Wealth Management in Cambridge
Investing in today’s uncertain world and maximising investment returns without taking too much risk is a real challenge.
Wealth Manager Cambridge
Choosing the right type of assets to invest in and achieving the right blend between those asset classes is vital in order to spread risk and maximise your investment returns.
Therefore, getting investment advice from a professionally qualified investment adviser has become increasingly important.
However, there are other factors to consider and that’s where using the services of an independent professional investment adviser can provide you with greater peace of mind. Why do you need professional investment advice?
Restricted versus Independent Advice
It is very easy to receive inappropriate advice from someone acting as if they know what they’re talking about. We have seen many examples of this from organisations with their own agenda, e.g. they offer restricted advice or are promoting their own range of products. The Financial Conduct Authority (FCA) calls this “shoe-horning” and despite their efforts to drive this out of the advice sector it is still happening every day. Therefore, it is very important to seek out independent advice from an adviser who is properly qualified and not restricted.
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There’s a saying when it comes to investing “it’s impossible to control investment returns but it is possible to control costs”. We regularly come across clients paying well over 2% per annum in costs despite being told a much lower headline figure. For example, an adviser or investment manager may say they charge 1% per annum and it would be easy not to give that a second thought. However, if they invest in active funds these add additional costs of between 0.65% and 1%, typically, and then add the cost of the administration platform to that, typically 0.25% to 0.45%, and you could easily be paying over 2% each year. Getting value for money means you should be looking to keep your total costs, including the cost of the investment advice, to between 1.0% and 1.5%.
Tax on your investments and the income from them is effectively another cost and something that can further reduce your investment returns. The obvious taxes are income tax and capital gains tax. However, there are other less obvious taxes including stamp duty, VAT and inheritance tax to consider. Further, there are many tax advantaged schemes that are approved by HMRC and designed to minimize the affect of taxation and or even achieve tax-free income and gains in return for investing in businesses and, therefore, helping the wider economy. There are also more widely used tax advantaged schemes like Individual Savings Accounts (ISAs) and Personal Pension Plans (PPPs) that attract tax relief on the contributions. An independent professionally qualified adviser will help you understand how best to navigate the tax maze to both minimise tax and take advantage of your personal tax allowances and exemptions.
Not all investors have the same attitude towards taking risks. Some will have a higher tolerance for risk than others. Therefore, it is important to understand what your own tolerance for risk is and what your capacity for loss might be. In simple language your capacity for loss means how much money you could afford to lose without it affecting your standard of living. One of the first things a professional adviser will do is discuss this with you and, using risk and capacity for loss questionnaires, help you understand how much risk would be appropriate for your personal circumstances, aims and objectives. Once your risk tolerance and capacity for loss have been identified, discussed and understood, only then can you invest with realistic expectations and truly understand the relationship between risk and reward.