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  • 21 July 2015

    Family Planning…

    (L-R) Liz Singleton, Justin Urquhart Stewart & Ruth Power
    Caption: (L-R) Liz Singleton, Justin Urquhart Stewart & Ruth Power

    As a fairly new Granddad, I was flicking through some photos the other day, (well actually scrolling through my camera memory card - but you know what I mean!) when I came across this picture of FMB friend, Justin Urquhart Stewart with FMB Directors, Liz Singleton and Ruth Power.

    It brought back some great memories of a fantastic cruise we had on Lake Windermere during one of Justin's visits to The Lake District some years ago. It then reminded me of a great piece of advice he gave to families in a recent blog of his...

    “If you are planning to invest – don’t! Invest in planning. It may sound trite but from personal experience I can clearly say that it’s true. Before you part with a single pound, sit down quietly and do some clear thinking as to what you to want to achieve, as well as how and when. After all, none of us would set up a business without a business plan, so why wouldn’t the same apply to your private life as well. In fact, the only thing that most of us actually plan is our holiday, and the rest we leave to good fortune – if we are lucky."

    He's right. As financial planners, we often hear about people wanting to invest, but what are you investing for? Without determining that, how do you know whether it is going to achieve its purpose?

    Financial Planning is all about getting to the heart of what’s important to you; quantifying your goals and objectives and finding a way to help you achieve them. With a family, this could be supporting your children with their education fees or helping them buy their first home or could be provision for retirement or long-term care costs for yourself or your partner. As a nation, we often tend to plan far too late, and we hear the phrase "I wish I had..." all too often. The thing is; it is never 'too early' to plan.

    Statistics released by The Guardian recently (07.07.15) showed that people sometimes massively underestimate when it comes to their finances:-

    • Their statistics showed that the cost of raising a child in Britain from birth until age 21 was shockingly underestimated by a staggering £179,000 - with the average guess being £50,000 when the actual cost was £229,000.
    • Another statistic showed that, when asked how much you would need to have in a private pension savings pot to get a total income of around £25,000 a year after stopping work (assuming that they were claiming a full state pension) - this was miscalculated by £191,000 with the average guess being £124,000 when the actual figure was £315,000.

    But how are you meant to know how much is enough? And how can it be calculated? We are able to use an extremely powerful cashflow modelling tool to demonstrate this. The tool can determine whether you are likely to achieve your goals or what changes need to be made to keep you on track.

    If you would like to have a chat about your finances, call one of our friendly planners today.

  • 13 July 2015

    Local Heroes!

    We have taken a conscious decision over the last few years to use local suppliers where possible. We understand that national firms bring employment to the region too, but as an independent Kendal business we need people to trust that local can be just as good as national and sometimes even better.

    We’re lucky enough to have a stable economy in South Lakes with unemployment significantly below the national average. That’s not to say we don’t have our challenges, but how can a firm like ours help? For a start, we employ 37 local people, but we can do more than that.

    We have been using local suppliers more consciously over the last few years. It’s surprising just how many services you use as a business and the majority can be found right on your doorstep. From design to pest control, from catering to security, how does this really help though? When you are a local independent, you can be more flexible in order to help your business survive even when the going gets tough. I think it’s the strength of our SMEs that meant this area got off relatively lightly during the recession in terms of employment at least. You can’t deny the huge influence of massive employers like BAE systems and Asda for example, but what I’m saying is we need a healthy mix of both. We support local because we want to encourage that healthy mix.

    But can we really find the services we require on our doorstep? We’re in a specialist sector and inevitably, for some of the financial expertise we require, we have to look further afield. But generally it’s easy to find excellent quality services right here in Cumbria, and that’s what we want. SERVICE! Excellent customer service is much easier for small local companies to get right, and that is where the SMEs like us will excel. Not where cheapest matters, but where service is paramount.

    So, because of this desire to support local business and our local economy, we have joined The Brewery Business Club. In doing so, we support the Brewery Arts Centre and all the other members by spreading the word about their great businesses. It’s a growing, vibrant community and a great idea to merge the creative arts with business to further promote the sustainability of a wonderful local resource. As part of our sponsorship, we will be holding some competitions on social media to win tickets for the Brewery Cinema so be sure to follow us on Facebook and Twitter to join in!


  • 10 July 2015

    The Budget...

    This week’s budget was always going to be interesting as the first Conservative budget since November 1996.

    In many ways, the focus was not on investors this time and more about welfare reform and tweaking the system to “make work pay”.

