A guide to wealth management for 30-45 year olds

A Guide to Wealth Management for 30 to 45-year-olds

01

Contents 03 04 06 08 09

An introduction to wealth management The importance of: A financial plan The importance of: An investment strategy The importance of: Tax planning How Equilibrium can help

02

An Introduction To Wealth Management We all want to protect our money as best we can. At Equilibrium, we have the know-how and expertise to not only safeguard your assets, but help them flourish. This wealth management guide will serve as a handy accompaniment for people aged 30 to 45 who are considering their financial options as they look to accumulate and significantly build their assets. Throughout this guide we will refer to these people as ‘young wealth accumulators’. The guide will explain the importance of creating - and sticking to - a coherent financial plan.

For many people, the decisions they make between the ages of 30 and 45 will shape their financial future. For this reason, effective wealth management is essential. Now is the perfect time for you, as a young wealth accumulator, to assess your finances and ensure you are fully prepared for the future.

If you have ambitions of accumulating significant assets over the next ten, 20 or 30 years, or aim to work hard in the hope of enjoying an early retirement, the decisions you make now will make a real difference further down the line.

This chapter of your life will likely be one of big change. Whether you’re starting a family, raising children, buying a house, focusing on your career or setting up a new business, your 30s and 40s are a defining period. You will also likely be placing a greater emphasis on money management than ever before.

This guide explains why wealth management is a necessity for young people who want to both significantly increase and protect their assets. If you have aspirations of becoming a business owner or company director, for example, this guide explains the various aspects of personal money management that you may need to consider.

Planning ahead is key, and it is never too early to start thinking about your future. By making wealth management a priority at this stage, you will give yourself the best opportunity to meet your longterm financial goals.

“Now is the perfect time for you, as a young wealth accumulator, to assess your finances and ensure you are fully prepared for the future.”

03

The Importance Of: A Financial Plan It almost goes without saying that looking after your money is imperative throughout your life. But while saving or investing may not have been your top priority in your 20s, now is the time to make sure you have a firm understanding of your expectations and what you need to do in order to meet your longterm objectives. It is the foundations that you put in place now that will allow you to build your assets in the future and, ultimately, allow you to live the life you dream of.

Now is the time to start thinking very seriously about your retirement savings and setting goals to make sure you remain on track to meet your future goals. You should be beginning to tick those important boxes: becoming debt-free, creating a will and setting out an investment strategy.

Effective wealth management, based on a strategic financial plan, can help you make the most of your assets and ensure your financial objectives are met.

Whether through effective tax planning or sound investment, you need to make sure your money keeps working for you.

Without a financial plan, you are less likely to set realistic goals and remain on track to meet them.

By failing to identify your financial strengths and weaknesses, you are unlikely to build on the former and address the latter. Nor are you likely to put a plan into action and monitor its progress. A financial plan adds the organisation you need to make sure nothing slips through the net.

Young wealth accumulators: Managing money The way you, as a young wealth accumulator, manage your wealth will likely differ to that of people of a similar age with fewer assets or smaller ambitions. Although we should avoid overgeneralising, it is useful to consider the different attitudes to money that certain groups have.

For instance, you are likely to be particularly savvy with your finances, and may well have effective money management techniques already in place.

When it comes to using your money - or, indeed, how you make your money work for you - you are likely to: • Have specific goals for your money • Be keen to make more money • Be smart with your money - you understand that higher risk investments have potential to bring higher returns, and are better prepared to take the risks • Diversify your investments • Ask a professional who knows better

Seeking financial advice This last point is key. People who accumulate significant wealth do not necessarily know the best decisions to make, but are willing to seek the advice of someone who does.

A financial plan enables you to be smarter with your money. A service tailored to match your personality and objectives will give you the best chance of getting the results you want.

04

05

The Importance Of: An Investment Strategy Investment forms an integral part of a successful financial plan. It is never too early to start thinking about investing, and it can be particularly important - not to mention rewarding and fun - for young wealth accumulators determined to build up their assets quickly. By investing strategically, you can continue to grow your assets as you progress through life.

Investment recommendations will vary depending on the individual. Portfolios are compiled to meet an individual’s needs, preferences and goals, and no two portfolios are likely to be the same.

However, it is common for an ambitious investor’s risk to be spread across a well-diversified portfolio - one that includes a mix of bonds and equities, for example. Their collections tend to be managed on a more bespoke basis, especially when the portfolios are larger in size and include many different options.

Where appropriate, this can often involve higher exposure to risk.

Greater risk capacity Indeed, although the level of risk depends on the individual, young wealth accumulators are often more inclined to take this risk. This is in contrast to people with fewer assets or not-so-grand aspirations, who are typically advised to place higher weighting to lower-risk options. For instance, an individual unlikely to ever be classified as high-net-worth may be pointed to assets such as cash, fixed interest and property.

There are notable differences between the financial needs of young wealth accumulators and those outside this bracket. You may find you are often cited as the target market for the latest ‘flavour of the month’ financial products - products that may not necessarily be the best fit for you. You are also more likely to either seek or be given advice from many different people. While this has its obvious benefits, it increases the likelihood you are not following a coherent strategy - therefore hindering opportunities to get the best returns.

