent of policy change would not become clear until after the fact, but Jeremy Corbyn is on record as eying a number of changes which could really hurt business-owners, higher-earners and those with large pension pots.
Corbyn has repeatedly stated that his party would want to raise corporation tax back to its 2010 level of 26%, undoing the Conservatives’ progressive lowering of this tax on profits. Alongside hitting entrepreneurs hard, this could also see UK companies slash their dividends payments. Retirees relying on this income stream could see their standard of living fall dramatically as a result.
Labour’s Manifesto promise to lower the threshold for 45% tax and to reintroduce the 50% rate is particularly alarming and will call for careful tax mitigation techniques to be deployed by higher-earners where they can. The lifetime allowance on pension contributions is also likely to tumble in the event of PM Corbyn coming to pass. We’ve encountered many users who want a professional wealth adviser standing at the ready to help protect their wealth.
There are certainly risks to attend to and now might be a wise time to be tweaking asset allocation and pruning vulnerable companies from portfolios. However, there may be big opportunities amid the gloom.
Stalling property prices prompt enquiries
The end of 2018 marked a six-year slump in UK house price growth due to a combination of Brexit uncertainty, lower sales volumes and lenders becoming more cautious. Lacklustre demand for buy-to-let properties, itself driven by the withdrawal of various tax breaks for investors, is another inexorable trend.
Although decades of growth have conditioned UK investors to see bricks and mortar as a great investment, our users are waking up to the fact that prices do indeed go both ways and that buying a second property probably isn’t the best use of large sums of cash. Being over-exposed to any one asset class is never a good idea, but particularly so when your primary residence will likely already represent a large chunk of your wealth and the market is going sour.
We’ve seen a significant uptick in enquiries from those wishing to diversify their investments. As our Guide to asset allocation explains, this will help minimise risks and maximise potential gains simultaneously.
Family wealth front of mind
As you might expect, we always see a surge of users wishing to put their financial houses in order at the beginning of the year. It is a time when many of us confront big issues like Inheritance Tax (IHT) and retirement planning, and take a step back to look at family wealth in the round.
The changing investment and political environment seems to have greatly increased this urge. Meanwhile, our piece on how the younger generations might be relying too much on their future inheritances has really struck a chord.
This January, we have seen requests for IHT advice shoot up by a third as wealthy individuals consider which changes to the tax regime might be coming down the line. Users have already been surprised to find just how quickly and easily they can get proactive tax mitigation strategies in place.
Finally, we’re seeing older users keener than ever to grapple with thorny issues like longevity, retirement and rocketing care home fees. Although these issues may not be pleasant to consider, our users are gaining great peace of mind from putting long-term, realistic plans into action.
Do you share any of these concerns?
A huge array of worries and financial ambitions bring wealthy individuals to our site seeking professional wealth management advice, including, but certainly not exclusive, to those outlined here. 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 make your wealth work ever harder, why not see which advisers would suit your needs.
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