Hi,
As the newest member of the Jones Hill family I thought I should introduce myself - here goes...
A bit about me…
Following my graduation from University of Birmingham with a joint honours degree in Materials Engineering and Sport Science, I needed to find out what I should do with the rest of my life - how hard could it be?
I found myself being offered a place on a top graduate scheme with a large financial planning company, and quickly realised what a rewarding profession this could be. Following a multitude of exams, my journey began in the world of mortgages and insurance, but soon moved into financial planning.
My Vision…
My decision to join Jones Hill was based on my vision about the future of financial planning. I can see where clients could have been short changed in the past and wanted be a part of a team that works collaboratively to help clients reach their goals and add real value.
I believe a Financial Planner’s job is to simplify the complex, manage trade-offs and help people make great decisions about their money.
Away from the Office…
Being born and bred in Somerset, I enjoy spending time with good friends, family and a cold cider. I love sport and have previously played semi-professional rugby.
A trip to Yosemite National Park in the U.S.A is next on my long list of travel destinations.
Looking Forward…
Going forward, my role at Jones Hill will be working with clients to help them plan for the future and make smart choices with their money.
Please do not hesitate to contact me if you have any detailed technical queries or complicated general queries.
I look forward to speaking with you all soon,
James
Let’s face it – no one wants to talk about growing old. We’d much rather spend our time enjoying these present moments with family and friends than look ahead to the inevitable. But it pays to prepare for the future by discussing a plan for your passing and the financial and emotional impact that this can have on your family.
Funeral plans can be of great benefit in the planning process, but it’s helpful to know what they are and how they work. If you’re not sure about your need for a funeral plan or how to choose one, we have you covered.
What, Exactly, is a Funeral Plan?
Most funeral plans work the same way. Money is paid in advance to a funeral director to cover the cost of a ceremony, cremation, burial, or celebration of your choice, locking in today’s prices. Given funeral prices have increased tenfold over the last decade, having a funeral plan in place means there is less of a need to set aside savings for a send-off.
This planning tool gives some peace of mind to you and your family, who will be safe in the knowledge that your wishes will be honoured without breaking the bank.
There was a time when planning for a funeral was as simple as paying a set amount to your funeral director of choice. The hope was that by the time you or a loved one passed, the provider would be available to follow through with your wishes for a send-off. Unfortunately, that wasn’t always a safe bet.
Today, the idea of a pre-paid funeral plan has evolved, with protections in place like having the money kept in trust or a life assurance plan. This means that regardless of what happens with the funeral director, you can rest assured that those funds are protected and ultimately are used to fulfill your wishes.
Taking Away Financial and Emotional Stress
Locking in today’s prices for funeral costs is helpful in keeping financial stress at bay, but there is another inherent benefit to putting a funeral plan in place. Families often struggle with what their loved ones wish to take place at their funeral. Burial or cremation, a mourning or a celebration? It can be emotionally draining to discuss these details once someone has passed away.
A funeral plan allows you to detail your wishes well in advance, making life easier for your family. A call to the funeral provider sets things in motion, and the funeral plan put in place takes care of the financial aspect of it all. Family members have little to worry about when the time comes.
Differences in Plans
While funeral plans play an important role in your overall financial planning, not all plans are created equal. There are countless plan options, features, and providers willing to take on the task of creating and delivering the send-off you want, and it can be difficult to know which is most appropriate for you and your family.
First, be sure to understand what’s covered in the plan. Some options lock in the cost of a funeral director’s services but may include expenses for burial, third-party vendors, or special requests that increase over time. Funeral plans could also have exclusions that limit the distance the funeral director will travel or where the burial site may be.
Additionally, it is important to select a plan from a qualified provider. Funeral plan companies should be part of the self-regulatory Funeral Planning Authority which encourages compliance with a code of practice.
If you’re unsure where to start with this search, get in touch with
Peter Brown from Best Funeral Plans - let him know you’ve come via Jones Hill .
Email: peter@bestfuneralplans.co.uk
Direct Dial: 02381 920168
Mobile: 07719 819240
www.bestfuneralplans.co.uk
We know talking about death is not an enjoyable task, but getting the right plan in place helps takes away the worry for you and your family.
Financial education, that is! Discussing money is a big taboo in many families and, frankly, it’s uncomfortable. But having “the talk” with children about money management is crucial to their success in life – and yours as a parent.
If there was ever a time to be open and honest about how to manage finances, it’s before your youngsters get off to university. Not sure how to have that discussion? Here’s how to get started with the ‘money management’ conversation and tips for making sure it sticks.
Remember Your Golden Youth?
No, really. Think back to being your child’s age. It’s likely money wasn’t a thought in your mind when you were taking your first steps into adulthood. Like you back then, kids on their way to university these days are experiencing a lot for the first time, including leaving the comfort of having their life managed for them.
They’ve never had a reason to budget… Until now!
