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Financial Planning

It pays to know the differences between independent and restricted financial advice

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Do you know which is better, independent or restricted financial advice? Spoiler alert: there’s only one right answer to this… Independent advice is far superior, and we’ll gladly explain why.

What is ‘independent’ financial advice?

As the name suggests, an Independent Financial Adviser (IFA) will offer you impartial, objective advice on financial products and services. This means they will carry out research across the whole of a particular market to find the right solution to suit you personally. They won’t be biased towards any particular financial company or product, and they won’t base their recommendations on fees paid by other companies to encourage them to sell their products. If you get your advice from an independent financial adviser or financial planner, you can feel confident they are working solely for the benefit of you, and no-one else.

Being independent is a highly-valued status in the advice industry. To call ourselves independent, financial advisers must be able to prove their status to the UK regulator of financial services, the Financial Conduct Authority. If you’re not sure whether an adviser is independent or restricted, ask them. A financial adviser who can only offer restricted advice must declare this to you before making a recommendation.

How does restricted advice compare?

It all comes down to the options that the financial adviser can give you. Being ‘restricted’ means an adviser can only recommend products from a limited selection or product range, not from the whole of the market. Here’s an example that highlights the difference from a client’s perspective.

You arrange to meet a financial adviser to set up a personal pension. An independent financial adviser will research every relevant pension available within the UK market to find the one that they believe is best suited to your needs. They will then make a recommendation and provide you with the reasons that justify their decision.

With a restricted financial adviser, however, the recommendation process is different. The adviser might tell you that they are only able to suggest a pension from one pension provider, or from a select panel of a handful of different pensions. Your options could be drastically reduced, because they won’t have access to the widest choice of products available.

Why is independent better?

Using a restricted financial adviser doesn’t necessarily mean you’ll be getting ‘bad’ advice. All financial advisers must have a similar minimum level of qualifications and meet the same standards.  It just means that the choices available to you may limited, and this might not be in your best interests.

And, sometimes, getting advice that isn’t independent can be a problem. Restricted advisers will often work for a much larger financial services company – in which case they are probably keen to sell you one of their products. Alternatively, they may call themselves restricted because they only focus on one type of financial product (pensions, for example). So, if the restricted adviser recommends a pension to you, you can never be entirely sure whether it is the right pension to suit your needs, or just that he gets paid to sell this particular pension to you.

Independent financial advisers, on the other hand, are so much more than just salespeople. We believe that financial planning is more important than just recommending where you should put your money. It’s our job to find out about your goals in life, look at your personal circumstances and help you decide on the best course of action. In fact, recommending products is just a small part of what we do. We tailor our advice to suit your needs, and we will never recommend a product that we don’t think is 100% right for you, and will always give you clear and comprehensive reasons behind every recommendation we make.

Are independent financial advisers getting harder to find?

You may be wondering why advisers choose to be restricted, since being independent is clearly better for clients? The simple answer is that it is more expensive to be independent than it is to be restricted.

Being restricted makes it easier to run an advice business. A lot of smaller financial advice firms have chosen to become part of larger networks, which give them a panel of investments to sell to their clients. This makes it cheaper for them to run their business, because they can minimise their costs, outsource some of their functions and don’t have to spend so long carrying out painstaking investment research.

Being independent, on the other hand, means going it alone. This can mean paying more for professional insurance, training, and other regulatory burdens.

Don’t forget, most financial advice firms are themselves small businesses. Some have been hit hard by the coronavirus. In fact, the number of independent financial planners operating throughout the UK is shrinking. We’re not quite becoming an endangered species yet, but it’s sad sometimes to see that there are fewer of us out there flying the flag for independence. Because we believe people deserve the opportunity to get independent advice.

As for us, we have no plans to switch from offering independent financial advice to restricted. We believe that being independent means we can keep delivering better quality advice – and better quality outcomes – for our clients. We’re proud to say that all of our financial planners are highly qualified, have years of experience of financial planning – not just selling financial products – and are proud to call themselves independent.

So, if you’re ever in doubt over independent or restricted advice, remember this: a financial adviser who is independent will proudly tell you that fact, whereas an adviser who is restricted is legally required to disclose it. That should tell you everything you need to know about which is better.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

Financial planning to help parents (and their kids) prepare for higher education

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While coronavirus has made academic life full of uncertainty, the one thing you can be sure of is that it’s likely to prove expensive. But don’t worry, we’ve done our homework and put together some practical tips to help you start saving for university fees.

Private school fees – let’s start with the maths

The number of parents who choose to put their children into private education has fallen significantly in recent years. According to the Independent Schools Council, private schools educate around 6.5% of the total population of schoolchildren. That works out at around 625,000 children being taught in around 2,600 schools.

