While some people are prepared to save for the future and are looking for the best rates available to protect themselves, as far as possible, from inflation, others are seeking a regular income. As your needs will vary, so can the solutions. Our independent position gives us freedom to advise on a wide range of investments. Note: taxation levels, bases and relief’s can change.
Planning
Independent
review of your investments
No doubt you took great care setting up your
investments, but you haven't thought much about them since (and neither has anyone
else!). Maybe the best choice at the time isn't still the best choice now. Investment
markets change.
- The original brilliant fund manager may have moved on.
- The company you originally invested with has changed (Merged, or taken over).
- New products are continually coming onto the market.
- Penalties that prevented you from making changes no longer apply.
- Your
investment funds are no longer performing.
- Your asset allocation may no longer suit your current and future needs.
Lets look at these one by one.
Loss of fund manager
A good fund manager can be the main reason for the success of a fund. If they
leave, therefore, the funds performance can suffer. You may receive repeated statements
of poor performance but still have no idea that the fund manager has moved on.
Takeover
of your investment company
Severe stock market falls in recent years have
seen both life assurance companies and investment companies suffer - in some cases
so severely that they were forced to sell their business. On top of this, there
has been much consolidation within the financial services industry.
For example, the struggling Royal and Sun Alliance had to sell off the management of its investment funds to a new company called ISIS. Since then, ISIS and Foreign & Colonial have merged. Changes such as these can mean new fund managers, loss of resources for the fund management team, cost cutting and even the merger of funds - you may end up invested in a fund that does not meet your initial objectives.
New products available
In recent years there
has been much development within the financial services industry. New products
have appeared that offer investors opportunities and cost savings not previously
available. Two examples are fund supermarkets and external funds.
Fund supermarkets let you consolidate all your holdings with one administrator. As the name implies, they also offer an extensive choice of funds. Supermarkets sometimes offer reduced set-up charges and opportunities to re-register your investments at no cost. It is also cheap to switch between funds. For a standard investment like an ISA, investing with a new fund manager might cost you as much as 6% in initial charge - contrast this with a fund supermarket, which may let you change funds for as little as 0.25%.
Investment companies and many life assurance companies now offer external funds. Top active fund managers in companies such as Fidelity offer funds that are often the top sector performers. These managers have the ability to pick stocks or holdings that out-perform the market. Your life assurance company may offer external funds that you are not aware of - or there may be another company that can offer you a greater range of such funds.
Old penalties lifted
Life assurance
companies often offer enhanced allocations to new investors in life insurance
bonds. But in return for these increases in the initial fund they apply withdrawal
penalties for the first five years. You may have invested in a bond that has passed
this five-year watershed, giving you the opportunity to review this investment
to see if it still meets your needs. There may be a better investment bond out
there - and another enhanced allocation to enjoy.
Investment
funds lost their sparkle?
A prime example of this is With Profits funds.
The aim of a With Profits Fund is to provide the investor with access to the stock
market and receive annual bonuses too. In good years the difference between a
funds achieved return and your annual bonus is kept in reserve. Then in lean years
these reserves are used to top up shortfalls in returns, so you still get your
bonus.
But severe falls in the stock market have depleted many reserves. Companies have had to reduce annual bonuses year after year, in some cases to nothing. The term "With Profits" may now have a hollow ring; such a fund might no longer suit your needs. Frustratingly, it can be hard to leave a With Profits fund, as Life Assurance companies apply withdrawal penalties. However, if you are investing for the medium- to long-term there may be time to recover the loss, or indeed make up the shortfall with an enhanced allocation.
Assets need re-allocating
The wise investors
buzzword is "diversify": spread your investments. Investors have varying
attitudes to risk, and few really sit down and work out the best asset allocation.
You should look at a variety of investment types: equities, commercial property,
corporate bonds, Government gilts and cash.
As the years go by, rebalancing may become an issue. For example, you may have started with 50% of your portfolio in cash and 50% in equities. If the stock market soars, you may find that the equities element now represents more than 50%. This means you are now taking more risk than you intended. Rebalancing would mean selling part of your stock holding and reinvesting in cash, restoring the sensible balance.
