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Our conversations with potential wealth management clients continue to be as wide-ranging as ever, with cryptocurrency complexities joining concerns about retirement funds which may not last and the influence of emotions on investment behaviour.
Official inflation figures necessarily lag the reality of today by a month or more, but even looking in the rear-view mirror we see that the stats are scary enough: as measured by the Consumer Price Index (CPI), April’s inflation figure came in at 9.0% – the highest annual rise since CPI records began in 1989. Added to this lag is the fact that the CPI “basket” of goods and services may not quite represent what people are actually needing to spend their money on, and particularly not for the affluent, whose spending on big ticket items can tend to be particularly vulnerable to inflation (increases in private school fees notoriously outstrip it in general). The result is that many people are starting to feel very worried indeed about how rapidly inflation can eat away wealth – particularly when interest rates remain low and many banks have yet to pass on to savers even the modest hike made by the Bank of England.
Naturally, this is of particular concern for those in or approaching retirement since – almost no matter how large a pension pot one has built up – the notion that these finite funds have to for last the rest of your life can start to look dangerous when inflation takes hold. With retirements now lasting perhaps several decades, outliving their money is a very real risk for many people.
Pension drawdown strategies whereby retirees utilise a combination of dividend income and crystallised returns to live on while remaining largely invested are what most of the individuals we speak to are thinking of today
Purchasing an annuity to guarantee an income for life was once a well-trodden path, but deals are often unattractive today (financial pages are even suggesting that those considering this option are not shy about admitting to unhealthy lifestyle habits in order to increase the offer rates due to the implication of them dying earlier!). Instead, pension drawdown strategies whereby retirees utilise a combination of dividend income and crystallised returns to live on while remaining largely invested are what most of the individuals we speak to are thinking of today.
What is becoming apparent to many, however, is just how carefully their investments will need to managed to sustain their desired lifestyles – at manageable levels of investment risk – for decades to come. It is impossible to offer general advice here since each strategy will need to be as unique as the saver themselves. Pension planning is one area where it really pays to get proper advice; mistakes can have a disastrous effect on your standard of living in what should be your golden years.
Cryptocurrencies continue to divide the investment management community. On the pro side, proponents point to Bitcoin being a uniquely “hard” form of money which can only become more important amid inflationary pressures; on the other, detractors maintain that the huge volatility of cryptocurrencies and looming regulation make them a speculative investment which should be approached with a great degree of caution. The jury is still out, in short, and in our view most investors should not allocate a large amount of their wealth to alternative assets generally, and particularly not such a new category.
Yet we do encounter individuals who have made significant bets on the continued success of cryptocurrencies – and some who have made a good amount of money from them. Interestingly, our conversations are now focusing more on the tax implications surrounding these assets, rather than their value as an investment in the first place.
What investors may not know is that the Revenue’s current guidance is that, for tax purposes, cryptocurrency is regarded as being resident in the place where the investor resides – this despite the fact that crypto assets are very often held via exchanges in other jurisdictions (who act like nominees, holding the crypto in their “wallet” servers)
What investors may not know is that the Revenue’s current guidance is that, for tax purposes, cryptocurrency is regarded as being resident in the place where the investor resides – this despite the fact that crypto assets are very often held via exchanges in other jurisdictions (who act like nominees, holding the crypto in their “wallet” servers). Anyone thinking that their crypto holdings and any gains wouldn’t be subject to UK taxes may therefore be in for a nasty shock.
This is a complex area where we can expect regulation and tax rules to change at speed. What it does make clear, however, is the importance of taking professional advice on the structure, location and taxation of assets for anyone of any significant wealth. Many of the wealth managers on our panel have specialist teams dealing in digital and other esoteric assets, so please let us know if you are in need of this kind of specialist expertise when entering our unique, fast and free matching process.
Our mission has always been to help people to maximise their long-term wealth by them getting proactive about investing as soon as possible. An integral part of this is sparking conversations among couples and families, and getting often neglected thought processes in motion.
We are therefore really pleased that in our conversations with high net worth individuals we are hearing much more about the psychology and emotions surrounding wealth and its management. We’d like to think our content on this topic, such as our recent piece on why investors often need managing just as much as their investments, has played a role.
What we are hearing from investors is that they are recognising much more the influence which cognitive and behavioural biases can have on their investment decisions – and that they are increasingly keen to tackle these in a more objective way which takes the heat out of situations like we find ourselves in today
What we are hearing from investors is that they are recognising much more the influence which cognitive and behavioural biases can have on their investment decisions – and that they are increasingly keen to tackle these in a more objective way which takes the heat out of situations like we find ourselves in today. Huge geopolitical strife, the prospect of recessions in leading economies and inflation running to 10% are quite understandably causing some people to feel very uncomfortable indeed. We can arrange some no-obligation initial conversations with professional advisors whenever you feel ready, so why not take that first step towards putting your mind at rest?
The world might be looking pretty bleak in a number of areas currently, but don’t let the magnitude of what may be facing make you think that there is little you can do. There is generally always something that can be done to further optimise an investor’s financial arrangements and ensure that they can continue to protect and grow their wealth.
Take our short matching questionnaire and join those who are probing their portfolios for weaknesses along with real professionals in the wealth management field. The world is undeniably highly uncertain, but you can make moves to anticipate changes to the investment environment 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.