And of course, private education doesn’t come cheap. Based on current prices, sending a child to a private secondary school between the ages of 11 and 18 could mean spending more than £105,000 in total. Sending them to a boarding school could cost four times that amount.

So, unless you have that amount lying around, you’ll need to start investing as soon as possible. For example, if you start saving around £461 per month as soon as the child is born, assuming that you achieve growth of 4.5%, then you should be able to have set aside around £75,000 by the time they start their first year at secondary school. But the later you leave it, the more you will have to save each month (and please don’t get us started on the cost of school uniforms).

What about university fees?

Last year, a record-breaking number of young people enrolled on degree courses to UK universities. And in 2017, the average university student graduated with a debt of £51,000 (according to the Institute for Fiscal Studies). So, if you have children looking forward to university life in the not-so-distant future, expect the ‘Bank of Mum and Dad’ to be called on frequently.

And, if you want to cover their debt completely, you’d need to start investing £457 a month when they turn 10 years old (assuming a return of 4.5% over an eight-year period). Start investing from their first birthday, however, and the monthly amount you need to invest falls to a much more palatable £180.

Investing for the long term

As with any investment, the best way to reach your long-term goal is to hold a portfolio of different investments spread across major asset classes (such as UK and international equities, fixed income investments (bonds), and other assets such as commercial property). Once you’ve built up a sizeable investment pot, you might want to convert some of your investments into cash, to make sure you’re always ready to pay the school fees (a good rule of thumb is to always have three years’ of school fees in cash deposit accounts).

Make use of tax wrappers

You should always try to make use of any available tax wrappers to help you with your school fees planning. Don’t forget that each parent can invest up to £20,000 a year in a Stocks & Shares ISA. This will give your investment the chance to grow tax-efficiently, and you don’t need to declare your ISA on your self-assessment.

Making use of the Junior ISA

If you can, it’s well worth making use of the Junior ISA to pay for university fees. You can open a Junior ISA on behalf of your children and currently you can invest up to £9,000 a year. As well as being tax-efficient, you can also invite grandparents and family friends to contribute. The money can only be withdrawn by the child when they turn 18.

That’s great, but my little angel is off to university this year!

If you have children about to head towards university, don’t despair. There are tuition fee loans and maintenance support designed to help manage the expense.

The maximum amount that universities can charge in tuition fees annually is £9,250. It’s worth knowing that tuition fee loans (plus any interest) are repayable over a 30-year term. Repayments only kick in once the student has graduated and is earning more than £25,000 per annum. The graduate will be expected to pay back 9% of the income they earn over this amount, so if they find a job with a salary of £28,000, they can expect to pay £270 a year (or £22.50 per month) towards their total tuition fee debt. And, if there’s any debt left over after 30 years, it is automatically written off.

We can help you start to plan ahead

If you’re thinking about how to start setting aside money to pay for your children’s education, get in touch. One of our qualified financial planners will be able to talk through the options available to you, assess your attitude towards investment risk, and come up with a plan to help you – and your kids – achieve the best possible outcome. There’s really no better time to start than right now.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

Ensuring Those Left Behind Have Enough Money

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Life insurance puts money in the hands of those who need it when a person dies. There are many reasons why this money might be needed. It’s not just for parents with young families. A need could arise at any age and the nature of that need could change as you get older. As such, regular reviews of your financial protection needs are essential.

If your income would stop upon your death, and you have people who depend on you financially, you should have life insurance cover. If you live with a spouse or partner and their earnings would also stop at death, they too should have insurance cover. However, if you do not have financial dependents, you may not have a need for life assurance.

Quantifying the need for life insurance

The life insurance needed to cover a loan is relatively simple to assess. You need enough insurance for the amount of the loan, and the cover should last for the time that the loan is outstanding. If you pay off some of the loan, you should be able to reduce the amount of cover earmarked for this purpose. However, if you take advantage of loan or mortgage repayment holidays as a result of Covid-19, you’ll need to review the cover you have in place as it may no longer be sufficient, unless you subsequently make overpayments. Most people also need insurance cover to replace their income if they were to die. The same principles apply but the calculations are a little more complicated.

Example – calculating needs
David and his wife Penny have a son of five who is about to start school. They have decided to send him to a fee-paying school and expect him to be there until he is 18. David and Penny are now considering life insurance to ensure that the fees could continue to be paid for the next 13 years. The first thing to do is therefore to quantify the total cost of school fees over the next 13 years, taking inflation into account.

