The more an investment manager understands your requirements – from what you are looking for from your investments to taking into account other aspects of your financial situation – the more they can personalise your portfolio to meet long-term objectives. For instance if you were working for a large US tech firm and as part of your remuneration package you receive share options it makes sense to give you less exposure to US tech companies within your investment portfolio.
It turns out that many people take more risk than they need with their own investments, often allowing this risk to concentrate in specific regions or areas of the market. The starting point for building a portfolio of investments therefore involves your investment manager carefully ascertaining the amount of risk required to meet your personal objectives.
Investment managers pay close attention to what could happen to the value of different investments in the case of changing market conditions. This aspect of investing is especially important when the portfolio represents a large portion of somebody’s overall wealth or the amount of time they can commit to being invested is short. Your investment manager is able to reduce risk when valuations look stretched and respond quickly to changing market conditions.
There are also more risks to consider than the general investment markets pose alone. Portfolio liquidity for example needs careful attention as you may need to access your money at short notice and your circumstances will naturally change over time. This could include anything from needing urgent care, funding a family event or deciding to buy a holiday home so it is important that your investments can be redeemed for as close to the market value as possible, even during times of market stress.
Achieving your desired lifestyle
It is common for people to use investments to supplement their pension income in retirement. In times when bond yields are so low, it is important to look at the total investment returns your portfolio offers and not just dividends and income. An investment manager can use both income and growth orientated investments in the portfolio to pay out a regular, set amount that works towards achieving your desired lifestyle.
Financial planning enables you to have your investments managed in line with your and your family’s tax position and overall wealth, benefiting from a bespoke solution that encompasses every aspect of your current financial position and future requirements. Furthermore a financial planner can work with you to help with areas such as pensions and planning for retirement, Inheritance Tax planning and general tax efficiency.
There are then many techniques a manager can take to help your financial plan to work and ensure your portfolio maintains its efficiency. ISA wrappers for example, even if they constitute a small part of a portfolio, are very useful to an investment manager as they can hold the highest-yielding investments without further Income Tax being applied. The rest of your portfolio can then be more focused on growth to use your Capital Gains Tax allowance each year. Joint portfolios between spouses can also be structured in a way that income-paying investments can be held by whoever has the lower marginal rate of tax.*
Call us on 020 7189 9999 or email us if you would like to discuss our Investment Management Service in greater detail.
*Please note that Tilney Bestinvest does not offer tax advice as part of the Investment Management Service.
This article was previously published on Tilney prior to the launch of Evelyn Partners.