Future Financial Services

At some point in the future, most of us want to slow down and stop working but still afford a relatively good standard of living without having to cut spending too drastically.

During our working lives, we earn income from employment or self employment to save and pay for living costs, holidays, etc. but when our earned income stops, there is a clear need for an income to come from somewhere.

This normally means using income and capital sums earned during our working lives to save enough capital to draw upon to fund what will hopefully be the longest holiday of our lives!

All going well, we should all be paid a flat rate basic state pension, but this will amount to far less than most people actually want or even need to survive, let alone provide for a comfortable retirement.

For those people lucky enough to have a generous company pension scheme, a large part of their retirement income could be generated that way.

For many people however, the bulk of their income when they stop working will come from their private savings.

Whether using ISAs, a buy to let property portfolio, Unit Trusts, OEICS, cash accounts or pension plans, the onus is on the individual to accumulate a large savings pot with which to generate or convert to income.

Modern personal pension plans offer numerous investment options and are extremely tax-efficient investment vehicles that can be used to save up money far more quickly than alternative methods of savings that don't have the generous tax-relief that pension plans benefit from.

Regardless of the medium you use to accumulate the savings, careful planning to ensure that you are saving enough on a monthly or annual basis is critical.  Regular reviews to assess investment returns, inflation, charges, annuity rates and volatility are paramount to keep the target retirement income on track.

Investment portfolios that are likely to meet clients’ objectives and appetite for risk is vital for successful investment advice.

There is a four stage process for managing clients’ wealth:

1. Fact Finding & Goal Planning

• Analyse Assets and Liabilities you already have

• Establish Target Income  or Target Capital amount and when it is required

• Establish any Specific Requirements –  investing in an Ethical fund for example 

2. Attitude to Risk & Asset Allocation

• Agree your attitude to investment risk

• Design a suitable mix of assets likely to generate expected or desired return within agreed risk tolerance

3. Tax Wrapper & Product & Fund Research

• Research and select most suitable and tax efficient investment products

• Research and select most suitable Investment Funds or Portfolios

4. Review Process

• I offer bespoke levels of ongoing service relevant to you and your needs

• Some clients require ongoing monitoring of the investment recommendations

• Some clients require reviews of the recommended funds on a regular basis

• Rebalancing of the assets might be required to maintain expected return

• For simple or smaller portfolios, ad-hoc reviews are sufficient for some clients

Why Invest?

Cash deposits are useful for holding emergency monies for exploding boilers or short periods of unemployment, but inflation can erode the value of cash over the medium and long term meaning cash is not actually as safe as many people believe.  In addition, with interest rates currently so low, cash savings accounts generally provide poor value for money.

Many people are reassessing their need for large sums of instant-access cash, allocating more capital to purchase ‘real assets’ that might have a better chance of keeping up with inflation. This means decisions need to be made about how and where to invest, but investing in the current environment presents a number of challenges.

The choice of retail investment options is mind blowing with new ways and routes to invest seemingly springing up every day.

Many investors prefer investing via open ended collective investment funds such as Equity ISAs, Unit Trusts and Open Ended Investment Companies (OEICs) that provide access to real assets but have professional fund management making the daily buy/sell decisions with the aim of getting your money to work that bit harder for you.

 For ISAs, Investors do not pay any personal tax on income or gains, but may pay unrecoverable tax on income from stocks and shares received by the ISA managers.

For many buying a house can be an exciting but also daunting prospect. Having an experienced mortgage adviser to help you through the process can save you stress, time and money.

Here are some of the key reasons to instruct a mortgage adviser or financial adviser who specialises in mortgages:

1. A mortgage adviser that you instruct represents you. He or she has no allegiance to the estate agent, solicitor or vendor you are buying through or from.

2. An experienced mortgage adviser will have dealt with many cases before and should know the type of properties to avoid, give tips on negotiation and provide some background to the legal pitfalls that can delay or stop a purchase in its tracks.

3. Whilst borrowing money is all about finding the cheapest rates there are subtle differences between mortgage products that you may or may not understand. Different lenders have different lending policies and some lenders do not lend at all in certain situations.  Having an experienced adviser to guide you through how to use product features and lending policies can lead to savings in the long term and as a whole of market mortgage adviser I can search the whole of market to find you the right deal.

4. The person arranging your mortgage has the most detailed knowledge of the mortgage market of any professional involved in the transaction.  With an experienced adviser advising on mortgages, a surveyor advising on surveys and valuations and a solicitor or conveyancer advising on the legal aspects, you can be confident of receiving the most suitable advice overall.

