Investing in Structured Products, by Consultant Elliot Gothold

By | Financial Planning, Investment News, Latest News

Structured Products are one of the more complex and less well-known types of investments but at NLP Financial Management we believe they can play a useful role within a broad investment strategy for our clients.  This article outlines how they work and some of the different products available.

In simple terms, a Structured Product is a pre-packaged finance product offering a given return, or coupon, over a specific period of time linked to the performance of a financial instrument, for example the FTSE 100 Index.  The main attractions of investing in structured products are that the potential annual returns can be quantifiable at the outset, albeit they are not guaranteed, and they provide useful diversification from other more traditional investments such as equities and fixed interest.  Although capital invested can be tied up for up to eight years, most plans offer the potential for early maturity on any investment anniversary, usually from the second year but sometimes after one year, subject to the performance of the underlying index.

There is a wide range of structured products available at any point in time, covering the full width of the risk spectrum, from lower risk products to high risk.   We carry out extensive research into the various structured products available to retail investors, and maintain a panel of approved products which can be offered to clients.

There are two types of product available; Structured Deposits and Structured Investments, and each product will target capital growth or income.  Structured Deposits are plans with a given rate of interest, which is payable subject to the performance of, for example, the FTSE 100 Index over the period of the plan, with each plan having specific conditions.  If the underlying index underperforms, investors may not receive any interest at all, but the capital invested is secure, while the products have the same protection of £85,000 under the Financial Services Compensation Scheme (FSCS), as with any other savings account.

Returns from Structured Investments usually depend on how a stock market index performs, and we only recommend plans linked to the FTSE 100 Index, rather than more than one index or individual stocks, which may offer higher returns but are higher risk.  We often favour more defensive plans, which can pay out even if the FTSE 100 Index falls, even by as much as 35% during the full term of the plan.  Some plans offer a “step-down”, whereby on each anniversary the measurement level of the FTSE 100 Index falls, so the plan can mature early even if the market has fallen since the start of the plan.  However, there is a risk that capital may be lost if the underlying index falls significantly, typically by more than 35% on maturity.

Another risk is that the provider purchases underlying financial instruments from one or more banks, known as counterparties, and if these institutions fail or become insolvent during the term of the investment, investors may lose their full investment as they are not covered under the FSCS.  Understanding the financial strength of counterparties is essential and a key part of our research process, and we will only invest in products where we are completely comfortable with the counterparty, or in some cases multiple counterparties, involved in that product.

In times when the FTSE 100 Index has fallen, investing in structured products arguably becomes more attractive, as the likelihood of loss of capital reduces, simply on historical levels of the Index.  Furthermore, the returns offered from structured products are often higher during periods of stock market volatility.  From a tax perspective, returns from growth plans are usually subject to Capital Gains Tax, providing the opportunity for investors to utilise their annual CGT exemption of £12,000.

In conclusion, due to the wide range of products available, their complexity and associated risks, we believe it is essential to obtain financial advice when investing in structured products.  Investing in a portfolio of carefully selected products, perhaps at different times to provide diversification between counterparties and a range of maturity dates and returns, can be an appropriate strategy to adopt alongside a broader investment portfolio.  Returns can be attractive relative to other investments, but it is essential to fully understand the risks involved, and due to their complex nature structured products are not suitable for all investors.

Elliot Gothold is a Consultant with NLP Financial Management Limited and can be contacted on 020 7472 5555 or at [email protected]

 

 

Incorporating Financial Planning into Company Benefits

By | Financial Planning, Investment News, Latest News

It’s become relatively standard practice over recent years, for medium to large companies to offer their employees access to a range of staff benefits that are over and above the traditional areas of private healthcare and life insurance.  Some even provide free food, holidays and unlimited flexi-time!*

A benefit that is growing in both popularity and need, is that of financial education, with the opportunity for employees to meet professional financial planners who can demystify what can be perceived as a complicated subject.  With 94% of UK workers experiencing money worries, 77% of these say their work is impacted and productivity is impaired, with protection, budgeting/planning and tax being among the highest concerns.**

There are various ways in which financial education can be implemented within businesses, from workshops and presentations on a range of financial topics, to one-to-one meetings; or as in the case recently, attending a benefits fair at Goldman Sachs, with whom NLP Financial Management has had a long-term business relationship.

