Please click the link here for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of February.
It’s something none of us want to think about, but unfortunately there are two certain facts in life – we’ll all pay taxes and we’ll all die at some point, however, we may also fall seriously ill so we need to consider protecting ourselves and our families should the worst happen.
Life expectancy in the UK steadily improved throughout the 20th Century, meaning we now have a larger and older population, which is mainly due to people looking after themselves more, smoking less and improvements in the treatments of illnesses. However, in the last few years life expectancy in the UK has slowed down and virtually ground to a halt, according to ONS data (Office for National Statistics) *. The data showed that as of 2016, a female baby born in the UK would on average be expected to live until 82.9, while a boy would be predicted to live until 79.2.
Although cancer survival is at a record high and smoking rates are at an all-time low, every 2 minutes someone in the UK is diagnosed with cancer and every 4 minutes someone in the UK dies from this disease**. Shocking as these statistics are, this is now the harsh reality of cancer in our day and age and despite on-going research, there are more than 360,000 new cancer cases reported in the UK every year – nearly 990 every day (2013-2015).
Whilst most of us don’t think twice about insuring our homes and our cars, worryingly, only one in four UK “main household earners” have a life insurance policy in place according to the Association of British Insurers ***. We may all feel that “it’ll never happen to me” but if something does, the impact of not having insurance can add to the stress and shock of receiving that news.
The research by comparison website MoneySupermarket.com showed that more men than women have Life cover, with 45% having a policy in place compared to 38% of women. Women often work part-time or opt to take a career break and stay at home to bring up children, so if they fall ill, or worse, this could effectively wipe out the family childcare, meaning the father would need to take time off work to look after his children. This is especially significant when a child is ill or has a long-term medical condition that requires full time care. Critical Illness (CI) insurance can provide a form of security as it pays out a tax-free lump sum on the diagnosis of one of a number of serious illnesses; this can apply to both the parents and children, as a parent can add their children to their own CI policy providing some financial peace of mind at such a difficult time.
Just one in five women have CI cover in place, compared to one third of men, according to research by comparison website ActiveQuote.com**** with only 13% of women with dependent children choosing to be covered, according to insurer Scottish Widows. They found 40% of mothers have life insurance cover, yet a critical illness claim is far more likely. The importance of taking out private CI cover grows with more women working part-time, not at all or being self-employed meaning they won’t have protection benefits through an employer.
With regard to Life cover, your policy pays a one-off payment to your dependents when you pass away and there are no income tax or capital gains tax liabilities on the proceeds. However, all proceeds that fall into your estate attract potential inheritance tax liabilities. This is chargeable at 40% after the nil rate band is taken into consideration. it is therefore recommended to set up a life insurance policy within a trust so that the proceeds do not form part of your estate.
One particular use of life assurance is for the payment of inheritance tax. For a married or co-habiting couple, this is set up on a “joint life second death” basis and placed in trust for the beneficiaries. The type of policy used for this purpose is usually a “Whole of Life plan”. By covering the expected amount of inheritance tax with this policy, the entire value of the estate can pass to the designated beneficiaries.
It is always recommended to seek independent financial advice when planning critical illness cover, life assurance cover and for estate planning. Protecting your family is critical as no-one knows what is around the corner for them health wise.
If you would like financial advice on the different Life Cover and Critical illness policies or Whole of Life policies covered in this article; please contact us at [email protected]
NLP Financial Management Limited is authorised and regulated by the Financial Conduct Authority. Estate planning is not regulated by the Financial Conduct Authority.
Please click the link here for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of January.
The Professional Adviser Awards, now in their 14th year, celebrate the knowledge, skills and commitment of financial advisory businesses throughout the UK.
Last night (7th February) saw NLP Financial Management (NLPFM) receiving our certificate for being named “Best Financial Advisers to Work for 2019”. There were only 14 companies in the whole of the UK who received this accolade, underpinning our commitment to providing the best possible environment and services for our staff, as well as for our clients.
We were also shortlisted for “Adviser Firm of the Year – London” which is now our 6th year in a row, and we are delighted to be the only firm in London to be consistently shortlisted for such a long period of time!
Adam Katten, Managing Director, commented “This was the 1st year that we were nominated for 2 awards and that in itself is a great achievement. Thanks to everyone who has helped in enabling us to obtain these achievements and rest assured that we will keep on striving for continuous improvements throughout the NLPFM business.”
Pictured is Consultant Elliot Gothold, Managing Director Adam Katten and Finance & Operations Director Lee Pittal.
JW3 (www.jw3.org.uk ) is the first Jewish Community Centre and arts venue of its kind to exist in London, opening on Finchley Road in 2013.