The approach to insuring other needs is roughly the same. For example, you could calculate how much your family would need to cover the general household and other expenses, and how long they would need the funds for.

You can arrange for life cover to pay out a series of annual amounts over a set period, which is a simple approach to replacing an annual income, but most life cover pays out a lump sum. If you want a lump sum to provide £1,000 a year for 10 years, you would need life cover of about £10,000 because even if you invested a lump sum it wouldn’t have long to grow before you needed to spend it. If you needed the income for 20 years, however, you might only need about £18,500 because you could invest some of this for the longer term and benefit from growth and income.

It is sometimes hard to work out how much life cover you would require for your family, because of the difficulties of assessing your family’s needs after one or both parents have died. Your usual pattern of expenditure provides a good starting point for these estimates. Then you would have to consider the other costs that might be involved, like childcare. It can be especially difficult to assess the potential financial impact of the death of a parent who spends most of their time looking after children and the household. A good starting point is to estimate the costs of buying in these services.

Over time, your circumstances will change. Children grow up and mortgages and other loans are repaid. Your income may rise or fall, stop and restart. The same goes for your expenditure. You may take on more debt. It’s therefore a good idea to review the amount of cover you have on a regular basis, to ensure that it is still appropriate for your needs and that you are not under or over-insured.

The Right Life Insurance Policies for You

Term assurance is the right sort of life cover for most types of family protection needs. It can provide insurance at the lowest cost for the period that it is required.

It is rare that you would need other types of life insurance for family protection, because they generally involve much higher costs than term assurance for comparable levels of cover. Whole of life assurance provides cover for the whole of your life, as the name implies, and its main use is in inheritance tax planning and provision for funeral expenses. Whole of life policies can have substantial investment values that you can cash in, unlike term assurance policies.

Term assurance is the simplest form of life insurance, working in a similar way to your home insurance. The policy will pay out if you die during the term, but if you survive to the end of the term, the contract simply ends and there is no pay-out.

The cost of term assurance varies considerably according to factors such as your age and state of health. The cost of 10-year term assurance for a 30-year-old is about a tenth of the same cover for a 60-year-old. A person’s state of health is also important; poor health could mean increased premiums or even the possibility that the individual cannot be insured. Although term assurance is a simple product, there are variations that suit different needs.

Types of term assurance

Policy type Description
Level term These polices pay out a fixed sum if you die during the term of the policy.
Renewable or convertible term Some policies are renewable, so that you can extend them for an additional period of cover at the end of the term regardless of your state of health at the time, while others are convertible to a whole of life policy regardless of your health. These policies cost more than level term.
Increasing term Some policies have an element of inflation proofing. You either have the option to increase the cover from time to time by a set percentage or, in some cases, the amount of cover increases automatically by a set percentage, or perhaps the rate of inflation. These policies also cost more than level term assurance.
Decreasing term This is like level term, but the amount of cover reduces each year. Decreasing term is typically used to cover a liability that you expect to decrease year on year, such as paying school fees until a child reaches the age of 18. The cost of this cover is less than level term assurance because the overall amount of insurance provided over its lifetime is lower.
Mortgage Protection This is a type of decreasing term assurance, but the cover reduces in line with the outstanding capital on a repayment mortgage where you pay off some of the capital every month. The higher your mortgage interest rate, the more slowly the outstanding mortgage capital falls each year. It is important to ensure that the interest rate specified in the policy matches the mortgage it is intended to cover, or that the rate is higher than the interest rate you expect at any time during your mortgage.
Family Income Benefit These policies pay an annual sum if you die during the term of the policy and the payments continue until the end of the term. Family income benefit can provide a higher initial cover for a lower cost because it is effectively a form of decreasing term assurance.

 

Example

Mark has twin children, aged five. He wants to ensure that if he died, the family would be protected until the twins reach 21. He feels they would need £30,000 a year for this and takes out a family income benefit policy to cover the liability. If he were to die in year one, the policy would pay £30,000 a year for 16 years – a total of £480,000. If he were to die two years before the end of the term, it would pay £60,000 in total.

Life cover from your employer or pension scheme If you are employed, you may well have life cover from your employer and you might want to take this cover into account when deciding how much insurance you need. However, you need to bear in mind that you will probably lose this cover if you leave your employer. At which point, you’d need to consider taking out additional cover.

Relevant life policies Employers can take out these policies on the lives of employees. They are not part of their pensions, but they have many of the same tax advantages.

Joint life policies There may be situations where you would want to take out a policy on more than one life. The policy could then pay out after both the insured people have died – this is sometimes used for inheritance tax planning. Alternatively, the policy might be arranged so that it pays out when the first of the insured people dies. This could be suitable for financially interdependent people, but would mean that the second person would no longer be covered by the policy after the first of the couple dies.

