You can only get so far on your own with retirement planning!

When faced with an obstacle, it is very natural to turn to your neighbour for help.  No one seems to have the monopoly on progress and if one person happens to extend help to another, they are sure to need some for themselves before very long.  From the earliest “farmers’ markets” to the international exchange of goods foreseen by Adam Smith in the Wealth of Nations this cooperation has procured great benefits for society.

Therefore, a topic beyond your field of expertise and ability may put you off starting the task in hand at all.  If something is out of your comfort zone, it can be more difficult to judge whether the help being offered is actually what you need.  

This is no truer than with financial tasks, such as planning for your retirement.  Any knowledge gaps you may have around investment or taxation together with a lack of experience, are in fact what push you to seek professional help.  But in an area with such important consequences, what can you do to ensure you engage an adviser who will suit your own style and needs?  

A general rule is to observe their behaviours, so as to identify whether the adviser you want to help you build wealth, isn’t trying to just help themself to yours.  One of the first things you can test early on in a relationship with a professional adviser is the amount of space you are being given. In an area as complex as financial services people need diverse amounts of time to come to  conclusions, due to different levels of understanding and experience,. Invariably, the needs of individual investors do not fit comfortably with an industry led ‘sales-cycle’. So, if you feel yourself being whizzed along to decide, at any speed which makes you the least bit giddy, ask the adviser for more time and see what they make of that.  If they have your best interests at heart, they will have already addressed it; other advisers will either pressure you to act early or wane in their desire to help you, both of which are sure signs you could find a better fit elsewhere.

Another important area is patience.  Owing to the nature of inflation, investment returns and level of product complexity, you may find yourself ‘understanding’ matters when explained to you in person, but then be unable to explain to someone else, what you have just heard.  Without rushing ahead, your adviser should be prepared to explain something as many times as it takes for you to feel comfortable, rather than moving swiftly on.  At times, this may seem contrary, slowing down your progress towards identifying or implementing a solution. But ultimately it offers greater value in the long term by helping you make better investment decisions without the unnecessary jumble of emotions you hear many others describe in the wake of stock market gyrations.

 Taking time to concentrate on the areas you can control, whilst acknowledging some may be beyond you, will help in dispelling the fog often experienced in planning for retirement.  More speed and less haste will be of greater value, as will the helpful advice offered by an adviser with your best interests at heart.

Translating academic theory into evidence-based investing

When it comes to investing, there’s loads of guidance at your fingertips. The newspapers publish regular fund manager views and online platforms all have ‘selected’ stocks which they recommend to secure strong returns. They’ve done all the hard leg work; all you need to do is choose from among the ‘likely’ winners they’ve filtered out. It seems too good to be true; and it is.

The trouble starts when investors go back to look at the chosen funds; they can be dogged by the thought that the results are never quite as good as they expected; even with ‘good market performance’.  Still, investment is a long-term game; there is no point in bailing out early unless you have chosen a real dud fund, right? Some even wonder whether experiencing the highs and lows is the only way to get to grips with how to invest… Most don’t even think of the question, which is worse.

It is a little-known fact that scientists and researchers at universities globally have been looking into this conundrum for over 65 years. Starting back in 1952, one researcher discovered that combining stocks of different characteristics in a portfolio would lead to an overall better return, with fewer of the ‘ups and downs’ along the way; portfolio construction became important.  Building on this in the early 1960s, other researchers independently concluded that the best ‘risk-reward trade off’ was to hold the entire stock market in proportion, balancing this by cash or debt to lower or increase the risk; not putting all your eggs into one basket.  Yet another one could discern the ‘efficiency of markets’: prices adjust rapidly, albeit not perfectly, to new information, so that the market price is fair and reliable.  

Over the next 20 years, the advent of computing power offered researchers a greater understanding of share price movements in a new model. Whilst holding the market was an efficient thing to do, being exposed to the market, however, was not a ‘single risk’ question.  Numerous studies pointed to anomalies in the model before academic research, validated by ‘peer review’, concluded that these anomalies, enhanced the model.  They were actually dimensions of ‘risk and reward’ which could be used reliably to enhance portfolio performance.  They can be summarised into four: smaller companies, value companies, profitable companies and share price momentum.  By exposing a portfolio progressively to these factors, a better investment experience is obtained.  In this way, advances in investing were validated by empirical research, not from idle theorising.  

