SKQ Issue 9

issue 9

SKQ A publication from

WELCOME

to issue 9

Spring Forward!

Spring Forward! Remember to change your clocks on Sunday 27th March!

I’m excited about the longer (and hopefully warmer!) days. And with the Easter holidays soon upon us, we can also look forward to putting our feet up with plenty of chocolate eggs.

In this issue: • Kunle discusses understanding your ‘Hierarchy of Needs’ • Q & A with Victoria Leggett, Head of Impact Investing at UBP • Neil’s thoughts on mortgages and Energy Performance Certificates • Richard’s story about cash flow forecasting in financial planning As always, the SK Team is here for you.

Chloe Editor chloe@skfinancial.net We encourage you to share our magazine with those you think may find it useful.

If you have any feedback or would like to contribute to our next issue of SKQ, send Chloe an email at chloe@skfinancial.net

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CONTENTS 04 Outlook from Kunle 06 Cash flow forecasting in financial planning 08 Q&A with Victoria Leggett 11

Mortgages & Energy Performance Certificates (EPC)

12

Get to know Lesley

13

SK Invest Podcast – Introducing Chris Fleming

14

SK Reading List

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OUTLOOK

From Kunle There’s nothing quite like the stair challenge I set myself at the start of each year. It’s a busy period seeing clients (mainly video meetings) and I always challenge myself to walk up and down the office stairs – all eight flights - to and from each meeting (sometimes I reward myself at the end of the day with a Tunnocks caramel bar).

It was during one of these stair climbs that I felt a sense of deja vu – a nagging feeling about writing this article, but as my foster mother used to say "you've just got to get on with it." So here we go.

Communication is king I recall in March 2020 working from home and wondering "what is going on?" – I don’t think I was alone in thinking that!

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But I realised that the way that I communicated with my colleagues and the way that we communicated with our clients would be even more important than ever before in the months ahead. Anyone who has read the book “Turn the Ship Around" by L. David Marquet will relate to how important communications are, especially in uncertain times (if you haven’t read it, you can buy it here – and check out the end of this issue of SKQ for more book recommendations).

And with markets back then falling faster than English wickets in the Ashes, I was suddenly acutely aware that we had recently employed the services of our new investment team, Square Mile. What a baptism of fire! But it didn’t take long to realise that we really were working with quality people.

Square Mile had a clear communication approach. Plain English. Sensible words. Helpful suggestions. Plus they were always available to help. It was just what was needed while navigating such a rocky period. They have been such a great addition to the SK Team.

What is your hierarchy of needs?

At the start of this year, I spent a bit of time in Tankerton reflecting on the markets- at c 7,600 and seeing how well the markets were performing, I thought and smiled what a difference two years make. Or perhaps not…along comes inflation (RPI 7.4% and CPI 5.4% at the time of writing). Russia has invaded Ukraine. We are still in a global pandemic.

But we know that panic is not a place to make decisions about our finances. And when it comes to money, we need to stick to the plan, remember that investing is for the longer term and importantly focus on what we can control. And it is this last point – focusing on what we can control – that often leads me to Ivan Maslow’s great work in creating the well-renowned Hierarchy of Needs.

I like to use a simplified version, but the principle is the same.

It doesn’t take much time or energy to complete this exercise and answer these simple questions.

But in return you gain real insight into your financial situation and can enjoy that all important sense of control in choppy waters.

Fixed Expenditure how much do I need to make sure all bills get paid?

Discretionary Expenditure where will the holiday destination be?

Beneficiaries how to protect monies for those that you love when you die?

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As financial planners, we regularly deal with the issue of pension freedoms and the ability to extract pension lump sums at will, to address particular financial needs. To many they seem like a quick, easy win, but a simple cash flow forecast often shows the pitfalls of going down this road.

Not so long ago, I was asked to consider solutions for a client who had read about pension freedoms. They wanted to make some home improvements as their disabilities were making things around the house a challenge.

They were unemployed, receiving a disability living allowance and had no savings to fall back on. It was easy to see why their pension pot looked quite so attractive.