To spark the conversation about money with your soon-to-be university student, consider what you needed in terms of financial guidance way back when. Was it a framework for managing money on a day to day basis? Or maybe ideas for how to develop and stick with a budget?
Remember your child is new to this adulting thing and will need (and maybe even appreciate, eventually) what you can teach them before they fly the coop.
Providing the Right Tools
Before your child runs off to university, take the time to draw up a budget
with them. You can easily start by using this
spreadsheet to break down spending categories in simple terms. Then fill in the appropriate amounts to fit their needs. Don’t forget to talk them through why it's important to keep track of where the money is going each month.
But kids these days may turn up their nose at an “old-school” spreadsheet. In fact, unless it’s accessible on their smartphone, will they even bother?. To make sure they’re actually following your guidance, you could suggest an app like
Monzo. It serves the same budgeting purpose, just with a fancier, tech-driven twist.
Budgeting education and tools are a great place to start, but don’t let those do all the heavy lifting. Your student will need coaching along the way, and possibly some direction when things don’t go as planned. And that will certainly happen. Set a date to look over the budget every few months.
Pro Tip - your new university student is likely to be much more receptive to this type of discussion one month before they receive their termly student loan.
Think Past the Budget
Creating and sticking to a budget is a must for university student money management, but there are other things you can do to help your child save here and there.
Student Council Tax discounts may mean there’s no need to pay council tax, so long as students live with other students. It’s automatic for students living in halls of residence but could apply to students in private housing arrangements, too.
And while it shouldn’t be a go-to tool, student overdraft protection is helpful. Many
banks offer student accounts that include a 0% overdraft service all the time that they are a student. Having this in place could save quite a few hefty unauthorised overdraft fees.
Getting through the talk about money with your child doesn’t have to be a drag. Focus on putting yourself in their trendy shoes, and give them the guidance, tech and encouragement that you needed when you were their age.
Having a hard time getting the conversation started? We’ve helped a number of clients help plan for their children’s university recently - we’re happy to extend this offer to OnTrack clients free of charge.
In a perfect world, financial planning would be a breeze no matter what stage of life we are in. The hard truth is that for most, avoiding money pitfalls is easier said than done. Here are the 3 biggest mistakes ex-military personnel make - and how to avoid them!
Mistake 1: Failing to Take an Active Role
Whilst you’re in the military, there are fewer active money decisions that need to be made. Pension contributions and life insurance, for example, are taken care of for you, without much if any input needed by you.
But once you’re in the civvie street, you have to take a more active role in arranging your finances.
Quite a bit more decision-making is necessary after military service, especially when it comes to your workplace benefits package. For example, many employer pension plans will match your contributions up to a limit, but often the employer’s default option is not the maximum available.
Tip - make sure to contact your employer’s HR or Payroll department and find out what the maximum matched contribution is.
A second area is life insurance. Many larger employers either provide life insurance as a core part of their benefits package or it is available as an add-on. But the problem is that most employees don’t sign up for the benefit, or don’t pay the very small premium to get comprehensive life insurance.
Tip - contact your employer and find out if they provide employees with a ‘Death in Service’ benefit and what the cost is to increase it, if you need to.
Mistake 2: Avoiding Basic Financial Skills
Countless life skills are developed during military service, but financial management isn’t always one. Part of that is because some of the big ticket items are provided for you, like your housing, food, and travel costs. There simply isn’t the time or need to create a personal finance budget or dive into money management strategies.
In the civvie street, that just isn’t the case!
Instead of avoiding these basic financial skills altogether, ex-military can do themselves a favour by getting to know how these tools work to their benefit. For instance, a budgeting app or an excel spreadsheet can be your best friend in getting a handle on your money each month.
Keep it simple by dividing expenses into basics, leisure, luxury, and milestone categories. Be clear about the income you have at your disposal each month. From there, you can determine what’s left to spend and save.
Tip - download a budgeting app to hold you accountable and keep you on track, top recommendation: YouNeedABudget.
Mistake 3: Not Having a Plan
Planning, strategy, implementation. This is the bread and butter of the military, but it’s amazing how often we forget all the best laid plans when we are taken out of the environment. It’s not uncommon for ex-military personnel I meet to tell me about the change of structure and organisation in their personal lives that they had in their military lives.
Creating a plan with a trusted partner not only gives you an understanding of what where you are, and where you’re heading, but it provides you with detailed next steps and contingency plan. Without a plan, there is no real way to know if the steps you are taking are helpful or harmful to your bigger financial picture.
Tip - take a piece of paper, and write down what you want to achieve, personally and professionally, within the next 3 years. Then work out the steps to achieve them.
The old saying, "those who fail to plan, plan to fail", is painfully true when it comes to your financial life.
Transitioning out of military service does not mean you are doomed to face one of these common financial mistakes, but without taking active steps, you are likely to face these challenges. Commit to doing one thing today to sidestep these common pitfalls, no matter how big or small.
