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Category : News

Is Income Protection really necessary?

Income Protection is sometimes described as the glue in a financial portfolio. The most devastating impact on your financial situation is likely to be caused by a loss of your income, and the inability to replace it.

Unfortunately, people lose their jobs from time to time. However inevitably what tends to happen is that these people pick up new roles elsewhere or take a new path in their careers. As a result, their income may drop for a period of time, but will usually pick up again before too long. These people are in the fortunate position of being able to work.

Being unable to work because of illness or injury is a whole other matter. Little or no costs are moved from your life, in fact new costs may emerge such as medical expenses, care fees etc. On the income side, there are social protection benefits available, but in reality these deliver no more than basic subsistence payments. So there is often a lot less money coming in, with sometimes more going out…

Income protection protects your most important asset in the event of illness or injury – your income. And yet at the same time, it still doesn’t find its way into everybody’s financial portfolio.


Your most important asset?

We have just reviewed some very insightful research carried out by Friends First among Irish consumers that shines a light on this issue, with some very interesting findings. First of all, when asked to rank their financial assets in order of importance, the findings were,

  1. Our home (67%)
  2. Our savings (57%)
  3. Our pensions (48%)
  4. Our income (43%)

While the findings might not be surprising in that we all have an emotional attachment to our homes, without their income, these people will lose all of the other assets (maybe bar their pension). Your income is the enabler of all of the other assets, and therefore is the most critical one to maintain.


How long could you cope?

The research then went on to ask how long employees could cope without their income where they are reliant on social protection, using their savings and maybe selling some assets. The findings here were startling when compared to the reality of income protection claimants.

  • 44% of people said they could cope for 3-6 months only.
  • 30% said they could cope for between 6 months and a year
  • Less than 8% said they could sustain themselves financially for 2 years or more.

However the average duration of an income protection claim is 6.5 years! And that’s an average, many last longer than that. So while having the foresight to maintain a nest egg to see you through a year or two of income loss is extremely laudable and wise, on its own it just might not be enough.


How much of your income do you need to protect?

This is a really important question. While income protection still enjoys the benefit of tax relief at your marginal (highest) rate, it’s another household expense that none of us enjoy. After all, you’re paying for a benefit that you hope you never collect! It is really important that we spend time together looking at your specific situation, your expenses and how they might be impacted by a loss of income. You want to have enough cover to meet your needs in the event of a loss of income, without paying too much along the way. You need to consider any sick pay schemes that you might have access to through your employer, as these might impact the cover levels and cost of a policy to meet your needs.

When asked by the researchers, two thirds of respondents felt that they would require a replacement income of between 50% and 75% of their current income levels. Just over a quarter felt that they would need to protect between 25% and 50% of their income, while 7% felt they would need a replacement income of less than a quarter of their current income. It may be that this last group are approaching retirement and/or possibly their incomes are significantly in excess of their expenditure. Otherwise they may be a little unrealistic about the level of income they would need to replace!

How much replacement income would you need?


We all have a range of financial challenges; making our money go further today, investing wisely, saving for retirement and protecting our main assets. In addressing this final one, never underestimate the value of your income – it is the one single asset that you really can’t live without.

Your 70’s onwards – looking after yourself & others

In this final instalment of our age-related articles, it is now the turn of the more senior members of our communities – all of you in your 70’s and older. This group have some very specific financial challenges, so here are some thoughts on wisely managing your financial affairs.


Stay healthy

A decline in health costs money, no matter what support you get from insurance policies and the state. Your house may need to be modified, you may need to pay carers, you may need to install expensive equipment etc. There are a whole range of areas in which ill health costs money.

While of course this is not fully under your control, do everything you can to stay healthy. Eat well and continue to exercise as much as you can, even a short walk every day makes a difference. Look after your mental health too – maintain social contact with family and friends and keep your hobbies and interests going as much as you can. Staying healthy will be a boon for your finances.


Stay aware

Help yourself make sound financial decisions. When you are making decisions where there are sizeable sums of money involved, do your research. This might be a significant purchase or getting some work done around the house. If you’re not comfortable doing this research yourself, ask a trusted family member or friends to help you. There are loads of great resources available on the internet to help you make better decisions. If you don’t know where to find them, ask someone who does.

Unfortunately there are always less savoury characters in our society. There are countless stories of people targeting elderly people in their homes with a range of scams, usually under the pretence of doing some “much needed” work. However this usually results in shoddy work that is hugely over-priced and sometimes results in these conmen stealing from you when given access into your home. Never buy from someone at your door. If you want to, take their number with a view to carrying out your research first. And run this by your family or trusted friends before you actually do anything. If the person at your door is genuine, they will completely understand you taking your time in deciding to buy whatever they are offering.


