Wealth Management Update – November 2017

Fund house merger

You may or may not be aware that the Henderson Group and Janus Capital Group have recently merged to form the new “Janus Henderson Investors”. The new firm is keen to tell investors of both companies that nothing will change regarding how they operate their investment funds, but name changes to reflect the merger will take effect over the next few months. For our readers, this relates specifically to our new holding in the Henderson Global Technology Fund, which will be renamed the Janus Henderson Global Technology Fund. If you have other investments with either company, expect to see a similar change taking place on those as well.

Dow Jones at all time high!

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange, and it is at its highest point … ever!

This means that to achieve their current financial results, American companies have repeatedly beaten analysts’ forecasts. It would seem that the person we have to thank for this is … Trump. His promises to cut corporation tax and help businesses export overseas, although not actually coming to fruition, have meant that the markets have reacted anyway.

As the saying goes, when America sneezes the world catches a cold. Well, when they are happy, so are we. This means economic and global growth is becoming more stable and we should continue to see solid numbers above expectations.

Debt…it’s all anyone can talk about

Every time you open the papers or your phone buzzes, someone is warning about the rise of debt in the UK and the current squeeze on households. We spoke a few months ago about student debt, but the present focus is on more “every day” debt.

More than 4.1 million people are in financial trouble and missing domestic or credit card bill payments, as it seems people were not prepared for any kind of interest rate or inflation rises – either literal or metaphorical.

Whilst the younger generation are reportedly struggling with renting or loans, the older generation’s issues focus more on mortgage debt and pension income, which may need to be subsidised with debt in the future.

A savings cash buffer can be a good way to avoid these kinds of shocks, including larger lump sum expenses that may come around unexpectedly. We recommend that you keep 3–6 months’ expenditure in an easily accessible cash account for emergencies such as these.

While this is only short term, having a long-term savings goal and plan in place would be ideal to protect against those gradual increases that sneak up on us, such as mortgage interest rates or inflation that erodes your usual income.

With inflation at its highest point in five years it would seem the squeeze could get even more intense, so if you need help or advice on savings – to work out the how, why and where – then let us know!

In our book, we talk about the benefits of compound interest and its magical powers, please do download a FREE copy of our book The Wealth Secret or share it with someone you know.

Wages … that awkward conversation

Following on from the mention of debt above, it is astounding that the rise in inflation has not yet been reflected in the wages we receive each month. It is this issue that many economists are calling the real problem with the economy, not Brexit or any other fiscal or monetary problems that we are facing.

This imbalance in income and expenses could be the main cause of the ‘squeeze’ that many households are facing, which is forcing them to rely on credit cards or loans to pay the bills. This problem is not one that can be fully rectified through savings alone on a long-term basis, but is one that must be addressed at the source of those savings.

Have we, as a nation, become so used to stagnant wages that we have lost the expectation and drive to go after a pay rise? Or are dual-income households causing low wages to look “not that bad”?

It is likely a combination of these factors and also policy and wage-related issues. Hopefully wages will catch up with inflation soon, but if not – if you don’t ask you don’t get! Prepare yourself for that awkward conversation.

A bit of a downer, or a necessity?

Funeral costs …
Already you are appalled that we have mentioned such a morbid subject, we can tell. But is it something we should all be prepared for? After all, we are all going to need a funeral at some point.

The average cost of a funeral is £4,000! That is a 112% increase from the cost in 2004. So that means in another ten years a funeral could cost in excess of £7,000. We would want to be on a rocket to the moon for that much!

Without making provision for the inevitable there is no guarantee that, after other expenses, your estate will cover the cost of laying you to rest. Which means that this cost may have to be borne by your loved ones.

The same applies to the cost of probate, which was a hot topic back in April but which was put on hold before the election. That proposal would have seen probate fees increased to up to £20,000! This has not been addressed since but it is highly likely that it will be in the near future, as it would generate an extra £300m per year for the government.

The time to make provision for this is now, so if you need advice on how much and how to put money aside for things like this, then we can help.

Notes on Brexit

We are writing a little early this month and so we haven’t been able to access the full parliamentary report on the recent round of Brexit negotiations as yet. This is a little frustrating as the media noise around the supposed “deadlock” has been extremely loud this week. We will focus instead on what we have been able to uncover surrounding what seems to be the main sticking point – the so-called “Divorce Bill”.

The EU’s position on this subject hasn’t changed since the outset – that the UK should honour its share of the financial commitments made whilst it was a member. In return, the UK will continue to receive funding for programmes of which it is a part until they draw to a close. Seems pretty straightforward, doesn’t it? The premise on which the EU expects to proceed with negotiations is to calculate the amounts involved, reported in the media to be anywhere between €6bn and €75bn, as there isn’t a precedent for this – unsurprisingly! As this forms part of the “detanglement” of the first stage of negotiations for them, it’s not surprising that they aren’t willing to move on until this is finalised, at least nominally so.

However, outside of the Prime Minister’s Florence speech last month, the UK has made no formal response to the EU’s position, so this makes it very difficult for negotiations to proceed. This reticence seems to stem from a disagreement over the legal interpretations used by the EU. Our position is that these ongoing fiscal arrangements form part of our ongoing relationship, however the EU views them as unrelated to our future relationship but associated with our prior membership. Is this going to be a case of one step backwards to take two steps forward? We expect so, or how else will we proceed? We suppose we could always revert to the art of haruspicy to find a way forward – maybe Boris could be useful after all!

Budget date

Don’t forget, the Budget announcement will be on Wednesday 22nd November.

Book of the month

This month’s book is actually two! Two books, because they go so well together. The first is a cook book, which is packed with some highly researched information on how food and nutrients can protect your brain, together with some fantastic recipes: Healthy Eating to Reduce the Risk of Dementia by Margaret Rayman Katie Sharpe, Vanessa Ridland and Patsy Westcott.

The second book is 100 Simple Things You Can Do to Prevent Alzheimer’s and Age-Related Memory Loss by Jean Carper. This book has some fascinating facts that we had never considered but most certainly make sense. The range of activities you can do to reduce the effect of dementia is extensive, however picking just a few from the book will most definitely help. Diet plays an important part in a healthy brain and so this book pairs up nicely with the cook book above.