Ensuring the right people get the money

Generally, the best way to ensure that the proceeds of a life policy are paid to the people you intend to benefit is to arrange for the policy to be in a trust. Some types of trust give the trustees discretion or flexibility about how they distribute the benefits, but it is a good idea to get advice about this. If you die, the policy proceeds will be paid to the trustees and then the beneficiaries, not into your estate. This arrangement could save them IHT and should speed up the payment to the beneficiaries.

There are other ways to set up life policies. The person you want to benefit could take out the policy themselves – the so-called life of another basis. In some circumstances this can be a wise arrangement, especially if the potential beneficiary wants to be certain that the premiums on the policy are being paid. But mostly it is preferable to arrange for a policy to be in trust.

Covid-19 and life insurance

Many life insurance providers are reassuring those with existing policies that they will pay out in the event of a claim resulting from a coronavirus-related death. However, because each insurer has different terms and conditions, you should check your policy to ensure that pandemics are not excluded.

Applications for life insurance from new clients are being accepted, but if an applicant is currently experiencing Covid-19 symptoms, the insurer is likely to postpone processing their application until they have fully recovered. Telling an insurer that you are in a good state of health when you are not will invalidate your policy, meaning that it will not pay out in the event of a claim.

Please do give us a call if you wish to speak to one of our Financial Planners about your life insurance requirements. We have good relations with reputable providers and can possibly make preliminary enquiries with underwriting teams about certain conditions to gain an understanding of how an application may be considered.

This article is for general information and is not intended to be advice to any specific person.

Making Sure That You Have Enough Money if You Fall Seriously Ill

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The purpose of health insurance is to provide some money if you fall seriously ill or have an accident, potentially affecting you for many years. In this case, you would probably stop earning, although your financial needs might well be greater than ever. The state benefits you would receive would be relatively low and would be most unlikely to provide sufficient income to meet your needs, especially if you have substantial rent or mortgage payments to make. You might also need capital, for example to make adaptations to your home or to pay off debt. A rainy day fund can help in the short term here, but it’s not a complete solution. The precise level of fund required can vary from person to person, but, as a minimum, three to six months’ expenditure could be used as a guide.

Virtually everyone who is working therefore needs some kind of health insurance to provide financial protection if their earnings are affected by serious illness or disability. Even if you have no financial dependents, there is a very strong chance that you will need health insurance if you are responsible for paying your own bills.

Income Protection Insurance

Income protection insurance – sometimes called permanent health insurance – pays a weekly or monthly income if you cannot work because of illness or disability. You may think that you do not need to worry about this kind of cover, but the fact is that in the UK there are nearly 14 million people with a limiting long-term illness, impairment or disability. The prevalence of disability rises with age. Around 8% of children are disabled, compared to 19% of working age adults and 45% of adults over state pension age.

You can generally be insured to receive a monthly benefit of up to about half to two-thirds of your pre-tax income. If you have no income, you may still be able to take out a policy, but the maximum payout will be limited, generally to an income of about £20,000 a year.

Some employers provide income protection insurance, but a very large number do not. Employers are only legally obliged to pay employees, in the form of statutory sick pay, for the first 28 weeks of their being unable to work because of an illness or injury; even then not everyone will qualify, and the employer does not have to pay the full salary. It is worth specifically checking the position with your employer. If your employer provides cover, the benefits generally continue to be subject to income tax and national insurance contributions, at least initially, but you won’t usually have to pay tax on the premiums. If you take out the cover yourself, the benefits are tax free.

Income protection insurance pays after a waiting period on each claim and can usually continue to pay you up to retirement age, unless you recover and return to work sooner. The cover normally lasts until you are aged 60 or 65, but you can arrange the insurance for much shorter periods – say five or ten years – and this cover is much cheaper because it is substantially less valuable. The chances of having a serious illness or disability increase substantially as you grow older.

During the Covid-19 outbreak, insurers have experienced a rise in queries regarding income protection insurance. Generally people who are simply self-isolating are unlikely to be covered. However, a small number of providers will consider claims for self-isolation where it is medically advised. Those with severe coronavirus symptoms that continue beyond the waiting period will start to receive their monthly payout if those symptoms mean they meet their insurer’s definition of incapacity (e.g. they are unable to work at their own occupation). Some providers are restricting cover for respiratory conditions for new customers.

Income protection can appear relatively expensive but can be very valuable if you fall seriously ill. If you are considering taking out a policy these are some of the things you should consider.

