With conflict in Eastern Europe, escalating inflation, tax rises just around the corner and the return of volatile markets, the past few weeks have certainly proved eventful. So, there was plenty for Graeme Clark, Head of Private Clients and Paul Kemsley, Senior Private Client Manager to discuss in their latest Quarterly Review of issues, developments and trends affecting Courtiers clients.

War in Ukraine

With the war in Ukraine continuing to extract its terrible toll, when discussing wealth management a sense of perspective is called for. Graeme assuredly struck the right note when he said; “It’s a very sad situation obviously, and everyone is worried and concerned about what they see on the news.”

That said, despite paling into insignificance when compared to the human suffering in Eastern Europe, the effects of the war have not gone unnoticed by investors, sending a shock through equity markets and contributing to increased levels of volatility. Inflation, which was already on an upward path is set to rise further driven by higher energy costs and rising grain prices.

The conflict in Ukraine has undoubtedly delivered a shock to markets, the world economy and even perhaps to people’s sense of financial wellbeing and security. However, as far as precipitating a radical change in clients’ behaviour, Graeme he says it’s very much business as usual. ‘Yes’, he says, some clients have noticed “a lot more volatility” when they log in to their Courtiers account to look at their fund valuations, but clients have been reassured by regular updates from the Investment Team. “I have not had anybody say, ‘I want to pull my money out’, or anything like that, or even suddenly downgrading their risk.”

Inflation is certainly a regular topic of conversation between clients and their Advisers, with energy prices a particular concern. “We are assessing whether our clients’ incomes are still appropriate to meet their needs, where they are pulling their income from so that they are doing so in the most tax efficient manner to compensate for these rising costs,” says Paul.

Clients not deterred

Despite the impact on equity markets, clients have continued to invest in Courtiers Funds. “There’s still the appetite there,” says Paul. Not only do returns from deposits in banks and building societies remain derisory, “they know that we are controlling the risk for them as well.”

While stock market volatility has risen and the cost of living continues to escalate, Paul says that clients are well educated and experienced enough to take a long-term view and not allow themselves to be deflected from their lifetime and lifestyle goals. “A lot of our clients want to help their grandchildren, whether that’s educational costs or supporting them to get onto the housing ladder, they still have these sorts of goals to work towards.”

How much cash should you hold?

In times of market and economic turbulence like those we’re now experiencing, having a cash buffer to draw on rather than being forced to sell assets, such as equities that have depreciated in value can be an effective way of protecting your wealth. Graeme says that when it comes to how much an individual chooses to hold in cash there are no hard and fast rules. “It’s very personal to them.”

He explains that some clients, especially those with secure income to cover their expenditure, prefer to run their cash right down and leave as much as possible invested in Courtiers Funds in the expectation of high returns, and safe in the knowledge the funds are “very liquid” and can be redeemed quickly and easily. On the other hand, those people whose plans include major expenditure, such as paying for a house extension in six months’ time may be more inclined to hold the money in cash, reassured by knowing that it will be available when needed. “It depends on how risk averse the client is, what the market conditions are, and what they can get from their cash deposits.” The “psychological element” and the comfort blanket of holding cash can also be a factor.

For those who sell fund units each month to provide them with a regular income, Graeme says some will continue to do so. He explains that even if they sell when prices are down, they reckon there will be other months when prices are up allowing them to sell more units and that “over a sustained investment period, they will probably be better off leaving their money invested.” That said, where a client is in income drawdown, there is the option “to ring fence a little bit off in a cash fund.” Please contact your Adviser if you would like any further information.

All that glitters

In times of war and strife, gold is often seen as a safe haven. The current conflict appears to bear this out, with the price of gold hitting its highest level since August 2020 on 8 March 2022.

Paul says that viewed as an asset class, gold has a number of drawbacks. Not only does it not provide an income, but there is also the cost of storing it, and unlike a portfolio of equities and bonds, where you can sell part of your portfolio, you can’t sell part of a gold bar. Moreover, “a lot of people already have exposure to gold through jewellery and other items like that,” he says.

Time running out

With the end of the tax year only a couple of weeks away, time is running out to take advantage of the opportunities that this provides, a subject we covered in a recent article.

That said, ahead of the April 5 deadline, Courtiers Advisers are continuing to work with clients across a range of areas of wealth management. This include helping them to make the most of their annual ISA allowances, to mitigate the effects of Capital Gains Tax (CGT) and advising them on the best ways to utilise their annual gift allowance. Your Adviser will be happy to answer any questions you may have.

Navigating the rocky road ahead

Looking ahead to the new tax year, Graeme is only too aware of the effect that the freezing of many allowances, (a subject we explored late last year) will have in pushing people into higher tax brackets and in breaching allowances such as the lifetime allowance for pension contributions. He says this only serves to highlight the value of sound long-term financial planning and the support an Adviser can give in providing this.

With all that has happened in the past few weeks, the final quarter of the 2021/22 financial year has proved particularly eventful. The indications are that the coming months aren’t going to be any different.