Whilst events such as these usually cover a wide selection of wellbeing providers, employees can informally meet finance professionals and ask questions in a relaxed environment, with the option of continuing the discussions afterwards, should they wish to do so.

Crucially, these events help employees to start having conversations about aspects of their current or future finances that they may have pushed to one side.  It’s a common misconception that individuals need a large capital sum of money before speaking to a Financial planner, when in fact, a beneficial relationship can be started early on, that can help people effectively formulate their financial futures and put themselves in a far better position later on in life.

If you’d like to discuss the option of NLP Financial Management attending your workplace please contact us at [email protected]

*https://www.glassdoor.co.uk/blog/best-place-to-work-with-great-comp-and-benefits/

** https://www.closebrothersam.com/for-employers/news-and-insights/25-million-uk-employees-affected-by-money-worries-while-at-work/

Pictured – Ed Beaber (Business Development Consultant), Adam Katten (Managing Director) and Elliot Gothold (Chartered Financial Planner).

Driving our continuous professional development

By | Financial Planning, Investment News, Latest News

We believe it’s crucial to keep supporting our staff in developing their careers and experience.  Not only does this benefit our clients, but also enables us to be an employer of choice, attracting and retaining talented individuals within a fast moving industry.

For this reason, we recently held an event in London for our para-planners across the NLP Financial Management group.  The day focussed on developing their existing knowledge of tax efficient investments including:

BPR: Business Property Relief – Investments that qualify for BPR can be passed on free from inheritance tax upon the death of the investor, provided the shares have been owned for at least two years at that time.

VCT: Venture Capital Trusts – after ISA and pensions allowances have been exhausted, VCT’s could be the next best option.  Adventurous investors get the chance to invest (up to £200,000 annually) in small firms to help them thrive, with the Government offering generous tax breaks in the process.   You get up to 30% income tax relief on the amounts invested (up to the total tax due), tax free capital gains, and tax free dividends.  However they are high-risk and longer term than more traditional investments.

EIS: The Enterprise Investment Scheme – run by the Government, this aims to help younger, higher risk businesses raise finance by offering risk-taking investors substantial tax relief; up to £1m worth of investments in companies per person that qualify.

The staff then received important updates on Compliance and HR from relevant experts, before heading out as a team for some rest and relaxation!

Due to the high risk nature of BPR, VCT and EIS products, financial advice should be sought before making an investment. Tax reliefs stated are subject to change and are dependent on individual circumstances.

We made the top 100!

By | Financial Planning, Investment News, Latest News

We’re delighted to have received the news that NLP Financial Management has been featured in the Top 100 financial planning businesses in the UK.

The New Model Adviser Top 100 list is a prestigious accolade to obtain, especially as it takes into consideration financial planners the length and breadth of the country, from very small firms to companies much larger than ourselves.  We are also one of only 16 London financial organisations to be included, which in itself is highly significant, taking into account the number of financial planners who are based in the capital.

Our willingness to share our knowledge and expertise with external bodies and individuals was also noted, which is part of our company’s ethos.   In the same way, our drive to develop our people has helped us become both an employer of choice and a company respected and trusted by our clients, who refer to us on a consistent basis.

Recognition in this form is also an appreciation of the efforts and hard work by our staff, to ensure we are consistently delivering a personal service and putting our clients at the heart of everything we do.

Why we need private dental insurance

By | Financial Planning, Latest News

The best way to reduce dental costs is to take good care of your teeth but, according to the Oral Health Foundation, one in three people have NEVER flossed their teeth and one in four do not brush twice a day. Twice yearly visits to a dentist, along with good oral hygiene can prevent the development of many illnesses.

For basic care, NHS dentists can the best option. However, if your teeth need attention from past neglect and you want to explore private dental treatment, dental insurance could lower the costs.

You’ll need to consider the following factors to decide whether or not you need insurance and which insurance provider is the most appropriate fit for you:

  • You STILL have to pay if you use the NHS

NHS dentists are not free, unlike NHS doctors.  It is cheaper than a private dentist, but there may be limits on the treatments that can be offered.

  • Your NHS dentist may ALSO be your private dentist

Most dentists perform a mixture of private and NHS treatment, and by choosing to go private you will bypass NHS waiting lists. However, as prices for private dentistry are set by the dental practice, they can vary across the country. Ideally obtain quotes from a few different dentists to make sure you are getting a competitive price for the required treatment.

