Fix Up, Save Sharp

There’s no denying that the current economic climate is tough, with everyone feeling the increased cost-of-living-pinch. Between sky-rocketing interest rates, fuel prices and inflation, it’s easy to feel financially overwhelmed, but with an in-depth budget analysis, our advisers can help bring clarity, support and even some savings.

The objective is to go through your finances with a fine-tooth comb, identifying spending that could be reduced or stopped for a period to boost your monthly disposable income. It might not be sophisticated planning, but uncovering a few of hundred pounds a month of overspending is not unusual.

Suggestions that can arise through a financial review include debt consolidation solutions to try and reduce the monthly cost of outstanding loans and credit cards. We can also revisit mortgages to see if there’s a way to lower your monthly payments and check any insurance policies to see if these can be arranged more cost-effectively.

For people over 55, there’s the potential to look at equity release. However, unless necessary, this route is usually only suited to people over state pension age and confident that the home they’re in now will be their ‘forever home’.

Above all else, there’s no need for embarrassment. We know day-to-day life gets in the way, and finances can quickly become muddled. Our role is to un-muddle them before they become irreparable, giving you reassurance and hopefully some extra funds in your account during these challenging times.

QUICK-WIN SAVING TIPS

  • If you commute on trains, ‘split ticketing’ websites can reduce the costs of some journeys.
  • Skip the posh coffee on your commute and invest in a reusable coffee mug you can refill at home. Good for your pocket, even better for the environment.
  • Turn down the heating by one degree or reduce the time the heating is on during the day.
  • Let the latest mobile phone release pass you by, keep the handset you’ve got and switch to the cheapest tariff available.
  • Search for online discount codes, and cashback offers.
  • Cancel unnecessary streaming and TV subscriptions.
  • Plan supermarket shopping to avoid pricey impulse buys.
  • Try batch-cooking your meals; not only does it mean less time in the kitchen, but it will help to reduce money lost through food waste.
  • Review your debts and insurance with one of our advisers by contacting the office at admin@lakesidefs.co.uk

LAKESIDE’S ASSET ALLOCATION UPDATE

Our most recent quarterly rebalance took place against a backdrop of uncertainty and, in some parts of the financial markets, panic. However, looking beyond the immediate volatility, we see a more fundamental structural change in the economy.

Between 1980 and 1995, the Bank of England's base rate fluctuated wildly between 5% and 15%. Then, between 1995 and 2008, the base rate was more stable, ranging between 5% and 7% throughout that period. However, when the credit crunch struck, the base rate fell to almost 0%. These low rates seemed almost unfathomable then, but gradually, they became normal and stayed at record lows until this year.

Now, we are beginning to feel the pain of things going back to the old, long-term normal as interest rates have started to rise and are likely to continue to do so.
As we move towards higher interest rates, there are likely to be two asset classes which struggle through the transition.

1. Property

As rates rise, borrowing becomes less affordable, so the amount available for property purchases is likely to reduce. The extent to which this affects property prices is uncertain at this stage and will depend on many other factors. However, it seems unlikely that property prices will catalyse significant gains within the portfolio in the short to medium term.

Having established that there is limited prospect for growth, we then turn to the risks associated with holding bricks and mortar. The critical risk we see (beyond falling values) is liquidity. In periods of stagnation within the property market, selling a property quickly to meet demands associated with investors' withdrawal requests can be difficult. This often leads to a fund being "gated", which means it is temporarily impossible to withdraw your money or make changes to the investment.

Because of the reduced prospects for growth, and the risk of gating, we have decided to remove funds which invest directly in property. Instead, we will invest a smaller percentage of the portfolio in property funds which invest in stocks and shares of companies in the property sector (such as building companies).

Whilst in the short term, these companies face the same risks as the wider property market, we have already seen very significant falls in these fund values, meaning that whilst we will accept higher levels of volatility, we are also investing after the value has fallen. This allows us to benefit from the eventual recovery without exposing our portfolios to the liquidity risk associated with direct property funds.

2. Government Bonds (Fixed Interest Funds)

When interest rates rise, investments in these types of funds typically suffer (Investments in UK index-linked gilts have fallen 40% this year despite traditionally being considered "low risk"). So in January this year, we dramatically reduced our holdings in these assets, which has significantly benefited clients' funds. Where we retained exposure for diversification purposes, we chose funds that hold what are known as "short-dated" investments. These short-dated funds are much less susceptible to interest rate changes than traditional fixed-interest funds.

In this quarter's rebalance, we have continued with this strategy, with just one very targeted increase in exposure to a government bond fund. This fund remains short-dated but yields some income into the portfolio, while the asset value is likely to remain relatively stable.

Summary

What we see in markets is a return to the long-term norm. However, we felt it necessary to make some quite substantial changes to the asset allocation this quarter to help navigate the transition as smoothly as possible.

"What we see in the markets is a return to the long-term norm."

Over the coming quarters, we anticipate some significant growth opportunities and will seek to capitalise on them as and when they arise. However, in the short term, we believe the portfolio is now well-positioned to protect against key apparent risks whilst remaining invested to benefit from increases when they come.

FINANCE QUESTION & ANSWERS INCOME PROTECTION FOR THE SELF-EMPLOYED

Without the safety net of traditional employment benefits, income protection is all the more important for the self-employed, as Lakeside Financial Consultant Sara-Jane Kerr explains…

What is income protection?

SJ: If you’re unable to work due to sickness or an injury, income protection will provide a replacement income which is paid monthly to financially support you during that time.

