Interest in inflation hedges, an earlier-than-usual tax planning focus and concerns about securing returns over the coming year are what we’re noticing about our High Net Worth Users this month.
Inflation hedges wanted
Inflation continues to be front of mind among our users and we’ve been having many interesting conversations about the “hedges” investors can deploy.
There has been a lot of media hype about cryptocurrencies now being a better hedge against inflation than gold, with highly supportive noises coming some very illustrious banking and investment names indeed. Yet those on the other side are just as vociferous.
Gold is of course a time-honoured store of value when inflationary pressures are mounting and, while cryptocurrencies have novelty appeal, they can be extremely volatile, taking investors on a rollercoaster ride few have the stomach for with any really important sums. Gold has its cachet for a reason. However, the costs associated with storing the precious metal mean that Exchange-Traded Funds (alongside mining stocks) are often the more accessible route to holding some physical gold.
There are many inflation-hedging techniques that wealth managers can pursue for their clients. Their first move, however, will be to ensure that they are not holding excess cash: if your wealth isn’t at least keeping pace with the rate of inflation then it can be powerfully eroded away
Both cryptocurrencies and gold are in the more exotic categories of investment and certainly shouldn’t represent a great deal of most investors’ portfolios. There are many inflation-hedging techniques that wealth managers can pursue for their clients. Their first move, however, will be to ensure that they are not holding excess cash: if your wealth isn’t at least keeping pace with the rate of inflation then it can be powerfully eroded away. As frustrated savers will know only too well, there isn’t an interest-paying account in the land that even comes close currently.
Financial planning enquiries pick up pace
There is typically a “shape” to the wealth management year, with financial planning and tax issues often left on the backburner until perilously close to the end of the tax year for those without an adviser in place (it is seldom too late to take some action, but strategies always work better if sufficient lead time is built in). This year, however, things are quite different.
The parlous state of the government’s finances has become all too apparent; Britain’s debt level is now 95.5% of GDP, the highest such ratio since 1963. High Net Worth Individuals are only too aware that tax thresholds have been held for five years and a slew of increases looks inevitable. Tax mitigation has never been higher on the agenda and you should be aware that there are a host of strategies a wealth manager can pursue to quite legitimately reduce your bill.
Tax reduction is often the overlooked part of the wealth management equation, but it really shouldn’t be as it can really make all the difference to your final financial position
Thinking about tax across the whole family and ideally across the generations can create the potential for real savings. Tax reduction is often the overlooked part of the wealth management equation, but it really shouldn’t be as it can really make all the difference to your final financial position. Now is a good time to be looking ahead to the new tax year.
There are some very serious questions investors need to ask themselves presently, not least where are they most exposed to inflationary risks and what the weaknesses in their portfolio positioning might be. Pressures are ratcheting up, as is the tax burden it seems. Our matching process is fast and free, so why not see what a wealth manager could achieve for you if you feel like your finances could be better arranged?
Covid creates investor confidence crisis
While some DIY investors have been able to ride out the twists and turns of the markets over the past year or so, new research chimes very much with what we hear from investors shaken by the extreme volatility we’ve seen. As we recently explored, many investors are prone to doing something (anything) to the serious detriment of their portfolios in times like we’ve seen and this piece seems to have really struck a chord with our users.
We’re hearing a lot more self-reflection from investors on whether they would be getting better results in partnership with a wealth manager who can correct their behavioural biases. This is a really underappreciated element of the value that a professional adviser brings, but once that has been grasped it is not easily forgotten.
We’re hearing a lot more self-reflection from investors on whether they would be getting better results in partnership with a wealth manager who can correct their behavioural biases
At the same time, new research among UK HNWIsi suggests that 33% have seen painful losses since March 2020 and 20% are not confident that their portfolios will do well over the coming year either. This cohort of people is one of our main target audiences – those who have become less comfortable with managing a significant portfolio, like a pension pot, and who are starting to suspect that struggling on alone is likely to be a false economy when superior performance and risk management are factored in.
Gain clarity from complexity
As well as enhanced returns and risk management, much of what the wealth management proposition is about is peace of mind. Few of us have got the time and inclination to constantly watch the markets and puzzle over every asset class you need to build a balanced portfolio. Then there are all the regular tasks that it’s so easy to forget, like topping up your ISA. Having someone to keep an eye on all of your wealth management to-dos feels great, as well as ensuring that no deadlines are missed.
Few of us have got the time and inclination to constantly watch the markets and puzzle over every asset class you need to build a balanced portfolio
You can get clarity from complexity in no time at all by taking up the offer of some free, no-obligation discussions with a shortlist of firms perfectly matched to you.
To get a flavour of what the wealth managers on our panel have achieved, read a few of our case studies. Better still, let the leading firms we work with explain their track records themselves!
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.