Claim everything due to you

You probably spent around 40 years working and paying tax, now it’s your turn to receive. Know all of your entitlements and claim them, whether it’s in relation to social welfare rights, free schemes for the elderly or other such supports. You’ve earned the right to these supports!


Continue to invest wisely

This is one area where it’s really important to work with a financial planner. They will help you identify what your life goals are and to develop a financial plan and investment strategy to ensure your goals are achieved. Your goals might be around living life to the full for the next 10 years, maybe building a war chest for long-term care later in life or indeed your goals might relate to transferring money in a tax efficient way to your loved ones. In fact you will probably want to consider a whole host of different scenarios and potential outcomes. Your planner will help you look at all of these.

These goals need careful planning and a wise investment approach. Simply locking all of your money up in a deposit account is often the wrong strategy. Get help to identify your goals and to invest wisely.


Begin wealth transfer now

Wealth transfer is often a tricky area. Apart from the odd gift, people often don’t want to face it “until they are gone”. However on the other hand most people hate the idea that after their death, they may leave their loved ones with a significant tax bill. This may for example force the sale of the family home.

Now is the time to ensure that you leave a lasting legacy and not a tax bill. Planning your wealth transfer should be in train now. There are tax exemptions that allow you to transfer wealth to others while you are alive without incurring a tax bill. Know what is available to you and how you and your loved ones may benefit from a structured estate planning approach. Your financial planner is the person in your corner on this one.


Make sure your wishes are clear

It is your money and for you to do with it as you see fit. Make sure your wishes are crystal clear, irrespective of what the future holds for you. Should the day come where you lose your mental capacity, it is very important that you will have an Enduring Power of Attorney in place that will ensure your affairs can continue to be managed as you would wish. Of course, ensure whoever will carry out this role is very clear about what you would want.

Likewise your Will should reflect how you wish your assets to be distributed upon your death. As part of this, don’t be afraid to talk to us about death. Trust me, it’ll happen to every one of us! A recent survey in the UK of more than 2,000 people found that 30 per cent of people are uncomfortable seeking financial advice to talk about death. This undermines their financial outcomes as beneficial plans are not implemented.

Also more than half of people aged over 55 haven’t discussed bank accounts, insurance, investments and personal possessions with their family. This reticence to discuss these issues unfortunately stores up challenges for bereaved family members down the road.


At this stage in life, make sure all your financial decisions reflect what you want. A family member or trusted friends can help you with those everyday decisions. As your financial planner, we want to help you to make wise financial decisions to ensure that all of your life goals are achieved and enjoyed.

Are we all saving enough for retirement?

There finally seems to be some level of commitment at a government level to dealing with Ireland’s looming pension crisis. This is as a result of an ever-widening gap between what people are saving for retirement, and how much they will actually need to enjoy a comfortable retirement.

The OECD suggests that people on average should target a replacement income in retirement of 70% of their pre-retirement earnings. Higher earners probably don’t need such a high replacement level, as they often have other assets to call on, and enjoy reduced expenditure as mortgages and other debt tends to have been paid off. However for low earners, they require a replacement income of up to 90% of their pre-retirement earnings to survive, as they tend to need every penny that they earn just to get by. Currently the maximum state old age pension for a single person is €12,652 – this represents just 33% of the average annual earnings in 2017. And with less than half of the population (and only about a third of private sector workers) having any pensions savings at all, many people face survival at best, penury at worst in retirement.


Will the policy makers save the day?

The pensions crisis is one of the biggest challenges facing policymakers today. Think of the National Debt or Brexit on steroids! It just doesn’t get the coverage as it is such an enormous challenge and it is a problem that can be (and usually ends up being) kicked down the road for the next government.

The problem is that state old age pensions and also the pensions of public sector workers are paid for from current tax revenues. There is no pot of money set aside to cover these promises. Currently we have 5 workers paying tax for every pensioner who receives a pension. Over the coming decades, this ratio will drop to 2 workers for every pensioner. The problem is getting worse, so the options of policymakers are limited.


How are you fixed yourself?

Because the state is not going to rescue us, each of us needs to fund our own retirement to a large degree. Your own state of readiness depends on many factors, including

  • Your desired lifestyle in retirement
  • How much you will save between now and retirement
  • How much your employer will pay into your pension fund
  • How much you have already saved
  • What assets you may have to sell to fund your retirement lifestyle
  • What windfalls are likely to come your way – e.g. an inheritance.

Aviva carried out some great research in both 2010 and 2016, called “Mind the Gap” in which they examined the gap between what people are saving and how much they need. Their key finding is that Ireland has the third largest pension gap in Europe, with an average pension gap of €12,200 per person, per annum.  51% of people said that they are not prepared for retirement.

