Lowes Consultant Chris Large explains why it is so important to review our financial plans and goals on a regular basis and, in conjunction with Independent Financial Advice, take appropriate action where needed.

Financial planning can never be a ‘one and done’ event. We always recommended that a long-term plan is put in place in respect of your wealth building and lifetime financial goals. But the world is nothing if not a moving feast and over time it is inevitable that we will need to amend our savings and investments appetite and our financial plans accordingly.

This will have a potential impact on where we save and invest and the action, we need to take to avoid unnecessarily paying tax, as examples.

Currently, we are all being affected by the rise in the cost of living – notably in the prices paid for fuel and energy. Governments are fighting the dual-headed and, in terms of policy, conflicted dragon of rising inflation and economic slowdown. Both of which may affect our savings and investment portfolios and our financial plans. There are numerous ways the landscape has changed over the years which demonstrate why we need to review our financial planning strategies on a regular basis.

Stockmarket volatility

Over our 50+ years of advising clients we have seen markets rise and fall – including some ‘crashes’, such as in 1973, and 2008, with smaller market downturns along the way. Overall, however, while stockmarkets are driven by investor sentiment and so by nature are volatile, they have always recovered from these setbacks and in time, started climbing again.

But we don’t want simply to rely on index performance in our financial plans, ideally, we want to take more control of the situation and find investments which can deliver more

consistent returns through professional management and provide a buffer against volatility.

It’s important therefore that we review and diversify our investments on a regular basis, with a view to creating a smoother investment path. No matter how we manage our investments, at times of negative volatility our portfolios can be affected but placing our investments in the hands of investment professionals who day-in day-out are watching

the markets and finding the best companies in which to invest, makes sense. Likewise, bringing in investments that can provide some protection against falls in the stockmarket and deliver a constant income stream can help balance out a portfolio – structured products and fixed income investments are cases in point.

The ability to react to the changing landscape is one of the reasons we set up the Lowes Managed Portfolio Service, as it enables the Lowes Investment team, as the portfolio managers, to review each portfolio against its investment criteria and take prompt action where and when needed.

Pensions policy

Pensions have been subject to considerable change over the past 20+ years. It is somewhat ironic that a much needed shake-up of the pensions market in 2006 was heralded as ‘pensions simplification’, as since then, pensions have become ever more complex and confusing for people to deal with.

How we use our pensions within financial planning was significantly affected by the introduction of the Pensions Freedoms legislation in 2015. This inherently changed the

way we view and use our personal pensions. Death benefits are a case in point. These changed to enable pensions to be passed on to beneficiaries outside of a person’s estate, making pensions a central pillar of estate and inheritance tax planning, not just a way to save for retirement.

Changes to how much may be saved within a pension before incurring a tax surcharge – known as the Lifetime Allowance - have altered dramatically also. In the 2010/11 tax year it was £1.8million – that was drastically cut and currently stands at £1.07million, which has been frozen until 2026. These changes have significantly altered financial plans.

Tax

There has been plenty of tinkering with tax over the years and we can expect governments to continue to do so going forward. On a positive note, the amount that can be earned before paying the relevant level of income tax has increased over the years. We have also seen the ISA allowance go up to £20,000, enabling us to save/invest more of our money free of income and capital gains tax. And we saw the introduction of the Residential Nil Rate Band (RNRB) increase the amount that could be passed on to specified beneficiaries by £175,000. However, the RNRB and the inheritance tax Nil Rate Band which has been £325,000 since the 2009/2010 tax year, have both been frozen until 2026, alongside the rate of capital gains tax (CGT) exemption, as another example. Freezing of tax rates is already seeing more people becoming liable for tax and is an area where Independent Financial Advice is proving its worth in helping identify and mitigate against potential tax

liabilities.

Risk

Risk comes in many forms. Every time we save or invest, we are taking risk in one way or another. There are risks we can better control and those we cannot. Geopolitical risk to our

savings and investments, for example, can be seen in Russia’s invasion of Ukraine, which alongside supply chain issues, amongst others, are currently dampening investor sentiment.

Throughout our lives our view on how much risk we are willing to take with our savings and investment will change. In our 20s and 30s we may feel happy being adventurous with our investments, because if we lose money as a result, we have time ahead of us to make it back as part of our long-term plan. But as we get older and nearer retirement, often we want to be more cautious in our investment strategies, not wanting to lose a chunk of our wealth from our retirement pot at or around the time we will need to draw on it.

Life changes

Finally, there will always be events which happen in our lives which require amendments to our financial plans. Births, marriages, divorces, and deaths can not only affect us financially but can also change the way we view risk, our capacity for loss, our need for protection and consequently, how we structure our financial plans. Later life care as an example, is now an issue for more people as the demographic trend in the UK is for people to live longer than in the past, but not necessarily in good health.

Structure and strategy

In this blog article we have touched on a few of the issues which can and have affected financial plans and why having a structured and long-term strategy in place, which is regularly reviewed, is essential.

What we don’t want to do is be continually reviewing where we are – this has been proven to be counterproductive to a long-term financial plan. In our experience, as a rule of thumb, reviewing our overall plan once a year and amending if needed and where necessary, is usually sufficient to keep a plan on track.

Bearing all these elements in mind, keeping your financial adviser abreast of any changes in your life or your life’s goals, will enable them to review your financial plan in good time and better ensure not only that they can advise in respect of those changes, but your overall financial plan continues to do what is intended.

As I said at the start of this article, a financial plan is never ‘one and done’. Rather there is an inherent need to regularly review our finances and our plans, to better align them with our lives and our goals, always considering the changing world around us.

If you’d like to put a long-term financial plan in place, or better understand how external factors can impact your finances, please get in touch by calling us on 0191 281 8811 or filling in the contact form below.

Lowes Financial Management is Authorised and Regulated by the financial conduct authority.