The power of cash flow forecasting Eventually, what dissuaded the client from proceeding with a pension transfer was when we presented them with a lifetime cashflow forecast which offered two scenarios. The first, where the client received income guaranteed for life from their scheme pension. The second, from a non-guaranteed Flexi-Access Income Drawdown Plan, having first drawn a tax free lump sum to pay for home improvements. The penny dropped. It was now clear just how much income they stood to lose if they proceeded with a transfer.

As a result, we found two other options for finding the money to fund the improvements. First up was the opportunity to apply for a Disabled Facilities Grant from their local authority and potentially receive up to £30,000 towards the cost of improvements to their home. The second – and the one that got given the green light - was to apply for an equity release product called a ‘Lifetime Mortgage’. This gave them the cash sum required for the necessary renovations, while also allowing them to build up an emergency fund and preserve the guaranteed pension payable in five years’ time.

It just goes to show that despite the vast increase in flexibility presented by pension freedoms, your pension won’t necessarily provide the best solution.

Not always what they seem They were considering transferring their secure salary-related occupational scheme pension to their Personal Pension Plan to release a tax free lump sum. But while they were eligible to draw retirement benefits directly from the occupational scheme, it would be at a significantly reduced level as they were still some five years away from the scheme’s retirement age.

An initial examination of the scheme benefits also showed that they would have to forego some very valuable guarantees. What’s more, as they lived alone and had no children, death benefits were of no particular interest and they could potentially incur a severe drop in their retirement income. But despite all this, the lure of the pension lump sum was still too good for the client. We needed another way of demonstrating the true impact of this approach.

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Richard

“It just goes to show that despite the vast increase in flexibility presented by pension freedoms, your pension won’t necessarily provide the best solution.”

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Kunle’s

Q&A WITH

VICTORIA LEGGETT Victoria Leggett and I bonded over a chat about financial education and how to encourage school leavers and graduates to consider career opportunities in fund management.

Victoria is the Head of Impact Investing at Union Bancaire Privée (UBP) and as a successful Fund Manager, she has some useful tips for dealing with the pressures that come with the role, as well as with modern day life.

Can you tell us a bit more about what you do?

What is your company doing to be more sustainable?

I work with a team of people who are investing money in companies, which are making a positive impact on society or the environment. Our day to day job involves finding those businesses, stress-testing them and then when we have invested, staying in regular contact with them to make sure they are meeting our financial and impact expectations.

UBP has recently conducted a full sustainability review and made commitments around carbon footprint and the increase of assets invested in sustainable solutions.

What do you most enjoy about your role?

It is the privilege of being able to meet the leaders of businesses which are driving genuine change. I also feel that in a small way our team is contributing to finance becoming more responsible and hopefully working for society instead of being detached from it.

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What suggestions would you have for younger people wanting to become a Fund Manager?

If you think you probably shouldn’t be a Fund Manager because economics or maths haven’t been high priorities – you’re probably exactly what this industry needs, so don’t be put off.

However, the one thing you do need in this job is resilience. Investing can be very taxing on your self-esteem! We all go through phases of getting things wrong and the stock market is a merciless place. You have to be able to shake off the stress at the end of the day.

Would it have been important for you to have learnt about personal finance at school?

What would you now like to have known that you didn’t know before?

YES! We were taught nothing. I always found it strange that I left school being able to name the component parts of a mitochondrion, but I had no idea what a mortgage was or what APR meant.

That you have to be generous to the present to really get the most out of your future. Also, to pay attention to the anger in myself or anyone else, there’s normally something behind it to connect with and stop it escalating – and that can really rescue your day if it works!

How do you deal with disappointment?

Pretty well! I have very high expectations of almost everything, so I am regularly disappointed. The good thing is it means I’m used to it.

What's your favourite quote?

Thoughts aren’t facts. Don’t believe everything you think.

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What is the best money tip that you have been given?

Never invest in something you don’t understand, which is probably why I don’t have many biotech companies in my fund.

