Leaving your finances to chance is not a viable option

Financial and investment advisers are part of that group of professional service providers that many people do not understand or, worse, may not necessarily trust. The statistics back this up. In a December 2020 update on the Financial Advice Market from the industry regulator, the Financial Conduct Authority (FCA), their research found that 54% of UK adults with £10,000 or more of investible assets, around 8.4 million people, did not receive any formal support to help them make investment decisions over the previous 12 months*. I, therefore, decided it would be a good idea to explain the case for the accused!

Wealth is precious

The accumulation of wealth is often the result of something meaningful in your life.

According to House of Commons Business Statistics, in 2020, the UK was estimated to have 6 million private sector businesses, explaining why we often see the sale of such firms as a source of investible assets. Another very personal source is an inheritance. Research conducted by Kings Court Trust revealed that £5.5 trillion is expected to pass between generations between 2017 and 2047, making this a significant wealth-planning issue.

However, these monies are built up, protecting and growing that wealth is not something you want to leave to chance.

Fail to plan, plan to fail

With the age of generous state support a thing of the past, there is now an explicit acceptance that we all have to take personal responsibility for our finances.

The younger generation faces the challenge of staying in touch with rising house prices as they seek to generate a sufficient deposit. Families electing to fund schools fees face ever-increasing costs. And with the cost of university tuition fees in England being £9,250 per annum, it is likely many students will need some level of parental support.

Perhaps the most critical planning topic is retirement. With the basic state pension for 2021/22 set at £179.60 per week or £9,339.20 per year, the need for private provision is evident. This, coupled with the falling number of employer-funded final salary pension schemes, means the only option for many is private provision.

Yet as a nation, we are still slow to respond to this challenge. Retirement income data from the Financial Conduct Authority, gathered from their work with financial advisers, puts the value of the average pension pot accessed for the first time as £59,424 between Oct-19 and Mar-20. A figure which holds little hope for the retirement many of us dream of.

When you add these to other planning issues, such as unforeseen capital expenditure, mitigating tax, plus when and how to pass on wealth to family members, the sensible conclusion is none of us can afford not to have a plan.

You don't know what you don't know.

With the democratisation of information through technology, you may feel this is something you can manage with a bit of research. But where do you start? Google? Absolutely, but with so much information out there, much of it still drowning in jargon and not all of it genuine, you can quickly end up in a head spin.

Most of us have experienced little or no education on the topic of money, but perhaps we know somebody who knows somebody who has done well on the stock market. But what credentials might this person have, and more importantly, what protection is there for you if things go wrong? 

Maybe family is the answer. You would think so, but many of us find it hard to talk to loved ones about our money. In November 2020, the Money and Pensions Services said: 55% of people don’t feel comfortable opening up when they have worries about their financial situation. It is also true to say that family conversations about money can stir up many emotions, making it hard to take clear decisions.

So, if the internet is a myriad of blogs and infographics, friends are a risk, and you are not comfortable dealing with family, engaging with an objective and professional guide looks like a sensible option.

It's a risky business.

Investment fraud is a clear and present danger. You may think that you are savvy enough to spot a legitimate proposition from a suspect offer, but those who operate in this dark world are hugely sophisticated. In November last year, the Investment Association reported that the total lost by victims of ‘clone firm’ scams was just short of £10 million, with over 200 people affected.

When making legitimate investments, it is vitally important to consider the different risks involved, from liquidity to inflation and from concentration to credit; all of these can impact the outcome. It is why, we, as professional managers, consider up to nine different types of risk when designing diversified portfolios for our clients. Furthermore, our process includes an assessment of your tolerance for risk, designed by experts in behavioural finance, Oxford Risk. With those results, we can ensure any recommendations are matched to your expectations and experience.

I have already highlighted the precious nature of wealth, so it is vital to have the right plans and investments in place to help you and your family achieve your financial aspirations.

Not enough time in the day

In recent years, time is not something that we have generally had in abundance. The 'Modern Families Index 2019' from the website ‘Working Families’ states that in 76% of families with one child, both parents are in employment, reducing by just 1% to  75% when two children are involved. 

Furthermore, research suggests the pressure to perform in our jobs is growing. According to the 2020 Health & Safety Executive Annual Statistics, 17.9 million working days were lost due to work-related stress, anxiety or depression in 2019/20.

The picture this paints is one of growing demands on families, which begs the question, where will they find the time to make informed decisions on investing and to keep essential plans on track?  

Hopefully, I have been able to convince any doubters that there is real value in working with a professional and authorised wealth manager, someone who, in the first instance, can act as a trusted guide and guardian of your wealth and who. ultimately, can increase your chances of achieving realistic financial goals.


* Sources:

Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review (fca.org.uk)

Retirement income market data 2019/20 | FCA

Shame, upbringing and burdening others: why 29 million UK adults don’t feel comfortable talking about money despite feeling worried about it | The Money and Pensions Service

Almost £10m lost to investment scams since March lockdown | Press Releases | The Investment Association (theia.org)

BH_MFI_Report_2019_Full-Report_Final.pdf (workingfamilies.org.uk)

Work-related stress, anxiety or depression statistics in Great Britain, 2019 (hse.gov.uk)


Important Information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment decisions. Please also note the value of investments and the income you get from them may fall as well as rise and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.


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