In order to achieve the OECD replacement figure of 70% of pre-retirement earnings, Aviva calculated the following average additional pension savings (not total savings) that people need to make,

  • For a 30 year old – €5,100 per annum.
  • For a 40 year old – €6,700 per annum.
  • For a 50 year old – €9,700 per annum.
  • For a 60 year old – €28,000 per annum.

(Source: Aviva’s Mind the Gap, 2016)


What needs to be done?

The state has a critical role through pension policy. Within the next few years we are certainly going to see auto-enrolment of all workers in pension schemes. This means that your employer will be obliged to automatically include you in a pension scheme, where a fund will be built up for you based on contributions from yourself, your employer and the state itself (through tax relief or some other credit system). Of course you will be allowed to opt out, but the default position is that you must be included in a scheme. This will be a major change in Irish pension policy and hopefully will have the desired effect of improving retirement outcomes for people. This approach has certainly been successful in other countries. We now need to see how auto-enrolment will be rolled out, as the devil is always in the detail!

However, as identified in the Aviva research, we all need to take personal responsibility too and save more. A very rough rule of thumb is that you should save half your age as a percentage of your earnings – a 30 year old needs to save 15%, a 50 year old should be saving 25% of earnings etc. This is a very rough calculation though, nothing beats your financial adviser examining fully your specific circumstances and advising the right contribution level for you. However it’s pretty simple – the quality of your retirement lifestyle will be a direct result of the assets you build up yourself.

We also need to educate ourselves better on where we actually stand in our own retirement journey. How much are you likely to have in retirement? Is that enough to meet your needs? What are your options to improve your situation? Are you missing tax saving opportunities?

At the end of the day, spending money today on retirement saving is hard, as there is no immediate reward. However hopefully you will live a long and happy retirement – this will certainly be hugely enhanced by the retirement planning you do today.

5 ways we help you stay on track that might leave you wondering!

We are in the business of helping you to achieve the life that you want to lead, through wise management of your money and by helping you to establish sound financial behaviours. We know from experience that developing a financial plan for you is the first step to enabling you to achieve your desired lifestyle, followed by years and years of relentless and rigorous focus on this plan. It will never be achieved by short term tactical genius and taking bets.

In relation to your financial behaviours, our role is akin to being your (financial) guardian angel! The biggest factor in wealth destruction is very often the investor’s own misguided behaviours and actions. As a result the most important role that we can play is to stop you making mistakes that will impact your wealth. This is sometimes the unseen work that we do, so we thought it would be useful to give you a sense of a few ways in which we add value, without you probably even realising it!


1. Keeping a long-term perspective

This is probably the biggest challenge for investors. You are bombarded every day by news of markets falling (this is followed at some stage by a rise again – every time), economic warnings, news of financial meltdown – all potential threats to your financial wellbeing. As a result you could be tempted to constantly make “tactical” changes. The problem is that more often than not, you’ll make the wrong changes and most of these doomsday scenarios never come to pass. Even when they do, they correct themselves given time.

So we avoid this short-term news and focus on your plan, which is all about your long-term financial health. We are confident that we have put the right strategies in place to help you achieve your goals over the long-term and we don’t get distracted by short-term noise. It might appear like we’re doing very little. In fact we’re usually doing you a huge favour by avoiding any unwanted activity!


2. Seeing volatility as your friend

Volatile markets are very good for your wealth! While they might (temporarily) be very bad for your nerves, there is a real upside to volatile markets. We are real believers that saving regularly is a core principle of long term wealth. When markets drop, your savings buy more assets – think of these opportunities as an asset sale! Market falls offer a great opportunity for buyers (savers). Unfortunately for many people, market falls result in the panic button being pressed and people getting out of markets – selling when prices are low. This is bad for your financial health… so we will help calm your nerves when markets are volatile.


3. We’ll encourage you to do very little

Constantly tweaking your portfolio makes an adviser look very busy, possibly even appear as an expert who is making highly brilliant changes for your benefit. Unfortunately in most situations, the opposite is actually the case. Developing a plan, developing the right investment strategy to achieve that plan and then sticking with the strategy (and right behaviours) over many years is the road to success.


4. We’ll follow the plan and not the markets

Following the markets means you’re driving while looking through the rear view mirror. You’re basing your future decisions on what is gone and behind you, rather than the road in front of you. We want to keep you looking forwards, as this is all you can influence. If we can help you do the right things that will have a huge impact on your future financial wealth, then we’ll have done a good job. So we’ll spend much more time talking about how much you are saving (and spending!) rather than investment performance, as these are the factors that will make the most difference to the achievement of your financial plan, and ultimately your desired lifestyle.

Yes investment performance is important. But it’s gone, it’s over. And it doesn’t tell us anything about the future. We can’t time markets any better than you can. Nor can fund managers. So very often those little tweaks will simply be the wrong action to take. Review the plan, change the plan as needed and adjust the investment strategy in line with the plan is the road to success. Not “brilliant” short-term bets.


