Investments carry risks. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Our approach to investment advice is based on clearly understanding your financial situation, your aims and how much risk you are prepared to take with your money.
The guidance we will give you helps you through this process and means we can make sure our solutions are right for you and that you have all the information necessary to make a clear decision.
Why People Invest
We invest for a number of reasons:
Saving for a specific purpose
Building a fund of money for personal use at a later date
To generate an income that will maintain a good standard of living
To achieve growth that will at least outpace inflation
Before investing we recommend you address four key areas:
Have you cleared any outstanding debt?
Have you adequate emergency funds?
Have you sufficient financial protection to cover risks such as sickness, accident or death?
Have you planned for an income in retirement?
We will help you meet the needs and actions in these areas in line with your investment requirements.
Understanding Your Needs And Requirements
We will take you through a fact find where we will ask you about your current financial situation, your investment aims and objectives. We will also ask about your feelings concerning your investments. How you feel about risk and your expectations are important aspects of getting the right investment for you. We will also consider your tax position to ensure you are maximising any tax free or tax allowance entitlements.
Some Of The Areas We Will Consider With You:
• Are you investing for growth, income or both?
• What other investment plans do you already have?
• How long are you prepared to invest for?
• Do you need access to money at any time?
• What is your tax position now and when you intend to take the benefits from your investments?
• What degree of risk are you prepared to take?
Understanding Risk
Financial risk is the risk associated with investing in certain investment types and the potential returns from those investments.
Investment returns are not usually guaranteed and any investment strategy brings with it the potential for loss. Each type of investment carries a different level of risk.
Generally the amount of risk you take is linked to the reward, i.e. the more risk you take the greater the potential for higher returns.
It is important to understand the level of risk you are prepared to take with your investment. To understand your attitude to risk we will take you through an independent risk profiling tool in which we will ask you to respond to a series of statements which help to understand your overall willingness to take risk.
Click here to download our risk questionnaire
The Risk Profiles
Defensive
As a defensive investor you tend to see yourself as a very cautious person and you view risk with extreme negativity rather than a source of opportunity. If you have very little or no experience of investments and do not find financial matters easy to understand, then you may be suited to a Defensive approach to investing. You may also be suited to this approach if you take a long time to make investment decisions and tend to be anxious about those decisions. As a defensive investor you typically look for the safest investments that protect capital and carry no risk. You are extremely averse to risk and prefer to invest in bank deposits.
Very Cautious
As a very cautious investor you tend to see yourself as a cautious person and view risk negatively rather than a source of opportunity. If you have no or little experience of investments and do not find financial matters easy to understand, then you may be suited to a Very Cautious approach to investing. You may also be suited to this approach if you take a long time to make investment decisions and tend to be anxious about those decisions. As a very cautious investor you typically look for safer investments that seek to preserve capital and carry little risk.
Cautious
As a cautious investor you tend to see yourself as quite a cautious person and are inclined to view risk negatively rather than as a source of opportunity. If you have limited experience of investments and do not find financial matters easy to understand, then you may be suited to a Cautious approach to investing. You may also be suited to this approach if you take a long time to make investment decisions. As a cautious investor you are likely to look for safer investments although you may consider taking some limited risk in exchange for increased potential returns.
Cautious Balanced
As a cautious balanced investor, you tend to see yourself as quite a cautious person and are inclined to view risk negatively rather than a source of opportunity. If you have limited or moderate experience of investments and do not find financial matters particularly easy to understand you may be suited to a Cautious Balanced approach to investing. You may also be suited to this approach if you take some time to make investment decisions and tend to be somewhat anxious about those decisions. As a cautious balanced investor, you are inclined to look for safer investments although you may consider taking some risk in exchange for increased potential returns.
Balanced
As a balanced investor you do not see yourself as a particularly cautious person and have no strong positive or negative associations with the notion of taking risk. If you have some experience of investments and a degree of understanding of financial matters, then you may be suited to a balanced approach to investing. You may also be suited to this approach if you make investment decisions reasonably quickly and don’t tend to be particularly anxious about those decisions. As a balanced investor you can be inclined to look for a combination of investments with differing levels of risk and understand that you may need to take some risk to meet your investment goals
Balanced Growth
As a balanced growth investor, you do not see yourself as a cautious person and have no strong positive or negative associations with the notion of taking risk. If you have experience of investments and a degree of understanding of financial matters, then you may be suited to a Balanced Growth approach to investing. You may also be suited to this approach if you make investment decisions reasonably quickly and don’t tend to be particularly anxious about those decisions. As a balanced growth investor, you can’t be inclined to look for a combination of investments with differing levels of risk and goals.
Growth
As a growth investor you do not see yourself as a cautious person and are inclined to view risk as a source of opportunity rather than as a threat. If you have experience of investments and find financial matters fairly easy to understand, then you may be suited to a Growth approach to investing. You may be suited to this approach if you make investment decisions relatively quickly and are not usually particularly anxious about those decisions. As a growth Investor you typically look for higher returns rather than safer investments and understand that you need to take some risk to meet your investment goals.