  • Choosing the right policy

Dental insurance cover ranges from routine to emergency dental treatment, selected cosmetic work and some policies also include worldwide cover.  The price of insurance varies per company and will depend on the different benefit levels of cover available.  It is therefore important to read and understand the “small print”.

  • What is typically covered?
  1. The cost of standard NHS and private treatments such as check-ups, X-rays and hygienist visits.
  2. Fillings, root canal, extractions, periodontal treatment, implants, crowns, bridgework, dentures and orthodontic treatments.
  3. Accident and emergency treatment and worldwide cover. 
  • What is not covered?

Pre-existing conditions are not always covered by some insurers and the exclusions on treatments can vary.  It is essential to check. Please also note that some insurers, who offer plans for individuals, will request that you’ve had a check-up within the last 12 months.

If you are interested in dental insurance, a specialist company who are a leading dental insurance broker

“Get Dental Plans Ltd”, can help you make sense of the market with a range of dental plans for both companies and individuals.  Get Dental Plans are one of NLP Financial Management’s partners, extending the services we are able to offer our clients for an even greater holistic approach to your financial and life planning.

For more information, please contact:

Paul Lewis

T: 0800 0857 123

E: [email protected]

Website: www.getdentalplans.co.uk

Get Dental Plans Limited is an appointed representative of Get Medical Plans Ltd who are authorised and regulated by the Financial Conduct Authority.

 

Caring for Elderly Parents

By | Financial Planning, Latest News

As advances in medical treatments continue apace, expected lifespans are increasing too. Sadly, for many, this means living with chronic illness for longer and an increased chance of cognitive impairment. This can put a strain on the family unit as children turn into carers.

It can therefore be vital that professional advice is sought to ensure that one’s parents’ welfare and finances are being properly managed and to take steps to ensure that should they become unable to deal with these matters independently, the children can step into their shoes. It is strongly recommended to discuss these topics with parents and ideally, with a solicitor and financial planner, long before any signs of mental frailty are evident.

Being involved with the management of one’s parents’ affairs, alongside a financial planner, can save substantial sums in Inheritance Tax if appropriate planning is put in place. It can also mitigate the payment of long-term care costs, if they are needed.

Subject to parental agreement, the children should have drawn up Lasting Powers of Attorney. These will only be effective if the parent has “capacity” at the time, i.e. the ability and understanding to make this decision.

A lasting power of attorney (LPA) is a legal document whereby the parent (the donor) appoints one or more people (known as ‘attorneys’) to stand in their stead and make decisions on their behalf, should they lose mental capacity – no matter how transient that episode may be.

There are 2 types of LPA:
• health and welfare – this covers their daily routine, medical care decisions, moving into a care home, life-sustaining treatment, etc.
• property and financial affairs – this includes managing their bank accounts, paying bills, collecting pensions, selling the home and the ongoing management of any investments either by them    directly or their appointed financial adviser, etc.

One can choose to make one type or both. A solicitor will provide the appropriate professional guidance and advice, particularly in regard to who might be appointed as an attorney. This is not something to be taken lightly and needs careful consideration.

When parents become unwell and care is needed which cannot be met by children, there are a number of organisations that offer free help and advice. The parent’s GP is often a good resource, particularly as they should be familiar with the patient and the medical history, diagnosis and prognosis. Experienced professionals can be engaged to meet with parents and children to discuss the best course of action, thus helping to ensure that a parent remains safe and well.

In some instances, “care at home” may only be a temporary measure and the long-term solution is a move into a care home. This is a major decision. It is highly recommended that the children obtain support and guidance from specialist organisations, of which, thankfully, there are many; Age Concern, the Alzheimer’s Society and Dementia UK to name but three. Private care homes are expensive, typically upwards of £1,000 per week in Greater London and if dementia care is required, considerably more.

Planning for and discussing such eventualities when one’s parents are fit and well may seem rather morose and it is understandable to put off these conversations for another day, however avoiding these subjects can be costly, frustrating and distressing in the future. Without timely action, decisions about a loved-one’s welfare can be taken out of one’s hands and the day-to-day dealing with finances and investments is entirely curtailed, without recourse to the courts. This can prove very costly indeed.