Resident IFA Blog

I am off to see a Client tomorrow morning, to review their Investments. They are certainly not awkward, but not particularly ‘engaged’ all the same.

I say this as the last review we undertook was in April 2009. I have since tried to initiate meetings, but the over-riding sentiment is ‘que sera sera’.

Anyhow, the Investment in question has risen by a whopping £750-odd since it was made 4 years ago. This equates to a 1.5% gain.

The original investment was for £50,000. So far, so average…or poor, some might be saying.

The thing that really interests me is how it has actually recovered mightily since April 2009. It was then standing at just over £34,000!

Credit goes to the Client here. They didn’t stomp & shout; instead realising and trusting to the longer-term, and content that they did not need to access the monies. This is when ‘que sera sera’ works well in keeping blood pressure in check!

So, we at least have a base to (re)start from – whereby the Client has not made a loss. It must be said that they agreed with their attitude to risk assessment at outset, showing them as a ‘7’ out of 10 – possessing a risk tolerance for investing of the highest end of Medium risk…perhaps more accurately ‘Medium/High’.

The second task that I will undertake tomorrow – after imparting the ‘good’ news around investment value – is to re-assess the Clients attitude to investment risk. Nowadays, it is also intrinsically linked…and perhaps more pertinent…to understand the Clients ‘Capacity for loss’.

As is evident, this Client has a (almost strange) sang-froid towards volatility in the stockmarket. A discussion around capacity for loss covers the potential downside of any investment decision, not just focusing on the upside; as Financial Advisers have sometimes been accused of in the past.

This is not to say that we put the fear of God into people nowadays, yet an adult, realistic conversation should be entered into before an investment is made, or even considered.

Back to my “So far, so average…or poor, some might be saying”, above. 1.5% growth over 4 years obviously isn’t stellar performance.

However, a basic-rate taxpayer who is not pro-active, currently sat in one of the all-too-prevalent bank ‘Savings’ accounts paying 0.25% (or in that region), will have seen only (approximately) 0.8% compound return after tax over the same period.

On top of that, at least the Client has now consented to a discussion with me…and I intend to prove my worth and help as much as I am allowed to.

Until next time…