The last 5 months have seen a seismic shift in most areas of British Life and personal finances have been no exception. With the uncertainty that Covid-19 has caused we have seen unprecedented government support, a crash and rally of the stock market and mass redundancies. We thought it would be a good time to get some advice from a financial adviser.
Ian Scott Painter is a Chartered & Certified Financial Planner with over 30 years’ experience. He owns and runs Affinity Integrated Wealth Management Ltd and Genus Financial & Estate Planning, both operating out of Maidstone and with Clients spread throughout the South East. The businesses specialise in True Comprehensive Lifestyle Financial Planning which puts the person rather than their money right at the centre of the relationship. They work with Clients and their families with particular emphasis on those that are at or who are approaching retirement and help their Clients to “Live Life with Purpose” – Ian has written a book of the same title.
We asked him some of the burning questions we have been asked by our clients:
- What should an individual be doing financially in the current situation with Covid-19?
Sometimes doing nothing is best especially when it comes to trying to second guess which way investment markets are going to move or what is going to happen with the economy or certain sectors within it. If you are finding it difficult financially, then check what essential things have to be paid for and cut out any unnecessary or unused expenses like gym memberships, TV subscriptions, music services and the like. Also perhaps spend a bit more time checking if better deals can be had for things like car and household insurance renewals. Cutting unnecessary costs and making savings on insurances added together can make a big difference. Save the difference to give yourself a further buffer and breathing space.Understand too that the current situation is only temporary. Things will return to normal in due course. If you have a plan, stick to it, make some minor adjustments if need be, but unless you feel that a fundamental change of direction is required, just keep going with the 5, 10 and 20 year plan. - Are pension contributions a good idea at the moment?
Pension contributions are generally always a good idea as they are particularly tax efficient for both individuals and business owners alike. They are a great way to build personal wealth and to extract money from businesses. Do remember however that monies in a pension cannot be accessed before age 55, so don’t put money in that you cannot afford to lock away. Remember also that the contribution allowance rules around pensions are complicated so check what you are allowed to pay in first. - Why is having good financial advice important?
There is a huge difference between financial advice and proper Financial Planning. Financial advice is generally to do with the putting in place of (some would say “sale” of) a financial product such as a pension, an investment or a life policy. Proper financial planning involves looking at the whole person, what they want to achieve over their lifetime and what available resources may be available now or in the future to enable those objectives to be met. It will encompass detailed lifetime cash flow modelling, what-if scenarios and needs analysis. A formal financial plan will then be developed from which an action plan can flow; that action plan may or may not involve the implementation of financial products. I would argue very strongly that a Financial Plan should always come first and the reason for this is obvious – you would never build a house without first having an architect draw up a plan to work from, why would you ever do the same with your money? So yes having good financial advice is important but not as important as having a Financial Plan from which to work – this can save you thousands of pounds in the long run, it can protect your loved ones from disasters, can help you to meet with your lifetime objectives and even to retire happy. - Are Isa’s a good investment?
Generally yes. There are however different types of ISA so it is important to understand what ones are right for you and your family. Unlike pensions, ISAs attract no tax relief but any income taken and growth generated is tax free. ISAs and Pensions are therefore best used in combination and within an overall planning framework. - What’s more important Life Insurance or a Pension?
In financial planning terms, protection i.e. life assurance should always come first. This is an important concept to grasp – what is the point of having a fabulous pension aged 60 if you fail to make it to that age and you die beforehand leaving your family destitute. Protect what you have before building for the future. The younger you are the cheaper such protection is, so buy it whilst you are young. You should also consider other protection arrangements rather than life assurance alone – things like protecting your income if you are unable to work, your business if you are incapacitated (shareholder agreements and shareholder protection), serious illness events such as heart attack or stroke. All of these can be insured against and that insurance can make all the difference to both a business and a family. - Are premium bonds are a good investment?
They can be depending on the prevailing rates of return and the tax position of the holder. They will be more attractive to higher rate taxpayers than others. They are backed by the Government so are secure but the rates are not very attractive currently and haven’t been so for a number of years now. Other types of investment can offer better returns but premium bonds do offer the potential of a big win of course (or you may get very little back). - Will a mortgage payment holiday affect my credit rating?
No, it should not if under the current Covid-19 measures.
A gentle warning
This content should not be construed as advice at all and is just generic and for information only. You should seek independent advice based on your personal circumstances before taking any action. The value of investments can fall as well as rise. You may get back less than you invested.
One thing for certain good financial advice will come in handy in these uncertain times.
