We believe a globally diversified portfolio provides the best chance of capturing market returns. Occasionally we are asked why equity funds in our portfolios are held on local currencies rather than being hedged back to Sterling. We think this bulletin from investment group 7iM provides a helpful explanation why this makes good financial sense, and we thank 7IM for allowing us to reproduce this.
It’s official. The communications have been sent out to our clients and it’s been humbling to receive so many kind responses, and overwhelmingly enthusiastic feedback, for which we are really appreciative. Now we’re excited to announce the next phase for WMM to our wider audience….
We have noticed in recent years a greater call for planning services, partly due to a backdrop of economic factors making people take more notice of their existing arrangements and, certainly post-Covid, thinking more deeply about what really matters to them and their loved ones. People want to be more certain of their own futures and are seeking guidance on how to get there. Having good plans in place keeps things running on track.
WMM and London-based Evans Hart share a great deal in common and, at a time when demand for financial planning is at record levels, our joining forces will provide long-term benefits for all our clients.
Mike Weston, founder of Weston Murray & Moore, and Stephen Evans, founder of Evans Hart, were both leading the way in long-term financial planning back in the 80s, when the majority of advisers were focused on selling products. Both stood out for their client-centric approach and their strong belief in the benefit and value of financial planning leading advice for optimal client solutions. That ethos remains as strong today in both firms as it was over 35 years ago.
Our merger seems a very natural progression for us, and very much about carrying on doing what both firms do best…… Business as usual, only better.
So, what does this mean for our clients and anyone thinking of working with us? We’ve covered the questions that have been raised so far below, along with a few more for extra information.
It’s staying open! We remain here in our office with its beautiful outlook that we know so many of you appreciate. Having a local presence is important to many of you and it is therefore very important to us.
We love working in this space and we know you like coming to meet us here, so the office remains open as always.
Our office address and phone number will be unchanged. We will be given new email addresses in time, for efficiency as our back-office systems merge. Even then, our existing emails will still be monitored.
Your main point of contact will be, and will remain with, the team at Deddington. At some stage in the not to distant future I’m sure we will harness the advantages of working within a larger team, including a wealth of technical information and support during busier periods.
Evans Hart is the umbrella company under whose banner WMM will continue to work and manage the business as we have always done.
"If you don't move forward-you begin to move backward". (Mikhail Gorbachev)
It’s important that we avail of extra resources as we continue to grow and, this way, we can keep our existing infrastructure while benefiting from the additional support of Evans Hart.
Our ambition is to continue growing, benefitting from sharing ideas and expertise. Our relationships will be enhanced through the greater resources available to us and a wider service proposition. We will update you when we are ready to roll out any new services.
Each office/division within the larger group is responsible for their own direct running costs, so that each can run efficiently and avoids costs from other divisions impacting its clients. Our budget reflects our office size and location, our staff levels and all of the equipment and technical insight needed to support our clients with achieving their financial objectives and life goals.
As part of a ‘larger entity’ the Divisions may be able to benefit from cost savings in the coming years. However, as part of the agreement, we are able to guarantee that our fees are not going to increase as a result of the merger.
All fees have always been, and will continue to be, agreed and confirmed in writing before any work is undertaken.
If you’re reading this via our newsletter as an existing client or perhaps on our website as someone with an interest in working with us, and you have any additional questions please do get in touch on 01869 331 469.
Whether we are aware of them or not, we all carry biases which shape our thoughts and behaviour. Most investors know that making decisions based on emotion is likely to be counterproductive. But what about those subconscious beliefs that can fool us into thinking we are making an entirely rational choice?
Biases are apparent in all areas of life, and financial planning is no exception. It is only when we explore the reasons for the biases, and look past them, that we can make genuinely objective decisions.
Have you ever started with a theory or a hunch and decided to carry out further research? Do you notice how straightforward it is to find information that supports your original view, while opposing evidence can be easily debunked or cast aside?
That’s confirmation bias. When we have a particular belief, we are naturally inclined to seek out evidence in favour of it. The more we find, the more this enforces the belief, making it easier to ignore or discredit the opposite view.
Confirmation bias stems from two things. Firstly, we like to believe we are right. And secondly, you can prove just about anything with statistics. The truth is rarely black and white and it’s not always easy to see the nuances.
