It’s funny how your perception of money changes as you grow older. Children and teenagers often request money instead of presents for birthdays and Christmases as, particularly from older relatives, the prospect of another Christmas jumper suddenly loses its appeal. Then, as soon as they receive this money they must go out and spend it – the cash is practically burning a hole in their pocket. However, as adults, being gifted a sum of money or receiving an inheritance can seem like a burden.
Typically, people receive an inheritance when they are 55 to 65. Many are unsure of what to do with it and if they don’t pass it to the next generation, they leave it languishing in a bank account or Cash ISA, generating little or no return. Research shows that 35% of people deposit the capital in a bank or a Cash ISA. This is despite the negligible returns available that almost certainly could see the cash lose its real value over time as a result of inflation. Another 32% spend the money, while 15% take a longer-term view and invest it. The balance 18% pay off debts.
Perhaps, their inheritance could have been gifted to the next generation, which is something that only one in five of 55 to 65-year-olds currently do! The issue of inheritance can be a thorny one but it becomes even more complicated if it has not been discussed and well planned.
The age group 55 to 65 (Baby Boomers) control most of the wealth in the UK and it is the under 45s (Millennials and Generation X) who find themselves under the most financial pressure. Former university students have an average outstanding student loan balance of £35,000 at the point they commence the first repayments. Getting on the housing ladder gets even harder to achieve as house prices have increased more than incomes in the last 30 years. In real terms, house prices have increased by 259% during this period, while wages increased by 68%. So, Millennials and Generation X face a series of difficulties in building wealth. This is due to the combined impact of rising house prices, insecure employment and higher debt (including student debt) – which limits their ability to save for retirement during core earning years.
At Brunel we have become great exponents of intergenerational wealth planning and the benefits to everyone in the family of developing a gift plan. Essentially, we can tackle some of the biggest issues around the transfer of wealth including working out how much capital you need and whether you can afford to give some to loved ones without damaging your own financial plans. We know this can be a challenge without professional advice.
We certainly like to encourage regular gifts to meet the long-term financial needs of Millennials and Generation X. By way of an example, a good first step on the intergenerational wealth transfer road could be a pension contribution on behalf of a child or grandchild. A sum of £300 monthly contributed to a pension over a 20 years period could provide a £210,000 pension pot – assuming 5%pa compound growth and net of costs assumed to be 1.5%pa). This would be a great addition to the pension pot of a 45-year-old struggling to save for retirement!
Similarly, it would be possible to generate a £40,000 lump sum for a child or grandchild by making regular savings of £276 monthly for a period of 10 years – assuming 5%pa compound growth and net of costs assumed to be 1.5%pa. This could be used to help with a property purchase deposit or to assist with education costs. The same £40,000 lump sum could be achieved over 15 years by making regular savings of £168 monthly – assuming the same growth/costs as detailed above.
I hope this provides some food for thought and would encourage you to contact your Brunel Financial Planner if you would like to discuss intergenerational wealth planning in more detail.
I am delighted to announce that on 1st November we will launch our new platform. As many of you will already be aware, this is something we have been looking to do for some time and is the latest in a number of initiatives which will enable us to continue delivering market-leading service to you. As with all areas of the service we offer, we regularly review the marketplace and with respect to platforms it has become clear that technology has moved on a lot in recent years.
This means we can now offer a more intuitive and client friendly user experience at a standard cost lower than your existing platform. We are also able to control more of the elements ourselves, taking away our reliance on third parties, which in turn reduces timescales and the potential for misunderstandings.
What exactly is a platform?
To be clear, a change of platform will not impact on the wider Financial Planning and advice service we provide, nor does it impact on the portfolios we manage for you. The platform, in this sense, is simply the administration system where the assets are actually held and where the transactions (payments in, payments out, trading etc) actually take place.
This is an exciting development for us and one that keeps us, and our clients, at the forefront of financial planning services in the UK. Under the IronBright banner, the portfolios and the platform will now go hand in hand.