As an exclusive offer for friends, family, and colleagues of our valued clients, we provide a Second Opinion Service to help the ones you care about understand their financial situations better. If you know someone who would benefit from this second opinion service, feel free to pass this information on to them directly.
When initially taking a mortgage, many homeowners choose to take a fixed rate or tracker rate that lasts for between 2-5 years. When these rates end, in most cases the borrowing will transfer onto the lenders ‘Standard Variable Rate’ (SVR) and for most lenders, this means the rate charged will be between 3.74% to 5.74%.
Dave Rees, our mortgage expert, reveals how you could save up to £332 per month on your mortgage.
Typically, the rate for Standard Variable Rates are higher than those that are available if taking a new mortgage, so for most people a significant saving can be made by shopping around for an alternative. For example, a mortgage of £200,000 with 20 years remaining would cost £1,291pcm on a typical SVR of 4.74%. However, assuming there was equity of at least 25%, a 2 year fixed rate could be obtained at 1.44% - this would cut monthly repayments to £959pcm(*).
Alternatively, a 5 year fixed rate could be obtained for 1.69% with a £749 fee that would cut payments to £982pcm (*) A new lender will require the property value to be confirmed and a solicitor to be involved but the lenders offering these products (and many others) would pay these costs on behalf of the applicants.
Consideration should also be given to taking a new product with the current lender as in most cases, lenders will offer borrowers competitive options as an alternative to switching to the SVR and if no additional borrowing is required, this is usually a quick/simple process with little/no additional underwriting involved.
Ideally, these options should be considered 2-3 months before the current product ends, to help ensure if changing, that the new product can start as soon as the current product ends. For advice and guidance on product options, please contact Dave Rees on 01225 775923 (Option 2) or 07932 469797 or email at dave@davereesmortgages.co.uk
(*
Products quoted correct as of August 2017)
Hello!
I’m Ellis and the newest, and 7th member of the Jones Hill team (apparently this makes Jones Hill one of Bradford on Avon’s largest employers!).I’m sure I’m going to be speaking with many of you over the coming months, so I thought sharing a little bit about me first would be a great start.I competed for Great Britain in swimming, which meant I got to travel across the world representing our Country.In my spare time, I generally enjoy running, baking, sampling multiple gins (an ever-growing, extensive collection is essential), country pubs, and absolutely love dogs. My partner is a School Teacher, so we relocated from Norwich as part of his job. In Norwich I worked as a retirement solutions specialist for a little firm called Aviva, so I’ve got a really good background in understanding how financial services providers work. When I realised my partner and I were going to be relocating I looked around for the best financial services employer I could find, and quickly found myself at Jones Hill – this is my third day!My motto for life is: …. 'If you think you are beaten, you are. If you think you dare not, you don't. If you'd like to win, but think you can't, it is almost certain you won't. The person who wins, is the person who believes they can'……At Jones Hill, I will be looking after and developing our systems and processes with the aim of continuously improving your experience and journey with us. If you have any thoughts or ideas, drop me a line.I look forward to meeting you all soon,Ellis
It was at the end of 2016 when I was given a runner’s ticket to the 2017 Bath Half Marathon by my local Crossfit Gym in Trowbridge. Although I’ve run a fair share of races, I’d never run this far on tarmac.
Now, I’m not a particularly, ultra-fast runner - once or twice a month I’ll do Parkrun at Southwick Country Park, with a personal best of 20 minutes 57 seconds - not too shabby for an old fella!
I knew I’d never keep up with the racing snakes, so decided to make it more personally challenging than just running faster!
So, I decided to do the Bath Half whilst carrying an 80lb bergen (military rucksack), which is a tad under 6 stone - it’s a bit like carrying both my children, Maddi and Archie, on my back for 13.1miles. The bergen was filled with useful kit - rations, spare clothing, basha (tent-like thing), first aid kits, cooking equipment, wet weather gear, and lots and lots of water.
There was a method in this madness - I wanted to see how close to the Guinness World Record of 2 hours 30 minutes I could get!
Carrying such a huge load is very similar to walking your dog in a park. It's’ very sociable! One of my very first clients came over to say hi even though we hadn’t seen each other for almost 8 years! Thankfully I was able to remember Jo was a tree surgeon, who he worked for, and his family! Lots of serving and ex soldiers came up to try the bergen on - the word ‘nutter’ was mentioned a few times!
The race started and I realised within 100 metres that it was going to be a very tough challenge right the way through. Although the course is relatively flat, with that weight on your back, it didn’t feel at all flat.
The support along the route was terrific - from bands, drummers, cadets and the public as well as friends and family. There was loads of support to the extent that by the end my shoulder was aching from the congratulatory shoulder slaps from other runners!
By mile 8 by left knee was aching and I was getting sharp pains on the side any time I tried to do more than a fast walk. This meant the end to me getting anywhere near the World Record, but there was no way I wasn’t going to finish.
