Thursday 13 October 2016

How to Steady the Ship After your Divorce



Ending a marriage comes with a large handful of challenges, with money usually topping the list.

As a divorcing woman, you may feel overwhelmed because you spent your married years letting your spouse handle your financial picture. It’s time to take the bull by the horns and set yourself up for success by following these tried and true steps.

1. Update your accounts

The first step in steadying the ship is to take back control over your accounts.

If you have changed your name, you will need to update your bank and investment accounts. Identification cards, passports, and other property in your name will also need to be updated as soon as possible.

It’s not exciting, it is boring, but it’s a necessary step toward protecting what is rightfully yours while getting yourself organised for your new life.

2. Create your own goals

Throughout your marriage, you probably had a number of financial goals you were working toward with the help of your spouse - paying off the mortgage, university fees and so on.

You now need to create your own goals, remember it probably wasn’t raining when Noah built the ark!

Getting ready for retirement, paying down mortgages or loans or funding an account for travel all look a little different when you’re on your own.

Knowing what you want is the best place to start.

3. Have a plan in place

After you’ve determined what you’d like to achieve, you need to work out how you’re going to achieve it...

Your new financial plan should answer questions like:

  -  When do I want to reach these goals?

  -  How could I use my current and future assets to help me get what I want out of life?

  -  What does success look like within this new plan?

Getting clear about the path you will pave to secure the things you want in your financial life is a powerful step toward securing a stable future. For help with creating an actionable financial plan, check out our guide here.

4. Focus on what you can control

Emotions run high during and after a divorce, and they have a tendency to get in the way of reaching your new found freedom.

To steer clear of emotional pitfalls, focus on taking control where you are able. These areas may include paying yourself first through automated savings plans and investing with a long-term perspective in mind.

In addition to taking charge of your savings and investments, understanding the difference between what’s coming in the door (income) and what’s going out (expenses) each month is necessary for maintaining a tight grip on your plan. Know your budget inside and out, and make it work in line with your overall goals – without getting caught up in the things you can’t control.

5. Get help

Finding financial stability after divorce doesn’t mean you have to go it alone. At Jones Hill, we understand the financial complexities that come with ending a marriage and work to help you  move forward in the best way possible.

We lend an expert hand in building a new financial plan that fits your updated needs and goals. 

To schedule your consultation and get started down your post-divorce financial path, contact us today.

Wednesday 12 October 2016

WASPI -Why some women born in the 50’s have been stung...twice!



You may have heard me on BBC Wiltshire yesterday morning talking about the Petition that is being put forward by Women Against State Pension Inequality (WASPI) for the government to help ease the financial uncertainty for women born in the 1950’s who say they have received little or no notice that the state pension age for women is being delayed by up to 6 years.

Firstly, a bit of history - back in 1908 the Government of the day set up the ‘old age pension’ aimed to help those over age 70 earning less than £2,000 a year (in today’s money).  It was generous for it’s time and was means tested.

In 1925 it morphed into becoming contribution based, i.e. you had to pay into to it to receive it, and the start point was age 65 of the youngest spouse.

Under those rules Michael Douglas would be 90 years old before he could get his old age pension (are he and Catherine Zeta Jones still married?).  This was deemed unfair, so just after the outbreak of WW2 women’s old age pension age was dropped to 60.  And there it stayed for 55 years!

In 1995 we started the process of reducing some of the discrimination between men and women.  Many ex-communist countries have opted not to reduce the discrimination as they believe women are disadvantaged by usually being the one to bring up the children.  

In 2007 the Labour government decided to increase state pension age again eventually up to age 68, just 2 years off what it was originally set at in 1908!  But it’s still not means tested...not yet anyway!

The decision was then taken that, in 2010, state pension age would start to increase and by 2020 would be complete. In 2011 this date was brought forward to 2018. 

Of course people are living longer too, so delaying state pension for everyone will save the government a lot of money.

Apparently the government wrote to those concerned, and put adverts in the press, however when pushed for evidence of this under Freedom of Information, they refused as the cost to do so would be more than £600.  No one remembers getting a letter or seeing any adverts. In 1995, only 1% of the population, 600,000 people, had internet access - remember 26K modems and the funny noises they made when they connected?

If the DWP gets mail returned, it doesn’t always try to track you down, and they freely admit that a sizeable proportion of their mail doesn’t even get opened. Can you imagine expecting to be claiming your state pension in a year or two, only to find that it’s been delayed by up to a further 6 years!  Somewhere between 300,000 - 500,000 women are affected.

Some women were delayed by the first change to 65, and then by the second change as well.  Many didn’t know about the first change and so the double whammy will have sent them into shock.

Men’s state pension age was delayed too.  But they were given over 7 year’s notice of a 1 year delay.  

Ex pensions minister, Baroness Ros Altmann, said that at least 10 year’s notice should be required to give people adequate time to make alternative arrangements.  It took them 14 years to write to those affected by this debacle, but they say there is no wiggle room to put it right.

To compound the problem, at best, many women affected have small private or company pensions as companies used to exclude women and part timers from their company schemes.  They were highly reliant on getting their state pension, and it’s been thrust beyond their grasp, twice.  They were also much more reliant on their husbands staying in work for longer than expected.

Previous Pensions Minister Steve Webb said he acted too hard and too fast.  Despite this, Baroness Altmann ruled out any help on 26 Sept 2015 even though when she was Director General of Saga in 2011 she called for a slower timetable and better information.

There was a debate, which the government refused to take part in, on 7 January 2016 and it had unanimous support from those attending.  But, as a backbench motion it had no force to make the government act and DWP & Justice Minister Shailesh Vara said there would be no change.

