Topic: Financial Planning

The 4 Ps of Retirement Planning

Posted on February 4, 2020 by - Financial Planning, Life Planning, Retirement

I was having a conversation with my father over the weekend about his retirement and it occurred to me that there are 4 things that you must have to live a successful and happy retirement. All of them beginning with the letter P:

Purpose

People

Places

Projects

The first is arguably the most important and drives the other 3, so what better place to begin than:

Purpose

Those clients that go onto live happy retirements often enter retirement with a sense of purpose. They don’t feel that this is ‘it’, there is usually ‘something more’, ‘something next’ that is driving them forward.

There is no right or wrong answer here. Your purpose is just that – yours. It could be that you wish to write a book to change how people view the roman empire, perhaps you wish to play in a band and perform in front of 50,000 people. Maybe you want to visit each country on the planet, or it could be that you wish to provide the best support to your children and grandchildren.

It doesn’t matter what your purpose is, more that you have one.

Mitch Anthony, a US retirement expert says, “To have a wonderful retirement you only need two things: enough purpose to get up in the morning and enough money to sleep at night”.

I think this is quite true. Although it can be tricky, it is important that you figure out your purpose before you go into retirement to give yourself a sense of direction and meaning. Once this is clear, the other 3 p’s then fall into place.

People

The next thing most people will think about is people. Who do you want to spend more time with now that you have more of it?

It could be children and grandchildren. Perhaps you wish to spend more time with friends and family. It can also help to think about what you wish to do with those people. Is it simply spending more time with them that counts or is there something specific you need to work on or achieve together?

We have clients who have had slightly rocky relationships with their loved ones that have been repaired as they have gone into retirement. Perhaps it is simply the addition of more time that makes the difference.

Places

Where you do wish to go and see? What do you wish to do while you are there? For some people there will be grand plans to see the world (perhaps the whole of it), for others, their travel plans will be more modest.

However, it is important to decide in which places you wish to spend your retirement as this will very much drive the cost of your desired lifestyle.

Projects

Finally, it is useful to think about projects. Some projects could be short term and arise because you simply haven’t had the time to tackle them before. Clean the garage out, tidy that draw full of papers – that type of thing.

Other projects are far wider reaching and could transcend years or even decades. Learn to play the guitar, influence government policy, save the rain forest. All examples of projects that clients have wanted to undertake which could very well be works in progress forever!

Summing Up

From my own experience (and there is now a lot of research and science backing this up as well), the people who enjoy their retirement the most, are the ones that have really thought about the 4 P’s before they retire. In doing so, some people realise that they don’t really want to retire at all. Others will decide that their retirement might not really be ‘retirement’, more a new chapter in life.

If you would like any help on your own retirement journey, we would be delighted to assist. Please contact us now for your discovery meeting, provided at our own expense.

Educating The Next Generation Of Clients

Posted on January 29, 2020 by - Financial Planning, Life Planning, Next Generation, Uncategorised

Perhaps it is because my children are coming to the end of their primary school education, but I’ve become increasing aware of my responsibility as a parent to provide them with responsible attitudes towards money to help them through life. While they are beginning to understand the concept that things cost money, they are gradually realising that there isn’t a bottomless pit of cash buried in the back garden to pay for everything! Getting them to understand that saving the weekly pocket money to buy something that they really want is much better than blowing it all on a comic and sweets each week, is an important first step in encouraging them to adopt a lifelong saving mentality.

The Personal Finance Society is the professional body for the financial planning profession in the UK and they have recognised the importance of educating tomorrows savers, with the launch of the My Personal Finance Skills – a pro bono initiative to deliver financial education workshops to secondary schools and colleges across the UK. These workshops include topics such as helping students understand the value of everyday expenses, staying safe from financial scams and understanding the concepts of income tax and National Insurance once they leave school.

I volunteered to be an Education Champion, and despite a little bit of trepidation (there’s a reason why I decided to become a financial adviser rather than a teacher!) I took the plunge to deliver a workshop at a local secondary school just before Christmas. I have to say that it was a really enjoyable experience and was fascinating to see how fourteen and fifteen year old’s think about money – more than one were shocked about the cost of things such as household expenses and rent, especially when they were also informed about the difference between net and gross salary!!

