Why you need a financial MOT

At the risk of stating the blindingly obvious, I’d venture to suggest that an awful lot has happened in the last year or so. And not just to some of us. All of us.

Not only have we had an on-again, off-again and at the time of writing, nearly on-again pandemic to deal with, the economy isn’t exactly in the best shape of its life either.

These beyond-our-control events can and do affect your investments. “Stuff” happens whilst you’re getting on with life. The world looks more uncertain. Your financial future – mapped out in front of you as you thought it was – may appear different. Whilst nothing can be set in stone and of course, when it comes to any investments there are no guarantees, a financial MOT could give you back some New Year assurances that your money is working as hard as it can for you.

Consider the following, too:

When it comes to investments, the goalposts have been moved.

My experience in the financial services sector tells me that we may not emerge from the current cost-of-living crisis any time soon. The BBC kindly informs us that for various reasons the current rate of inflation is 4.2%.

And this week, the Bank of England’s monetary policy chief warned that, although UK inflation could start to drop back by late 2023, UK inflation could go as high as 5% next spring 2022. Given that interest rates are still broken-record stuck at 0.1%, your money is, in my view going backwards. For lower-risk investors, keeping pace with inflation in these circumstances can be a struggle.

Timing is Everything

We’re fast approaching Christmas, after which the self-assessment deadline and the end of the tax year will follow in quick succession.

Reviewing your finances, and your attitude to risk, could be an early New Year’s resolution. Let’s discuss the options available to help you make informed decisions about your financial goals and objectives.

Equally importantly, where you see yourself in 5, 10, or even 15 or 20 years’ time.

Also, we can examine your portfolio as a whole. It’s possible that some investments may have performed better than others; a review can highlight these for your best course of action.

You can book an appointment with me on 0345 505 3500.

Are you investing tax-efficiently?

With regard to deadlines, look out for my next blog regarding allowances and deadlines, but why not start getting ahead of the game?

There’s a range of government-sanctioned tax relief allowances for investment safeguards - but you have to act now, and you’ll need to be pro-active to claim them; they don’t just happen.

For example, a financial MOT could help you to confirm whether you’ve maximised your ￡12,300 capital gains tax exemption. Plus, whether you’ve made the most of your ISA allowance, and how you could reduce a future inheritance tax burden by gifting certain amounts to the younger generation. There are other allowances to be aware of, too.

Are your insurance policies still the right ones?

When it comes to wellbeing and security, having robust financial protection in place could make all the difference – not least if you have dependents.

The last two years or so have thrown a spotlight onto our health, and on how brittle life can be in ways that we could never have imagined. Whilst we can’t advise on how or if cover is available specifically for Covid-19, doubling down on “what if” scenarios could be the greatest legacy you leave to your loved ones – should the worst happen.

Putting aside for one moment the fallout from the pandemic, you may want to think about any life changes that you’ve experienced in the past year. If your life looks different, it could require an increase (or even a decrease) in your cover to ensure that you’re adequately protected.

In my opinion, life insurance, critical illness cover and income protection (or whichever combination best suits your circumstances) should be at the top of your To Do list in a financial review.

And your retirement plans?

You may wish to discuss topping up your pension fund, or even switching funds altogether – a more radical choice. Or, your investments may be serving you well. A review will let you know where you are. Anything over the current lifetime allowance of ￡1,073, 100 can be subject to tax of as much as 55%, so this will need to be discussed. And, avoided of course, if possible.

Of prime importance is your future. Not to mention your health, and that of your spouse, so a robust conversation about where and how you plan to spend your final years, whilst personal, will be essential.

How involved would you like to be in your finances? Your MOT can help you confirm your level of engagement. Whilst an annual review may suit your needs perfectly, do rest assured that we’re keeping a close eye on your investments every day – and advise you if you need to take action to keep everything in good shape.

Where would you like to be?

Here at Delaunay, we’d like to help you to think long-term. Often, it’s not something that we’re programmed to do, but thinking 15-20 years into the future and how you’d like your life to be, is one of those must-have conversations. Likewise, one we’re used to having with our clients, so don’t feel concerned.

Talk to us about the lifestyle you’d love to have, then we can help you “work backwards” in terms of how much money you will need in order for dreams to become reality in the years to come.

The right-here, right-now concerns about the disconnect between the current rate of inflation and interest rates are real. They could affect your financial health very soon. A financial MOT is designed to help you see the bigger picture and move you gently towards your golden years in the sun.