So far so good, but how does this help you to meet your investment goals?

Evidence-led investment is the best solution and is how professional advisers construct portfolios, for individual and institutional clients. This approach respects the advances offered by 65 years of academic research.  When combined with a low-cost approach to investment, it contributes to effective portfolios which can be backed by independent, third party data to show that you’re still on the right track every step of the way. 

When you add it all up, it’s common-sense investing, really!

If you think a successful career always equals a successful retirement – think again!

When you think about planning for retirement, what’s the first thing you expect to do? Earn money, of course – enough of it to save some for ‘a rainy day’. You assume that the more successful you are, and the more money you earn, the more likely you are to have a good solid nest egg saved up, right? In theory, yes, but nine times out of ten, this may not be the case. 

Success at work often leaves little time for concentrating on yourself and planning for the future, so while you may have the cash to invest if you’re climbing the career ladder and seeking professional success, you might not have spent time making your money work hard and go further. We see this all the time with clients who are thriving at work but haven’t spent much time thinking about life after work and how they’ll fund their lifestyle. They know they have cash to fund their lifestyles now, but can’t quite shake off the feeling which comes every time they think about the future… Will it be enough?

If you think you might be in a similar situation, ask yourself the following questions:

• When is it that you would like to retire?  Should you finish all at once or gradually wind down?  It’s important to know what you want because, financially, it makes a difference
• What level of spending do you think you will have when you retire?  The easiest way of thinking about it is by looking at how much you spend now (you can adjust for inflation later).  There will be some basic life costs to keep you warm and fed; but then there are the kinds of things you would like to do or continue doing which mean additional expenditure
• You have spent some time accumulating assets; what is their value?  
• Do you have any equity in your workplace? How and when will this pay out?

Pretty soon, you end up with a page of information about yourself that you can now share with a professional to help you start planning for retirement.

It doesn’t matter if you’re successful at work – and which industry you work in – it’s difficult to find time to step back and think about your future. You’ve got the means, now put them into a plan to deliver your goal; a comfortable and fulfilling retirement.

Planning for retirement? Enjoy the journey!

If you’re reading the news, chances are you’ll hear about a pension scandal or a scam. There’s always a story or two about someone who put their hard-earned retirement fund in a scheme which ‘just couldn’t fail’. And it did – the next thing you know, the fund has gone bust and they’ve lost all their money; like Arch Cru for example where £400M was lost in 2009 and investors were left with very little.

With all this news, it can be really scary when you’re starting to think about retirement – especially if you’re trying to plan by yourself. At the last count there were thousands of funds you could invest in, and it’s easy to get bogged down trying to keep up with what is currently on offer without going round and round in circles and then shelving the idea for another year because it’s too complex!

Retirement should be a positive experience and planning for it should be exciting, not stressful. Here are the top things we encourage our clients to think about when they start planning for life after work:

• What’s your end goal? Thinking about where you want to be and when are always good starting points. Calculate what your monthly outgoings are now, and make necessary adjustments e.g. subtract mortgage payments. Add in extras like holidays or hobbies and you should have a clearer picture. The figures may be more or less the same once you’ve made your adjustments, but now you have a basic framework and can start adding other building blocks
• Will retirement be an immediate stop for you, or will you gradually stop working over a time period? If you want to phase work out, how many years do you want to spend doing this?
• What have you already got saved towards retirement? Your existing pension details should include a valuation, where your pot is invested and how much is being contributed by you and your employer
• Find out your State Pension entitlement; this can be done online. If you’re in a relationship, your difference in age may affect when you can access your pension, so look into this
• Do you have any ‘spare’ income or assets, which could be used to support a retirement plan?

Once you have these building blocks (and it may take you a while to get them on one piece of paper), it’s time to seek out the help of a professional adviser. They will review your information and convert your spending target into a suitable goal before working out what you need to do in order to reach it. Then they will help execute the agreed plan to fulfil your retirement goals. It really doesn’t need to be complicated, stressful, or difficult. Like anything in life, just starting off may be the hardest part of the journey!