This generation of children are fully immersed in social media and there is no doubt that they are heavily influenced by the lavish lifestyles portrayed by some celebrities. One of the objectives of the workshop was to make the participants aware of the income needed to maintain such as lifestyle, and the dangers of using easy borrowing in an attempt to live the “Instagram lifestyle”.

A number of clients have expressed their concerns over the years about the ability of their children to manage large amounts of inherited wealth, and last year we sought to set up a next generation workshop to provide financial education for young adults. While we didn’t have the level of response that we had hoped for, I’m sure that this will be a topic that we will revisit in the future.

Because We Needed Something To Worry About

Posted on January 14, 2020 by - Financial Planning, Investments, Media, News

As I sat down to my Christmas Dinner this year, I recall being quite surprised at how settled things seemed to be. Not just in my own little home on Christmas day, but across the country.

The decisive Conservative victory in the election gives us a more certain path for the future and regardless of your views on Brexit or politics in general, I have always argued that uncertainty is almost always worse than the outcome, even if you disagree with the outcome.

As we went into the Christmas holidays, it seemed nearly certain that we would officially leave the EU on 31st January 2020. Of course, this is merely the beginning, and the end of January will signal the beginning of (supposedly) 11 months of trade talks which are designed to culminate in a trade deal by the end of the year.

So, despite the slight uncertainty hanging over the future trade relationship between the UK and the EU, all seemed to be sorted. We had a stable government, Brexit was going to happen and even the US and China seemed to be getting to the bottom of their trade dispute.

It was as if the world knew we didn’t have anything to worry about…

Of course, what followed is the US strike on Iran and the subsequent retaliation, giving us a whole new geo-political issue to ponder over.

Now, my feelings about this issue are just the same as with any issue (from an investment standpoint anyway) – keep calm and carry on will always be the motto.

What this just goes to show though is that there will never, ever be a ‘good time’ to invest. All those people who were waiting until Brexit and the election sorted themselves out will still be waiting to see how the US / Iran situation pans out, all the while missing out on what has been one of the best periods in market history.

The old adage that time in the market is more important than timing the market could not be more important, especially given that this uncertain world seems to be the ‘new normal’ as I wrote about a few weeks ago.

Portfolio Update – Post Election December 2019

Posted on December 19, 2019 by - Financial Planning, Investments, Review

Following last week’s General Election result, we have taken the decision to increase exposure to the UK equity market for the majority of our portfolios. For the first time in over a decade, we have a government that has a free hand politically and provides much greater certainty that the UK’s exit from the EU will happen sooner rather than later.
Stock markets and sterling both rose at the end of last week following the election results, but the last couple of days have shown that there is still a long way to go before Brexit is delivered. The introduction of a legal provision by the Government barring an extension to trade deal negotiations has increased the prospect of a no-deal Brexit, and this has seen the FTSE 250 and sterling lose momentum from their gains last week.
The increase in the allocation to UK equities comes at the expense of US equity holdings which appear quite expensive when compared to other markets, and with an impeachment trial and Presidential election due in 2020, the US will be entering its own period of political uncertainty.

Buckingham Gate Portfolio Review – December 2019

Posted on December 3, 2019 by - Financial Planning, Investments, Pensions, Review

Lindsell Train UK Equity : The importance of liquidity

The demise of the Woodford Equity Income fund has shown just how important it is for a fund to be able to manage it’s outflows. For those who need reminding, the fund had suffered from a run of redemption’s over a period of time and was suspended in early June when it was unable to meet the request from Kent County Council to withdraw its investment of circa £250 million in the fund.

The reputational damage incurred has since led to the decision to remove Neil Woodford as manager of the fund in October and an announcement that the process of winding up the fund would begin in January 2020. This leaves the reputation of Neil Woodford, once considered as one of the most successful fund managers during his tenure with Invesco Perpetual, in tatters and seems very unlikely that he will ever recover from this and return to a position where he is trusted to manage other people’s money.

