MONEY MATTERS: Another anniversary

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Last Thursday was a special anniversary for me; it was 20 years since I first met Dan and Barbara.

When I first met them at their home, I was greeted in a friendly manner.

“We are quite wealthy, even after experiencing losses in the stock market some years back; there’s no way we’re getting involved with those city-slickers anymore – pin-striped rats! Can you help me with my pensions?”

Presumably, you are aware that pension funds have a choice of funds, and every year you weigh up the merits of each fund and select the ones that you think will do well?

“How would I know what to choose?”

You don’t necessarily have to be an investment guru; you can rely on common sense. I see that 50% of your money is in the UK stock market, 40% in the US stock market, and 10% in property. Were you aware of that, and have you considered moving your funds around?

“What do you mean?”

You do realise you can switch your monies around from one fund to another?

“No one has told me that in 20 years. Are you sure?”

I nodded. You might want to consider making some changes. Both the US and UK stock market are booming, but your property fund has performed pretty badly.

So badly, in fact, that it really has only one way to go, whereas the two stock market funds are on a high at present and have a long way to fall.

Dan and Barbara agreed to appoint me as their adviser.

The advantage in taking them on, was that they were a blank canvas, they had none of the misleading investment myths that confuse so many clients.
Like confusing volatility with risk.

Like believing that in order to get a greater reward – you need to take more risk.

Like the so-called benefit of pound cost averaging – a statistical foolery.

Like not taking on a coach for their investments, when all football teams have them.

Like not setting objectives for income in retirement and planning to achieve that level of income.

With stock market funds at an all-time high, you need to ask yourself – what might happen if you leave the funds as they are, what might happen if you move them.

After realising that stock market reversal would decimate the value of their pension, they decided to move the bulk of their money into the bombed-out property fund.

Some eight months later, after agreeing to re-position his pension investment funds in line with my advice, the stock market collapsed and property soared. The increase in the value of Dan’s pension fund meant the couple had enough income to live comfortably when they retired.

Many years have passed since I met Dan and Barbara. These days, client meetings are held in our offices, our clients have far more substantial investments, and they want proper advice on a whole range of issues.

But I have never forgotten Dan and Barbara.

Very often, clients want to make sure their assets will pass to their children. It’s possible to do so without paying Inheritance Tax, but for that to happen, sophisticated planning is required.

It’s said that 80% of clients with an IFA are fairly confident that they will be OK for income in retirement, and that 45-50% of clients who don’t have an adviser are worried that they won’t be able to carry on with the lifestyle they currently enjoy.

To find out if your pension fund investments are making the most out of your money, come and meet us for a chat and coffee. Give Ruth a call on 0118 934 7921.

Past performance is not necessarily an indication of future returns, and future performance is not guaranteed.

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