    The most significant measure for us was the change to the Inheritance Tax threshold. Much of our planning is around helping clients pass wealth on to their families. This measure will be very welcome to many people, as it is not hard to fall foul of the current limit, especially in South Lakeland where property prices have always been high in proportion to wages.

    Over the years, we have helped hundreds of clients reduce their exposure to IHT. The truth is, in real terms this tax, which at the outset was supposed to be a tax on the wealthy, was increasingly becoming a middle-income tax as the threshold slipped behind inflation. The rise to £1 million is a fulfilment of a promise the Conservatives have been making to their core voters for many years. Until the recent relative upturn in the economy, it was politically hard to deliver. The inclusion of the family home softens the blow for any detractors, who could argue that you should not be able to pass on a relatively modest family home free of tax? I suspect this will remain the limit now for a very long time. It will be difficult to justify any concessions on this going forward when the government is constantly looking for sources of income to pay for our increasing pension and long-term care bill as the population ages.

    As we meet with clients over the coming year, it will be time to take stock and review how this affects people on an individual basis. The beauty of having a relationship with a financial planner is that we can respond to changes and make sure your plan is still fit for purpose. The financial landscape has changed dramatically over the last 18 months and we strongly recommend an ongoing review of financial plans to ensure people take advantage of changes to financial legislation as well as looking at how changes to personal circumstances affect your goals and objectives.

    For more on the budget, check out the BBC summary or see how the budget changes will affect you with the BBC's Budget Calculator.

  • If you are a parent of young children, as I am, you probably wonder from time to time about their financial future, for example:-

    • If they want to go to university, how will they/we pay for it?
    • How will they afford the deposit on their first home?

    According to new research, over 40% of parents aren’t regularly saving for their children’s future. Those who are saving are only putting away an average of £34 a month for each child. Once inflation is factored in, this is unlikely to produce a pot in the future large enough to cover university costs or a deposit on their first home.*

    The average house price could hit £1.3 million by the time a child born this year hits the age of 30 if property prices continue their current upward trend.*

    Of course, many parents just can’t afford to save for their children. It’s not a case of not wanting to, but simply not being able to. Parents also have their own retirement to plan for as well as wanting to spend any spare cash on themselves.

    FMB can help with your financial planning. We can use cashflow modelling software to see if there is any spare money in the budget that could be saved for your children. We can give you a realistic idea of what this will be worth in the future and how far away this might be from your target amount. We can give advice on the best vehicle to save this into; such as a Junior ISA or another form of savings account. It is important to ensure that savings you do make for your children are invested in the best possible place and in a tax efficient manner.

    Since April 2015, parents are now able to transfer the old style Child Trust Funds to Junior ISAs. As more providers are offering these newer savings products, parents may benefit from a wider choice of investments or lower charges.

    Call us on 01539 725855 if you would like to discuss the financial future of your children.

    *Source: Yahoo Finance 14.04.15

  • The subject of behavioural finance is one that has been in the press recently and it is one I am particularly interested in, but what does it mean?

    Essentially, it is the crossover between investing and the sub-conscious psychology that forms the basis for an investor’s rationale.

    The subject can generally be broken down into 8 recognised concepts;

    • Prospect Theory & Loss Aversion
    • Anchoring
    • Mental Accounting
    • Confirmation and Hindsight bias
    • Gambler's Fallacy
    • Herd behaviour
    • Overconfidence
    • Overreaction

    I will choose two to look at in this blog.

    Loss Aversion

    Ask yourself the following. Would you rather have;
    A) A guaranteed payment of £90 or
    B) A 90% chance of receiving £100

    Then ask yourself this, would you rather have;
    A) A guaranteed loss of £90 or
    B) A 90% chance of losing £100

    This principle suggests that if investors are faced with the possibility of losing money, they often take riskier decisions aimed at loss aversion. Did you choose the same as the majority; answering A and then B? The two questions above are mirrors of each other, but most people would answer A for the first and B for the second, thus proving the theory.

    Gambler's Fallacy

    This is the lack of understanding that results in incorrect assumptions and predictions about the onset of events.

    For example; in the Monte Carlo casino in 1913 the ball of a roulette wheel fell on black 25 times in a row. Many gamblers thought this an excellent opportunity to bet on red. However, the next spin was black and millions were lost. If an investor thought about it logically; on every single spin, there is an equal chance of the ball falling on red or black. On this occasion, they were therefore falling into the gambler's fallacy trap and not thinking clearly.

    I find this a very interesting topic and one that I have done quite a bit of reading on. If you, like me, found this interesting, I would recommend reading “Thinking Fast & Slow” by Daniel Kahneman. Hopefully, your good investment behaviour will lead to good investments!

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