Courtiers Wealth Management
Courtiers Wealth Management

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Clients urged to stick to long term plans and goals

23 Jun 2022

The economy may be going through a bumpy period, but clients should not be blown off course and should stick to their long term plans and goals. That’s the overriding message in the most recent Quarterly Adviser Review from Graeme Clark, Head of Private Clients and Paul Kemsley, Senior Private Client Manager.

Yes, the economic headwinds that were first discussed by Graeme and Paul last December have strengthened, with inflation at a 40-year high, rising interest rates, declining stock markets and gloomy predictions that the UK is about to enter a recession, but clients should hold fast.

“Most clients understand and appreciate there is going to be volatility short term, and that they are investing medium to long term so they can achieve their longer-term goals,” says Graeme.

“We have seen the downside,” agrees Paul, “but you’ve got to stick to your long-term objectives, and over the long term the Investment Team has done a great job.” As Courtiers CIO Gary Reynolds explained in his most recent CIO Talk, although most Courtiers Funds have fallen since the start of 2022, they have outperformed their peers.

Despite the temptation to cash in investments when markets, such as the S&P 500, which is down more than 20% since the start of the year, are falling Graeme says “he is not getting that” from his clients. As predominantly experienced investors, he says they understand that at times there will be “these blips in the market”.

With inflation predicted to hit 11% later in the year, Paul acknowledges that some clients may be thinking about taking more money out of their pension. However, he cautions that before going down this road, they should speak to their Adviser. We can model it, he explains, and if it’s putting their capital at longevity risk (running out of money) then we can have that conversation.”

When markets on which pension funds in Defined Contribution schemes depend are going through a sticky period as they are now, cashing in those savings and beginning to draw on them can mean reduced pension benefits. Graeme says that for most clients this isn’t a problem. “Most clients have a mix of assets and sufficient wealth, which means they can stick to their original retirement plans,” he explains.

Regular Adviser reviews means any client’s decision to retire is very unlikely to be a spur of the moment decision, but planned over the course of several years. As a client approaches retirement, this typically means moving into lower risk assets, which has the effect reducing volatility and softening the impact of any general market downturn. “That’s where the value of planning comes in,” Graeme says.

Rishi Sunak’s freezing of allowances and thresholds is continuing to create ripples, with the risk that people could end up paying more tax. Graeme says the freezing of the LTA (Lifetime Allowance, the maximum pension savings that a person can build up without a tax charge) at £1,073,100 until April 2026 is a good example. Again, Graeme says that’s where the advantage of detailed financial planning with an Adviser comes into its own.

However, he is keen to explain, tax planning shouldn’t be seen in isolation, but as part of a “human approach” that focuses on how it can meet clients’ objectives.

It’s also about marrying up the investment returns with that tax planning. “There ‘s no point getting lower investment returns if it’s tax efficient. And likewise, it’s no good being ultra tax efficient if you don’t get the investment returns, and that’s what clients pay us fees for, to help them through.”

Beyond being aware of the immediate issues facing clients, in a fast changing and turbulent world, it’s vital that Courtiers Advisers are always looking ahead. “What” I ask do they see “as the long- term trends that could affect clients?” Paul says he expects to see the level of taxation continue to rise, at least initially before the trend is reversed as the negative impact on the economy and wealth creation is recognised.

Graeme suggests that “sticking a penny on income tax” won’t wash with the voters, which means that taxes on wealth such as Capital Gains Tax will be very much in play. “Whatever your political persuasion, it’s going to an easy vote winner to have so called stealth taxes through the back door.”

While the second quarter of 2022 has certainly brought with it challenges for Courtiers Advisers and their clients and the future looks even more uncertain than usual, Paul says that one thing that has been unremittingly positive has been the return of face-to-face meetings between clients and their Advisers. “Yeh, it’s much better,” says Paul. “I mean video conferencing is good, but you don’t get that interaction. Everyone’s just had enough of being cooped up for the last couple of years. The clients are welcoming that return.”


Important Information

The views expressed by Courtiers in this summary are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this article. Investors are recommended to take independent professional advice before effecting transactions and the prices of stocks, shares and funds, and the income from them can fall. Past performance is not a guide to future returns. Tax treatment depends on individual circumstances and may be subject to change in future. We do not endorse or accept responsibility for website content on any websites other than those operated by Courtiers, which may be accessible via links in this article.

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