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Are your finances on Cruise Control?

Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice, if you are unsure of the suitability of an investment for your circumstances please contact us for personal advice.

This article was published in January 2019, however the data relating to HL clients was produced in October and November 2018.

Bruce Pearce
Head of Advisory Services

Could it be time to revisit your investment strategy?

There’s no doubt about it, investing is a long term game. Once you’ve started investing, it can be tempting to go on auto pilot and keep adding the same amounts to the same investments over a long period of time. At HL, we want to empower people to be confident investors and, as part of this aim, we encourage our clients to check-in with their investments regularly to assess whether their current aims and objectives are still met.

Although it’s impossible to say with absolute certainty how often you should revisit your investment strategy, changing it as necessary before it’s too late (e.g. when you’re close to retirement) could make all the difference.

Regular checks are essential when planning your retirement. If you get your pension or retirement planning wrong, it can be very hard to recover from. So, at the very least, it’s a good idea to check on your pension pot to see if you’re on track to have enough income in retirement.

If you’ve already retired, it’s an even better idea to keep tabs on your investment and drawdown strategies to check they’re going to help you live the lifestyle you want. If you’re unsure how you’re doing or if your strategy is sound, seeking financial advice can help you make the right decisions.

How much do you know about your pension?

The Financial Conduct Authority (FCA) released some surprising findings in June 2018 which show that, three years on from the introduction of pension freedoms, more choice is both a blessing and a curse. Do any of these statements from the FCA sound familiar?

  • 10% of those surveyed with £100,000-£199,000 pensions don’t know where or how they’re invested. 27% of the same group only have a rough idea.
  • 34% fall into the FCAs ‘least engaged’ profile. A typical person in this group:
    • Knew they were taking their pension but had a limited idea of where their money was invested
    • May feel their pot is too small to be engaged with
    • Tend to be younger (55-64) with a lower pot size and lower income
  • 52% of those surveyed said the risk of losing money is a very important factor in making an investment decision. Only 34% said getting a good return was very important.
  • The FCA is concerned about those holding cash only for long periods. They suggest that this is unlikely to be the best strategy for quite a few people. Those taking money out of their pension fund(s) evenly over 20 years could expect a 37% increase in annual income from their pension by investing in a mix of assets rather than cash, if they were willing and able to accept the risks of investing.
  • Almost half of consumers surveyed who only hold cash don’t know that their money isn’t invested.

Note: The FCA surveyed people over 55. These people had not received advice, had moved all of a pension worth at least £10,000 into flexi-drawdown and had stopped paying into that pension.

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Next - How engaged are HL clients?


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Bruce Pearce
Head of Advisory Services

What do HL clients do with their investments when they’re nearing retirement and in retirement?

We found the FCA’s statistics to be pretty revealing so we thought we’d look at our own clients as a cross section of society to see how engaged they are – especially around retirement. At HL, we try to empower our clients to invest with confidence. So we’d expect many of them to be pretty engaged when it comes to their retirement plans.

To give us an idea we had a look to see how many of our clients review and change their investment strategies when they’re near retirement and already retired.

Please take this information with a pinch of salt. Everyone’s investment goals and attitude to risk is different. What works for our ‘average’ client may not work for you. Please don’t regard this as personal advice. If you feel like you need some guidance on your investments or retirement strategy, we have a team of financial advisers who can help.

Wealth peaks when you’re near retirement

Our data shows that, on average, our clients’ portfolios peak in value when they’re nearing retirement (55 – 65 years of age). This is of course is to be expected given that this portion of our clients have had longer to tuck away their wealth. It’s also probably not much of a surprise to see that portfolios decrease in value on average when people retire and start to take money out of their investments.

What’s interesting is that (for women in particular) the decrease in portfolio value isn’t as steep as the increase in value which could indicate that our average client has a good retirement and/or drawdown strategy in place to make their money last. If you’re in your 60s or 70s and you’re not sure about your investment strategy for retirement financial advice may be able to either review your investments or reassure you that what you’ve got will serve you well.

Does engagement increase with wealth?

Though many of our clients manage their own investments on the phone, a growing number are accessing their accounts via our website and mobile app. The frequency of those logging in can suggest when our clients start taking more interest in their investments. Log in frequency does increase slightly past the age of 50, which could again suggest that those nearing the retirement crunch time are keeping a closer eye on their investments.

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Next - Growth, income and risk


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Bruce Pearce
Head of Advisory Services

Our older clients switch from growth to income

We can see a clear shift in the balance of growth and income funds as our clients get nearer to retirement. Around 80% of clients are invested in growth funds before they reach 40. But between the ages of 50 and 90 this preference reduces to 50%.

Our clients are more risk averse as they get towards retirement

For our clients with ISAs and Self-Invested Personal Pensions (SIPPs), the level of risk people are prepared to take in their 50s is at a similar level to those in their 20s but it tails off gradually after 50. For our SIPP clients, there is a slight jump in the risk score of their chosen investments in their late 60s. Our ISA clients’ risk peaks in their early 30s but takes a further dip past 50. Those with investments ‘outside’ of SIPPs and ISAs tend to start switching to investments with lower risk far earlier (in their 30s) but the investments they choose also carry higher risk in the first place.

Reviewing your attitude to risk is one of the key things to consider as you get closer to retirement. As with many aspects of investing, there’s no right answer, but it’s important to be aware that reducing risk is not always the right answer. That may sound counter intuitive and… well… risky but if you’re unsure of how to restructure your portfolio for retirement, our advisers can help.

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Book a call with our helpdesk to find out if you could benefit from advice.

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Next - Financial Advice


FIND OUT MORE ABOUT FINANCIAL ADVICE

Book a call with our helpdesk to find out if you could benefit from advice.

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Bruce Pearce
Head of Advisory Services

Seeking financial advice as you get nearer to retirement

There are few more important times to pay attention to your finances than when you’re near retirement. If you’ve read this and feel like you need a personal recommendation on your investment strategy in the lead up to and beyond your retirement, our team of financial advisers can help.

When you seek advice from us, it’s totally on your terms. You decide how you get your advice (on the phone or in person), how much advice you get and how often. We do charge for this service but you’ll only ever pay for the advice you really want.

To find out more about how our advisers could help you, call our advisory helpdesk on 0117 317 1690 or book a call back.

Book a call back

FIND OUT MORE ABOUT FINANCIAL ADVICE

Book a call with our helpdesk to find out if you could benefit from advice.

BOOK YOUR CALL

FIND OUT MORE ABOUT FINANCIAL ADVICE

Book a call with our helpdesk to find out if you could benefit from advice.

BOOK YOUR CALL