In financial planning, we might favour a particular company or investment and look for reasons to use them, rather than taking an objective view. An independent financial adviser, by definition, must look at the whole of the market when making recommendations. Seeking advice can help you see the wider picture and make decisions based on evidence.
Overconfidence bias occurs when we place too much faith in our own judgement.
Evidence has proven that it’s virtually impossible for an individual investor to consistently ‘beat the market.’ This is particularly true when trading individual stocks and attempting to buy and sell at the right times. The market is too unpredictable, and any information that could affect your decision is already priced in.
But people still trade shares. This suggests that a huge number of investors place greater confidence in their own stock picking abilities than that of a professional manager, or the steady predictability of a passive fund.
Successful investing doesn’t just mean supercharging your growth in the short term. It’s also about managing risk and coping with the inevitable downside. Over the longer term, a diverse investment strategy that stays on course is likely to improve long-term growth prospects.
Past performance is not necessarily an indication of future performance. This statement appears throughout the financial services industry, and is intended as a reminder that just because a fund has had a good run, this doesn’t mean it will continue.
But top performing funds attract attention, and therefore investment. This boosts the share price as demand increases. Eventually, this levels off, and another fund takes the top spot. And so it continues.
The gambler’s fallacy arises from a belief that just because a horse (or a fund) has performed well, it will continue to do so. Often, this doesn’t include in depth research into the reasons for the success or the underlying holdings. Many of the top performing funds in 2020 benefited from the circumstances, i.e. an increased demand for tech and healthcare products. That doesn’t mean that the same funds will outperform in 2021 as it’s likely that other trends will take over.
When investing, it’s important to look at factors other than past performance. As always, diversification is vital, as this can help to capture market trends that might otherwise be missed.
No one wants to lose money. In financial planning, sometimes we can take actions that are interpreted as ‘cautious’ or ‘risk-averse’ to avoid losses. For some investors, the pain of a loss can far exceed the elation of a gain.
But keeping all of your money in cash is not simply cautious. It’s creating a loss in real terms, as your money will lose spending power in every year that inflation rises. By eliminating one risk (investment fluctuations) you are creating another (inflation risk).
Similarly, selling investments when the market is falling is not a prudent move. It can prevent further losses, but what about the losses that have already occurred? When do you decide to buy back in? A habit of selling when the market is falling and buying when the market is rising is far less efficient than simply buying and holding.
Fluctuations are part of investing, and therefore part of financial planning. Rather than trying to avoid market dips, the secret is to understand how you will cope when (not if) they occur.
Herd mentality, or ‘groupthink’ means following the crowd.
Investment prices are driven by supply and demand. This not only relates to the underlying assets, but also to investor appetite for a particular fund or share. So if a particular stock falls out of favour, investors often believe they are taking the safe route by copying what everyone else is doing. But this causes the price to drop further, and those at the back of the queue will probably lose more than if they just stayed invested.
Cryptocurrency is an excellent example of this, as the wildly fluctuating values are based on little more than trends and opinions shared on social media.
Sometimes success comes with taking your own path rather than following the herd.
A financial adviser can help you to overcome biases and take an objective look at your financial situation.
Please don’t hesitate to contact a member of the team to find out more about financial planning.
Many people put off decisions around estate planning. It can be a complex area, as well as being a difficult subject to think about. But having an estate plan in place can help to reduce stress for your loved ones as well as saving on tax.
Below, we outline five common mistakes when it comes to estate planning.
Making a will is the most important thing you can do when it comes to estate planning. This is a legally binding document which outlines your wishes for your estate. It includes details of how you would like your assets to be distributed and who should be responsible for the administration of your estate.
If you die without a will, the rules of intestacy will apply. This means the court will nominate someone to deal with your estate – this may not be someone you would choose. Assets are then distributed in a strict priority order, starting with spouses and children – this depends on the value of your estate and where you are in the UK. If you aren’t married and don’t have children, your assets will pass to other family members. If you don’t have any living relatives, the Crown will receive your estate.
The rules do not account for unmarried partners, step-children, friends, or carers. They do not take into account your relationship with your family, for example, wishing to prioritise a niece or nephew over an estranged sibling.
Unless you put plans in place, there is also a risk that your children could be disinherited. If you die and your spouse remarries, their estate could theoretically pass to their new partner, and subsequently the new partner’s children. This can be avoided with proper estate planning.
Making a will is simple, inexpensive, and can easily be changed. It’s far better to have a basic will as soon as possible than to put it off.
