Wealth planning encompasses the disciplines of tax planning, retirement planning and estate planning, which together with a sound investment management plan can greatly increase the health of your wealth.
The first half of the year was already a torrid time for investors, but July is seeing threats to wealth proliferating on all sides. Both global and domestic issues are intruding on our users’ sense of calm this summer, meaning more and more people are clamouring for professional advice – if not the relief of delegating the management of their portfolio entirely.
It was confirmed at the start of July that investors in Neil Woodford’s beleaguered Equity Income Fund would have their money tied up for at least another 28 days, sparking another surge in enquiries from worried savers.
Woodford was once hailed as “the manager who made the middle classes rich” and his flagship fund commonly featured on the recommended or “star buy” lists of the UK’s biggest investment platforms. Unsurprisingly then, we have been encountering calls from large numbers of DIY investors who have found themselves painfully over-exposed to a now suspended fund with no way to know when they can take their money out.
We have been encountering calls from large numbers of DIY investors who have found themselves painfully over-exposed to a now suspended fund with no way to know when they can take their money out
It is impossible to know when the suspension on the Equity Income Fund will be lifted as there is no prescribed limit to on this. Nor is it easy to know what will happen to the vehicle’s price once dealing recommences. Woodford himself is hopeful of rebuilding the fund’s value, but sceptics believe too much damage has been done.
What is certain is that investors with significant exposure need to take professional wealth management advice as a matter of urgency. It may be that “taking the hit” and running for the exits is the right option for you, but it may be that waiting it out to see if value can be recouped is the better option, as we explain here. Much depends on your situation and other investments.
News that Labour leader Jeremy Corbyn is planning a major raid on inherited wealth should he come to power has sparked enormous panic among affluent individuals.
Labour plans to tear up the existing Inheritance Tax (IHT) regime with a radical system centred on a “lifetime gifts tax” that would apply to all the cash – and, even more shockingly, property – that individuals receive over the course of their lives. This would see the tax-free inheritance allowance slashed to less than half of the current £325,000 to £125,000 – a figure which will scarcely help children get a foot on the housing ladder anywhere in the UK. Nor would passing on the family home to direct descendants be safe as Labour plans to scrap the family home allowance too.
There is, of course, much more for even moderately wealthy people to fear from a Labour government. To fund its vision of a high-spending socialist utopia, the Party plans higher taxes across the board and large-scale asset confiscation in the form of forced renationalisation of utility and transport companies at below market value. These dividend-payers naturally form a significant part of many people’s portfolios.
There are a number of defensive strategies affluent individuals can take to guard against what would undeniably be a nightmarish turn of events for even the middle class – let alone those wealthier
There are a number of defensive strategies affluent individuals can take to guard against what would undeniably be a nightmarish turn of events for even the middle class – let alone those wealthier. Divesting potential “state assets”, diversifying away from sterling exposure in case of its collapse and ensuring that all tax allowances are used to the hilt are just the start.
You must make sure that any such preparations won’t harm your financial position if the status quo endures, however, so talk to a professional adviser before making any serious decisions.
The ante just keeps going up in the bitter trade war between the US and China, with tit-for-tat tariff increases constantly in the news. Should a full-blown trade war erupt between the two biggest superpowers, the world will reap the whirlwind. There is a very real risk of us plunging into global recession and stock prices plummeting by up to 20% across the board.
Adding fuel to the fire, at the start of this month President Trump threatened $4bn in tariffs on EU goods – completely undoing the boost to market sentiment that tentative talks between the US and China granted. The President’s extraordinarily aggressive rhetoric has also included threats to Vietnam that may well extend to any country Washington sees as “taking advantage” of the US in world trade.
Should a full-blown trade war erupt between the two biggest superpowers, the world will reap the whirlwind. There is a very real risk of us plunging into global recession and stock prices plummeting by up to 20% across the board
Our users are in no doubt as to how huge the financial ramifications of global trade wars could be, and this situation has shaken many DIY investors out of a complacent approach to risk management.
Many of our older users remember that when President Nixon imposed a 10% tariff on imports in the 1970s, the S&P 500 plunged 10% in three months and so are keen to take defensive action before the summer’s slow trading period takes hold.
Diversification will be key. But in light of all the risks portfolios face today, achieving the right asset allocation can be incredibly complex. Investors will also have to react with lightening speed to new developments and so as the holiday season kicks off, discretionary wealth management services are proving more popular than ever.
Great swathes of investors have had a rude awakening on wealth management fees this year, and enquiries continue to spike as new-style breakdowns land on doormats.
Under new European rules known as MiFID II, investors are now entitled to a full rundown of all the fees their portfolios incur, with all charges for advice, investment, trading and so on broken down into pounds and pence. For many people, this has clearly been a big shock – particularly when illustrations have shown just how much of a drag on performance these costs have been over time.
It now being July, you should have received your statement for 2018, although some firms are really struggling with the granularity of these very much more transparent reporting requirements.
Confusion has been rife, however, and many of the calls we receive have been from exasperated investors who can make little sense of reports featuring scores of columns and Latin terms.
The best investment managers will be confident in their transparency and able to demonstrate they are delivering good value for money. The wealth managers we introduce to potential clients help them to make like-for-like comparisons on both fees and performance.
If your wealth manager isn’t giving you the clarity and comfort you deserve, you shouldn’t hesitate to make a change. It’s far easier than you might think.
Whether you are a new or existing client, read our guide to what to expect from wealth management fees to get more empowered. It is, after all, your money.
Trade wars, inheritance, political earthquakes and opaque fees are just the leading issues we are encountering in our conversations with users this July. High Net Worth Individuals are usually negotiating a broad range of financial challenges, encompassing all manner of investment management and wealth planning issues.
The need to make investments work as hard as they can, keep tax to a minimum and boost family’s wealth in the long term are, however, universal themes.
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?