Did I mention that it will also be cheaper? Modern technology translates to lower running costs which we are delighted can be passed on to our clients.
What we need from you now
By moving to more modern technology we also hope to reduce the amount of paperwork that we all have to deal with. This does however mean all communication will be done online. As such, if you have not already done so, can I ask that you please register for our secure client Personal Finance Portal so that we can keep you updated?
If you are yet to register please follow https://brunelcapitalpartners.mypfp.co.uk/ and click on the ‘Register’ button in the top right from where instructions will follow.
Unfortunately, if you are not online, I am afraid you will not be able to benefit from the new platform and will stay with the current provider at the prevailing, higher ongoing costs.
While this is a positive move for all concerned we do want to make sure we move you over to the new platform in a deliberate and staged way rather than hitting a giant ‘GO’ button on the first day. This gives us more control over each account and so I would ask that you bear with us. You will all hear from us in the coming months confirming when your own accounts will be moved and anything we need you to do will be explained at the time.
In the meantime, if you have any questions, please don’t hesitate to speak to your planner.
In the community
Brunel are delighted to sponsor two excellent speakers at this year’s Wells Literary Festival. As there will be a limited number of people attending each event all the speakers will be live streamed, this is free of charge and we are pleased to share the link with you. https://www.wellsfestivalofliterature.org.uk/live-streaming will tell you how to sign up to attend a virtual event. The website also gives the list of all the speakers.
The events we will be sponsoring are:
Pragya Agarwal who will talk about her book Sway: Unravelling Unconscious Bias at 6pm on Tuesday 20th October.
Pragya is a prize-winning behavioural scientist, activist, writer, and freelancer. She unravels the ‘unintentional’ biases on how we communicate and perceive the world and the effect on decision-making. What are the forces that affect us all? She investigates who we are and who we want to be. Scientific, non-judgemental. ‘Cogently argued and intensely persuasive’ Waterstones.
The second speaker is Hashi Mohamed on Saturday 24th October at 3.45pm. His book is entitled People Like Us: What it Takes to Make it in Modern Britain
How does a refugee from the Somali civil war become a successful London barrister with an Oxford degree? Hashi Mohamed explores social mobility in Britain today and concludes that his story is far from typical. He offers inspirational advice to those wanting to change their circumstances and to all of us who wish to see a better modern Britain.
We hope you have the opportunity to dip into the delights of this year’s festival.
Financial Planning Manager
For all of you who kindly follow our weekly updates, I am pleased to report I now have a new gold crown on my tooth and can now return to enjoying a Sunday dinner of roast pork and chew a piece of crackling without the fear of breaking my dodgy tooth. Ahh, life’s small pleasures!
So, when we embarked on producing our weekly newsletters, I wanted to find the best way for me to keep up to date with the weekly news and thus keep my articles fresh and relevant to what was happening in the current week. I had become a little weary of the poor reporting from the popular news channels so decided to subscribe to ‘The Week’. What attracted me to this publication was the feedback from a couple of famous readers – It’s the quickest way of finding out what’s been happening all over the world and The Week is the ideal paper for those who are too lazy or too busy. I am both and proud of it. Yes, I thought, that is the one for me!
6 months later I have also succumbed to subscribing to a couple of authors newsletters. I wanted to share the latest from Adam Grant who is an organisational psychologist and author. Bear with me on this! This is what caught my eye recently:
2020 has forced us to rethink many of our basic assumptions—from how we work to where kids learn to what it takes to stay healthy. Yet in our daily lives, too many of us still favour the comfort of conviction over the discomfort of doubt.
We listen to opinions that make us feel good, instead of ideas that make us think hard. We see disagreement as a threat to our egos, rather than an opportunity to learn. We surround ourselves with people who agree with our conclusions, when we should be gravitating toward those who challenge our thought process. We need to develop the skill—and the will—to rethink our views.
