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Through advice, we aim to help you achieve financial independence. Meaning the individual wealth you have acquired over the years, is sufficient to meet your income and capital requirements, as you get older.
Everyone's definition of financial independence is unique to them. However, in each case we recommend you build up value your 'six boxes' to a level that suits you. These boxes are:
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Other
(eg. Jewellery, Antiques, Paintings, Classic Cars, etc.)
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At the time you want to work less hours or retire completely, nobody knows what the economic situation will be. In addition, no one knows what interest rates will be, the rate of inflation, what legislation changes will be implemented in the meantime. If this is the case how can we accurately predict which is the best of the six boxes to be invested in? The answer is we cannot. Imagine planning to retire over ten years, only to find your savings are in a box that's inappropriate to open (e.g. it may not be the right time to sell your business, interest rates may be too low, etc). It could mean you have to keep working until the circumstances are right. You may not have control over these factors so your retirement may be postponed for years.
This is why we recommend building value in all your boxes, to different degrees for each individual. This way you can decide which box is the best one to open, when you do want to slowdown. At that point, and only at that point, will you know what level interest rates are, etc. By diversifying your portfolio of wealth, we can help keep as many of your financial options open as possible. You therefore have as much flexibility as possible, when it comes to gaining financial independence.
The Value of Your Business
At some stage in the future you may want to sell your business. This may be to family, an unconnected third party, a management buyout, etc. Working closely with your accountant, bank and solicitor we can identify which is the best option for you.
Your Pension Savings
Many business owners we meet tell us their business will be their pension when they retire. However, not many of them realise that their pension could be part of their business while they are trading.
This is not suitable for everyone but could mean the pension savings you have amassed over previous years, could be used to buy you the business premises you have been looking for. In certain circumstances, the funds could also be used to help the business expand, instead of going 'cap in hand' to your bank.
Instead of paying rent to a third party landlord, you could pay rent to your pension pot. So generating wealth and filling up your pension box.
Your Cash Savings
We all need access to cash before and after we retire. We can help both you and your business identify the best accounts on the market. It may even be suitable to use offshore accounts to reduce the tax paid.
Individual Savings Accounts, Unit Trusts, Bonds and Other Investments
Historically investors have chosen funds by looking at the ones that have a proven track record over a three, five, or even ten year period. The problem with this is that, without the aid of a time machine, this information is near to useless.
In a landmark study, "Determinants of Portfolio Performance", published in the Financial Analysts Journal in July/August 1986 and updated May/June 1991, Gary P. Brinson, L. Randolph Hood and Gilbert Beebower concluded the biggest single factor (over 90%) explaining the difference in performance of a fund that did well, compared to a fund that performed poorly, was asset allocation. Funds that did well had a mixture of the four main asset classes (cash, fixed interest investments, property and equities) to diversify their portfolio.
Example:
Between the year 2000 and 2003 many equities (or shares) fell in value. You could therefore have been a knowledgeable fund manager but still lost money. Conversely, you could have no expertise in property management, bought a residential property, and seen your investment grow. The four main assets mentioned perform differently when reacting to economic circumstances.
Today, this issue is reasonably settled. No one disputes the impact of asset allocation on investment results. Large institutions and sophisticated investors are increasingly turning to asset-class investing. If the vast majority of investment returns can be attributed to an asset allocation decision, shouldn't efforts be concentrated where they will have the most impact?
Generally, each client should therefore have a mixture of all four asset classes in their investment portfolio. How much they should have in each class is dictated by their individual attitude to risk. We can provide help and advice regarding this, so you can make the most of your investments.
Property
Investing in property gives you the option of producing income via rent (assuming you can find a tenant), or a capital lump sum (assuming the property has risen in value).
We help our clients build property portfolios both in the UK and abroad where appropriate.
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