5. Not getting bogged down in products

Similar to the last point, we can make the biggest difference to your financial health by helping you to avoid making mistakes, and by guiding you to do the right things to improve your future. This usually has very little to do with products. Of course, we will make sure that you have the right life cover, income protection and investment products in place, that goes without saying. But while keeping them under review, we let them do what they are meant to do.

Instead we focus on the more important items. Have you got your wills completed and up to date? Should you have Enduring Power of Attorney in place? Are your bank accounts optimally set up to enable you always to be able to access your money? Are you controlling your spending, in line with your financial plan? And are you saving enough for your desired future life? All nothing really to do with products, but these are the things that will make the big difference to you in the future.


In summary, it all comes back to developing your financial plan, and the strategy to achieve that plan. And then by all of us staying out of the way (while keeping everything under constant review) and letting products and markets do what they are supposed to do over many years.

Your 60’s – cruising to the end of your working life

This month it’s time for the latest in our series of age related articles – welcome to the world of the sixty-somethings! As you (potentially) approach the end of your working life, you are at a really important stage in your financial life. We hope to give you some food for thought to ensure you make the wisest financial decisions to see you through the next phase of your life.


Plan carefully for the end of your working life

It is really important that you are getting the best financial advice at this stage – there are so many significant decisions that need to be taken. You want to work with somebody who can confidently confirm to you the lifestyle that you can afford into the future, who can help you plan your financial life for the rest of your life.

Your adviser needs to have their finger on the pulse too in relation to all of the pension related opportunities that are available for you – maximising tax-free cash opportunities, carefully planning your post-retirement strategy and deeply understanding the various tax reliefs that are available to you. The days of saving until you’re 65 and then buying a fixed income for the rest of your life are long gone. Now is the time to start thinking about managing your pot of money wisely until the day that you die.

Of course if you are a business owner, you need to have clear line of sight of your exit strategy and how you will generate the maximum personal value from your exit from the business.


Keep saving while you’re earning

Now is not the time to ease off on your savings, instead you need to put your foot to the floor! Your expenses have probably reduced – your mortgage hopefully is in the past, the kids are educated and have moved out and you have more spare cash.

Remember your time horizon for saving is no longer age 65, it’s until you die. So the more you save now, the better your lifestyle will be later in life.


Review your investment strategy carefully

In the past when your time horizon was age 65, it used to be all about having everything in cash or other low risk assets at this stage. Now that people are financially planning into their 80’s and 90’s (and beyond), your time horizon is longer and your investment strategy needs to reflect that. We will always carefully consider your total investment timeframe before carefully constructing your investment portfolio for you.

An example of such a strategy that some people consider is an investment “glide path”. Instead of putting all of your money into low risk assets as before, some use a rule of thumb of keeping “age 100 minus your current age” in equities. So, a 65 year old would have 35% of their investments in equities. While such rules of thumb are useful, we will always look at your individual circumstances, your own specific attitude to risk and all of your available assets in deciding what’s right for you.


Know your current (& likely future) expenses

As the days of earning income draws towards a close, a significant factor that will impact your future wealth is your expenditure. Now is the time to get crystal clear on what you spend. So actively track your spending, know how much you’re going to need in the future to live the life that you want. Then we can demonstrate to you everything that is financially achievable for you for the rest of your life.


Keep your emergency fund full and protection in place

There can sometimes be a temptation to think that you’ve cleared all the hurdles and can now just start spending your hard-won savings. Unfortunately things can go wrong at any stage in life. That emergency fund that you had built up is still really important to see you through any significant bumps in the road.

Your life cover and specified illness cover are also still very important. You may not need as much cover as before, but you still need to protect your loved ones and yourself against future disasters. And it’s a fact of life that you’re also more likely to claim at this stage in your life too…


Think about future work (seriously!)

We suggest that you look at future work opportunities too. However you will be doing this as much for the mental wellbeing benefits as for the actual financial benefits. And you will only look at work on terms that suit you – doing work that you like, in a location that is easy for you and where the work hours really fit around the rest of your life. Work at this stage should be a source of enjoyment, not a chore!


As the world of work draws towards an end, you still hopefully have a very long life in front of you. So it is really important that you retain a long-term view of your finances and get really good advice in doing so. And that’s why we’re here. We want to guide you to allow you live the very best life that you can lead, for the rest of your days.

Your 50’s – time to build and retain your wealth

This is the latest in our series of articles that consider the financial challenges for clients at a specific stage in life. This time we’re looking at people who are in their 50’s. This is a really important stage in your financial life as it is often the time in life of maximum income and the greatest opportunity to really build your wealth.