A Power of Attorney allows you to appoint someone you trust to make key decisions for you if you are no longer able to. This can include matters around property and finance as well as medical decisions, such as treatment and end of life care. You can appoint the same person to deal with both areas, but you don’t have to.
To be legally valid, your Power of Attorney must be registered with the Office of the Public Guardian. This is an important step, and must be done while you still have full capacity.
Without a Power of Attorney, the Court will appoint someone to deal with your affairs for you, who again, may not be someone you would choose. The whole process takes longer, which can cause delays in making financial or medical decisions.
A Power of Attorney can be made alongside your will and is simple to change at a later date.
When you die, the value of your estate may be subject to Inheritance Tax (IHT). This is currently 40% of your estate value over the nil rate band (currently £325,000 for an individual or £650,000 for a married couple).
You can reduce this by giving away some of your estate during your lifetime. There are, of course, rules in place to deal with tax avoidance, for example making deathbed gifts to avoid IHT.
You can give away up to £3,000 per tax year, which is immediately outside your estate. You can also make gifts for special occasions as well as unlimited donations to charity. Larger gifts usually drop out of your estate after seven years (depending on the timing of other such gifts).
Given the limitations on gifts, the earlier you start planning, the more you can reduce your IHT liability. It also allows you to make gifts at the point your loved ones need it most.
Of course, you need to be careful to balance your own needs with the desire to reduce your estate. If you give away too much, too soon, you risk leaving yourself short of money later in life. This can cause problems, particularly if you need long-term care.
There are also situations where giving away assets can reduce the relief your estate can claim. If your estate includes a main residence, and you are passing this on to a direct descendant, you can use the residence nil rate band (RNRB) to reduce the value of your estate further. The amount is £175,000 (£350,000 for a couple), capped at the value of your property. If you gift the property, you could miss out on this relief.
If you give away assets, you need to be sure that you don’t require them for your own purposes. If you still use the asset or retain any benefit (for example, rental income), there could be tax consequences. It’s a good idea to seek advice if you are considering making large gifts.
A trust allows you to set aside money or assets for your beneficiaries without giving up complete control. They are extremely useful in the right situation, but getting the balance right between tax-efficiency and flexibility can be tricky.
If you have a life insurance policy, it’s usually a good idea to place this in trust. This can help avoid delays, and as the money bypasses your estate, should not increase your IHT liability.
Pensions are also a type of trust, and should not be forgotten about when it comes to estate planning. A pension is highly tax-efficient, and it may be effective to use other assets first and preserve your pension for your beneficiaries.
Estate planning can be complicated, and it’s a good idea to seek advice, particularly if you have a large estate or complex family situation.
Please don’t hesitate to contact us on 01869 331 469 to find out more about estate planning in context to your wider financial planning.
With the news that the Government have extended the deadline for filling any gaps in your National Insurance record, by making voluntary contributions, we wanted to revisit who should do this and the benefits.
When the new State Pension was introduced from 6 April 2016, the Government also temporarily extended the normal six-year window which allows you to pay Voluntary (Class 2 or 3) National Insurance Contributions (NICs) to fill in gaps as far back as 6 April 2006.
The extension was initially due to end on 5 April 2023, but due to the volume of applications, this was extended to 31 July 2023. The Government have now issued a further extension to 5 April 2025.
Furthermore, they have announced that all relevant voluntary NIC payments will be accepted at the 2022-23 rates, right up until 5 April 2025.
You will no doubt have seen mention of this in the media over the last 12-18 months, with some articles claiming you can boost your pension by up to £50,000. This is, of course, the best case scenario, for someone topping-up ten years of NICs.
Should I do this?
The first step is to request a State Pension forecast and your National Insurance payment history. Both of which are available to download online, via your Government Gateway login. This will enable you to check that your NIC history is correct and that no eligible years have been mis-recorded.
If your State Pension forecast shows that you are already on track to claim £203.85 per week, this is the maximum or ‘full’ pension for 2023/24. You cannot increase your State Pension above the current ‘full’ pension of £203.85 per week.
The HMRC helpline (0800 731 0175 if you are not yet State Pension age, and 0800 731 0469 if you are already at State Pension age) has also proven to be very useful for several of our clients already, but do be prepared for a long wait to get through! The process has rightly proven very popular.
How much will I get?