The last 2 miles were a long, long hard slog, and the final half mile was simply brutal. I wasn’t out of breath and I was fully hydrated, but my legs, hips and shoulders were screaming blue murder and my heart rate was averaging 130bpm.
I rounded the corner toward the finish line ahead, to find a small but determined crowd egging me on. I had no choice, however painful it was - I couldn’t walk it, I had to sprint it, and staggered over the line in 3hrs 40 minutes.
On the other side of the finish line I dropped the bergen off my back with a resounding thud. One of the 8 or 9 medics, who crowded around shaking my hand, went to pick it up for me and couldn't get it more than 10-12 inches off the ground, so 2 of them managed to get it on to a wheelchair and accompanied me off the course.
It’s taken me about a week to start back in training and I can now run properly again! Would I do it again? Well, I’m already down for next year’s, so who knows!
In the meantime, lots of people have kindly donated to my
fundraising page for Clic Sargent - feel free to help with this if you would like to.
Behavioural finance, the idea that we make choices based on intuition and emotion more than rational thought, helps us understand what drives our decisions – our biases, fears, and overall feelings about money. But emotion and intuition rarely pave the way for sound decision-making.
The need to make decisions, big or small, is present every day, including choices about money. From saving and investing to paying down debt, making the “right” decisions is not always black and white.
If you want to avoid making costly mistakes with your financial planning, here are the things you will need to understand.
Identifying Behavioural Biases
No matter how rational you think you are, we are all human and act on emotion from time to time.
Several biases, or triggers, are built on this premise, here are some of the most common that relate to your money:
- Overconfidence: the tendency to place too much confidence in your choices about money (like when we found that one ‘star’ fund manager)
- Anchoring: using old, outdated information or rules of thumb to justify past decisions
- Representativeness: making connections that aren’t really there (Trump won the election, the market went up, so that must be good for the economy, right?)
- Loss aversion: a reluctance to accepting loss, even if it’s costing you money (I won’t sell it now, because it’s sure to come back)
- Regret reduction: avoiding certain actions so regret is not an option
- Blind spots: failing to see the behaviours that hold you back
Each of these biases in financial decision-making can cost you significantly. For example, being overconfident about your goals may mean you fail to spot check them periodically, which could mean falling short of your objectives.
Failing to see the missteps in your financial behaviours or the holes in your plan may result in not saving nearly enough or continuously selecting the wrong investment.
Likewise, holding on to a poorly performing investment simply because you don’t want to realise the loss can mean even bigger losses down the line.
If you’re avoiding regret, it usually means you’re not taking the right actions to reach your objectives. You may have been burned by the market before and are sitting on the sidelines waiting for your time to get in. But the evidence shows it’s ‘time in the market’, not ‘timing the market’ that really counts.
Biased short-term perspectives based on emotional responses result in lost opportunities, wasted costs, and more importantly, unhappy and subpar investment returns.
How To Overcome Your Behavioural Biases
So, how do you overcome behavioural pitfalls with your financial planning?
First, you have to recognise that decisions based on emotions are likely to be poor decisions.
For instance, according to
behavioural finance research, by focusing your attention on emotional feelings instead of proven, rational methods, this can cost you 4-5% in lost returns on your investments each year. Now that’s an expensive mistake!
Understanding what triggers you to make, or avoid making, certain decisions is the next step. If you see yourself falling into one of these categories, try setting up a list of hard and fast rules that can help steer your next move.
For example, never make investment decisions straight after reading the morning papers. Instead, take some time to cool down and reflect before coming to your decision.
How a REAL Adviser Can Help
If after this, you found that you’re still succumbing to behavioural biases, there is where working with a REAL financial adviser can help
Getting advice from an experienced professional who not only understands these biases but also works to stand objectively in between you and the big mistake is a service worth paying for in its own right.
REAL advisers do just that. We provide unbiased professional advice when it’s needed most – when your circumstances change, when markets are volatile, or when there’s doubt about your future success.
Ending a marriage comes with a large handful of challenges, with money usually topping the list.
As a divorcing woman, you may feel overwhelmed because you spent your married years letting your spouse handle your financial picture. It’s time to take the bull by the horns and set yourself up for success by following these tried and true steps.
1. Update your accounts
The first step in steadying the ship is to take back control over your accounts.
If you have changed your name, you will need to update your bank and investment accounts. Identification cards, passports, and other property in your name will also need to be updated as soon as possible.
It’s not exciting, it is boring, but it’s a necessary step toward protecting what is rightfully yours while getting yourself organised for your new life.
2. Create your own goals
Throughout your marriage, you probably had a number of financial goals you were working toward with the help of your spouse - paying off the mortgage, university fees and so on.
You now need to create your own goals, remember it probably wasn’t raining when Noah built the ark!
Getting ready for retirement, paying down mortgages or loans or funding an account for travel all look a little different when you’re on your own.
