Six situations where DIY investors need a helping hand

Many people think they don’t qualify for wealth management services, when in fact they fall well within the range where professional help with their finances is warranted. Below I have come up with a list of scenarios where a trained eye can give do-it-yourself (DIY) investors a valuable steer.

1) You are approaching the pension contribution limit

The reduction in lifetime pension contributions down to £1 million poses problems for affluent individuals. Those with funds near the limit must act quickly to avoid facing a tax charge of up to 55 per cent on the excess. A fund valued near £890,000 today, for example, could breach the £1 million mark in three years if it achieved 5 per cent growth a year. There are, however, other ways to build retirement income security.

2) Your tax bill is starting to hurt

Tax planning is essential for preserving your wealth, be it income tax, capital gains tax or inheritance tax. In addition to Isas and pensions, there are lots of other strategies that a wealth manager can recommend to minimise your tax obligations. In fact, the government offers compelling tax incentives on certain investments such as enterprise investment scheme vehicles and venture capital trusts.

3) You have received a windfall

If you have recently come into some money via an inheritance, or perhaps from a business sale, it can be hard to know what to do with it. Capital preservation is the foundation of a robust wealth strategy, and it is vital that you take steps to ensure that as much as possible of your new funds remain yours and not the taxman’s or lost on management fees.

4) You want help keeping on top of your portfolio

Some say a good portfolio can be constructed from as few as 15 stocks, but many portfolios can, over the years, become much bigger and more complicated to manage. Keeping track can be a real chore, and that’s without factoring in diversification and risk management requirements. A wealth manager will give you a comprehensive overview of your investments and how they perform, and manage them in line with your objectives.

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5) You want to avoid the dangers of a home bias

People exhibit a home bias in their investment behaviour – as well they might, because it’s easier to get a handle on your own market. But you have to look further afield to diversify your investments and maximise your returns. Also, though stocks and bonds are where most people feel most comfortable, alternative asset classes such as private equity, commodities or real estate could all be appropriate. A good wealth manager will help you access the entire investment universe.

6) You’d like assistance in putting an action plan in place

Affluent individuals often fall into the ‘time poor, cash rich’ category. Having an adviser who knows your financial situation and goals – and who has taken the time to understand your risk profile – can be invaluable. Most wealth managers will appoint a dedicated relationship manager who can stay with you over the years, providing tailored advice when you need it.

Other things to consider

The decision on whether you use someone to help manage your investments will depend on both practical and personal considerations. Some who enlist the help of a professional will still still want to retain investment control, but upon retirement this may change. There’s even the possibility of splitting your wealth into smaller pots, which can be managed on individual lines. These are options you can discuss with your prospective wealth manager.

If you are unhappy with your current wealth manager, shop around to ensure you are getting the level of service and investment performance you require without paying excessive fees. It’s your money and it needs to work hard, so make sure this is happening. 

Lee Goggin is the co-founder of the website

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