This depends on your personal situation. However, in our experience the State Pension top-ups offer a very good, secure return. It’s always worth checking to see if you can increase your pension, and by how much, so that you can make an informed decision.
Things to consider before proceeding:
This is where the HMRC helpline can come in handy, advising you of how much a top up of a particular year will affect your pension.
If you are expecting to receive certain benefits in retirement, this may be reduced by increasing your State Pension, so you may not end up better off.
Invitation
The best place to start with this particular decision is with the Future Pensions helpline as mentioned above.
If you’d like to discuss this in context to your wider financial planning, get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).
Well, Tax Year anyway!
Following the recent Budget there are some changes to allowances and pension funding rules, which have now come into effect. Here, we provide a summary overview of the allowances and reliefs available this tax year.
Regardless of your employment position, it is important to ensure that you are on the correct tax code, otherwise you could be paying too much tax (or not enough). You can contact HMRC or your accountant to doublecheck.
A few providers offer ‘flexible ISAs’ which allow you to replace withdrawals within the same tax year, in addition to your standard annual ISA allowance.
EISs and VCTs are high risk, illiquid investments and may not be suitable for everyone. It’s therefore important to take advice from a fully qualified financial planner with experience in these areas before investing.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469.
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).
Source: Knowledge: Year End Tax Planning (techlink.co.uk)
With a new year underway and the cost of living continuing to increase at a pace, and the knock-on effect of this to most services and products, investors are understandably looking for ways to ensure they capture the best investment returns where possible. But where should you start with this?
Many investors still attempt to chase the best performing countries, sectors and funds, selling assets that have fallen out of favour and buying the newly touted ‘best buys’, often based on historic performance.
Many professional investors and fund managers believe they have the ‘skill’ to do this.
However, whilst there are lessons that can and should be learned from historic data, many decades of academic research show that the manager’s ‘skill’ is more often likely to be ‘luck’, and that repeat ‘luck’ is almost unheard of.
Dimensional Fund Advisors have compiled the following chart, showing the Randomness of Returns. The chart focuses on the performance of global markets, by country, since 2001.
Source: Dimensional Fund Advisors, Randomness of Global Stock Market Returns
This chart demonstrates, clearly and colourfully, that it is very hard to predict which country will outperform from one year to the next, taking Austria as an example – they produced the highest developed market return in 2017, but the lowest in 2018.
Similarly, markets have returned on average about 10% a year, although almost never that amount in any given year. So, like trying to pick the winning country, asset or company, we don’t advocate trying to predict or outsmart (i.e. time) the market.
Our investment philosophy is based on buying the whole market, with a diversified global portfolio.
Whilst you would have still seen the losses in your Austria assets in 2018, you would also have had the positive returns from the Finnish market (the top performers in that year). Holding all (or almost all) of the market can help to provide more reliable outcomes over time.
Dimensional’s research shows that ‘buying the market’ and holding over the longer-term has provided better outcomes for investors, than trying to pick the winners and losers individually.
Our message to our clients is clear – “don’t try to time the market, and don’t try to pick the winners and losers”. A solid, long-term financial plan, taking no more risk than you are comfortable with, will stand you in very good stead, allowing you to concentrate on the people and goals that really matter to you.
Dimensional say that “the market is a great information processing machine. It runs on human ingenuity, which is why returns tend to grow over time as people work to innovate and improve the value of the companies they work for. So start the new year off with a clean slate—just like markets do every day.”
Interested in discussing the chart in more context to your own financial planning? Get in touch today to arrange a free, no-commitment consultation with our team here at WMM.
You can call us on 01869 331469.
Some employees are able to claim tax relief on work-related expenses if their employers have not already reimbursed these.
This can include items such as:
The gov.uk site has guidance on who can claim and what for. You’ll first need to set up a Government Gateway login, if you don’t already have one, and from there the process is relatively simple.
However, if you were to use a search engine, the Government’s own site might not be the top result. There are many claims companies, offering to help you claim the tax relief. These companies also advertise widely on social media, with a simple ‘click here’ to begin the process.
The claims companies will liaise with HMRC on your behalf, as your ‘agent’ and arrange any reliefs you might be eligible for. As you might expect, the claims companies charge, for their ‘help’, often taking a percentage of the tax reclaim before passing it on to you.
HMRC are urging individuals to apply directly themselves, online or, if by post, by form P87 only, as the information required is exactly the same as they would need to provide to the claims company in any case.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with our team here at WMM.