The aim of JW3 is to transform the Jewish landscape in London by helping to create a vibrant, diverse and proud community, inspired by and engaged in Jewish arts, culture and community.
As part of its desire to create a lively and informative community offering a wide range of classes, activities and events, JW3 have asked NLP Financial Management (NLPFM) to work with them in delivering some key financial educational sessions. The first one took place in October 2018 and more are planned throughout 2019.
These sessions are focused on Inheritance Tax planning and Financial Planning post-retirement, including gifting assets to family members, life insurance, equity release and the use of trusts. The tax benefits of leaving a legacy to charity are also covered and to support this, NLPFM are working on this JW3 project alongside a highly respected local firm of solicitors, Manuel Swaden (www.manuelswaden.co.uk), who deal with Trusts, wills and powers of attorney.
We will continue to provide our time and expertise to JW3 this year in the form of financial planning and collaboration encouraging members of both the Jewish and wider community in London to feel better equipped and confident to manage their money more effectively.
Please click the link here for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of December.
The British College of Osteopathic Medicine, located 50 yards down the road from our offices in Finchley Road, is internationally renowned as a leading specialist learning institution in osteopathy. It was one of the first educational establishments to be accredited, meeting the quality standards set by the General Osteopathic Council – the industry’s main governing body (GOsC).
Earlier this year NLP Financial Management were approached by BCOM to take part in their Undergraduate Masters in Osteopathy Course for their last year students, being both award winning and local Independent Financial Planners.
BCOM offer a course for their final year students to assist them in their financial education, before they branch out as associates in osteopathy practices or become self-employed. Receiving hands-on financial knowledge before they are qualified will give students a better understanding of how to plan not only their own personal finances but also how to run their business in a tax-efficient way and take advantage of pension and other financial planning opportunities.
This was the first time NLPFM had worked with the college and Adam Katten (Managing Director) is delivering two detailed lectures, the first one in October advised on the importance of financial planning and protection planning including critical illness and life insurance, the second lecture in March focused on pensions and investment opportunities.
Annie Osborne, BCOM final year student said “Adam’s lecture really opened my eyes to some important considerations for financial planning into the future. He helped us to reflect on factors such as income and critical illness protection that we hadn’t necessarily considered before. Thank you Adam, I’m really looking forward to part 2!”
The more educational institutions – and companies – that can provide this form of learning, the easier students will find it to manage their money and make it work for them. As they develop both their careers and their lives, fewer people will be left with extensive gaps between their current wages versus their projected retirement income, so can look forward to enjoying their later years.
Professional Adviser has recently announced their shortlists for its 2019 adviser and provider awards, which is now in its 14th consecutive year and we are delighted to announce that NLP Financial Management is once again a finalist.
The awards are designed to demonstrate excellence in both the financial advice profession and also within the wider financial services sector. We won the Adviser Firm of the Year (London) both in 2014 and 2018, having been shortlisted now for 6 years running – and we will find out at a black-tie ceremony held in the Brewery, London in February, if we have been successful for another year.
Being nominated as a finalist is a great accolade and reinforces our continued efforts to remain a leading firm of advisers.
With one in five parents now giving away money to their children to avoid high inheritance tax bills, it is more important than ever to include your children in your financial decisions, to avoid them having a nasty shock or trying to deal with something they know nothing about should the worst happen.
Research undertaken by Direct Line* found that a total of £227 billion has been transferred, with £32,920 being the average amount that parents are gifting their children. Another 19% of parents had not given any money away as of yet, but planned to do so in the future. However, 34% of parents said they did not have the assets to give away, with one in 10 saying their children are too young and 13% were worried that they will be short of money themselves when they are older.
Times are changing. In our grandparent’s day the financial decisions were normally carried out by the breadwinner of the family (typically the male) and sometimes only the sons were made executors of the will, which was kept a secret until the parent(s) died. Nowadays, thankfully executor responsibility is split equally between all the children to ensure everything is kept fair.
More parents are realising they need to look at their finances before it’s too late to ensure their children know their wishes and who to contact from a financial point of view, whether it is another family member or a Financial Advisor. The latter is especially important to help children know who to turn to for help with investing their parents’/grandparents’ money when the time comes. Even if gifting money to your children before you die is the route you decide on, there are still implications to be considered, such as if you give the money away you need to do so 7 years before you die, otherwise your children will still be liable for inheritance tax.
Talking about finances is uncomfortable for both children and their parents, but doing so can alleviate stress and worry in the future – especially if you are suddenly taken ill or suffer from dementia and can’t make your own decisions. You may feel too proud to talk to your children, feel it is a private matter, don’t want to lose control of your money or don’t want your children to take advantage. Whilst these concerns are valid there are considerable benefits to having this discussion with your (grown up) children whilst you still can.