Here are some thoughts on how you might approach your finances differently in the second half-century of your life.


Accept advice and help

We very definitely put this one at the top of the list, as there are some crucial strategies to implement correctly at this stage in your life. If you should make major mistakes in relation to your retirement finding during your 50’s, you probably won’t have enough time on your side to fully recover from them. There are also significant tax saving opportunities available to you in retirement funding, investment schemes and exiting your business. Each of these needs to be considered carefully. This is also a critical time to plan how to transfer your wealth to the next generation in a tax efficient way.

Each of these (and more) are important strategies to get right and each of them require careful advanced planning. We modestly suggest that you accept our help in helping you to maximise the financial opportunities open to you. At the end of the day, research has shown us time and time again that clients who accept advice and help from experts achieve better outcomes.


Have crystal clear goals

Now is not the time to muddle along and hope for the best. We encourage you to take a step back from your bank and investment statements and really look into the future. What does your desired life look like for the next 20/30/40 years? When you have this picture clear in your head, then it’s our job to show you what you need to do to achieve it. We’ll create the plan and then work with you every year to ensure you achieve your dreams. Without the clarity of your dreams and objectives, are you just drifting along to see where life takes you?


Don’t touch bonuses

Now we start getting very practical! Hopefully at this stage of life your monthly income exceeds your expenditure. You probably have the back broken of your mortgage or even your mortgage may be behind you. Bonuses that you get in work or from inheritances etc. are very welcome, but in truth probably not necessary to fund your life today. So don’t use them for today, give yourself more options in the future. If invested wisely, they might help you to retire earlier, buy a place in the sun or (not quite as exciting!) pay for long-term care later in life. Do you really need that 3rd holiday this year or the very top of the range car?


Maximise your pension contributions

Once you hit your 50’s, you can get tax relief on your own pension contributions at your marginal rate on 30% of your net relevant earnings. Once you hit 55, this rate increases to 35%. While there is a maximum annual amount of earnings of €115,000 for which tax relief will be given, if you have spare cash there are great tax saving opportunities here. Of course if you have your own business, there are opportunities for even greater tax savings through making pension contributions. As you generally cannot claim relief for years gone by and as the radio ad says, “Once they’re gone, they’re gone”, don’t let these opportunities slip through your fingers.


Pay attention to your investments

As mentioned earlier in this piece, your 50’s are a time for continued wealth accumulation, but without taking significant bets at this stage. It’s really important that you work very closely with your adviser to ensure that your investments reflect your timeframes and your appetite for risk. You should be watching that money grow in a way that doesn’t cause you sleepless nights.


Keep the kids moving!

Yes we all want to help our kids and we’re not advocating that you throw your kids out on to the streets once they are through college! But at the same time, be careful about the level of support that you give to them in buying a house or in their careers. Support them fully within your means, but don’t let their financial needs derail your own goals. Otherwise financial problems will just stack up for you in the future, and these may also come back to haunt your kids!


Your 50’s are a time of great financial opportunity. Please give us a call and we will help you to make the most of these opportunities for you and your future.

8 Great Financial Goals to improve your Lifestyle

We’re now well into 2018 and we often find that the finances of our clients settle down a bit at this time of year. The madness of Christmas is behind us,and a lot of annual financial commitments have often come and gone at the start of the year. Spring is a good time to take a step back and consider how you can maximise the impact of your financial resources in achieving your desired lifestyle.

We’ve done some thinking on this and have set out 8 ways in which careful management of your finances can positively impact your lifestyle goals.


1. Don’t live on the financial edge

We have come across a number of situations with new clients over the last few years in which they have relatively significant investment portfolios, but without any real liquidity. Their money is tied up in properties and other long-term investments.

One of the impacts of this is the discomfort it causes, as the conversation includes statements such as, “We’re fine once there are no short-term shocks and we need money”.

Why put yourself though this? We suggest that you keep a portion of your investments accessible at all times. You might want to (or have to) take a few months off work, do some significant work to your house, or financially help a family member. Allow yourself the luxury of being able to do these things.


2. Pay yourself first

Saving money for the future and planning your retirement are among your most important financial activities. Treat them like this. We’ve seen many examples of people who save whatever is left over at the end of the month. This approach unfortunately rarely works as there is no lid put on spending.

Instead we advocate that you identify in advance how much you want to save each month and take this money out of your current account immediately after payday. You are now more likely to curtail unnecessary spending as you see your account balance reduce over the month. Yes, from time to time you will need to dip into your savings – but at least now they are there to allow you to do so!


3. Clear your debts

Debt is the drag on all your finances and once these are cleared, everything you earn is pretty much for you. Actively look to pay off your debts. There are many different ways of doing this; negotiating better interest rates, paying off high interest rate debts first or paying off your smallest debts first (known as the snowball effect). Talk to us and we’ll give you a steer on how best to do this.