This is the topic of Adam’s new book – THINK AGAIN. It focuses on how we think too much like preachers defending our sacred beliefs, prosecutors proving the other side wrong, and politicians campaigning for approval. If we thought more like scientists searching for truth, we could develop the humility to know what we do not know and the flexibility to change our minds as the world changes around us.
As you know, my better half Dr B (as she is now known) is a scientist. She warmed to the above analogy of thinking like a Scientist. For me, it made me think of two political hot potatoes – Brexit and the American election, especially when I read these 2 headlines in relation to the above:
In America – The ousted director of the office involved in developing a coronavirus vaccine has quit his post at the National Institutes of Health, charging that the Trump administration “ignores scientific expertise, overrules public health guidance and disrespects career scientists”.
Britain’s chief Brexit negotiator has hinted that Boris Johnson is willing to compromise with the EU about the contentious issue of state aid in order to land an “eminently achievable” trade deal.
For the team at Brunel, we continue to challenge our thought process; encourage new ideas and processes and evolve our financial planning and investment proposition to try and make it the best it can be.
… and finally, the death of Eddie Van Halen from throat cancer, aged 65, brings to a close one of the most colourful and lucrative sagas in American rock music. If Aerosmith was the premier US hard rock band of the 1970s, it was Van Halen who stepped into their shoes during the 80s. Formed around the Van Halen brothers, the guitarist Eddie and the drummer Alex, the band rode a tidal wave of multi-platinum albums over a 15-year period. Few other acts have come close to matching their commercially combustible mixture of spectacular and addictive rock, flamboyant stage performances and outsized personal behaviour. RIP in Eddie.
Goalkeepers love penalties because it is their turn to shine even though the odds are always stacked against them, but that is the beauty of sport – its uncertainty, anything can happen on the day. They can be the hero. The trouble is that too few do, in fact, become that hero.
An analysis of 286 penalty shootouts found roughly 50% of keepers leaped left, 44% leaped right and only 6% stayed in the middle. Interestingly though, the study also showed that 39% of actual kicks were struck down the middle, with the rest broadly going right and left in equal proportion. So, if nearly 40% go down the middle, why do only 6% of goalkeepers recognise that by staying put, doing nothing, will produce the best results?
The answer is probably down to “Action Bias”, which is our tendency to act even when doing nothing is better. Goalies may be keen to act to avoid regret and the recriminations of teammates – imagine Jose Mourinho’s reaction when the penalty is scored if Hugo Lloris had done nothing but stand in the middle of the goal! Doing it consistently right in one game, over the course of a season, over a career is very difficult but when nearly 40% of penalties go down the middle the game plan must surely be “be brave and stick to your guns”.
I have been reminded of this research over the past few months when colleagues and clients have asked what IronBright is doing differently to deal with the seismic events that enthral us all and what changes we are making in the portfolios to deal with the impact of the pandemic … and the answer is “nothing”. But remember that doing nothing is not the same thing as not having a plan. We do nothing that is not in our plan.
We do not try and second guess the market because crystal ball gazing and tea leaf reading skills remain out of our reach. The lion’s share of your longer term returns come from holding your asset allocation, which we reset every six months through the May and November re-balances; this is a discipline that generally means we sell high and buy low throughout the year, every year.
It has been a terrible year for many reasons but the portfolios that we look after for you are holding up very well. The FTSE All Share remains down -19.70% year to date whereas the IronBright 50 P portfolio (which reflects most client assets) is down just -2.82%. Even the racier IronBright 70 P is only down -5.13%.
When the pressure is on, we do not chase markets. We do not jump right or left if our plan is to stay still. We have strict investment disciplines that we abide by when it comes to managing your money and it has worked for you over the years that you have been kind enough to entrust your money with us.
I hope that you all remain fit and healthy and on behalf of the entire team I would like to thank you for your continued support and good humour.