THE IMPORTANCE OF FINANCIAL ADVICE

There is no time like the present when it comes to sorting out your finances.

Dealing with household bills and monthly outgoings is do-able, if a little time-consuming. But going it alone when it comes to your wider finances can be daunting. Properly managing investments and making the right financial decisions takes time, effort – and skill. Ideally, you’ll take advice from a professional.

You might want help with managing your savings and investments more tax efficiently or simply want to plan for the longer term.

Being tax efficient for some is just a case of using the annual ISA allowance. But for those with higher levels of wealth and more complex affairs, an adviser can explore some of the lesser-known tax breaks and allowances.

Your adviser will help you manage your assets in a way that gives you the best possible chance of achieving your financial goals, matching your portfolio choices to your own attitude to risk.

If you’re happy to choose your own investments you might not feel the need to take advice. Indeed, there are many people who consider themselves investment experts and choose to fly solo.

An adviser could be your best asset

Yet an adviser can be your best asset. The fee you pay will get things in place to build your wealth, protect your family, plan for a comfortable retirement, ensure your plans are on track, as well as peace of mind your money is working as hard as possible.

Quantifying the value of financial advice is not an exact science, but there has been research that shows people who take advice are better off after 10 years than people who weren’t taking any advice, for example.

Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16[1].

Non-affluent investors saw their wealth boosted by an impressive 35% by taking advice with a 24% uplift to their pension wealth. Affluent investors saw their wealth bolstered by 24% and their pension boosted by 11% if they took advice.

Benefits of an adviser

One key benefit of speaking to a financial adviser is their ability to scour the market for the most appropriate investment or tax solution for you.

Banks often advertise services for help on finances, but this is not comparable with advice from the likes of Tavistock, because a bank will typically only be able to offer products from its own offering, which is extremely limiting and runs the risk of missing out on a more appropriate solution. Plus, the ‘information’ or guidance offered won’t necessarily follow any assessment on whether a specific product is suitable for your needs. It is likely to be more of a signpost of what’s available.

It’s not just the start of a new calendar year that can prompt the need to speak to an adviser.

Life events such as getting married, having a baby, buying a home or getting divorced often provide common triggers for seeking the help of a professional. Many people might simply decide it’s time to talk to an expert if they no longer have the time to manage everything themselves.

Some people might worry about the cost of the services advisers provide. However, the research mentioned already illustrates the benefits of advice – financial advice is an investment in itself.

Plus, advisers must be clear upfront about what their fees are and agree with you in advance how you’ll pay them, so you should never be in any doubt what it will cost you.

Professional advice is about more than just investment returns; it’s about knowing and understanding an individual’s goals, to ensure advice provided is tailored and offers the best possible chance of achieving those financial goals.

In conclusion

Speaking to a trusted, established firm of advisers should achieve that all-important peace of mind that you’re in safe hands.

Source:

[1] https://ilcuk.org.uk/financial-advice-provides-47k-wealth-uplift-in-decade/

FIVE NEW YEAR RESOLUTIONS FOR 2022

The beginning of a New Year presents the perfect opportunity to explore a shaping up your finances.

In the same way you might make a plan to be healthier this year, there are also measures you can take in an attempt to build your wealth and put measures in place to protect it.

Here are five ways you can improve your finances in 2022:

1. Sort out old pensions

Round up all your pensions to make sure you’ve got the full picture for your retirement savings. You might even unearth money you had forgotten about. Losing track of a pension is more common than you might think with around 1.6 million lost pension pots worth £19.4 billion, according to the latest estimates[1].

If you think you have some money lurking in an old workplace pension scheme, you can get in touch with your former employer and ask for the details. Be ready with the dates you worked there and your National Insurance number. The Government’s Pension Tracing Service can help reunite you with your savings if your old employer is no longer trading.

For personal pensions, you can try the Pension Tracing Service. You will need the name of the provider to find the contact details. Where old life companies have been taken over and no longer trade under that name, the database will recognise it anyway and direct you to the new provider that now looks after those schemes.

If you don’t have any luck there, try Experian’s Unclaimed Assets Register (UAR). This is more comprehensive because you can search for old shares and insurance policies, as well as pensions.

2. Don’t leave too much in cash

Money that’s earmarked for the future – rather than what’s in your rainy-day account – will see its value eroded if it’s left in cash for the long-term. This is even more apparent now with rising inflation and ultra-low interest rates. This combination means your money is guaranteed to make a loss when it comes to real returns over the long term. Save for a rainy day, invest for your future.

3. Use tax allowances

There are plenty of allowances to make use of. Remember the tax year runs from 6 April to 5 April, so make sure you use allowances before it’s too late.