Targeted investment strategy It is essential you follow an organised, coherent and targeted investment strategy, making the most of the assets at your disposal. Although you may have more opportunity to take on greater risk, your strategy needs to account for your personal tolerance for risk, how much risk you need to take and how much you want to.

As a young wealth accumulator, you are therefore advised to seek assistance, ensuring your strategy has the right mix. When constructing a strategy, emphasis also tends to be placed on spreading risk - a tactic aimed at protecting you from any sudden changes in the markets.

06

Diversification But what is the best way to spread risk? One of the most common methods is diversification. This involves investing in different areas, many of which have no connection to another. It is important to remember, however, that there are two different types of risk, and diversification only helps to counter one.

• Unsystematic risk Can be lessened through diversification, and relates to value changes in a region or sector

• Systemic risk Cannot be reduced through diversification, and relates to major events such as interest rate fluctuations or inflation

There are various ways to diversify a portfolio, and these include: • A mixture of assets There are various assets in which you can invest, including bonds, shares and equities, while you can also opt for more ‘independent’ asset types, such as commodities and property • Different sectors Investing in different sectors can offer a more secure safety net, as movement in some industries will have little effect on others

• A spread of companies You can delve a little deeper by investing in individual companies either within the same or across different sectors. Again, risk can be spread further by investing in multiple businesses • Consider different regions To maximise the spread of risk, consider investing in different regions. This has value for many reasons, such as reducing

07

The Importance Of: Tax Planning Tax planning is essential in the formation of an effective financial plan, especially given the complexity of the subject. Tax legislation rarely stands still - it is very fluid and changes regularly.

It is therefore essential you stay ahead of the curve and do not suffer simply because changes have passed you by.

This is because tax planning is increasingly important with larger portfolios. People are often not aware of changes in relation to tax, and it can be difficult to actively manage tax on an ongoing basis. As a consequence, individuals may pay more tax than they are required to - and this can have a huge impact on high-net-worth individuals.

Through effective tax planning, you can ensure you keep on top of regulatory change and do not pay more than you are required to. Income tax and capital gains tax each have their own intricacies, and people will often need assistance to safely navigate these murky waters.

Tax mitigation strategy

Investment portfolio tax planning Tax planning with regard to investment portfolios is an often-overlooked area of financial advice.

However, we feel it is essential this gap is plugged especially when it comes to high-net-worth clients or those aiming to become one in the future.

A simple tax mitigation strategy, flexible enough to deal with change, can help you stay one step ahead, ensuring tax continues to work for and not against you. It is important to use the right tax wrapper best suited to your needs. Indeed, there are various tax wrappers compatible with larger portfolios, but these would prove far less tax efficient if used for smaller portfolios. By selecting the right tax wrapper for the right investment, you can go a long way to ensuring your tax planning delivers the best results.

08

How Equilibrium Can Help For young wealth accumulators aged 30 to 45, effective wealth management organised through a sound financial plan can be a great way to help build your assets. It is no secret that you will have to work hard for your money. However, once you get to where you want to be, it is only right that your money works hard for you.

This guide has shown that, as a young person with aspirations of building your assets and cementing your position as a high-net-worth individual, you need to think a little differently when putting your financial plan together. There is no one-size-fits-all approach in wealth management - strategies must be tailored to the individual, based on numerous factors.

Among the main considerations are personality and objectives. Your investments, for instance, are based on your level of risk, while they must also meet your goals. It is therefore important to devise a coherent strategy with multiple factors in mind, such as investment and tax planning. These are particularly important for young wealth accumulators, keen to both safeguard what they already have and to continue making money in order to meet their longer-term financial objectives.

Although young wealth accumulators may typically diversify their investments and be more willing to take bigger risks with them, it must be stressed that every plan needs to be different, and specifically tailored to meet the needs of the individual.

Equilibrium recognises this, and we place great emphasis on understanding our clients from the very outset of our journey together.

Whether we work with you now or in the future, we always take the same approach to give you the very best chance of realising your goals.

We draw up our financial plans with great input from our clients, and our fact-finding exercises help us to understand all we can about you.

From here, we help you make the right decisions, with our experience and expertise complementing your personal wants and needs.

09

We can help you make decisions on investments, tax planning and all other aspects of wealth management. You know where you want to be - and we can help you get there. But don’t just take our word for it, here’s what some of our clients have to say:

“One of the things that I liked about Equilibrium is that they listened to me about what I was after in the long-term and designed an investment portfolio to be able to suit that.”

- Jon “Very helpful in analysing my current and future financial status and plans. There was no pressure to engage Equilibrium during the initial meetings where they were discovering my financial position and how they could assist with improving the future financial planning and pensions position.”

- Mike

Equilibrium Asset Management offers Restricted advice. Our investments are not like building society or bank deposit accounts, as the capital value and any income can rise and fall and your capital is at risk. The tax treatment of investments depends on your individual circumstances and may be subject to change in the future.

10

Head Office: Equilibrium Asset Management LLP Brooke Court Lower Meadow Road Handforth Dean Wilmslow Cheshire SK9 3ND Chester Office: Equilibrium Asset Management LLP 19a Telford Court, Chester Gates Business Park Chester CH1 6LT

t : t : e : w :

+44 (0)161 486 2250 +44 (0)800 168 0748 askus@eqllp.co.uk www.eqllp.co.uk

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission.

11