A good mortgage adviser knows every element of the property purchase or remortgage because he or she interacts with every other key person in the deal. This in-depth knowledge is vital in advising you as to:

• The progress of the transaction

• Problems that may occur

• Whether the proposed purchase is worth pursuing

Not all mortgage adviser are the same, finding one that genuinely has your best interests at heart can be a useful addition to the team you engage for your purchase or remortgage.

Mortgage Advice 

In contrast to the limited service proposition of most high street banks, my fully comprehensive advice service does not stop once a suitable mortgage product has been researched and applied for.

By keeping in close contact with clients throughout what can be a very involved and stressful period of their lives, I am able to help project manage the otherwise demanding house buying process.

From early advice on what sort of property to buy and areas to consider, to helping find a good solicitor, through to advice on which survey to instruct and ensuring all documents and paperwork are forwarded and submitted at the right times, I am on hand to help and advise wherever I can.

• How much can you afford to borrow?

• How much deposit do you need?

• Which lenders will lend to you?

• How much money will you need to cover moving costs and fees?

• What will your total monthly outgoings be if you own your home instead of renting?

• What size mortgage can you get?

• Who do you talk to and how do you start?

• What types of insurance will you need?

• What type of mortgage is right for you?

Choosing the right mortgage product has become even more complicated in the recent past with lenders tightening criteria in a bid to minimise their risk amid more scrutiny from the regulator.

With years of experience and access to the whole of the market, I am well placed to help you find the most suitable mortgage, even in this difficult climate. Whether you are buying a property for the first time or the twentieth time of you want to raise capital on your current mortgage, I have the expertise to make sure you get the most suitable solution for your circumstances.

Types of Mortgage

Fixed rate mortgages are for those of us who want to be certain of their monthly outgoings and a good option if you are of the opinion that interest rates will rise. They are protected from interest rate fluctuations for the length of deal period. Whilst most clients opt for a two, three or five year fix.

Tracker mortgages track a base rate which is usually the Bank of England base rate and are dependent on its fluctuations. If it drops you pay less, if it increases you pay more. Lifetime tracker mortgages are available for the entire duration of the loan period.

Offset mortgages allow you to offset any money in your current or savings account against your mortgage, so you only pay interest on the difference. As the savings for offset mortgages aren’t currently taxed, it can be an efficient way for high rate tax payers to use their money.

On the whole, the British public simply don’t like insurance, evidenced by the enormous protection gap in the UK.

The idea that we should pay money out to a third party in the hope that we never see any return is often enough to avoid this uncomfortable issue completely. This means we now have a serious problem in the UK with the vast majority of us significantly underinsured.

Generating the multiple, and often large, cash sums required to realise our financial plans will almost always rely on continued and rising earned income during our working life.

Illness or injury can seriously damage financial plans by forcing an individual to erode hard earned savings, or can limit the future ability to earn at the same rate as before. A few thousand pounds diligently saved over a number of years towards a house deposit or school fees can be spent in a matter of months if minor injury or illness prevents earnings.

If a serious or critical illness strikes, then even on returning to work, an individual’s lifetime earning ability may be damaged due to a disability of some kind or perhaps as a result of a lengthy and damaging forced career break. Pension plan forecasts, to generate a given income in retirement, will suffer if an individual can no longer afford to make sufficient regular investments.

Cost Effective Solutions

A cost effective way to manage and protect against this downside risk is to pool it with others via an insurance company. If a large number of people pay a small premium to an insurance company, then if one of those people falls ill, then there is a lump sum or income available to give to that person.

Saving £50 per month into a bank account for 12 months would generate £600 plus interest. Buying an insurance policy for £50 per month might purchase £200,000 of cover payable on serious illness.

Death of an income generating member of the household can leave children and their carer without any means to continue mortgage repayments or cover utility and food bills.

There are various State benefits that may help, but most are limited, don’t start immediately and usually only last for a fixed period of time. Until an individual has enough cash and investments on hand to clear any debt and provide for them self and their family, come what may, then a protection plan or insurance policy should be considered.

There are lots of different types of insurance available and it can be confusing, but broadly speaking, there are four main areas of personal protection:

• Life Cover

• Critical Illness Cover

• Income Protection

• Accident Sickness & Unemployment Cover (ASU)

What to have and when?

Every type of protection product may become a priority need at some point in our lives.  However, the need to protect our lifestyles and those of their families tend to be a long term, even a permanent need.

Death, sickness or injury can strike any of us at any time.  It has been said that protection should underpin every aspect of financial planning.

The range of protection plans available is very wide.  All protection plans have one thing in common however, and that is to produce a sum of money at exactly the time someone needs it most.

A person’s protection needs are influenced by four key factors:

• Age

• Dependants

• Income

• Financial liabilities

These factors should be considered in conjunction with each other and not on an individual basis.