It may help to open discussions around children potentially needing a small ‘early inheritance’ to help them out, whether this facilitates higher education, assists them to buy their first property or simply to alleviate any money concerns. It can also save time when they know details of your will/s, powers of attorney, where vital documents are held and even meeting your financial advisor so a relationship is formed.
It is also helpful to talk about options should you no longer be able to care for yourself; waiting lists for retirement/care homes can sometimes be long, so it means your children can move faster should the need arise. No one wants their parents to become ill and lose their judgement but there are several studies that show the ability to make financial decisions declines by about 2% a year after age 60.
It is important that discussing family money matters does not become a taboo subject and you try to get everyone involved in financial planning and budgeting from an early age as it instils good financial awareness. This can start from saving money in a piggy bank, having a bank account as children get older and even bringing them into family businesses or taking up part-time jobs encouraging them to budget for what they need, whilst showing them the real costs of living and what expenses you have as a family each month.
By being open and honest regarding the financial history of the family it means your children will also learn from your experiences, good or bad, and it will help shape their financial future.
To talk to NLP Financial Management about your financial planning please contact [email protected]
Developed markets displayed heightened volatility during November. Deutsche Bank track over 70 distinct asset classes and by mid-November over 90% of these classes were negative for the year to date, which is the highest level since 1901. But by month end, the MSCI World Index was up 1.3%, US equities were up 1.9%, Europe was off -0.6%, the UK -1.5%, and Japan up 1%. Emerging Markets were up 3%, with Asia up 4%, and Latin America 0.2%.
The trigger for the falls had been the rising yields on US Treasury bonds due to further hikes in short term rates by the US Federal Reserve, and fears of the US-China trade war. The OECD said global growth has peaked and will slow down during 2019. Meanwhile, back home the UK and EU signed the draft Withdrawal Agreement to ensure a ‘deep and flexible partnership’ as they laid the ground for the trade negotiations to continue after the UK leaves the EU on 29th March 2019. However, the Prime Minister endured a torrid time presenting the Agreement to Parliament.
The FTSE 100 was down 1.5%. The market is now yielding over 4% and the Price Earnings ratio is down to 12 and stands at attractive valuations below its historic averages.
Brexit has dominated the headlines as Theresa May’s Withdrawal Agreement was brought back to Parliament. Mark Carney, governor of the Bank of England, stoked fears of a UK recession when he presented research on the effects of the various Brexit outcomes. His research indicated that a disorderly ‘No deal’ Brexit could be worse than the Global Financial Crisis of 2008. GDP would shrink by 8%; house prices could crash by 30%, commercial property by 48%; the Pound would fall; inflation and interest rates would have to go up to 4%; and unemployment could rise to 7.5%. The
UK would be £100bn worse off.
The research also revealed that a disruptive Brexit would see GDP down 3%, house price falls of 14%, unemployment up to 5.7%. A ‘close’ deal would affect GDP by 1% and a ‘less close’ deal would mean a GDP fall of 3.75%. Under May’s deal, the UK economy would be 3.9% smaller over 15 years.
Finally, Carney showed that under a ‘No deal’ the economy would be 9.3% smaller. The overall conclusion was that any deal would leave the UK worse off than its current position remaining in the EU. The report was dismissed by Brexiteers as the resurrection of ‘Project Hysteria’.
The crucial vote on the deal was postponed as it was expected to be voted down, so the prime minister declared she would go back to Brussels to obtain assurances regarding the temporary nature of the Irish backstop. The hope that May’s deal will be passed by Parliament faded and the probability of a ‘No-deal’ scenario and a second referendum has risen. A second referendum runs the risk that the original referendum vote would be reversed and there would be no Brexit at all. A softer deal termed ‘Norway Plus’ in which the UK would re-join the EEA and yet retain membership of the customs union and the single market has been muted.
The outlook for UK investors remains complicated. UK equities are weighed down by raised fears of a ‘No-deal Brexit’, although the sterling weakness that would accompany such an outcome would boost the value of overseas profits. There is also the risk of a Labour government which would put pressure on a range of utility and transport company shares which Labour has promised to renationalise. A ‘soft Brexit’ would remove much of the Brexit risk premium but likely cause a rally in the pound, possibly to as high as $1.40 according to J P Morgan. The Pound slipped back to $1.27
by the end of the month.
During November the market sold off heavily but ended the month up 1.9%. Valuations were ignored as both Growth and Value stocks fell. Defensive and low beta stocks were sought as much as cyclical stocks was avoided. However, earnings were still on the up as prices were down. Thus, Price Earnings multiples have been compressed. Hardest hit were any special situations companies and those in turnaround mode. The market is buying the safest haven stocks now at any price. Banks and Consumer Staples sectors were affected but Healthcare benefitted as did defence stocks. US factory production has fallen but is well above crisis levels. Labour shortages in the house building sector have pushed up wages.
