Tips for financial planning through challenging markets

In this blog, James McIntyre (director in our wealth management team) highlights his key tips for effective financial planning through difficult times and uncertain markets (such as the current climate whereby COVID-19 continues to impact the globe).

The last 12 months, although very unusual, have been a time for reflection for us all, allowing us to contemplate how we work, spend our downtime and look after our families and own wellbeing. For many, financial planning has come into focus and I’m pleased to have been able to support clients throughout this time with beginning or continuing preparations to achieving their personal financial goals.

Like many walks of live however, the COVID-19 pandemic certainly impacted the investment landscape – global markets reacted in their typical way, creating uncertainty for individuals with money invested.

Despite this, there are some great ways in which you can manage your financial planning through challenging times to keep you on track to achieving your end goals. I have outlined my advice on some key things to think about below.

Have a proactive investment strategy

Investment markets are constantly changing, so having the ability to manoeuvre is critical to helping your portfolio stay on track – now more than ever.

Working with PM+M gives you the opportunity to opt for an investment team who can make ongoing changes to our model portfolios, as and when required. This means that the investment team will act and make decisions on your behalf based on market fluctuations, giving you the reassurance that your investments will always be directed towards achieving your objectives.

I sense that moving forward, this type of investment management service will become a crucial planning tool. It offers a really flexible approach and allows you to rely on a trusted adviser with the reassurance that your portfolio is in good hands,

Consider income planning

As financial advisers, we are unable to control investment markets. However, we do have a powerful tool at our disposal, which I term ‘retained income planning’. This can mitigate the effects of volatile markets and help you thrive during uncertain market conditions by holding cash, either personally or within a pension, to fuel ongoing income requirements.

If clients rely on selling investments to facilitate ongoing income requirements, I often favour this ‘retained income’ approach to cash flow planning.

This cash is used to support ongoing income for a defined period, maybe two or three years, to help us control ‘when’ and ‘how much’ we sell from investments on a rolling basis. This gives us more control, as we do not need to sell assets during a negative market cycle and can wait for values to recover.

Invest for the long term

For those looking to enter the market, there is no need to panic or rush; this is not the moment to time the markets. As long as you are prepared to invest over the longer term (5 to 10 years plus), there is time to target growth in excess of inflation.

When someone is ready to invest, there could be mathematical logic in ‘drip feeding’ into the markets. If more volatility is seen over the next 12 months, those who do this may benefit if markets fall, as potential new investors can distribute risk across a time period by accessing markets through regular investment or by investing capital across several tranches.

The investment journey is designed to maximise the efficiency of investable assets over the longer term. This relates both to new investors and those who have placed investments during the last one to three years. Cash investors will not see volatility, but they may well see capital depreciation in real terms due to the prolonged affects associated with inflation. Holding cash (retained income) remains a crucial planning tool, as when we get the planning right and hold sensible cash levels, this allows us time to invest with the long term in mind.

The only thing that matters is the price that you sell the asset for, compared to the price that you bought it for. If investors remain mindful of the long term, this can result in success.

Build your risk profile

An investor’s true attitude to risk is tested in difficult times. A robust conversation drives a risk profile, which determines the appropriate asset allocation (i.e. the portfolio make-up), and ultimately leads to the resulting performance and volatility of a portfolio. A higher risk profile is associated with a portfolio that contains more equities, which by their very nature tend to be more volatile but tend to provide the best results over the long-term.

Our PM+M financial advisers work with you to identify your ‘risk to reward’ balance, set your retained income at an appropriate level and together, devise a plan to achieve your long-term goals.

Markets are showing an uplift since the initial COVID-19 shock, therefore there is no time like the present to revisit a conversation about your appropriate risk profile; this should, in fact, be an ongoing and evolving process.

Think about protection, wills and Lasting Power of Attorney

Life cover, critical illness cover, income protection, wills and Lasting Power of Attorney are powerful planning tools. No one wants or expects to make a claim on a protection policy in their lifetime, however, the reassurance that these planning tools offer (i.e. knowing that loved ones would be protected if something went wrong), is priceless. Sadly, hindsight is a wonderful thing, so our aim is to advise you and ensure you have no regrets and have the right insurance in place to protect you and your family.

Note that many providers are putting a COVID-19 clause into some of their income protection policies, meaning that they will not ‘pay out’ for COVID-19 related claims. Those with pre-existing policies will not have this problem. We cannot predict the future, and therefore it is essential to re-visit protection planning, to understand how much you / your family would need in the event of the unexpected.

Get in touch

Times are new, different and ever changing, so thinking about ways in which you can adapt your investments to work collaboratively with the uncertain climate we find ourselves in should definitely be considered.

For those individuals who do not have a financial adviser acting on their behalf, I hope this article has highlighted the need and importance of having one, and how together we can work towards your goals even in these unknown times. Every client strategy is bespoke at PM+M and we are confident that we can advise and guide you on your journey, in a way that works for you.

For a free, confidential discussion about how we would support you, please get in touch via the button below.

For more information about anything in the above article, please get in touch using the button below.
James McIntyre
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