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Neil ENERGY PERFORMANCE CERTIFICATE (EPC) IMPORTANT NEWS FOR LANDLORDS AND TENANTS

If you’re a landlord or thinking about selling your home, you will need a valid EPC rating for your property. Without it, you will not be able to legally let or sell your property, so it is well worth looking into.

An EPC or Energy Performance Certificate gives detailed information about your property’s energy efficiency and carbon dioxide emissions. No doubt you will have seen those coloured bar charts on property details, with corresponding letters - A (very efficient) to G (inefficient).

That’s the property’s EPC rating.

Renew every 10 years But what many people don’t realise is that these ratings are only valid for 10 years and there are very clear rules as to what efficiency rating you must achieve if you’re going to let or sell your property. If you’re unsure when your rating was last done, you can simply visit the government site here to find out whether or not it has expired. They also give you helpful tips on how to improve the energy performance of your home.

If you find you do in fact need a new certificate, then simply visit the ‘get new energy certificate’ page to organise. Bear in mind that the cost of an assessment varies by assessor and the size of the property. After the assessment, the assessor will give you a digital copy of your certificate, but you can also view or print an existing energy certificate online. But simply having an EPC rating is not the only thing you need to consider.

Achieve an energy rating of E or above Back in April 2018, the Minimum Energy Efficiency Standards (MEES) came into force. This required all properties being let in England and Wales to have a minimum EPC rating of ‘E’. From 2020, the MEES applied to all existing tenancies – not just new ones or renewals. If your property does not have an energy rating of E or above it cannot be legally let out. If the property is being sold, there is no minimum rating but an Energy Performance Certificate is required.

What’s more, the Department of Business, Energy and Industrial Strategy (BEIS), is now leading on a consultation to improve the energy performance of privately rented homes, which if implemented as legislation, would see the minimum EPC rating increased to C from 2025 for new tenancies and from 2028 for existing tenancies.

Use your EPC for better mortgage deals The EPC rating also plays a crucial part in your mortgage application. As part of the valuation process a valid EPC is required in line with the lender’s criteria.

And if you have a highly efficient home, it could be worth looking around for what some lenders are calling ‘Green Mortgages’. This means buying or owning an energy-efficient home could offer you more favourable terms. This could mean either getting a slightly lower interest rate, or cashback when you take out the mortgage, or both. As such it is well worth reviewing your property’s EPC rating online and considering the recommendations made to improve the efficiency of your property.

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GET TO KNOW: LESLEY A member of the SK team tells us a bit more about their life, loves and future plans…

I joined SK in August 2013, having spent the previous 20 years working for two other Independent Financial Advisers where I met David. Neil I have known a lot longer.

Working for SK has been an enjoyable and challenging experience, keeping up with the changing governance requirements that all financial firms have to comply with! We are a good, strong team who support one another and are committed to providing a first class service to all of our clients.

My earlier working life was in general insurance where I met my husband Bill whilst working for Pearl Assurance.

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We married and had three children who are all employed in a variety of professions and whom we are very proud of. Between them we have four beautiful and talented grandchildren who certainly keep us on our toes and amused!! Family is important to me. I love spending time together whether it is a family meal or long weekends in Norfolk, where we spend a lot of our time.

We have rebooked our holiday to South Africa this year – it was originally planned for 2020 - where I will finally see the Victoria Falls and go on safari. I also enjoy the cinema and eating out is a regular with good friends.

Travel has always been a shared passion and taken us to the USA, Australia, New Zealand, India, China, Japan as well as Europe.

Most daring thing I have ever done: I was recently coerced into going down a waterslide with the grandchildren, something I won’t be repeating.

Biggest fear: Spiders!

THE SK INVEST PODCAST INTRODUCING CHRIS FLEMING

INVESTMENT DIRECTOR, SQUARE MILE Every quarter we interview our investment partner, Square Mile, asking them questions raised either by our clients, our colleagues or within our community.

In the latest SK Invest podcast, which was recorded on Friday 4th February 2022 before the Russian invasion of Ukraine, we speak to Investment Director Chris Fleming about how the markets have performed since the beginning of 2022. In particular, we examine how tech stocks have fared and why they have differing impacts on the main UK and US stock exchanges. Chris also gives his take on the other sectors of the economy which have performed well recently.

