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Jonathan Gibson

Brexit and your investment portfolio

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There is always a temptation to play around with an investment portfolio’s structure, in other words, to attempt to position it for potential short-term global events, such as Brexit.

Irrespective of what might happen in the future, including any of the potential outcomes of Brexit, as investors we can rely on a number of truths:  markets work pretty well and are hard to beat, so capturing the market return on offer using lower-cost, well-structured products makes good sense;  spreading our assets broadly to ensure the risks we face are well-diversified will always sit at the core of a successful long-term strategy;  balancing out the risks of shares by owning high quality, short-term bonds provides a good insurance policy;  being patient and being disciplined are fundamental to achieving the returns we need to fulfil our lifestyle and financial goals.

As we are faced with short-term uncertainty, and possible anxiety, over Brexit, let’s focus in on diversification.  There are many ways in which an investor can be diversified, however, owning a portfolio that includes many thousands of companies, all market sectors, spread across developed and emerging economies, reduces the risk of being caught out by material negative impacts in specific markets, such as the UK.  In the UK a few names dominate; the top 10 shares represent more than 35% of the total UK market and the largest, HSBC, weighs in at 5.3% of the broad UK market.

A market-capitalisation weight to shares across all developed and emerging markets shows a very different, well-diversified picture.  The largest listed company in the world is Microsoft at 2.2% of the market.  It is worth noting that Microsoft’s market capitalisation is over US$1 trillion, compared to HSBC’s US$150 billion.  In a global market capitalisation weighted portfolio, HSBC’s weighting is greatly reduced to under 0.5%.  It is astute for investors’ portfolios to hold material allocations to non-UK shares and the majority of companies that this represents.

Sector diversification also makes good sense.  Owning a material allocation of global shares ensures that sector exposures are diversified.  The UK has some large sector allocation differences compared to the world as a whole; in particular it has no major technology companies like Microsoft, Amazon and Google, despite technology shares representing around 15% of global equity markets.  UK exposure to technology shares is less than 3%.  The UK is also materially overweight in the energy and basic material sectors.

If you are a client of Wells Gibson, you will have an investment portfolio which is as well-positioned as it can be to weather Brexit uncertainty and whatever lies ahead.  As a member of the Evidence-Based Investment Solutions group, our recent Investment Committee Meeting in September concluded that, of the thousands of funds available to UK investors, the funds our clients are currently invested in, are all excellently managed and represent some of the best available to give our clients exposure to global asset classes such as short-dated bonds; commercial property; and developed market and emerging market company shares.

Brexit and the political chaos that we see before us, combined with the polarisation of politics between quasi-Marxist policies on the left and populist rhetoric on the right is unsettling for all.  We are where we are, unfortunately, whatever one’s Brexit views or political persuasion.

Please don’t hesitate to get in contact if you have any questions.

Graduate Career Opportunity – Associate

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Please apply by emailing us at integrity@wellsgibson.uk and let us know why you would like to be a part of the Wells Gibson team. Please also include a CV.

THE POSITION

As an Associate, you will join our graduate training programme, learning how Wells Gibson is a trusted partner for a number of client families.

You will begin by supporting the financial planning team and be mentored through professional exams so you are qualified as a Certified Financial Planner and Chartered Financial Planner within 5 years.    As you progress through the training programme you will progress to the client-facing role of Financial Planner and in the long-term, Senior Financial Planner.  Alternatively, you might prefer and be more suited to the role of Technical Financial Planner.  Whatever route you choose, we are confident you will be authorised to deliver our Proper Wealth Planning service within 3 years.

As an Associate, you will be mainly based in our office within the Technology Park in Dundee however, travelling to meet clients and attend professional events should be expected.

RESPONSIBILITIES AND DUTIES

Your role as an Associate will quickly evolve as you progress through your professional exams, but to begin with:

  • You will join the financial planners in client meetings, learning on the job and helping them with any work which arises from the meetings.
  • You will gain experience working within all roles in Financial Planning, including helping the existing financial planning team to give the best possible client experience.
  • You will assemble the information necessary for the financial planning team to assess the clients’ position and formulate advice.
  • You will liaise with clients by phone and email, to collect information from them and to answer their questions.
  • You will liaise with product and investment providers and other professionals to collect information.

DESIRABLE CRITERIA

  • Minimum 2.1 degree in any subject (preferably Finance/Economic/Business/Maths or similar).
  • Minimum Grade B in GSCE English and Maths.
  • You will need general computer abilities, particularly within MS Office and on social media platforms.
  • You need to be well-organised, with an ability to get things done.
  • You need to be a great communicator, both verbally and in writing.
  • You will need to be driven to succeed, particularly with ongoing study for relevant professional exams.
  • You will need to hold a full driving licence and have access to a car.
  • You will need to have an interest in business development and building relationships with clients, in order to build a career in financial planning.

This opportunity is part of our long-term growth strategy.  While we are ready to appoint now, we want to engage the right person for this position, and therefore please apply if you would like to be considered, even if you are committed to something else for a few months.

Could inheritance tax be abolished at the next Budget?

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Speaking at a Conservative Party conference fringe event this week, Chancellor Sajid Javid gave a strong hint that the unpopular death tax could be reformed or even abolished later in the year.