Consideration Possible issues
Exclusions Check the conditions and exclusions on income protection insurance policies as terms vary between different insurance companies. Almost all illnesses are generally included in the cover, but most have exclusions, for example if the illness is caused by drugs or alcohol abuse.

There is an important difference between cover for being unable to work at your own occupation and cover for being unable to work at ANY occupation. It is much better to have the first type of cover, though it is likely to be more expensive. Otherwise, if you cannot work at your own occupation, under the wider definition the insurer could insist on your undertaking other work.

Insurers will generally only pay a proportion of recent earnings as benefits, which can be hard for people who are self-employed or have fluctuating earnings.

Inflation protection It is normally advisable for income protection insurance to be inflation protected in two main ways. You should be able to increase the level of cover periodically regardless of your state of health, or the cover should increase automatically in line with inflation or a fixed percentage. It is also important to ensure benefit payments keep pace with inflation. If benefit payments never increase after you fall ill and cannot work, their real value will be gradually eroded over the years.
Underwriting Insurers are careful when people first apply for income protection insurance. If you have, or have had in the last few years, a health issue, the insurance company may exclude your particular problem, increase the premium or possibly decide not to insure you. Insurers also pay attention to your occupation. You will get the best terms if you work in an office, mostly indoors and do little or no manual work. The cover is much more expensive for people who work with machinery or in relatively hazardous places like factories and farms.
Claiming If you have to make a claim, the insurance company will continue to pay you the benefit until you are well enough to return to work. If your illness recurs, they should start paying the benefit again. Unsurprisingly, they will want to check from time to time that claimants are genuinely incapacitated.

Example David works as an IT manager. He earns a good salary and he lives a comfortable lifestyle. In the event of being unable to work due to illness, he would receive full pay for up to four weeks, but would then only receive statutory sick pay and, later, state benefits if he is eligible for them. He would not be able to continue to meet his commitments and may have to sell his flat should the illness continue into the long term. David might consider income protection to provide an ongoing income after his employer stops paying him. This could continue until his selected retirement age or, if he wanted to keep premiums down, for a limited term of, say, five years.

Critical Illness Insurance

Critical illness insurance pays a lump sum if you are diagnosed as suffering from a specified illness. Over 30 conditions may be covered, including serious cancers, heart attack and stroke. Some providers may cover significantly more – even up to 100 different conditions.

The advantage of critical illness insurance is the benefit is paid very early, shortly after diagnosis of the illness, without any significant delay – unlike the usual longer waiting periods of income protection. It is also in the form of a lump sum that can allow you to make rapid adjustments to your lifestyle and pay off loans. The main drawback is that this type of health insurance only covers a limited set of conditions. These are common disabilities, but critical illness insurance generally does not cover some important conditions, such as musculoskeletal pain and most mental illnesses.

People often take out critical illness insurance to cover a mortgage or other loan. Because you are significantly more likely to have a critical illness than die whilst you are of working age, it is more expensive than life insurance. But this reflects the likelihood of needing to claim on the policy.

Critical illness is an important and valuable addition to income protection, but it should not normally be regarded as a replacement for it.

Whereas an income protection policy will pay out to those suffering from severe Covid-19 symptoms beyond the waiting period where the insurer’s definition for incapacity is met, Covid-19 itself is not covered by critical illness policies. However, if the coronavirus leads to one of the conditions listed on your policy, for example a heart attack or a stroke, and you survive the waiting period, the policy would pay out.

Again if you would like to discuss your income protection requirements in more detail, please do give us a call.

This article is for general information and is not intended to be advice to any specific person.

Helping You to Afford the Cost of Private Medical Treatment if You Need it

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Private medical insurance (PMI) pays for private health treatment. Depending on your budget, you choose what you want covered – just in-patient or day-patient treatment, or out-patient consultations and medical tests. PMI pays for the treatment of acute conditions only. It does not cover chronic conditions (except, generally, at onset) and pre-existing conditions may also be excluded. As part of the response to the Covid-19 outbreak, providers are continuing to delay non-urgent treatments to free up beds for the NHS. Treatments will be delivered and funded by the provider once the beds are no longer required.

Health cash plans pay for everyday health costs, typically 75%–100% of costs for dentistry, optical and consultation costs, plus a small sum for each day spent in hospital, subject to an annual limit. Other dental options include capitation (maintenance) plans, which are agreed with your dentist and cover likely costs over the next year, and dental insurance. Plans may require an initial waiting period to stop people taking out cover for known treatment then cancelling the policy.

We can assist you in obtaining medical insurance by researching the marketplace for the most suitable cover. So, if you wish to discuss this area of protection in more detail, please do get in touch.