The second debate on 1st February 2016 was also rejected by stonewall Shailesh Vara, although she said that the women could of course claim Job Seeker’s Allowance instead.  This is worth much, much less than state pension and comes with a raft of terms and conditions designed to reduce how much you can have.  

You can understand why women affected are very unhappy!

Here’s hoping that something more positive comes from this latest petition. We know there is going to need to be a compromise but it’s likely that one party will be compromising much more than the other.

If you want to know your state pension age, click here.

Remember that, at best, basic state pension is often little more than £20 a day, so you absolutely need to provide for yourself - if you’d like to talk pensions then get in touch.

Friday 7 October 2016

The Active/Passive Debate




A heated debate over the benefits – and drawbacks – of active and passive investment management has been a constant in the investment world for years. Supporters for active investment focus on the potential for high returns, while passive investment fans focus on low fees and simplicity in portfolio construction. At Jones Hill, we understand the need for both, but we want to shed some light on the differences.

Confused about how active or passive management fit into your investing goals? We’ve got you covered.

 The Lure of Active Management

Active investment managers put together a mix of investments meant to outperform the broad market. They may look at economic factors, sector or company research, and market trends to pick and choose which investments to include in a portfolio. These strategies are based on one tempting principal: to beat the market (or appropriate benchmark). 

While active management is attractive on its face, the strategy comes at a cost. Actively managed funds are more expensive than their passive counterparts which ultimately eats away at your returns. To add to the pain of active management, most managers fail to outperform the market – especially when it comes to core holdings like large company stocks. If you don’t feel like spending your time chasing returns, active management probably isn’t for you.

 Logic in Passive Management

On the flip side of the investment coin is passive management – a portfolio strategy that uses simple tracking of an index to generate investment returns. Passive managers don’t try to reinvent the wheel; instead, they select the same stocks found in a particular index, for instance, the FTSE 100, and put together a portfolio that mimics those holdings.

Because passive management doesn’t include in-depth research or ongoing buying and selling in an attempt to boost returns, investments here are much less costly. Instead of focusing your time and energy on chasing unrealistic returns to make up for fees, you can sit back, relax, and know your investment is using proven logic to give you a respectable return over time.

 Who Wins the Investment Debate?

Both active and passive investment styles can help you reach your investment goals, but there is a clear winner in certain situations. Passive investments are a smart choice for your core holdings since history has shown us that active investments simply don’t live up to the performance hype. However, adding low-cost active investments as a small portion of your portfolio gives you access to specific sectors or certain market trends, potentially enhancing performance.

At Jones Hill, we are strong supporters of the low-cost, sound investment strategies represented by passive management styles. But we also understand how active management can play a small part in your overall portfolio design. If you want an expert to help you navigate the world of active versus passive investment strategies, contact us today. 

Tuesday 4 October 2016

Risk Tolerance - Meet Mr Risky and Mrs Cautious


Well, “the risk tolerance chat” is the investment equivalent of the “birds & the bees chat”, important stuff to say the least! 

Properly understanding your risk tolerance allows you to be invested in line with your goals and objectives instead of lying awake at night worrying what your investments are up to. 

Investment risk and risk tolerance, you’ve probably heard tons about it, but might still find yourself scratching your head thinking.. “what on earth is it?” 

What On Earth Is Risk Tolerance?

Risk tolerance is how much risk you can handle in your portfolio and is determined by your investment goals. For example, Mrs Cautious has modest financial goals and a long time to achieve them, therefore she doesn’t need to take on much risk and would likely have a low risk tolerance. After all, why take more risk than you need to?

On the other hand, Mr Risky has more ambitious goals and he’s in something of a hurry (think Friday evening rush hour commuters). Mr Risky is more likely to hit the gas and cut a few corners because, in his view, the reward is worth the risk.

Understanding where you sit between Mrs Cautious and Mr Risky is the art of risk profiling. 

Mr Risky Meets Mrs Cautious 

But what if you have the needs of Mr Risky but the personality of Mrs Cautious? For lots of people, the answer is just to invest in riskier stuff, right? 

Unfortunately not, and this is where we find a lot of people get stuck and worried about what their investments are doing (Up.. Down.. Up.. Down). 

If you’re in this situation, don’t jeopardise your nest egg. Instead, consider revising your investment goals to something a little more modest (do I really need 2 weeks in Fiji?), or putting a few more quid into your monthly savings plan. 

The Behaviour Gap

For years there have been attempts to simplify the process of identifying risk tolerance by using questionnaires and other tools, but the truth is there are no shortcuts (listen up Mr Risky).

One reason for this is the difference between what we think we would do in a particular circumstance and what we would actually when that circumstance arises. This is called the “behaviour gap”. 

For example, in the annual fire drill at the office, everyone knows not to fetch their coat / briefcase / favourite stapler, but we just can’t help it, we just need that stapler right?

This is the behaviour gap in action, we know what to do when the fire bell rings, but when it happens, we go searching for our belongings - and that’s the risk tolerance conundrum!

In an investment context, the equivalent is sitting in your financial adviser’s office, calmly informing them that you can live with a market fall of, say, 20%, but when you start to see red, the first thing you want to do is pick up the phone and scream SELL, SELL, SELL! 

At Jones Hill, we realise that properly understanding your risk tolerance is an important part of the financial process. That’s why we ask searching questions and listen attentively, so that we can design a portfolio that’s just right for you.

 

Why we do it

Everyone deserves to lead a rich and fulfilling life without the worry of running short of money.

 

 

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