Adventurous
As an adventurous Investor you do not see yourself as a cautious person and are inclined to view risk as a source opportunity rather than as a threat. If you have significant experience of investments and find financial matters fairly easy to understand, then you may be suited to an Adventurous approach to investing. You may also be suited to this approach if you make investment decisions relatively quickly and are not usually particularly anxious about those decisions. As an adventurous investor you often look for higher returns rather than safer investments and understand that you need to take risk to meet your investment goals.
Very Adventurous
As a very adventurous investor you do not see yourself as a cautious person and usually view risk as a source of opportunity rather than as a threat. If you have substantial experience of investments and find financial matters easy to understand, then you may be suited to a Very Adventurous approach to investing. You may be also suited to this approach if you make investment decisions quite quickly and are not generally anxious about those decisions. As a very adventurous Investor you normally look for higher returns rather than safer investments and understand that you need to take considerable risk to meet your investment goals.
Speculative
As a speculative investor you do not see yourself as a cautious person and usually view risk as a source of opportunity rather than as a threat. If you have substantial experience of investments and find financial matters easy to understand, then you may be suited to a Speculative approach to investing. You may also be suited to this approach if you make investment decisions quickly and are not generally anxious about those decisions. As a speculative investor you always look to higher returns rather than safer investments and understand that you need to take a high level of risk to mee your investment goals.
Diversification Of Risk
Having established your risk profile we need to understand the best way to invest.
Spreading risk is one of the most important principles of investing and is achieved by using several different investment types or asset classes.
The asset classes to invest in are linked to your chosen risk profile. Different asset classes have varying degrees of risk and return. Examples of different asset classes are listed below:
Cash
Cash is often perceived as a risk-free investment but it is also a low-return investment. Historically, cash has given a return of close to zero once the impact of inflation is taken into account.
Fixed Interest Securities (Bonds)
There is a wide range of fixed interest securities from low risk short-term government bonds to higher risk long-term corporate bonds. Bond investment can be a useful counter-balance for equities because the performance of these two asset classes tends not to move in parallel.
Commercial Property
Property is an asset class that offers the potential for long-term income and capital growth and is normally uncorrelated to equity markets.
Equities (Shares)
Investment in equities, both UK and global, has long been the cornerstone of most investment portfolios, providing long-term scope for growth of both capital and dividend income. Equity performance tends to be volatile in the short term.
Commodities
Commodity investments are useful in creating a diversified portfolio and these are sometimes known as Alternative Investments.
These different asset classes are blended together to produce a portfolio that aims to match the risk profile.
By taking this approach, even if a particular asset class goes through a bad patch the rest of your investment need not be affected.
Investment Fund Types
Once we have determined your risk profile and its corresponding asset allocation we then need to decide on the funds you want to invest in to achieve your financial goals.
Cash and Cash-like Funds
Funds that provide lower volatility than risk based funds with returns linked to bank and building society deposit rates.
Insurance Company Products
This involves investing directly with an insurance company either in one of their in-house portfolios or their external range of funds. The management charges for these portfolios will normally be lower than the Active Management or DFM funds.
Passive Management Funds
These are invested in multi asset classes which predominantly track a particular market or index e.g. FTSE. The performance of these type of funds attempt to mirror the selected indices and are essentially run through computer programmes and therefore do not include active fund management.
Active Management Funds
These are multi-asset funds actively managed by the chosen fund managers.
Discretionary Fund Management
These consist of a portfolio pf varying assets and investment types based on the attitude to investment risk and the agreed investment strategy. The Discretionary Fund Manager is responsible for switching between funds and sectors in response to market changes, research and analysis. They will rebalance the portfolio assets in line with the agreed strategy when deemed appropriate.
Fees and Charges
When making an investment there are three main parties that can be involved.
1. The administration platform (if used)
2. The manager of the invested funds
3. The financial adviser
The Administration Platform
Typically the charge will be a percentage of the funds invested. Each platform has a different charge but usually range between 0.25% and 0.50% depending on the size of the fund.
The Fund Manager
The charges made are a percentage of the funds invested. This is known as the fund’s Total Expense Ratio (TER) and is made up of the various costs and expenses of running the fund.
The TER charged will vary depending on:
• The investment fund chosen
• The size of the investment
• The fund ‘type’ e.g. passive, active, DFM
The Financial Adviser
The amount of fee for advice is agreed in advance. There will be an initial fee for the advice provided and the implementation of any recommendations. There will also be a Servicing Fee for ongoing monitoring, valuations and regular reviews.
The fee can be paid by cheque or can be paid through the investment provider if authorised by you.
What Happens Next?
If you want to proceed further in receiving advice regarding investments it will be necessary to meet to complete the following documents:
• Fact Find
• Terms of Business
• Risk Profiler
We will then prepare our report with recommendations. This report will also outline the fees payable. If you decide to proceed with the recommendations we would then complete the required documentation.