We also look at the importance of having a diverse portfolio to manage risk and the role that bonds play in diluting investments losses when equity markets occasionally take a tumble.

Listen here for the full conversation between Chris and our Paraplanner Richard Simmonds.

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SK READING LIST

The team shares some of their recommended reads for 2022.

BELLMAN & BLACK

BY DIANE SETTERFIELD As a boy, William Bellman commits one small cruel act that appears to have unforeseen and terrible consequences. The killing of a rook with his catapult is soon forgotten amidst the riot of boyhood games. And by the time he is grown, with a wife and children of his own, he seems indeed, to be a man blessed by fortune.

Until tragedy strikes, and the stranger in black comes, and William Bellman starts to wonder if all his happiness is about to be eclipsed.

Desperate to save the one precious thing he has left, he enters into a bargain. A rather strange bargain, with an even stranger partner, to found a decidedly macabre business.

WILL

BY WILL SMITH AND MARK MANSON Will Smith's transformation from a fearful child in a tense West Philadelphia home to one of the biggest rap stars of his era and then one of the biggest movie stars in Hollywood history, with a string of box office successes that will likely never be broken, is an epic tale of inner transformation and outer triumph.

THE BOOK YOUR DOG WISHES YOU WOULD READ

BY LOUISE GLAZEBROOK Louise Glazebrook is a dog behaviourist, trainer and television presenter who specialises in teaching people how to understand and connect with their dogs.

Louise tackles everything from bringing the right dog home, understanding body language and breed behaviour, responding to common behavioural issues, to the toys and games that you and your dog will both love.

Most dog trainers focus on the dog, but Louise focuses on you, the owner, giving you the skills and confidence to interpret your dog's needs and behaviour and build a better, happier relationship for life.

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“I do believe something very magical can happen when you read a good book.”

J.K. ROWLING SKQ issue 9 | 15

ELEANOR OLIPHANT IS COMPLETELY FINE

BY GAIL HONEYMAN Eleanor Oliphant leads a simple life. She wears the same clothes to work every day, eats the same meal deal for lunch every day and buys the same two bottles of vodka to drink every weekend.

Eleanor Oliphant is happy. Nothing is missing from her carefully timetabled life. Except, sometimes, everything.

One simple act of kindness is about to shatter the walls Eleanor has built around herself. Now she must learn how to navigate the world that everyone else seems to take for granted while searching for the courage to face the dark corners she s avoided all her life.

THE HUMANS

BY MATT HAIG

After an 'incident' one wet Friday night where he is found walking naked through the streets of Cambridge, Professor Andrew Martin is not feeling quite himself. Food sickens him. Clothes confound him. Even his loving wife and teenage son are repulsive to him. He feels lost amongst an alien species and hates everyone on the planet. Everyone, that is, except Newton, and he's a dog.

Who is he really? And what could make someone change their mind about the human race ?

RISE

BY SIYA KOLISI There have been many comments made and books written about Siya Kolisi, captain of the Springboks, and the first black man to lead his country in over 128 years of South African rugby.

For the very first time, Siya Kolisi shares his story in an extraordinarily intimate memoir, charting his journey from being born into the impoverished Zwide township, to leading his proud nation to an astonishing victory at the Rugby World Cup in 2019.

However, Rise is not simply a chronology of matches played and games won; it is an exploration of a man’s race and his faith, a masterclass in attaining a positive mindset, and an inspirational reminder that it is possible to defy the odds, no matter how they are stacked against you.

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"Spring: A lovely reminder of how beautiful change can truly be."

TRACY MCMILLAN The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.

This document is distributed for information purposes and should not be considered investment or other advice or an offer of any product / security for sale. This document contains the opinions of the authors but not necessarily the firm and does not represent a recommendation of any particular security, strategy or product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.

Please contact us before you transact. Errors and omissions excepted.

SKF Trading Ltd trading as SK Financial.

SK Financial is directly authorised and regulated by The Financial Conduct Authority.

SKQ issue 9