With Christmas and the New Year over for another year, our attention turns back to matters of financial planning as we scour the money pages to see what your clients might have been reading over the weekend.
Often older clients can be concerned about gifting money or assets to their offspring because of what might happen to those assets in the event of them getting divorced at some point in future. However, allaying concerns to a degree, The Sunday Telegraph Money section is reporting on a recent case which went through the courts. In this instance, the judge ruled that the financial terms of the divorce should be based solely on the assets generated during the marriage rather than to take account of assets which were in place beforehand – in this case a trust fund. For advisers dealing with such client concerns, this case confirms the principle that non-matrimonial assets remain protected, including those held in trust structures. The article proceeds to stress the importance of arranging for a prenuptial agreement to be in place however, to make it clear as to what might happen to existing assets in the event of a subsequent divorce.
In the Financial Mail on Sunday, Alasdair McKinnon, manager of the Scottish Investment Trust, is reportedly in ultra-cautious mode. The article explains that he currently holds around 10% of the trust’s £800m assets in cash because of concerns around equity market valuations. Also that in a defensive move, he has increased exposure to gold mining companies within the portfolio. However in the article, he makes it clear that the trust’s usual remit of investing in equities is just on hold for the time being. Despite the underlying pessimism, McKinnon continues to search out potential opportunities for the trust. He is currently in Shanghai assessing whether there is a case for investing in emerging markets.
Also at the MoS, investment income is another theme for the week as Jeff Prestridge reports on five collective funds which currently deliver an income yield of 5% or more. As you’d expect, he makes it clear that each fund involves potential volatility in capital values as well as the possibility of income fluctuations too. In case your clients are reading it and have a few questions for you, the particular funds he covers are Merchants Trust (yield 5.5%), Henderson Far East Income (Yield 6.6%),Dunedin Income and Growth (5.2%), Woodford Income Focus (6.3%) and Artemis High Income (5.7%).
Meanwhile, the Sunday Times Money section leads with a full page article looking at lasting powers of attorney. Whilst highlighting the rise in applications for LPAs (771,000 last year) as the population ages, the article looks more at the downside risk of choosing the wrong attorney – or the implications of what might happen in the case of disputes. Given the importance of making such arrangements in a timely fashion, we have to hope that this doesn’t deter people from considering the attorney route where it is appropriate but it is quite possible that the negative stories the article reports might be on your clients’ minds and be on their list of questions ahead of the next review meeting.
In his Personal Account column, Ian Cowie urges reader to hold their nerve during periods of market volatility and not to sell out of their investments in panic. As he succinctly puts it “Those of us saving to avoid poverty in old age should do what we did as homeowners when house prices fell. Sit tight, stay calm and wait for the storm to blow through”. He also reminds readers that periods of volatility can throw up buying opportunities and shares his plans to top up holdings in Baillie Gifford Shin Nippon, Fidelity China Special Situations and JP Morgan Indian ITs in the weeks and months ahead. He also reports on his recent investment in biotech specialist trust Syncona ( which previously traded as the Battle against Cancer Investment Trust) even though it trades at a premium of 28% to NAV ( it was 40%!). He justifies the purchase on the basis that even if only a few of the invested projects come good that the NAV could rise substantially – and that the thought of his money being used to help cure serious illnesses is also an added bonus. Finally there are wise words to many employees who may be considering opting out of auto-enrolment schemes in April, when the employee contribution rate increases to 5%. His advice is sensible – that such a move would be “a mistake – because choosing to shun a savings scheme backed by your employer is equivalent to asking for a pay cut.” No doubt there are many IFA Magazine readers who would agree with him.