Knowing what you want is the best place to start.
3. Have a plan in place
After you’ve determined what you’d like to achieve, you need to work out how you’re going to achieve it...
Your new financial plan should answer questions like:
- When do I want to reach these goals?
- How could I use my current and future assets to help me get what I want out of life?
- What does success look like within this new plan?
Getting clear about the path you will pave to secure the things you want in your financial life is a powerful step toward securing a stable future. For help with creating an actionable financial plan, check out
our guide here.
4. Focus on what you can control
Emotions run high during and after a divorce, and they have a tendency to get in the way of reaching your new found freedom.
To steer clear of emotional pitfalls, focus on taking control where you are able. These areas may include paying yourself first through automated savings plans and investing with a long-term perspective in mind.
In addition to taking charge of your savings and investments, understanding the difference between what’s coming in the door (income) and what’s going out (expenses) each month is necessary for maintaining a tight grip on your plan. Know your budget inside and out, and make it work in line with your overall goals – without getting caught up in the things you can’t control.
5. Get help
Finding financial stability after divorce doesn’t mean you have to go it alone. At Jones Hill, we understand the financial complexities that come with ending a marriage and work to help you move forward in the best way possible.
We lend an expert hand in building a new financial plan that fits your updated needs and goals.
To schedule your consultation and get started down your post-divorce financial path,
contact us today.
You may have heard me on BBC Wiltshire yesterday morning talking about the Petition that is being put forward by Women Against State Pension Inequality (WASPI) for the government to help ease the financial uncertainty for women born in the 1950’s who say they have received little or no notice that the state pension age for women is being delayed by up to 6 years.
Firstly, a bit of history - back in 1908 the Government of the day set up the ‘old age pension’ aimed to help those over age 70 earning less than £2,000 a year (in today’s money). It was generous for it’s time and was means tested.
In 1925 it morphed into becoming contribution based, i.e. you had to pay into to it to receive it, and the start point was age 65 of the youngest spouse.
Under those rules Michael Douglas would be 90 years old before he could get his old age pension (are he and Catherine Zeta Jones still married?). This was deemed unfair, so just after the outbreak of WW2 women’s old age pension age was dropped to 60. And there it stayed for 55 years!
In 1995 we started the process of reducing some of the discrimination between men and women. Many ex-communist countries have opted not to reduce the discrimination as they believe women are disadvantaged by usually being the one to bring up the children.
In 2007 the Labour government decided to increase state pension age again eventually up to age 68, just 2 years off what it was originally set at in 1908! But it’s still not means tested...not yet anyway!
The decision was then taken that, in 2010, state pension age would start to increase and by 2020 would be complete. In 2011 this date was brought forward to 2018.
Of course people are living longer too, so delaying state pension for everyone will save the government a lot of money.
Apparently the government wrote to those concerned, and put adverts in the press, however when pushed for evidence of this under Freedom of Information, they refused as the cost to do so would be more than £600. No one remembers getting a letter or seeing any adverts. In 1995, only 1% of the population, 600,000 people, had internet access - remember 26K modems and the funny noises they made when they connected?
If the DWP gets mail returned, it doesn’t always try to track you down, and they freely admit that a sizeable proportion of their mail doesn’t even get opened. Can you imagine expecting to be claiming your state pension in a year or two, only to find that it’s been delayed by up to a further 6 years! Somewhere between 300,000 - 500,000 women are affected.
Some women were delayed by the first change to 65, and then by the second change as well. Many didn’t know about the first change and so the double whammy will have sent them into shock.
Men’s state pension age was delayed too. But they were given over 7 year’s notice of a 1 year delay.
Ex pensions minister, Baroness Ros Altmann, said that at least 10 year’s notice should be required to give people adequate time to make alternative arrangements. It took them 14 years to write to those affected by this debacle, but they say there is no wiggle room to put it right.
To compound the problem, at best, many women affected have small private or company pensions as companies used to exclude women and part timers from their company schemes. They were highly reliant on getting their state pension, and it’s been thrust beyond their grasp, twice. They were also much more reliant on their husbands staying in work for longer than expected.
Previous Pensions Minister Steve Webb said he acted too hard and too fast. Despite this, Baroness Altmann ruled out any help on 26 Sept 2015 even though when she was Director General of Saga in 2011 she called for a slower timetable and better information.
There was a debate, which the government refused to take part in, on 7 January 2016 and it had unanimous support from those attending. But, as a backbench motion it had no force to make the government act and DWP & Justice Minister Shailesh Vara said there would be no change.
The second debate on 1st February 2016 was also rejected by stonewall Shailesh Vara, although she said that the women could of course claim Job Seeker’s Allowance instead. This is worth much, much less than state pension and comes with a raft of terms and conditions designed to reduce how much you can have.
You can understand why women affected are very unhappy!