Why is it particularly important if you are self-employed, and what are the main risks of not having this type of insurance?

SJ: Self-employed people don’t get the traditional work benefits that an employed person gets, such as sick pay. As such, it’s important to have cover in place to help them if they have to take a prolonged period off work due to sickness or injury.

Without such insurance in place, they might find that sickness or an injury causes an immediate and long-lasting negative impact on themselves and their family. If they’re unable to work, it might be that they can’t afford essentials such as monthly living costs and mortgage repayments.

When would the income protection insurance be activated, how much will it pay out and over how long?

SJ: The protection would generally kick in when a doctor has signed the person off work and in line with the agreed deferred period. This is the time at which you would like the insurance policy to start paying out. So, if an individual has savings or another income source they can rely on, they might set the deferred period to six months. If not, it could be more like six weeks. The longer the deferred period, the lower the insurance premium.

Income protection policies will pay out up to 60% of a person’s gross earnings either until they are well enough to return to work or for the duration of the policy term. This can be anything from 12 months to five years to retirement - the longer the payout period, the higher the premium.

Are there any other key considerations clients should keep in mind when looking at income protection?

SJ: Any pre-existing medical conditions will need to be declared to the provider, which they will either choose to exclude from the cover or will charge a higher premium to include.

What factors affect the cost of income protection?

SJ: A person’s age, lifestyle (e.g. smoking or excessive drinking) and any pre-existing medical conditions will impact the premium along with the length of the policy and the job they do. For example, someone who works at extreme heights or in construction will generally pay a higher premium than an office worker who is deemed less likely to have an accident or suffer an injury.

How can Lakeside assist self-employed clients in finding the right provider or product for their circumstances?

SJ: We take the time to understand a client’s current financial situation, including looking at their savings/income streams. From there, we can put together a policy recommendation, including a suggested deferred period and level of cover.

For further information on income protection, please contact: admin@lakesidefs.co.uk


LAKESIDE TEAM Q&A - Sara-Jane Kerr

Delivering a personal service and helping clients plan for the future is what Lakeside Financial Consultant Sara-Jane Kerr finds most rewarding about her role. Here she explains the areas she specialises in and shares her goals for 2023.

Tell us about your background and how you came to join Lakeside?
I joined Lakeside over 18 months ago following a 20-year-career in banking. I’d risen to management level, but I really missed the customer interaction side of things. And so, when a financial consultant opportunity came up at Lakeside, I jumped at the position.

Can you tell us about your role?
My day usually consists of client meetings, updating information to prepare financial reports, and sharing my findings and recommendations with clients.
I take time to understand a client's current financial situation and, from that, prepare a report to help them understand what is going well and if any areas require attention so that we can underpin any shortfalls.

Are there any areas in particular that you specialise in?
I can help clients directly with insurance, wills and estate planning. Meanwhile, I have a mortgage team that supports me, and I can pass clients onto advisers specialising in pensions and investments if they require specific advice in those areas. This means I can understand and deal with all areas of a client’s financial planning while keeping it all in one place.

And what do you enjoy most about your role?
The personal aspect. I do most meetings face-to-face though some are done over Zoom if the distance is a problem. As a naturally chatty person, I love meeting new clients and keeping up to date with existing ones. I also find it really rewarding to be able to help people plan financially for the long term.

What would you say sets Lakeside apart from other financial companies?
We can support clients with a comprehensive financial plan, which includes will and estate planning. This helps them to understand the bigger picture and how each area of their planning fits into another, a bit like a jigsaw. So, for example, retirement planning and protecting their income now to ensure they can still meet their retirement goals if the worst happens.

Tell us about your main interests away from work…
I love to travel, and my top holiday destination is the Maldives. I’ve been twice this year and have already booked to return next year. It’s just such a beautiful place where you can totally switch off. I also really enjoy swimming, which I do most mornings.

What are your top personality traits?
I talk…a lot, and I’m always happy - your glass-half-full type of person who likes to cheer everyone up. I genuinely believe what you put out into the world is what you attract back. I’m also incredibly tenacious - at work and home - I have to find a solution to any problem and will keep going until I do!

Can you share a personal and work goal for 2023?
My 2023 work goal is to grow my client base through recommendations from those who I’ve done a good job for. I’d also like to build more clients around the North Lincolnshire area where I live to cut down on travel.

My personal goal is to lose the one-and-a-half-stone I’ve put on in weight from holidays this year, so I can put it back on when I go away next year!

If you would like to discuss Lakeside’s investment and estate planning services, contact the office at admin@lakesidefs.co.uk

SERVICES

Just some services we offer at Lakeside

At Lakeside our clients benefit from bespoke financial solutions and pro-active, ongoing advice as well as access to exclusive products and services with extremely competitive pricing and charge caps. We offer the following services to all our customers:

  • Investments
  • Pensions
  • Insurance
  • Mortgages and Lending Options
  • Wills
  • Lasting Powers of Attorney

Visit the ‘News’ section of our website for further articles and updates on the portfolio of services that we offer.

 

First published on December 5th, 2022

The information provided above is believed to be correct at the time of publication and is provided for information purposes only, it does not constitute advice. Any reference to interest rates or growth rates are examples only and are for illustrative purposes only. You should seek independent financial advice before making any decisions about your finances and financial products. We accept no liability for loss as a result of any action taken based on the information on this page where appropriate independent financial advice is not taken from Lakeside FS Ltd.