Helping You to Get the Protection You Need

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Financial resilience is the ability to recover quickly from an unexpected financial shock. Many of us insure our homes and cars without really thinking about it, but far fewer insure their lives and incomes. And yet, if you were to pass away, how would those you leave behind be able to manage financially? If you were unable to work due to illness, how would you find the money to pay your household bills? Savings can and do help in the short-term. But what happens when they run out? What happens if an illness goes on for three, six, or even 12 months? What then? Covid-19 has focused many people’s minds on the need for an adequate rainy day fund and financial protection. While nothing can ease the emotional distress the virus has and is continuing to cause, it is possible to lessen its financial impact on those affected and their loved ones. Life and health insurance protection underpins most good financial planning.

Insurers are constantly looking at new ways to meet people’s needs, such as through life insurance that includes critical illness and/or income protection insurance, which may be cheaper than taking out separate policies. It is important to look at your options – what do you need most now? How much cover do you need? Can you defer some cover until a future date? What can you do to protect yourself and your loved ones financially in light of the Covid-19 pandemic?

Our role is to do four things:

  • Know enough about you to make the right recommendations. We take the time to understand your financial situation, your needs, preferences and views. Whether for example, you would feel comfortable accepting that premiums may rise, or if you want a guaranteed solution.
  • Help you to identify your priorities. If you were insured against absolutely everything, like most people you may find premiums unaffordable. We don’t expect you to be an expert on life insurance, but we need to know your attitude to risk. Working out how things might change in the future and prioritising matters could be a sensible thing to do.
  • Recommend solutions to meet your needs. The right policy is important, but a will or writing policies in trust could be too.
  • Review. Your financial protection needs change over time. Regular reviews are essential to ensure your plans continue to meet your needs.

If you would like us to assist in finding the most suitable protection for you, we will be happy to help!

Warning – How to Avoid Financial Scams in 2020

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It’s no secret that financial scams are becoming more sophisticated in 2020. Earlier in February, The Guardian ran a story about how one unfortunate retired couple who were conned out of £43,000, and who are still struggling to gain compensation (their banks are claiming the couple were negligent). In this particular case, the couple received a call from a scammer who claimed to be a bank fraud investigator insisting that their savings could be stolen. They instructed the couple to phone their bank using the number on their bank card. However, as the couple did so, the scammer was able to cleverly keep the line open and divert them to a fake call centre.

We sometimes encounter sad stories such as these, or “near misses” which could have resulted in financial disaster. So what can you do to protect your family finances against malicious activity? We offer this short guide to help.

 

#1 Be careful on public WiFi

It has been estimated that at least 594 million people across the globe have been victims of cybercrime. Much of this can be attributed to the rise of public WiFi, which most of us admittedly use due to its convenience (especially when abroad). However, many of these networks are unsecure and fail to have adequate encryption measures in place, allowing hackers to intercept your sensitive data if you log into your mobile banking or make an online purchase.

One way you can avoid this danger is simply to conduct these kinds of activities on your trusted mobile network, and not on public WiFi. Another option, however, especially if you have no access to data, is to connect using a secure virtual private network (VPN), which encrypts the connection to and from your mobile device, creating a secure “tunnel”.

 

#2 Beware of unsolicited calls

We frequently speak to people who have received suspicious calls about their savings or pension. This is particularly common amongst senior citizens, who are deemed by scammers to be more vulnerable and in possession of greater sums of wealth than younger people.

The first important thing to note is that since early 2019 there has been a UK ban on pension cold calling. So, if you receive a call about your pension from someone you do not know, it is a good idea to consider ending the conversation and notifying your financial adviser. This ban does not stop such calls from happening, of course, so it’s important to always be vigilant.

You could also insist on something in writing from the caller. In other words, tell unsolicited callers: “I never follow instructions from unannounced calls. Write to me so I have something to refer to.” If the person on the phone pushes you because the matter is “urgent” or because “utmost secrecy is required”, then take this to be a red flag.

 

#3 Paper shredding

Without thinking, many of us throw away receipts which contain details of our credit card or debit card number. This is often where identity theft starts, so it would be prudent to invest in a paper shredder. Also, keep a regular eye on your bank statements or mobile banking (using a secure connection) to monitor any suspicious activity.

 

#4 Keep software up to date

Many of us are also quite lax when it comes to updating our security and antivirus software for PCs and mobile devices. Be careful not to get into the habit of simply pressing the “later” button when an important app or firewall program prompts you for an update. Many scammers can exploit open holes within these protective layers of security, so it’s important to keep them closed.