The event, which was organised by the Institute of Economic Affairs and the Taxpayers’ Alliance, saw the Chancellor admit that scrapping inheritance tax is something a Conservative government may consider soon. He acknowledged that inheritance tax is hugely unpopular, due to the inherent unfairness of taxing income during life and at death.

Speaking at the fringe event, Javid said:

“I shouldn’t say too much now, but I understand the arguments against the tax. I do think that when you pay taxes already through work or through investments and capital gains and other taxes, there’s a real issue with then asking [individuals], on that income, to pay taxes all over again. Sensible changes have already been made, but it is something that is on my mind.”

So, what might we expect to see in terms of inheritance tax reform in a Budget later this year?

The Office of Tax Simplification is currently carrying out a review of inheritance tax, with the goal of simplifying this tax system. Their first report was published last November and included a recommendation the government should transition taxpayers to a fully digital system for inheritance tax.

Their final report, published in July this year, proposed changes to the ‘seven-year rule’ for potentially exempt transfers, as well as making changes to taper relief.

As things stand, inheritance tax is charged on the value of taxable estates in excess of £325,000. It’s charged at a rate of 40% on death. No inheritance tax is paid on estate values under this nil-rate band, or on monies left to a UK resident spouse or civil partner, registered charities and some other organisations.

In addition to the £325,000 nil-rate band, a residence nil-rate band is being phased in, which provides a further exemption where the main residence is left to a direct descendant on death. This residence nil-rate band was introduced in 2018/19 at £125,000 and currently stands at £150,000 for the 2019/20 tax year. It will continue to rise to reach £175,000 in 2021/22, at which time when combined with the nil-rate band, a couple could potentially leave £1,000,000 free of inheritance tax.

Inheritance tax is a big deal for a relatively small number of families. According to the latest official figures, 28,100 estates were charged inheritance tax in the 2016/17 tax year, up 15% on a year earlier. It means 4.6% of estates are liable for the death duty. These families paid an average inheritance tax bill of £179,000, to pay a total of £5.4bn in inheritance tax, a new record level.

Inheritance tax is often referred to as a voluntary tax because there are several steps you can take to reduce or even entirely mitigate this tax for the next generation.

A good starting point is to understand how much tax your children and others would pay if you were to die today. You can then explore the various options, which include making use of available allowances, gifting money, and placing assets in a trust.

Wells Gibson supporting Financial Planning Week 2019

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What is Financial Planning Week?

Financial Planning Week is a chance for people nationwide to access free financial planning sessions offered by CISI Certified Financial Planners.

This is an opportunity for anyone at any stage of life to book in for an hour long, one-to-one, confidential session between the 7th-11th October 2019.

The annual campaign, organised by the-not-for profit professional body the Chartered Institute for Securities & Investment (CISI), is a national initiative to help improve the financial fitness of the UK public, while highlighting the fact that CERTIFIED FINANCIAL PLANNERTM practitioners represent the pinnacle of professionalism for their knowledge, skills and integrity. You can also explore the Financial Planning Week website for handy tips and tools on how you can plan well to live well.

www.cisi.org/cisiweb2/fpweekmicrosite/find-a-planner

Click the link above to find a planner near you and book your free session or you can contact us directly.

Helping your children onto the property ladder

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Getting onto the property ladder has become an increasingly difficult challenge for young adults.   

Rising property prices and areas where affordability long ago went beyond reach, means turning to the Bank of Mum and Dad for financial support is necessary. 

New research suggests that older homeowners are stepping up to this challenge, providing the funding for their adult children to buy a property.  Equity release adviser Key found that retired homeowners are finding capital in a variety of ways, including selling their buy-to-let property investments, acting as a guarantor on a mortgage, or taking on new mortgages. 

Releasing cash in these ways is in addition to using cash savings, something 95% of retired parents have done when supporting property purchases for their children.  Around a fifth of older parents who acted as the Bank of Mum and Dad used monies from their pension funds as a source of capital. 

The research, which spoke to 150 mortgage advisers, found that 19% have received enquiries from older customers about selling buy-to-let investments or holiday homes.  Nearly a third of older customers asked about acting as a guarantor, to help secure the mortgage required by their children or grandchildren. 

Also, 28% made enquiries about remortgaging to release capital, and 21% to take out a new mortgage. 

It’s estimated that nearly half of first-time buyers are tapping into the Bank of Mum and Dad for financial support.  Other research published recently showed that parental support would be in the top ten largest lenders in the UK if it were a real bank.  

Data from industry body UK Finance shows that the average first-time buyer in Scotland is 29 years old and has a household income of £35,000.  In London, the average first-time buyer is 32 years old and has an average household income of £68,000. 

Looking at the national picture, the average age of a first-time buyer is 30.  They have a loan-to-value of 85%, with a mortgage of £145,000.  This means the average first-time buyer in the UK needs a deposit of £25,600. 

Of course, it’s not just first-time buyers who need a helping hand.  Home movers who move from their existing property to a larger or more expensive home are often turning to parents too.  Advisers estimate that 24% of those moving to their next home are receiving parental support. 

If you’re considering giving your children or grandchildren a helping hand on the property ladder, keep in mind the need to secure your financial future first.   

By constructing a comprehensive wealth plan, it’s possible to model the likely outcome of different gifting or lending scenarios.  

Wells Gibson delivers Proper Wealth Planning which has financial forecasting at its core as this is the most prudent way to prevent giving away too much; money that you might need later in life.