Here’s hoping that something more positive comes from this latest petition. We know there is going to need to be a compromise but it’s likely that one party will be compromising much more than the other.
If you want to know your state pension age, click here.
Remember that, at best, basic state pension is often little more than £20 a day, so you absolutely need to provide for yourself - if you’d like to talk pensions then get in touch.
A heated debate over the benefits – and drawbacks – of active and passive investment management has been a constant in the investment world for years. Supporters for active investment focus on the potential for high returns, while passive investment fans focus on low fees and simplicity in portfolio construction. At Jones Hill, we understand the need for both, but we want to shed some light on the differences.
Confused about how active or passive management fit into your investing goals? We’ve got you covered.
The Lure of Active Management
Active investment managers put together a mix of investments meant to outperform the broad market. They may look at economic factors, sector or company research, and market trends to pick and choose which investments to include in a portfolio. These strategies are based on one tempting principal: to beat the market (or appropriate benchmark).
While active management is attractive on its face, the strategy comes at a cost. Actively managed funds are more expensive than their passive counterparts which ultimately eats away at your returns. To add to the pain of active management, most managers fail to outperform the market – especially when it comes to core holdings like large company stocks. If you don’t feel like spending your time chasing returns, active management probably isn’t for you.
Logic in Passive Management
On the flip side of the investment coin is passive management – a portfolio strategy that uses simple tracking of an index to generate investment returns. Passive managers don’t try to reinvent the wheel; instead, they select the same stocks found in a particular index, for instance, the FTSE 100, and put together a portfolio that mimics those holdings.
Because passive management doesn’t include in-depth research or ongoing buying and selling in an attempt to boost returns, investments here are much less costly. Instead of focusing your time and energy on chasing unrealistic returns to make up for fees, you can sit back, relax, and know your investment is using proven logic to give you a respectable return over time.
Who Wins the Investment Debate?
Both active and passive investment styles can help you reach your investment goals, but there is a clear winner in certain situations. Passive investments are a smart choice for your core holdings since history has shown us that active investments simply don’t live up to the performance hype. However, adding low-cost active investments as a small portion of your portfolio gives you access to specific sectors or certain market trends, potentially enhancing performance.
At Jones Hill, we are strong supporters of the low-cost, sound investment strategies represented by passive management styles. But we also understand how active management can play a small part in your overall portfolio design. If you want an expert to help you navigate the world of active versus passive investment strategies, contact us today.
Well, “the risk tolerance chat” is the investment equivalent of the “birds & the bees chat”, important stuff to say the least!
Properly understanding your risk tolerance allows you to be invested in line with your goals and objectives instead of lying awake at night worrying what your investments are up to.
Investment risk and risk tolerance, you’ve probably heard tons about it, but might still find yourself scratching your head thinking.. “what on earth is it?”
What On Earth Is Risk Tolerance?
Risk tolerance is how much risk you can handle in your portfolio and is determined by your investment goals. For example, Mrs Cautious has modest financial goals and a long time to achieve them, therefore she doesn’t need to take on much risk and would likely have a low risk tolerance. After all, why take more risk than you need to?
On the other hand, Mr Risky has more ambitious goals and he’s in something of a hurry (think Friday evening rush hour commuters). Mr Risky is more likely to hit the gas and cut a few corners because, in his view, the reward is worth the risk.
Understanding where you sit between Mrs Cautious and Mr Risky is the art of risk profiling.
Mr Risky Meets Mrs Cautious
But what if you have the needs of Mr Risky but the personality of Mrs Cautious? For lots of people, the answer is just to invest in riskier stuff, right?
Unfortunately not, and this is where we find a lot of people get stuck and worried about what their investments are doing (Up.. Down.. Up.. Down).
If you’re in this situation, don’t jeopardise your nest egg. Instead, consider revising your investment goals to something a little more modest (do I really need 2 weeks in Fiji?), or putting a few more quid into your monthly savings plan.
The Behaviour Gap
For years there have been attempts to simplify the process of identifying risk tolerance by using questionnaires and other tools, but the truth is there are no shortcuts (listen up Mr Risky).
One reason for this is the difference between what we think we would do in a particular circumstance and what we would actually when that circumstance arises. This is called the “behaviour gap”.
For example, in the annual fire drill at the office, everyone knows not to fetch their coat / briefcase / favourite stapler, but we just can’t help it, we just need that stapler right?
This is the behaviour gap in action, we know what to do when the fire bell rings, but when it happens, we go searching for our belongings - and that’s the risk tolerance conundrum!
In an investment context, the equivalent is sitting in your financial adviser’s office, calmly informing them that you can live with a market fall of, say, 20%, but when you start to see red, the first thing you want to do is pick up the phone and scream SELL, SELL, SELL!
At Jones Hill, we realise that properly understanding your risk tolerance is an important part of the financial process. That’s why we ask searching questions and listen attentively, so that we can design a portfolio that’s just right for you.
