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HL financial adviser, Jonathan Baker on how he’s adapting his advice in the current climate

HL financial adviser, Jonathan Baker shares what he’s been saying to his clients to help them through these tough conditions and look forward to a brighter future.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

In these turbulent times, it might feel like there’s a lot beyond our control and it might be difficult to see a brighter future. But, this shouldn’t stop you revisiting your plans and getting ready for better days ahead.

Every client’s circumstances are different but Jonathan Baker is able to let us in on what he’s been telling his clients to consider.

Remember, this article isn’t personal advice. If you need financial advice, please use our financial advice service. Unlike cash, investments and income they produce can fall as well as rise in value so you could make a loss.

Assessing how much risk to take

It’s widely accepted that you should try to take less investment risk as you approach retirement. When to do this will depend on lots of different factors. For many this will be around five years before you plan to retire. Normally I’d advise my clients to do this by moving some money from stocks to other lower-risk investments like bonds and into cash for example.

But sadly in this climate some of my clients may be forced to keep their risk profile as it is and in some circumstances this may delay their retirement.

This would give the market extra time to hopefully recover. It might sound counterproductive and your first reaction might be to de-risk to protect what you’ve got but in these circumstances, your level of risk needs to adapt differently to meet your objectives.

Previous stock market crashes have made substantial recoveries within five years. De-risking too early by converting your stocks into cash, could mean that the value of your portfolio fails to recover. As always, past performance isn’t a guide to the future and the value of investments could fall further.

Value of UK stock market following drops

Past performance isn’t a guide to the future. Source: Thomson Reuters Eikon 13/03/20.

Rebalance and stay diversified

Staying calm, balanced and diversified is key.

Rebalancing after a market fall could mean selling some of the investments that haven’t fallen as much, to top up the investments that have fallen furthest.

Without rebalancing, your portfolio will naturally increase exposure to the areas that have performed best over a given period of time. This can have two negative impacts:

  1. The risk in your portfolio can increase. For instance, if you become over exposed to equities if they outperform fixed interest/bonds. This could mean you become exposed to more risk than you want in order to reach your retirement goals.
  2. Different investments (shares, bonds etc.), sectors and geographical regions come in and out of favour over time. If you don’t rebalance, you might end up with a portfolio mix which is unsuitable for your retirement plans

Tough times or not, regular re-balancing should be done to make sure you’re not over exposed to one type of asset and your portfolio is right for your circumstances now and in the foreseeable future.

Preparing to take income from your pension

You should choose carefully when to start taking income from your portfolio. In normal circumstances, you could use the dividends to help generate a cash buffer to be used when you first retire. But, some dividends have been cut and others are expected to be lower for another 1-2 years.

If you have enough in your cash reserves, you may not need to rely on dividends to top up. But if not, you may need to consider starting to build up your cash pot earlier.

Give it time

You don’t have to commit to every financial decision for the rest of your retirement straight away. Take your time. Make sure you thoroughly plan what you’ll need income for in the first year or two and leave as much of your portfolio invested for as long as possible to recover.

If you need money in the near future and have savings that could be used instead, you might want to consider using those, rather than selling investments. But make sure you keep enough back in an emergency fund in case of any unforeseen expenses. If you have to cash in your investments, you could lose out significantly in the longer term. So, you might consider only cashing in what you need.

Planning ahead will help you make smart decisions without having pressure to act quickly.

Extra help available if you need it

Now more than ever, it’s important your next steps take you in the right direction. If your confidence has dipped and you need a helping hand, our financial advisers could help you retire on your terms.

Each of our clients have different goals and circumstances. The information in this article is only a guide and your adviser will get into the details of your goals to give you a personalised plan for your retirement.

A good next step is to talk to our advisory helpdesk. They’ll help you understand:

  • What help and support we offer to help you plan your retirement
  • Why our expert financial advisers could be the answer if you need more help
  • How financial advice works, including the benefits and costs

If you decide advice is right for you, we’ll put you in touch with an adviser within two working days. No personal advice will be given during the initial call.

Book a call back

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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