You can call us on 01869 331469.
Unless you already have a relationship with a financial planner, you might never have been asked this question. You might never have considered how it is you actually feel.
Although money is often seen as a number crunching, rational, exercise, (we all know what we should be doing, on a basic level at least) our relationship with money is an emotional one, full of highs and lows. Have you ever felt down and used a quick spending spree as a ‘pick-you-up’, only to feel guilty for spending the money later?
How we feel about money can also be connected to our upbringing or our own environment, not to mention the wider world and the ‘financial crisis’, the ‘cost of living crisis’, the ‘energy crisis’. It might feel like we’re being fed more negative financial messages than positive ones at the moment.
Depending on how you were brought up, talking about money might feel like a taboo; talking about how much you have is rude and boastful, or maybe you have a sense of abundance but would like to see some evidence. Your money story may be that you should feel guilty for spending a lot of money on something, talking about how much you haven’t got, or asking for financial help, when perhaps your belief is that you should fix it yourself. Even if your own story isn’t negative, it can still be complicated.
Perhaps this generation-old difficult conditioning is why people often find it so hard to talk about money now, even from haggling for a better price, to discussing long-term money plans and wishes with family, both of which can lead to challenging your feelings or your understanding of your finances, for you or your immediate company.
Just because the discussion might be hard or uncomfortable, it doesn’t pay to ignore the issues at hand. The key is to recognise and use those emotions to face the issue, and take action.
This could mean focusing on your goals and what you need to do to achieve them.
It may simply mean you have little idea what you are spending, even if you feel it’s affordable, and you want a better handle on things. The answer here might be setting out a budgeting and saving plan for your household. There are many budgeting apps and guides available, such as this one from StepChange.
Perhaps you want to put long term savings plans in place for specific goals, such as your children or grandchildren’s University fees or house deposits. You may have already saved efficiently over the years, but you’ve ended up with multiple accounts and you want to feel more in control overall. Do you have questions around arranging your estate more efficiently for the benefit of your heirs? These are all things a financial planner can help you with.
We ask our clients initially, and regularly, “in an ideal world, what would money mean to you?”. The answer usually includes “to not have to worry about it”. The answer isn’t ever in pounds and pence. It’s an emotional outcome.
Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).
HMRC issue tax codes automatically to your taxable income providers, whether this be an employer or a pension provider. Your code instructs your income provider how much tax to deduct from your pay.
The codes are reviewed each time tax legislation changes, you receive a ‘benefit in kind’ or your entitlement to tax allowances changes.
You’ll be used to seeing them on your payslips, and receiving notifications from HMRC that they have changed your code.
We’ll summarise the mostly commonly seen tax codes here, however a full list can be found on the HMRC website.
The most common code is 1257L, and applies where the standard Personal Allowance of £12,570 (in 2022/23) is available. It’s used for most people who have only one job.
The letter relates to your situation. For example, L means you have the standard Personal Allowance and M means you’ve received a transfer of 10% of your partner’s Personal Allowance, N showing that you have transferred 10% of your Allowance to your partner.
BR shows that all the income from that source is taxed to Basic Rate, and NT means not taxed. WI, M1 or X shows that you are on emergency tax.
One that we often come across is K. This is referred to as a negative tax code. This shows that you have another source of income that isn’t taxed, and so that tax must be collected from other income through your K code. The number shows the amount of additional income that needs to be taxed, such as the State Pension, this is always paid gross, but is taxable.
For example, let’s say Mrs Smith receives State Pension of £15,570 each year. This is paid without deduction of tax.
Mrs Smith also has a work pension which pays her £4,000 a year. Her tax code here would be K300. This lets her pension provider know that they need to calculate the tax deduction for her work pension, on that pension (£4,000) plus an additional £3,000, so £7,000 in total. This would lead to an effective tax rate of 35% on this pension.
Mrs Smith also has a small annuity from her personal pension, and this has a BR tax code. Her pension provider will deduct Basic Rate tax from the full pension – her Personal Allowance and any adjustments have been taken care of on her State Pension and work pension.
You can use the HMRC tax code page using your Government Gateway login. You can check the income that HMRC assume you will receive for the current tax year (you can also check the previous year). If you think the information isn’t correct, you can contact HMRC to ask them to update it.
If you’d like to discuss taxation in context to your wider financial planning, get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).
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