 

#5 Browse carefully

The internet is a fantastic way to manage your wealth and finances, using online investment platforms and mobile banking. Be careful, nonetheless, to check carefully which websites you visit and ensure they are secure. One simple way to do this is to check the website address in your browser to make sure it starts with “HTTPS” (not HTTP), which helps to encrypt the connection between your computer/device and the website.

Also, be aware when using email, text and other messaging services such as WhatsApp. If an unknown company sends you a message with a link (e.g. to your Amazon or iTunes account), think twice before clicking on it. Quite often these are fraudulent links to fake websites, dressed up to look like the real thing.

Exercise caution with friends and family as social media profiles and email accounts can sometimes be hacked and send these kinds of messages. If you receive a message about a new sales offer, for instance, consider typing the web address separately into a trusted search engine to find it, rather than simply clicking on a link which might take you somewhere unsafe.

This content is for information purposes only. It does not constitute investment advice or financial advice. To receive bespoke, regulated advice regarding your own financial affairs, please get in touch to speak to one of our independent financial planners here at FAS.

 

A Short Guide to Funding Long Term Care

By | Financial Planning

The demographic map of the UK is changing. Most of us are now living longer; in 2017 those aged 85+ were 1.35m in number, and this figure could reach 2m by 2031. Although this is wonderful news in many ways (more time with our loved ones!), it also brings significant challenges when it comes to financial planning.

First of all, it implies that people’s retirement funds will need to stretch further compared to previous generations. In 1980, for instance, an Englishman aged 65 had a 1/1000 chance of reaching 100 years old. Today (nearly 40 years later), those odds have shrunk to around 1/100.

This increased longevity is likely to put additional strain on the already overstretched State Pension and is one of the reasons why most employers are no longer offering employees Defined Benefit pensions (which pay a guaranteed lifetime income in retirement). Careful financial planning will, therefore, be needed more than ever to ensure we have the income we need in our later years.

Secondly, increasing life expectancy is also projected to accompany an increase in health problems amongst older people. In particular, research shows that the number of retired people with diabetes, depression, cancer and dementia is likely to at least double by 2035. Many of these conditions require some level of professional care, which come at a significant cost.

Given these trends, projections and figures, it is little wonder that at FAS we are often asked about what people can do to prepare for the possible costs of their future long-term care. In this short guide, we’ll be sharing some of our thoughts on this important subject. If you want to discuss your care strategy with one of our experienced financial planners, please do give us a call.

The Cost of Care

In 2019-20, the precise amount you pay for care depends on a range of factors including:

    Where you live in the country.
    The level of care you need (e.g. 24/7 intensive or temporary and residential).
    The quality of the care home in question.
    Your financial situation.

At the moment, there are around 400,000 people living in care homes across the UK; a figure which is set to rise to 1.2m by 2040. Residential care costs can vary greatly, but typically range from £600-£900 per week. Indeed, some people face annual care costs exceeding £50,000.

Ways to Fund it

£50,000 and similar figures are clearly eye-watering for most people to look at. After all, just 3-years in residential care could cost £150,000; enough to wipe out a significant portion of an Estate, and by extension a family’s Inheritance. How, then, can you prepare your finances for this large, yet unpredictable cost in the future?

In 2019-20, those possessing less than £23,250 in assets are entitled to financial support from their local council, to help cover the fees. If you (or a dependent, child or spouse/partner) continue living at home whilst you receive care, then the value of your house is not normally counted within the means-test determining whether you are eligible for council support.

We do not recommend that you deliberately deprive yourself of assets in order to try and get around this system. Not only does this leave you financially vulnerable, but the council is also likely to detect such deprivation strategies and calculate your care fees as if you still owned the home/assets you have sold or given away.

What, then, are some of the other options you can consider with your financial planner when it comes to creating a strategy for long-term care funding?

Own Income & Family

Some people are in the fortunate position where their siblings, children or other loved ones can contribute towards the costs of their care. This, combined with your own pension income as well as other savings and investments, could be enough to meet your care costs.

Property

Many people are cash-poor but asset-rich by owning a property. In such circumstances, downsizing or Equity Release could be an option to access funds needed to cover care costs. These are hugely important financial decisions with far-reaching implications for your financial plan, so we recommend that you speak with a financial planner about any decision or strategy involving using your property to fund your long-term care costs. It might be that other, more appealing options are available to you.

Care/Immediate Needs Annuity

With the help of an experienced financial planner, it is possible to find a good insurance plan which can help you meet your care costs. These plans usually involve paying a company a one-off lump sum in exchange for a guaranteed lifetime income (tax-free), which would be paid directly to your care home. The amount you pay for the annuity will vary depending on factors such as your age and health.