Facebook dropped on news it would face legal action over misuse of user data, election interference and the introduction of new digital taxes. Apple shares slid 24% on news that sales of the latest iPhone had slowed prompted by reports from key suppliers Lumentum (facial recognition) and Japan Display of reduced production orders. The $265bn loss on their $1trillion market cap is equivalent to the GDP of Bangladesh.
Following the midterm elections on 6th November, the Democrats won a majority in the House of Representatives, but the Republicans held on to their majority in the Senate which should not cause too many problems for Trump to continue implementing his agenda. There are some views the Democrat majority will curtail his spending plans. For instance, he had threatened to withdraw from the 1980s nuclear non-proliferation treaties of the Reagan-Gorbachev era which could lead to increased defence spending.
US Federal Reserve chair Jerome Powell said in a speech to the Economic Club in New York that interest rates may not have to rise as far as previously expected next year, maybe only one or two rises. This was warmly received by the markets and led to a sharp rebound in the Dow Jones and S&P 500 because he had earlier indicated that up to four rises were due during 2019. Future interest rate rises, Quantitative Tightening (QT) as it is called, has the effect of draining liquidity from the system and has raised premature fears of a recession.
At the end of the month further tensions with China emerged. Trump tweeted that he hoped for positive talks with China at the G20 meeting in Argentina. The tariff rate is scheduled to increase in January if a deal cannot be reached and tariffs maybe imposed on all of China’s exports to the US. Although the recent Asia Pacific Economic Summit ended in acrimony, a 90-day tariff truce was declared. However, Meng Wanzhou, Chief Financial Officer of Huawei was then arrested in Vancouver. The arrest was seen as a diplomatic blow against China. Huawei is now the 2nd largest producer of smartphones behind Samsung and ahead of Apple. The US is concerned that Huawei has been stealing US technology under instruction from the Chinese government and infringing intellectual property rights. John Bolton,National Security Adviser, expressed enormous concerns over their business practices. However, Canadian PM Justin Troudeau said the arrest was not politically motivated.
The EU Summit in Berlin discussed the Brexit deal. France had issues about fishing rights in UK waters. Spain raised issues over the border with Gibraltar. Of particular note, the European Court of Justice has issued a ruling that the UK could reverse the Article 50 process and stop Brexit altogether.
In Germany, the economy shrank 0.2% as a consequence of the impact of the US-China trade wars affecting exports. GDP was expected to fall to 1.5% from 1.8% next year. Much of the weakness appears to have come from a sharp slowdown in exports to China and German industrial production. Car manufacturing has been affected by the car emissions scandals. German banks were also in trouble. The offices of Deutsche Bank in Frankfurt were raided as part of the investigation prompted by the Panama Papers scandal of papers leaked from law firm Mossack Fonseca in 2016.
China and Emerging Markets
The APEC summit ended unusually with no joint agreement amid tensions between China and US over trade and tariff wars as mentioned above. On China’s Singles Day on 11th November Alibaba alone recorded sales of $30.8bn, over three times the total amount of Black Friday/ Cyber Monday in the US.
Brent crude oil prices fell some 30% during the month and ended as low as $58 having recently peaked at $86 on 3rd October. Saudi agreed to cut oil production to support prices. The US has now become the largest oil producer due to the doubling in production of shale oil over the past decade. Falls in oil prices are like a tax cut and support large oil importer countries, particularly those whose currencies have fallen sharply, and will decrease the cost of imports in local currency terms. This is good news for China and India and should be a positive for world GDP next year.
Uncertainty and fear drive down markets
Overall, global growth remains positive. In the near term, the main risk appears to be that the US-China trade conflict will escalate and the extent to which the US and the rest of the world can withstand the impact of ‘trade war’ tariffs. In the medium term, the primary risk is that the US economy is in the late stages of the business cycle and very sensitive to rises in the interest rate cycle. There has been increased buying of US Treasuries which has reduced the yields from 3.25% down to 2.8% as investors seek safety.
We are aware that short term sentiment and over reaction to geopolitical events has worried investors but we remain convinced that the economic fundamentals have not changed all that much. We are casting our eyes over undervalued areas of markets for further opportunities to invest, such as domestic companies in the UK, as well as select Emerging Markets. Our allocation to alternatives, property, and bonds funds offered the portfolios important downside protection during the recent period of volatility.
NOTE: This material has been written for information purposes only and must not be considered as financial advice.
Data as at 30th November 2018.