In the world of investing, we all should consider a few things before picking where to park our hard-earned money. Questions about how much volatility you can stomach, how long you will invest, and the purpose behind the investment are common, but if you’re like most investors, some attention is given to performance. And so it should be!
But is past performance the best indicator of future performance? Based on research and experience, our vote is a big NO!
A Major Player in Fund Performance
It’s easy to be drawn to high performing funds. Who doesn’t want an impressive rate of return – which may or may not come with some bragging rights? Despite the appeal of double-digit earnings, a handful of studies show that past performance isn’t a real indicator of future reward. In fact, the biggest predictor of a fund’s performance is cost.
Every fund has a built-in cost of doing business, known as the expense ratio. Portfolio managers are paid to create and maintain a bundle of various investments within a single fund, making it easy for you as the investor to participate in a well-rounded, diversified investment. The expense ratio pays for that convenience by reducing your total return.
A recent study by Morningstar, the leading global research provider on investments, broke down the importance of costs when it comes to picking your investments. The data reveals that across all asset classes, the least expensive funds outperformed more costly options each and every time.
Staying in Control
So how do you make sure you stay in control of your investment portfolio’s overall cost and total performance? Start with your investment style. Active funds, or those which chase returns in an attempt to outperform the market, have higher costs than their passive counterparts. Despite the appeal in terms of performance, research shows that active funds do not consistently provide higher returns over time (that’s before and especially after costs!).
That’s because chasing performance is less about skill and more about uncontrollable luck.
Passive investments – those which track an index in an attempt to reflect the performance of a specific market – have far lower fees, leading to less drag on your total return. Investment managers who follow a passive management style don’t get caught up trying to beat the market, but instead, they focus on creating consistency and simplicity in their investment choices.
At Jones Hill, we understand that to reach your goals you need investments that perform well over time. Instead of focusing on the hype of outperformance, we help you construct investment portfolios that are low-cost, tax-efficient, and in line with your tolerance for risk – all which allow you to enjoy your life without wasting time chasing unicorn returns.
Contact us today for a discussion about your investment objectives and how we can lend a helping hand.
Financial advisers, are they worth it? It’s a challenging question for any professional, so here’s the how to guide to know if a financial adviser is right for you.
Free Financial Guidance
The Internet can tell you a lot about investment and retirement planning, and best of all it won’t charge you a thing!
Prefer a bit of human contact? Then get in touch with Pension Wise. Although strictly speaking they’re not advisers, they can provide you with some guidance and point you in the right direction free of charge.
Financial Adviser Charges
The other option is to get real financial advice. But be warned, the old days of ‘free’ financial advice are over. Nowadays fees must be expressed clearly and fairly. There are a number of different pricing models, but these essentially boil down to three main categories:
1. Hourly - typically around £200 per hour
2. Fixed fee – a flat fee which typically depends on the time, complexity and value of the
work involved
3. Percentage of assets under investment – typically around 4% of your assets
Cards on the table – at Jones Hill we offer fixed flat fees. We always disclose the fees you will pay (in a format you can understand!) and explain our charges fully before undertaking any work on your behalf. We prefer fixed fees as they give you the peace of mind by knowing exactly what you will pay and it means that you are not being penalised simply for having more money (as percentages do).
So how do the numbers stack up for a typical client who invests £150,000?
1. Hourly – a full financial plan is likely to take around 15 hours, so will set you back around
£3,000.
2. Fixed fee – typically range from £750 - £2,500
3. Percentage of assets under investment – around £4,500
Financial Adviser Value
Those are some pretty big numbers, so the real question is will a financial adviser improve returns enough to cover their own fees (and then some)?
In most instances, the answer is yes. A number of studies have shown that advisers help clients to reduce the ‘behaviour gap’, often to the tune of 1 – 2% per year. An adviser is more likely than you are to be able to see the big picture and take the long term view (remember Brexit?). They will be also able to improve your tax position and save you £££’s in otherwise paid tax.
But there are other sources of adviser value that are just as real but won’t necessarily show up in your bank account. You might call this lifestyle value.
Consider the time, knowledge and inclination required for self-managing your own investment and retirement plans. If you’re the type of person who doesn’t find reading personal finance particularly interesting, or has more exciting things to do with your life, then you likely would benefit from having a financial adviser. By being able to hand off your financial affairs to a professional, qualified expert you will gain the time and peace of mind to do the things you enjoy most.
The bottom line is this, financial advisers aren’t right for everyone. For many people, a bit of Internet research, topped up by a visit to Pension Wise is likely to be just fine. But if you’re financial affairs are complex and you value spending the time on the things you enjoy, then you will likely to benefit from having a financial adviser.
Remember, money comes and goes, time only goes.
It’s all over the media – press, radio, TV, Facebook & Twitter - Brad Pitt and Angelina Jolie are to divorce! The questions many are asking are “who cheated?” and “with whom?” but more practical considerations arise.