4. Create multiple income streams

We have a client who took the plunge a few years ago and left corporate life, establishing himself as a self-employed professional service provider. He then started writing a (paid for) newspaper column and soon after starting lecturing too, which was another nice income stream. He’s gone on to collaborate on two books which have both delivered income. He hugely enjoys each of these activities. And all the while his own consulting business blossomed.

We all have multiple skills. The trick is identifying our skills and passions and then leveraging them so that work is not really work!


5. Plan to retire early

We’re not saying necessarily that you should retire early, instead we’re advocating that you plan to do so. Pay a lot of attention to your retirement planning, if possible don’t plan that you’ll be ok if you work until you’re 68. Instead plan so that you can retire at 55 or 60 or whatever age makes sense for you. Of course, it doesn’t mean you have to retire early; you can work into your 70’s if you want! But now you’ll be working on your terms, without financial pressure.


6. Live within your budget

First of all, do you have a household budget? Because if you don’t, you should… Identifying what you currently spend every month and what you should be spending each month are an important step in getting your finances under control. The next step is to live within your means, and this means that your income should comfortably exceed your spending. If it doesn’t it’s time to either rein in your spending or cut some items from the budget.


7. Don’t skimp or overspend on insurance

Insurance is a tricky business, and let’s be honest it’s a cost that none of us enjoy paying for. In the best-case scenario, we get nothing back for our money because we’ve had no need to claim! By the time you insure your house, cars, health, income and life, the costs really start to stack up!

It’s important as a result to get the right levels of cover in place. Don’t skimp on insurances, some of them are legal requirements such as car insurance and indeed the requirement for life insurance usually forms part of your mortgage contract. You need to have enough in case anything goes wrong. However we also see situations where people have too much cover, where they are over-insured. At a claim stage, your pay-out will be limited to your insurable interest, the amount required to make good your loss. We can help you to identify the right level of life assurance and income protection that you need to ensure that your financial goals can be achieved, no matter what happens in the future.


8. Leave a great legacy

We place a lot of store on helping our clients to plan for when they are gone. You don’t want to leave a financial mess behind you, potentially a tax bill and huge worries stacked on top of grief for your family. Instead you want to leave a large bank of great memories and a capability for your family to achieve their full potential and dreams. This can be done, but it requires careful planning and we will help you to do this.


We hope that there are goals in here that you can implement immediately. We would love to help you develop your thinking and your plans around them, so please feel free to give us a call to discuss them further.

Don’t blow your financial future in your 40’s – our 10 tips

We recently wrote about why people should be thinking about their retirement in their 30’s, and why this is the time when you should start seriously saving to achieve your desired lifestyle in retirement. We got a great reaction to this article, and were asked by a number of people in their 40’s for some tips in relation to managing money at their stage of life.


So here goes with our Top 10 Tips for managing your money in your 40’s.


1. Keep control of your lifestyle

For a lot of people as they enter their forties, the financial pressure starts to ease a bit. As a result of career progression and increased earnings, the bills (in particular the mortgage repayments) don’t look quite so daunting any more. And this is when people’s lifestyles can run out of control. Rather than putting their increased wealth to good use, they simply grow their lifestyle until this becomes the new “norm”. And as a result, that hard earned extra income ends up delivering zero impact to your long-term financial health. Put that extra wealth to good use.


2. Be careful with debt

Higher incomes and higher available financial resources generally result in people becoming less cautious with their money, as they have the financial firepower to suffer some losses. That’s fine, once you can afford these losses. When you borrow for investment purposes, any gains are quickly multiplied. However should you suffer losses with leveraged investments, these losses are multiplied too. Many Irish investors suffered catastrophic losses when the economy crashed in 2008, most of them because they had used debt to fund their investments. Be very careful with debt.


3. Be careful what you spend on your house

We’re all for living in comfort, but be careful that your house doesn’t become an unwanted millstone around your neck. We’ve seen a number of examples of people with the back broken on their mortgage, and then deciding that it’s time to almost re-build the house or indeed move to a bigger house. The rationale is usually around higher income levels making this possible, and also because the kids need more space – don’t they? This may well make sense, just be clear that the it’s hard to recoup money spent on your house, it usually isn’t fully reflected in future valuations. Also think past the next 5-10 years – will you want a bigger house when the kids decide it’s time to move on?


4. Don’t forget about your health and yourself!

It’s very easy (and rewarding) to get sucked into and really involved in the lives of your children. However don’t let this happen to the detriment of your own health and your other relationships. Not taking care of your own health will probably result in very nasty medical bills down the road. So make sure you keep eating well and exercising regularly to keep yourself in good shape. And make sure you’ve quality time with your partner away from the kids. Letting yourselves drift apart runs the risk of a nasty (and very costly) separation down the road. Keep the date nights going!


