Investors are used to rock-bottom interest levels, but now the prospect of negative rates is coming into view – necessitating a wholesale review of many people’s financial strategies.
The main thing to remember that it is never too early – or too late – to start getting professional advice on protecting and growing your wealth.
There are a number of strategies of wealth management for women that female investors can explore at every stage of their lives. And while you may not feel wealthy at present, prudent financial planning and clever investing might just get you there. Whether you are a young professional building your career or a retiree with very significant assets, there are wealth managers who can help.
In your twenties: start saving (even small amounts)
Drawing a pension might seem a very long way off to the young – and it is, which is the problem. Today’s graduates are likely to face at least 50 years of work before being eligible for a state pension, so those who don’t relish the prospect of working into their dotage need to start saving for an earlier retirement as soon as possible. Saving sufficient funds to maintain your lifestyle is going to be a big challenge since average life expectancies continue to rise. Additionally, women tend to live four years longer than men on average.
Wealth managers are increasingly active in managing pension pots and this will continue to rise as people use the freedom they have been given to invest their savings as they wish. Wealth managers will typically only manage your investments once you have £50,000 or more in a pension wrapper, but with reinvestment that figure is not far away.
Never forget either that the earlier you start a pension the better: because of the effect of compounding, those starting pension saving at the age of 25 could end up with £600,000 more in their pension pot than if they delayed saving until they were 40.
In your thirties: lay family foundations
Many women first get serious about managing their wealth in their thirties, prompted by big life events such as getting married and having children, which mean they now have a whole new set of financial goals to achieve.
If you have them, providing for your children’s future will naturally be a big priority. Fees for private education and university now easily run into £250,000 per child so making adequate provision for these calls for advance planning. Putting money aside in your child’s name through a Junior ISA is a good starting point, but wealth managers can deploy a whole range of tax strategies, like educational trusts, to reduce the burden of fees.
Most parents will want to give their children a head-start in life and a good wealth manager will help build up a nest egg for them as part of your overall financial plan. Those thinking even further ahead could also consider“bancassurance” solutions, which combine life insurance and investment management to ensure that family wealth is managed and passes to the next generation as tax-efficiently as possible.
In your forties: ratchet up risk?
Women generally have a more cautious approach to investment risk. They tend to avoid the raciest vehicles like hedge funds, but they are generally also far less active in mainstream risk assets like equities. Caution is wise, but taking on slightly more investment risk may be the best route to achieving big financial goals like paying off your mortgage. Indeed, in a low interest rate environment not taking on investment risk and sticking to cash might constitute a financial risk in itself. Your cash wealth can easily erode away over time.
Your forties may be a good time to consider increasing your investment risk exposure since there is plenty of time for losses to be recouped before retirement age. A professional wealth manager will design an investment strategy which is precisely aligned to your individual goals and which only exposes you to a level of risk you are comfortable with. They can also arrange for you to have different“pots”of money, managing some very conservatively while taking more risk with others in the hope of achieving greater returns.
In your fifties – optimise retirement savings
Your fifties are arguably the most important time for retirement planning. By this stage many higher earners may be approaching the pension contribution limits, which have been progressively lowered to now stand at £1.25m over a lifetime and £40,000 per annum for the 2014/2015 tax year (down from £1.5m and £50,000 respectively). This means that ISAs are becoming an increasingly popular retirement savings route, particularly since the annual limit has been raised to £15,000 (in either cash or stock and shares).
A professional wealth manager will be able to help you maximise your retirement pot while minimising the tax liabilities arising from all your financial affairs.
In your sixties – investments of passion
You may now wish to pursue your passions, and if you can combine these with investment returns then so much the better. Property, classic cars, fine art and jewellery are among the more typical investments of passion, although collectibles, fine wine and even rare stamps are increasingly mainstream assets in HNW investors’ portfolios.
Passion investments can provide a lot of enjoyment as well as impressive returns, however they do carry a range of additional risks which make specialist advice essential. Many wealth managers have dedicated teams advising on assets like art since proving provenance, valuations and storage can be fraught with difficulty – and that’s quite apart from managing the investment risk itself.
In your seventies, and beyond–shelter your estate from the taxman
Having carefully built your wealth, it’s natural to want to be able to pass on as much of your estate as possible. Good wealth managers have a range of strategies they can suggest to minimise the inheritance tax liabilities on your estate and, importantly, several of these do not depend on the seven-year gifting rule (whereby the party making the gift must live on for another seven years for IHT relief on that gift to be secure). Investing in smaller UK companies through an Enterprise Investment Scheme might be a useful strategy since Business Property Relief can apply, which would remove the IHT liabilities on shares after them being held for just two years.
These are just a few of the wealth management strategies you might like to consider at certain points of your life. Your financial adviser will be able to advise you on a great deal more.