When there’s a split, how do you disentangle your financial and lifestyle plans from those of your partner?
Sometimes life serves you lemons …
The typical Jones Hill client may not have the finances and lifestyle of Brad & Angelina (possibly a rash assumption on our part!), but they’d be wise to involve a financial adviser in the separation negotiations. In the absence of a pre-nuptial agreement (Apparently Brad & Angelina didn’t have one, so you’re in good company!) you would be foolhardy not to take specialist advice before agreeing on the terms of a split.
It’s true that a financial adviser will add to the costs of the separation, but the arguments for consulting a financial adviser regarding a divorce are similar to the arguments for consulting one at all – please also see our blog post “Are financial advisers worth it?”
In a separation there may be investments, pensions, property (eg a family home, holiday home) and financial liabilities (eg a mortgage) to be split. Pensions can be split on value (for younger clients) or on income (for more mature clients). It may be prudent to balance a pension against other assets to avoid having to cash-in and start afresh (offsetting) or it may be possible to have a portion of a pension paid to another party (earmarking) rather than start new separate pensions (splitting).
Market conditions or other reasons may make it undesirable to sell property, and in that case, a balance will have to be achieved using other assets. The division of mortgage liabilities will likewise need careful consideration according to the age, employment situation and other liabilities of the parties.
The tax efficiency of any financial arrangements should not be overlooked. Whilst gifts between married couples or civil partners are tax-free, the transfer of assets may give rise to Capital Gains Tax liabilities, and the post-split tax situation of the parties may be very different from each other.
Whether you’re married, in a civil partnership or co-habiting, if separation is on the cards, don’t forget to contact your financial adviser as well as your divorce lawyer.
PS – Brad/Angelina – remember, if you’re calling Jones Hill from outside the UK, add +44 in front of our telephone number!
OK Brad, we can understand that if Angelina has just announced she’s divorcing you, then making lemonade won’t be high on your list of priorities.
Nothing feels better than accomplishing a goal you’ve set for yourself. Maybe you’ve been burning the midnight oil at the office and finally got that big promotion, or maybe you’ve put in countless hours of sweat into a home renovation. Regardless of your objective, seeing the end result is a beautiful thing.
It’s no different with goals related to your money, but for some reason, for a lot of people financial objectives seem a bit more challenging.
Goals that Work – and Ones that Don’t
Would you set off on a cross-country road trip without some idea of where you were headed or when you wanted to arrive? Most of us would avoid that disaster by having some sort of plan in place. Your financial goals should follow the same thought process: what do I want and when do I want it? In other words, they should be SMART: specific, measurable, achievable, relevant, and trackable.
You can work hard and set aside a few pounds here and there, but without setting specific goals, you are likely to feel a bit lost. Setting objectives for your financial life starts with understanding the specific “thing” you’re aiming for and then defining what success means in the context of that objective.
For example, your objective of wanting to retire by age 60 with enough assets to draw 75% of current income is a specific, measurable goal that you can track periodically. Simply stating you want to retire one day is lofty at best and sets no parameters for measuring your progress. Knowing where you want to go is great, but if you have little to no idea where you’re starting from, you’re in trouble!
Action is Everything
Your ’retire by age 60, drawing 75% of your current income’ objective only works when you figure out what’s needed to get there. To frame your goal, you will need to ask intelligent questions, such as:
- How much do you need to save now in order to reach the right account balance?
- Which investment vehicles do you need to set up to save in a tax efficient way?
Answer these questions and you’ll be on your way to sketching an actionable financial plan.
But if you’ve struggled with major financial goals, you’re not alone. Working toward something as far off as retirement, buying a second property or funding your children’s education can be overwhelming to think about, let alone plan for. These goals seem too big and too distant, but breaking down your financial goals into smaller, manageable chunks can help.
Let’s go back to our retirement goal – start with the big picture. If your lifestyle in retirement involves expensive hobbies, you’ll probably need more than someone who plans to just potter ‘round the garden.
Focus on understanding the big number first, and then break that down into smaller pieces that fit into your everyday life right now. Establish milestones for yourself that are realistic (i.e. savings X amount by the end of next year) so you don’t set yourself up for missing the mark.
Accountability Along the Way
If you’re like most people, setting a goal is not where the problem lies. Of course, you want to retire, or buy a beach home, or send the kids off to school without the burden of tuition – these goals are not uncommon. Unfortunately, reaching them without too many hiccups is. If you are struggling with reaching financial objectives, it’s time to get SMART about what you want.
Being accountable to another person who understands what you are trying to achieve is a powerful step in actually reaching your goals. At Jones Hill we know what it takes to get to the next level of your plan, and we bring a perspective that is both unbiased and proactive. We will boost your level of understanding about different methods to achieve your goals, leading to an ongoing relationship that helps you build, achieve and maintain your best financial life.
01225 775923