Invitation

Many commentators have described the UK’s care system as in a state of “crisis”, and many people are understandably worried about how they will cover these possible future costs. However, at FAS we can help you can assess your options with a clear mind and with the best information available.

This content is for information purposes only.

5 Key Ways A Financial Planner Adds Value

By | Financial Planning

As Financial Planners here at FAS, we understand the value of financial planning which we offer to our clients. However, that value isn’t always easy to explain to those unfamiliar with it.

After all, financial planning isn’t particularly tangible; you can’t “see” or “feel” it like you can with retail products, such as a new car. However, financial planning, when done properly, solves many key problems which many of us experience:

    How will I ensure my family is financially secure if I suddenly passed away?
    Am I paying more tax than I need to, and are there ways to free up more of my income?
    How can I be sure that I am fully complying with the various rules about my taxes?
    Can I ensure a meaningful inheritance for my loved ones at the end of my life?
    Is it possible to secure a comfortable, secure retirement income? If so, how?

These are all very important questions which can keep us awake at night. Moreover, the answers are not always clear to people. Take the world of pensions, for instance. There are numerous rules about the State Pension, Workplace Pensions and Personal Pensions which often change over time (e.g. due to Government policy).

Once you start peering into this world, it can sometimes feel intimidating, but speaking to someone who understands the landscape can really help. At FAS, we believe there are at least five ways a good Financial Planner can add real value:

Helping to Clarify your Goals

Have you ever set out to achieve a goal, only to later realise it was unrealistic? Perhaps you thought you could teach yourself Mandarin Chinese fluently within a year, for instance, and quickly realised that it would realistically take more time and investment to get there?

Without the help of a professional Financial Planner, it is easy to make a similar mistake with your finances and wealth. However, the danger is that the costs can be much higher. This is because it is often many years later when people realise that their original retirement goals were unrealistic. With a Financial Planner, however, you can plot your intended course much more clearly and with far better information at your disposal.

At FAS, we will be completely honest with you and explain why we feel you are aiming too high or low with your retirement goals whilst outlining the reasons why. Then we will propose strategies that are achievable, allowing for different possible future scenarios.

Pointing out Blind Spots

It can be easy to think that you have “covered all of your bases” in your financial plan and yet miss out something important which could later cost you dearly.

Take British people who live overseas (Expats) as an example. Many people living abroad believe that they will not have to pay Inheritance Tax when they die due to their residential status, yet the reality is that most people will have to pay Inheritance Tax on their UK assets.

Mistakes like these can come as a nasty surprise later. So it does pay to consult a professional about your financial plan, helping to ensure that you have not missed out anything important.

Getting Better Deals

There are many areas of financial planning where it is possible to pay more than you need to. Take investment management fees as an example.

You might have an investment portfolio which you feel is performing well. Yet if you are paying excessively high fees which eat into your investment returns, then over many decades these could, effectively, represent a “loss” of tens of thousands of pounds.

We will help you to review your portfolio, scan the wider market and help you find the best deal for your needs and goals. Even a slight reduction on your investment management fees, for instance, could make a huge difference to your standard of living later on in retirement.

Minimise Threats

Did you know that in 2018 many people were scammed out of their pensions by fraudsters, costing each victim an average of £91,000? Whilst having a decent Financial Planner on standby is not iron-clad protection against receiving a malicious cold call, a trusted financial planner can help you discuss any unsolicited offers and avoid making costly mistakes with your money.

Simplify Everything

As mentioned above, many areas of financial planning are deeply complicated (such as pensions). A good Financial Planner will help to bring clarity to the world of Inheritance Tax, Income Tax, National Insurance, ISAs, Annual Allowances and more to help ensure you understand it. Moreover, this person can also help you bring different parts of your wealth together. This can not only make things more tax-efficient but can also simplify everything.

For instance, perhaps you are nearing retirement and have over a dozen pension pots scattered around due to a long, successful career in different lines of work. For many people, it can help immensely to consult a Financial Planner who can help consolidate all of these separate pots into a central pot, making everything much easier for you to manage.

Final Thoughts

There are many other benefits to a Financial Planner in addition to the above. For example, this person can help you to manage the emotional rollercoaster of investing. After all, your investments are likely to experience a lot of volatility and it can be tempting to act impulsively.

A Financial Planner can also help you to delineate the areas of your finances and wealth where you can exert control, and where you cannot. They can then help you to focus your energies on the former, allowing you to better relax and enjoy more peace of mind.

If you are interested in speaking to us here at FAS about your financial plan, then we’d be delighted to hear from you!