One of the most popular is the ISA allowance, which is £20,000. You won’t pay income tax, dividend tax or Capital Gains Tax (CGT) on any investments you hold in an ISA. You don’t even need to mention it on your tax return. Parents can also open a Junior ISA and save up to £9,000 a year into it. Crucially, an ISA allowance cannot be rolled over into next year. If you don’t use it, you lose it.

You should also consider the valuable tax breaks from pensions. If you’re a basic rate taxpayer, for every £80 you pay in, the taxman will top it up to £100. And if you’re a higher or additional rate taxpayer you can claim back up to an additional 20% or 25% through your self-assessment tax return.

Don’t forget that some investments also offer upfront tax benefits, so if you want to invest in start-ups and younger companies, investments such as Enterprise Investment Schemes, better known as EISs, could be attractive to you. There’s also a Venture Capital Trust (VCT) – another investment offering upfront tax benefits, that is designed to raise money for start-ups.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

4. Write a Will

Making a Will ensures your assets and possessions are passed on to the people you choose. Without one your wealth will be passed according to the “laws of intestate” – and not your wishes. Writing a Will can save on inheritance tax as well as spell out how you wish your wealth to be distributed.

5. Talk to a professional

A financial adviser can help you understand your financial priorities and put a plan in place to help achieve goals. Professional advice can go a long way to provide peace of mind that you are addressing the needs of you and those of your family.

Advice can be viewed as an investment in itself. Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16[2].

Source:

[1] https://www.abi.org.uk/news/news-articles/2020/05/19.4-billion-of-pension-pots-unclaimed-just-because-of-house-moves/

[2] https://ilcuk.org.uk/financial-advice-provides-47k-wealth-uplift-in-decade/

INTERGENERATIONAL WEALTH: IT’S A FAMILY BUSINESS

The number of families with multiple generations in retirement at the same time could rise in the future with the average life expectancy likely to increase.

This could trigger the need for people to review financial plans for the later stages of life.

Baby boomers hold the majority of the UK’s wealth[1], accumulated through generous final salary pension schemes, the long-term rise in the stock market and the boom in house prices.

Traditionally, wealth has passed from one generation to the next. However, intergenerational wealth management challenges that tradition as there is now a new set of considerations.

HANDING DOWN WEALTH

One of the most straightforward ways to support family members is to give away assets while you are still alive.

This can be done in a manner to minimise inheritance tax (IHT) for loved ones.

For example, using the various exemptions such as the ‘annual exemption’ allows individuals to give financial gifts, tax-free, to the value of £3,000.

You can also give £250 to any number of people every year, though you can’t combine it with your annual £3,000 gift.

There’s more to be given away tax efficiently using the “Potentially Exempt Transfer” which allows the giving away of all types of assets, including cash, property and shares tax-free, as long as you live for seven years after making the gift.

According to the King’s Court Trust, £5.5 trillion will move hands in the UK between 2017 and 2055, with this move set to peak in 2035.

People are increasingly passing on their pension pot as part of their legacy, and using other assets for a retirement income.

We know that the ‘Bank of Mum and Dad’ comes to the rescue frequently to help adult children buy property. Recent estimates suggest that 12.5% of the money lent to first-time buyers in 2021 will be from parents[2].

The over 60s are increasingly finding they are also needed as the ‘Bank of Grandma and Grandad’ to help fund childcare costs, school fees or university tuition fees for the younger generation – for their grandchildren.

SUPPORTING OLDER PARENTS

However, wealthy baby boomers might not want to commit to passing on that wealth to younger members if they still have elderly parents who need financial support.

Much older parents could need help with long term care costs at the very least, which will have an impact on inheritance for younger family members.

It’s crucial to ensure there’s enough money in the pot to support all the family, should you choose to.

TAKING ACTION

Many people might feel worried about having to provide or the prospect of providing financial help to other generations.

Yet help is at hand. Financial planning needs to be a family business. Instead of each generation making their own arrangements, families should consider how to use their combined resources in the best, most tax-efficient way.

Even better, putting in place the right plans at the earliest stage will allow greater opportunity to build wealth over time, and to provide for all loved ones.

Further, a well-structured and tax-efficient estate plan is essential for the smartest way to pass on wealth. An adviser can help formulate a plan that can benefit all the family.

Source:

[1] https://www.ftadviser.com/investments/2021/04/27/what-are-the-real-implications-of-intergenerational-wealth-transfer/

[2] https://www.dailymail.co.uk/news/article-10123081/First-time-buyers-borrow-record-10billion-Bank-Mum-Dad.html