5. Don’t let your career drift

With us all living longer and needing to be more self-sufficient in retirement, we’re going to be working until later in life. So your 40’s are only the mid-point of your career, if even that! This is not the time to take the foot of the pedal and start coasting towards retirement. Acquire new skills, get new qualifications, maybe develop additional income sources. You still have a huge amount to offer the world of work, so put these years to good use.


6. Review your emergency fund

Maybe you were very forward-thinking years ago, listened to the advice and built a nice “rainy day” fund. Now’s the time to take a good, hard look at it. A fund built up a few years ago may be quite inadequate today. Do you need to add to this to cover your current level of expenses?


7. These are big years for retirement savings

These are often the critical years for retirement savings. You now have the financial firepower to really turbocharge your retirement fund, and you also still have the time on your side to benefit from the magic of future compound interest. So make these years the high impact years in your retirement savings.


8. Don’t lose sight of your protection needs

If you get sick or should die, would your current protection cover fully cover the lifestyle requirements of your family, or did you set up your life assurance and income protection policies back in the days of lower income levels and lower household expenses? These may need to be reviewed, and we would be delighted to assist you in this task.


9. Who are you (or will you be) caring for?

One big challenge facing families today is the multi-generational impact on financial plans. It’s not enough to plan solely for your own future. All too often, we see parents playing an important role in helping their children with significant deposits to enable them to get on the home ownership ladder. After all, maybe it’s the only way to get them to finally move out! And as we see older people living longer and having more complex care needs later in life, the burden of financing this support may fall on the family. Does your financial plan take account of these costs?


Have you thought about wealth transfer?

Depending on your specific financial situation, now might well be the time to really start looking at the future transfer of your wealth. If you have significant assets to pass on eventually, these can be seriously eroded by our penal inheritance tax environment. Planning for this a long time in advance will allow us to develop financial strategies that will enable you to significantly reduce this tax burden, ensuring your assets go mainly to your loved ones and not to the taxman.


Follow these 10 tips and you’ll enter your 50’s in great financial shape!

Talk like an investments ninja!

With markets having powered ahead in recent years, in general people are happier talking about the performance of their investment portfolio. After all, it’s easier to talk about gains than losses! But we’ve noticed some conversations shifting towards consolidation of gains as the prospect of a turn in markets probably moves closer all the time. We’re not in the business of trying to time markets, but help investors to take a long-term perspective with their investments and to build a portfolio that matches your own attitude to risk.

But back to those conversations… We know there is a huge amount of terminology and jargon surrounding investments, so we thought we’ll help you sound like an expert the next time those conversations start up again.


Here are some terms that you might hear (or use!) and what they mean.


Active/passive investment: These are different approaches to portfolio management. Active management is where an individual manager will attempt to outperform through wise asset / stock selection. A passive investment approach is where a manager simply mirrors an index, such as a stock exchange index.


Annual dividend/yield: The dividend is the amount paid out to shareholders during a year, usually based on a share of the profits. The dividend yield is calculated by dividing the dividend amount paid on each share by the share price itself.


Asset class: This is a group of similar types of assets that make up an investment portfolio. The most common asset classes are equities (shares), bonds, property, cash and commodities.


Bear market: This usually refers to a fall of at least 20% from a market peak over a period of time.


Bonds: These are loans made by investors to companies or governments, in return for a fixed rate of interest and a return of the original capital at the maturity date of the bond.


Buyback: When a company believes its shares are under-priced and also has excess cash available, they will often look to buy back their shares and then enjoy the profits themselves when the shares rise in value. This is a way of returning value to other shareholders, as after the buyback, there are now less shares in circulation, increasing existing shareholders’ share of the business.


Correlation: The degree to which two securities tend to move in the same direction. A well-diversified portfolio will have lots of non-correlated assets.


Correction: Smaller than a bear market, this term is usually used in relation to a 10% drop in share prices.


Cyclical stock: The stock of a company whose performance rises and falls depending on the economic environment. For example, luxury car manufacturers saw big profits during the boom of the early 2000s… with much leaner times after 2008.


Defensive stock: Different to the above, defensive stocks aren’t impacted to the same extent by the economic environment as their demand doesn’t fall away. Companies that produce basic foods, energy suppliers and healthcare stocks are often considered to be defensive as there is a demand for these products in all economic conditions.


Equities: Shares, stocks – different names but the same thing. They represent a partial ownership of a business.


Economic moat: This is a relatively recent term, introduced by the investment guru Warren Buffett. He used it to describe a sustainable competitive advantage enjoyed by a company over its competitors.


Hedge:  This is a strategy used to offset some of the risks in an investment. Companies use hedging to protect themselves against risks such as currency movements or possible future price rises of a key raw material.


