HNWIs fear wealth taxes further down the line
Although Chancellor Rishi Sunak’s “mini-Budget” ruled out wealth taxes, our users remain nervous about their future imposition in some shape or form, now that the true size of the black hole in the public finances is becoming apparent. A number of high-profile wealthy people have actually been calling to be taxed more and, as users have pointed out, the government will not have missed a recent study by political economy professor, Richard Murphy, which showed that taxing wealth at the same level as income would generate £174bn a year.
The paper also highlighted how between 2011 and 2018 income had been taxed at 29.4% on average and wealth (from property, pension pots, etc.) at 3.4%. Aside from anything else, the fact that income was taxed at almost 10 times the rate of wealth underscores how important it is for your assets to work as hard as possible, and not just you yourself.
Aside from anything else, the fact that income was taxed at almost 10 times the rate of wealth underscores how important it is for your assets to work as hard as possible, and not just you yourself
Let’s hope that wealth taxes are not on the horizon. In either case, it is always worth taking financial planning advice – either on an ongoing basis or a discrete piece of work – to ensure all your affairs are optimised.
Active management regains its allure?
Passive investments like Exchange-Traded Funds exploded in popularity in recent years, but experts are warning that global stock markets could continue to recover unevenly and remain divergent. Questions from our users, particularly DIY-investors, indicate they could be slightly losing their shine.
Geopolitical turmoil, including widespread rioting, differing economic priorities and changing global supply patterns all swirl around the current crisis. This, combined with the ascendancy of tech-led market dominators may mean that simply “buying the market” through a low-cost instrument may no longer be such an attractive option.
Most will agree that passive instruments play a very useful part in portfolios, but advocates of active management now see the sector’s chance to deliver outperformance by responding quickly to emerging trends and spotting value
Passions rage over the value of active versus passive management. Most will agree that passive instruments play a very useful part in portfolios, but advocates of active management now see the sector’s chance to deliver outperformance by responding quickly to emerging trends and spotting value.
They also highlight how volatility is causing firms to dip in and out of key indices like the FTSE 100 and index trackers’ tending to add stocks to their “basket” that have already risen in value and remove them when they have already fallen.
Passive investments might be a great low-cost way to gain certain exposures for your portfolio, but many are arguing this may be active managers’ time to shine. Achieving precisely the right blend for your portfolio is a tricky task, so why not have a no-obligation discussion about your current holdings in the context of your objectives to check you are on the right track?
“Star” manager concept remains out of favour
Inflows into active funds have been outstripping those for passives on some metrics. But while investors may be drawn to active management, their enthusiasm is now definitely coloured by a wariness about “star” managers following the implosion of Neil Woodford’s Equity Income fund.
The fund’s failure has left a particularly bitter taste in the mouths of DIY investors, who claim platforms were actively recommending it to them while cutting their own holdings as the ill-fated vehicle’s holdings became increasingly illiquid.
For all types of investor, the affair has brought home the importance of proper diversification – and the need to “look under the bonnet” of your collective investments to understand exactly what you own.
Many of our users have realised that without tight investment discipline, it is easy to build up overlapping and over-concentrated exposures to certain companies, sectors, countries or even fund managers
Many of our users have realised that without tight investment discipline, it is easy to build up overlapping and over-concentrated exposures to certain companies, sectors, countries or even fund managers. Replicated positions are an endemic issue among investors going it alone.
Strategic – and responsive – asset allocation is the foundation of maximising returns while minimising risk.
Taking a bite of Bitcoin?
Advocates are making much of the fact that Bitcoin has been one of the year’s best performing assets (up almost a third), and are pointing to stronger still growth potential as investor acceptance improves. Platforms dealing in Bitcoin are reporting spikes in enquiries and analysts have predicted Bitcoin could hit $20,000 this year.
Part of Bitcoin’s appeal is its in-built scarcity at a time when Central Banks are printing money like never before (and thus devaluing traditional currencies). The spectre of inflation now looms, sending investors rushing to safe-havens both new and old (like gold).
Rising geopolitical risks are hard to ignore, but the right response is seldom to sink a significant proportion of your wealth into alternatives, and particularly relatively untested ones like cryptocurrencies.
When it comes to protecting capital, a well-diversified portfolio constructed precisely in line with your risk-profile is likely to be a much safer bet.
Do you share these concerns?
Online consultations are very much the norm at present. Getting a plan in place with a professional could be one of your best ever moves, and may be very conveniently performed too.
These are just a few of the concerns – and ambitions – that are bringing HNWIs to us to find professional wealth management advice.
We are also hearing from business-owners, those who need to revise their retirement plans, and people who looking to minimise their tax exposure ahead of a raft of changes that seem unavoidable.
Whatever your objective, compare leading wealth managers, for free, to find the right source of advice for you.