The fallout from the implosion of this fund has seen analysts much more focused on liquidity risk than ever before, and one of the casualties of this enhanced inspection has been the Lindsell Train UK Equity fund. Following our latest portfolio review in early November, Square Mile have taken the decision to downgrade the fund over liquidity concerns and it was removed from all of the Buckingham Gate portfolios on the 18th November 2019 and replaced with the Liontrust Special Situations fund.

The Lindell Train UK Equity fund has long been considered one of the most successful UK Equity funds, and under the management of Nick Train since it’s inception in July 2006, has generated a return of 377% compared to 119% from the FTSE All Share over the same period. However, performance over the last six months has been poor, and the fund has seen significant withdrawals over recent months with September seeing its largest ever monthly outflow of £374 million. While these withdrawals can be explained by a lack of appetite of investors for UK equity markets as a whole due to Brexit etc, the level of withdrawals and the structure of the Lindsell Train fund are causes of concern.

While there are a great deal of differences in the investment approaches adopted by Neil Woodford and Nick Train, there are similarities in that they both have the courage of their convictions in choosing the companies that they invest in. Nick Train’s investment process has been characterised by a low turnover approach and the ability to invest heavily in companies that he believes in. This highly concentrated portfolio approach has been one of the main reasons for his success, but also has the potential to be his downfall.

Square Mile’s analysts are very concerned that the large concentration of assets in the fund’s top 10 holdings could see the fund struggle to sell these at a cost effective price should significant outflows persist.

It is important to reiterate that Square Mile have no immediate concerns about the ongoing viability of the fund, and it has consistently met its performance objectives and redemption requests. However, the fall from grace of the Woodford Equity Income fund has made analysts very mindful of history repeating itself and are keen to look at other investment strategies that may work better in current market conditions.

There is absolutely no way of telling if this will be a good or bad decision for the portfolios in the future, but it is clear that Square Mile are very conscious of avoiding the trap that what has worked in the past will continue to work in the future.

If you have any questions on the above, please do not hesitate to get in touch with us by calling 020 3478 2160 or emailing portfolios@buckinghamgate.co.uk.

Quick Market Review – November 2019

Posted on November 5, 2019 by - Financial Planning, Investments, Media, News

October seems to have been a month of mixed messages. After four interest rate rises in 2018, the US Federal Reserve announced an interest rate cut to 1.50% (the third cut this year) citing a slowdown in the US economy, and concerns over trade wars and a global recession.

However, markets have generally been positive last month with risk assets generally outperforming perceived safe havens. The S&P 500 posted another all time high last month, and emerging market equities posted a return of 4.20% during October. Much of this was due to market confidence that trade war concerns were receding with the announcement of a Phase One trade deal between the US and China.

Political uncertainty in the UK has reduced as well with the prospect of a non deal Brexit now looking unlikely, and sterling has rallied against the dollar and euro, but as 70% of revenue from FTSE 100 companies is earned overseas, the improvement in the value of sterling has coincided with a fall in the FTSE 100 last month.

Boris Johnson finally got his wish of another General Election, and the prospect in 2020 of maybe a stable government and perhaps an orderly Brexit would go a long way to establish market confidence after years of political turmoil.

Investment Portfolio Update – October 2019

Posted on October 10, 2019 by - Financial Planning, Investments, News, Review

I am writing today to keep you up to date on how we are positioning portfolios in the run up to the potential Brexit deadline of 31st October (although keeping in mind this is not the first Brexit deadline we have seen, and may not be the last) and in light of some weakening economic data.

The slowdown in the global economy continues and the chances of a recession developing are increasing. Some countries such as Germany are probably already in recession, that is have a shrinking economy. However, even if recessionary conditions spread to other nations, we expect the extent of the economic contraction to be shallow and well short of what occurred in 2008/9. Nonetheless, the knock to companies’ profits would be felt by the stock market and equity prices would fall. 

Against this backdrop, equity yields are generous when compared to virtually every other financial asset. We are by no means certain that a recession will develop in the US and if that pivotal economy can continue to grow, equity markets have the potential to make further modest gains over the next couple of years. Therefore, rather than reducing equity exposure, we are making changes to the portfolio to limit the damage that a recession might bring.

Yields on government bonds around the world are at tiny levels. UK gilt yields are now virtually non-existent and the government is able to borrow at long term interest rates of well below 1%. 

