September 2023

Interview with…Poppy Fox and frankie smith

We are very lucky to be kickstarting our “In Conversation With…” series with Poppy Fox, an Investment Manager at Quilter Cheviot, and Francesca ‘Frankie’ Smith, a Strategic Financial Planner at Jarrovian Wealth. Poppy and Frankie have kindly agreed to answer some investment related questions that our clients commonly ask:

I have never had to manage my finances before and want to safeguard my financial future – what is the first thing you would recommend I consider once I have received my financial award?

Poppy: I would start with a review of your overall situation making sure you have a clear understanding of what you have – i.e. your assets and any potential liabilities. I would then look to see what your short and long term needs are in terms of income and spending. For example, in the short term what income will be required for day to day living and will there be one off costs such as moving house. It is also very important to consider your long term needs and ensure you have plans to make sure you have enough money to live comfortably in retirement. It could be worth considering engaging with a financial planner at this stage who will be able to help you work through all of your different options. Do remember that an initial chat with a planner should be at no cost and with no obligation to move forward it you feel this doesn’t work for you. 

Frankie: I completely agree with Poppy’s comments, and I would like to add that this is now you stepping into your next chapter. It is so important that alongside the fundamental elements such as understanding your short term and long term needs from an income perspective, that you also add in your aspirations, goals, holidays and so forth. All of this should be built into to the planning – I am always saying to my clients ‘life is for living’ and it is so important that this is included as part of any planning that you do. Ultimately, we are intending to create a plan with you that gives you the liquidity that you need, flexibility and choice with the decisions that you are making.

what is the most common pitfall when considering investing for the first time? 

Poppy: In my view, it is being scared of taking risk. Contrary to popular belief, risk is not a dirty word and you will have to take some risk if you want to invest your money and for it to grow over the long term. When you are looking to invest you should be doing so with a long term time horizon in mind (we say at least 5 years) because you will see periods where your investments go up and down. However, as a long term investor you can afford to take some risk, particularly if this is part of a wider financial plan. I would also point out the pitfalls of not investing and the problem of decision fatigue when it comes to looking at your money. Having been through a divorce you no doubt have made lots of difficult decisions and it is easy to leave your money in cash and not make that investment. Cash is not a risk free asset and the real purchasing power of your money will be eroded in real terms over time, particularly in times of high inflation.   

Frankie: Yes, this is where ensuring that you have enough liquidity around you (i.e. cash) is really important. In these more volatile markets I am encouraging clients to hold back around 12 months of income in cash to ensure that they have what they require from an income perspective. This means that it doesn’t really matter where markets are moving up or down, as you know the income is secured and this often gives peace of mind to clients, particularly if they haven’t invested in this way before. With any money that you’re investing it is important to take that rolling 3-5 year view and ensure that you have clear objectives set out for the capital that are aligned to your needs and risk profile.

Do I need professional advice – I have heard of friends self-investing? 

Poppy: There is no right or wrong answer to this and it is totally up to you. Some people are happy to plan and invest themselves and have an interest in markets and stocks, whilst other people think it is highly dull and would rather outsource this! However, if you are new to this, and/or are at a stage of your life where you have lots of other things going on, it might be worth considering outsourcing this to a professional to give you peace of mind, as well as the time to focus on other areas of your life. 

Frankie: I would echo Poppy’s comments that there is no right or wrong answer, but I think that time is a really important factor to consider. I always ask my clients how much time they have got to dedicate to self-management, particularly in a world that is moving so quickly, as it can be challenging to navigate and there is also so much information out there – you can easily become paralysed by information leading many into taking no action. With this in mind, I have found that a hybrid approach between professional assistance and self-management can be a good way to build in the freedom and ability to be actively involved, alongside the peace of mind of knowing you have a team or individual monitoring your money.

How do I start investing and how often should I review my investments?

Poppy: The best thing to do is just get started – there are so many options out there nowadays from internet platforms, to full gold service discretionary fund managers and financial planners. In some ways, however, too much choice can make things more complicated, so, again, it may be worth having an initial chat with a professional to help you get started on the right track. In terms of a review, I would say at least annually for a full review where you look at all your investments and reconfirm your wider financial plan. Other than that it is up to you and what makes you feel comfortable. We often find that in the early days clients want to be in regular contact, but as they get more relaxed with the plan and investments they are happy to have less regular reviews. You will usually receive a quarterly valuation, but, generally, I wouldn’t advise reviewing investments more than that unless you have a particular interest. Investments are for the long term and do go up and down and sometimes it causes unnecessary worry and stress if you are monitoring things too closely. 

Frankie: I completely agree, just get started. It is important to know how much money you need and ensure that you have that cash buffer around you. Once you have ascertained this you can start looking at ways to ensure your money is working as hard as you have to earn it! We always advise not to check too often as things are moving up and down, but having a quarterly review of where everything is and allowing you to take stock can be really helpful (particularly in the early days as you get used to the strategy and the investing process).

Most of my money is tied up in my property but I am nervous about my financial future – what could I do to supplement my income upon retirement?

Poppy: It could be worth speaking to a financial planner to consider what your different options are and how to make the assets you have work as hard as they can. For example, could it be worth considering downsizing on retirement to release some capital, which could be invested to provide an income in retirement? Or, do you have other non-property assets that could be invested wisely over the longer term and grow into a retirement fund? Or, do you have spare income that you could use to make regular pension contributions and potentially benefit from tax breaks around this? You may actually have more options than you think when we take a more thorough look at your circumstances. Planners are able to utilise cash flow modelling to help you consider different scenarios and visualise how things might look in the future. This is a hugely valuable resource and the visual nature of it can really help people understand their options and feel more comfortable about their financial future. 

Frankie: Albeit, interest rates have changed the landscape for this at present, over the past few years we have had a number of clients utilising lifetime mortgage structures to allow them to release equity from their homes. This usually makes individuals toes curl at the word ‘equity release’, but the products have vastly developed, and in some cases have given individuals the flexibility to release capital from their property assets to enable them to create an income from the extracted capital. Not only does this give a potential alternative to getting your money working for you, but in later life having debt in your estate can be an advantage when considering inheritance tax. We have to be mindful though that the landscape is different currently due to interest rates rising, but, in time, the cycle may change and these offerings may become attractive. The important element of all of this is to consider all of your options, and a financial planner can assist you in identifying them. Once you are aware of all of your options, it enables you to make informed decisions with regards to your finances.