Leverage: The use of borrowings to increase an investment impact. Great when a market rises, a disaster when a market falls. Remember property debts in Ireland in the early 2000s…


Market capitalisation: Market cap for short, this is the total value of the shares of a company. This is calculated by multiplying the number of shares outstanding by the share price.


Premium/discount: These terms are used to describe an exchange traded fund (ETF) that is trading above (premium) or below (discount) its net asset value, or bonds trading above or below their face value.


Real return: The actual return when the impact of inflation is included. An investment that grows by 3% in a period of inflation of 3% delivered no real return.


Sectors: These are used to describe different areas of an economy, such as financial services, construction, healthcare, technology and industrials. A well-diversified share portfolio will usually contain stocks from a wide range of sectors and geographical regions. The reason being to avoid having “all your eggs in one basket”.


Stock Exchange: There are locations, not always physical ones, where shares are traded.


Volatility: A measure of the degree to which a fund’s performance fluctuates. The basic rule is the higher the volatility, the greater the risk an investor is taking in search for higher returns from their investment.


Yield curve: This portrays the rate at which interest rates change when evaluating bonds with shorter maturities to those with longer maturities.


Of course this is not an exhaustive list, there certainly is no shortage of investment terminology. But we hope that these often used and sometimes misunderstood terms will help you shine in those investment conversations!

What are the risks to your investments?

When we’re designing an investment portfolio for our clients, we take into account quite a number of considerations. We start by understanding your investment goals and time horizons, and then we build a full understanding of your liquidity requirements, any asset class preferences that you might have and also the returns that you expect.

This final element brings the whole area of risk into the discussion – what your appetite is for risk and also your capacity to withstand any shocks within your portfolio. We look to build a portfolio for you that, in an overall sense, reflects this appetite and capacity for risk. We want you to achieve your investment objectives, while at the same time ensuring you can get a good night’s sleep and not lie awake worrying about your investments.

We’re asked a lot about risk in an overall sense and also more specifically about the different types of risk and how they might impact your portfolio. So we thought it would be useful to set out some of the main risks that can have an impact on an investment portfolio.

However we want to start with a note of caution. This is not an exhaustive list; it is simply a list of the main risks. Please note that the magnitude and impact of risks change all of the time too, as investment conditions change. Of course we’re always happy to answer any specific questions that you have in relation to any of these risks.


Economic Risk

This is certainly one of the most recognised risks. When there is a major economic shift, this can have quite a significant impact on investment portfolios. The last time we saw one of these was in 2008 / 2009 when the near-collapse of the banking industry plunged the world into recession, having a significant impact on investment portfolios around the world.


Geopolitical Risk

These are politically led events that happen across the world that create risks, which don’t always play out as expected. For example when President Trump was elected, many commentators thought that this would herald a swift decline in investment portfolios. However the opposite turned out to be the case – the S&P 500 index is up 21% since he was elected! But on the other hand, what impact would an escalation of the situation in North Korea have?


Market Risk

This is where individual shares can be dragged down as a result of a significant market downturn in their sector, as opposed to issues that may be affecting the individual company itself. Probably better known as collateral damage!


Currency Risk

This risk is impacted by changes within a single country or region. The value of a currency will be impacted by economic events that are specific to that country (along with other factors). So while the investment performance of (let’s say) British stocks that you hold may perform in line with expectations, the value of Sterling will have an impact on your investment too, either increasing or reducing the value when transferring the money back into Euros.


Interest Rate Risks

We’ve all become very accustomed to an extremely low interest rate environment. However nothing lasts forever, and we are seeing signs around the world of interest rates beginning to increase, albeit quite slowly. These will impact different asset classes. For example, as interest rates rise, the yield on existing bonds falls, as investors will get a higher return from new bonds issued. Fixed interest (bond) fund managers in particular watch interest rates like a hawk! In the same vein, inflation has an impact on some bonds (where a fixed rate of interest is paid), so inflation risk is another that is carefully monitored by fixed interest fund managers in particular.


Credit Risk

Bonds are effectively loans made by investors to issuers (governments or companies usually) in return for a coupon each year and repayment of the loan (investment) at the end of the term. There is always a risk, sometimes very small and at other times bigger that the issuer will default on the repayment of the loan. Higher risk issuers have to pay a higher coupon (rate of return) to attract money to make this risk attractive to an investor.


As stated earlier, this is not an exhaustive list of risks! We all face risks every day in relation to every aspect of our lives, managing investments is no different. However the critical lesson is to be clear about your appetite and capacity for risk, and to ensure that your portfolio reflects this. Then you can leave the fund management experts to worry about all of these individual risks, as they seek to achieve the returns you expect in order to meet your investment goals and objectives.