On such yields, any capital gain potential if a recession does strike will be small. US bonds yields are more generous at a little below 2%. This means that if the US falls into recession, US Treasury bonds can potentially deliver a worthwhile capital gain. Thus, US government bonds appear to be a better option for the portfolio. 

As we have no wish to take any currency risk on this position, we are buying the sterling hedged Vanguard US Government Bond Index fund. If global growth rebounds, the price of this fund is likely to fall, however, the equity positions held in the portfolio should gain to a far greater extent.

We will of course be watching events closely over the coming weeks and I shall write again if we feel that any further changes are required in the portfolios.

If you have any questions on the above, please do not hesitate to get in touch with us.

Kind regards
The Buckingham Gate Investment Committee

Investment Update – August 2019

Posted on September 2, 2019 by - Financial Planning, Investments

Matthew Smith, Director of Buckingham Gate Chartered Financial Planners, provides his clients with an investment update for August 2019.

Headlines:

UK GDP Numbers

US/China Trade War

Possibility of a No-Deal Brexit

Markets Posting Impressive Gains Year-To-Date

The value of investments can rise as well as fall and you may not get back the full amount you invested. Income from investment is variable and not guaranteed. The statements in this video are for information only and are not designed to constitute personal advice. If you are unsure, you should seek advice from a qualified financial adviser.

The Only Constant Is Change

Posted on September 2, 2019 by - Budget, Estate Planning, Financial Planning, Inheritance Tax, Investments, Life Planning, Media, News

If you are anything like me, you will have been fascinated by the seemingly never-ending political surprises over the past few days, not least Boris Johnson’s decision to prorogue parliament.
All of this would make for fantastic watching if it were a political TV drama, but unfortunately it is real life.
In some people’s minds, Mr Johnson’s actions have made a general election more likely and by extension the prospect of a labour government more likely as well.
Many will use these potential changes on the horizon as an excuse not to take action on something. Not to invest. Not to get that updated will drawn up. No to [insert any other thing you might want to do here].
Although potential changes are always unsettling, it is important not to use them as an excuse for inaction. Because, the thing is, once one change has happened, there will always be another one on the horizon.
If we have a general election this year, who’s to say that there wont be one next year? (and in the current political climate, I wouldn’t bet against it). Once we have had this years budget, there will be the Spring statement and then next years budget.
There will always be changes on the horizon, but at some point we must act if we want to achieve anything.
I always say to clients that we must plan based on what we know today and then adapt and change the plan in the future when the inevitable changes happen!

The Balance of Life

Posted on July 29, 2019 by - Financial Planning, Life Planning

“Life is what happens when your busy making other plans” – John Lennon

“I’m busy.”

“Work’s good thanks, it’s busy at the moment.”

“Sorry, we’re busy.”

As human beings we seem to be busy with our busyness and often, if it’s not managed properly, we get out of balance. We’re working too hard. We’re not seeing friends and family as much as we would like. We’re not enjoying the activities that give our lives fulfilment and energise us. We have no time to think – to think about what really matters most.

Achieving balance is a constant push and pull, and deep down you can feel when it is out of kilter. We must constantly reevaluate whether we have the right balance, if we’ve moved too far in one direction, or if we’ve given up on an element completely.

Every single person has a different definition of what they would consider balance. This evolves over different stages of life and as it evolves, so must the individual. My balance will not be the same as anyone else’s, although it may be similar. What constitutes as balance to me may be boredom to you. What I consider a balanced weekend – seeing friends, going to the gym, swimming with the kids, walking to a cafe, popping into my sister’s may be perceived as “too much going on” to someone else.

Friends, pastimes, family, work – when we get them in balance, we enjoy life. It is said that when you’re having fun in life, then you have struck some kind of balance. How many people do you know that have worked so hard for retirement that when they get there they don’t know what to do because working is all they’ve ever done? How many people do you know that are so busy supporting their family that they never actually see them?

Society has got better at addressing these issues and employers and employees are far more aware of work life balance than they were even 10 years ago.

At Buckingham Gate we’re in the business of having our clients reach the right balance.

We hope you have a lovely balanced week.