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Economic data suggesting some developed countries, including the US, could fall into a recession continued to affect investment markets in September 2024. Read on to discover other factors that may have affected the performance of your investments.

UK

Data from the Office for National Statistics (ONS) shows inflation remained stable at 2.2% in the 12 months to August. The figure is slightly above the Bank of England’s (BoE) 2% target.

Despite speculation that inflation data would lead to the BoE cutting interest rates, the Bank opted to maintain its base rate at 5%. While good news for savers, it means borrowers, including mortgage holders, are still likely to face higher outgoings when compared to 2021.

Many economists expect the BoE will make an interest rate cut before the end of the year. Indeed, investment bank Goldman Sachs predicts the interest rate will fall to 3% over the next 12 months.

GDP data showed the UK economy returned to growth in July after a plateau in June. However, the figures were disappointing, with just 0.5% growth in the three months to July 2024.

There could be more positive news in the coming months though. Investment bank Peel Hunt optimistically said the UK economy is heading for “above-average growth” as inflation stabilises and consumer demand picks up.

A report from the Office for Budget Responsibility (OBR) provided a less cheerful outlook for the UK. The latest risk and sustainability report warned the UK, and other countries in the world, face long-term pressures, such as an ageing population, climate change, and rising geopolitical tensions.

In addition, the OBR said, based on current policy, public debt is projected to almost triple to more than 270% of GDP over the next 50 years. The comments highlight the challenging backdrop chancellor Rachel Reeves will need to consider as she prepares to deliver her first Budget on 30 October.

There was positive data released from the manufacturing sector. S&P Global’s Purchasing Managers’ Index (PMI) recorded the strongest month in two years. Both output and new orders continued to recover.

Yet, many businesses continue to face significant headwinds. Among those is UK shipbuilder Harland & Wolff, which owns the Belfast shipyard that once built the Titanic. The company entered administration in September.

Research also suggests that trade difficulties following Brexit could worsen. Aston Business School analysed the effect of the Trade and Cooperation Agreement on UK-EU trade relations, and found that trade is down by almost a quarter.

The FTSE 100 experienced ups and downs, including falling 0.6% to a three-week low on 4 September. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Fresh worries about the health of the global economy have gripped markets, with the FTSE 100 far from immune.”

Europe

Eurozone inflation fell to 2.2% in the 12 months to August 2024. The news gave the European Central Bank the confidence to cut interest rates for the second time this year.

The Paris Olympics provided a short-term boost to the eurozone economy. A PMI output index increased for the first time since May in August 2024 to reach a three-month high of 51.0 – a reading above 50 indicates growth.

However, as the temporary boost of the Olympics fades, additional PMI data isn’t as positive. Indeed, HCOB’s flash PMI suggests the eurozone economy shrank for the first time in seven months in September.

The manufacturing sector in particular is struggling, with a PMI reading of 45.8 in August 2024. Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “Things are going downhill, and fast. The manufacturing sector has been stuck in a rut.”

As the largest economy in the EU, the conditions in Germany can affect the bloc, and statistics suggest there are risks ahead.

Indeed, the Kiel Institute for the World Economy predicts Germany’s GDP will shrink by 0.1% this year and has halved its growth forecast for 2025 to 0.5%.

Statistics body Destatis reports industrial production in Germany fell by 2.4% in July – far more severe than the 0.3% fall economists had predicted. The automotive sector suffered the largest fall (8.1%) followed by electrical equipment (7%).

German carmaker Volkswagen has spoken about the challenges it faces. The company warned that it has a “year, maybe two” to adapt to lower demand. The economic environment has led to Volkswagen considering making unprecedented closures in its home market for the first time in its history as it tries to cut costs.

US

Inflation in the US fell to its lowest level since February 2021 in August 2024 to 2.5%. In response, the Federal Reserve cut its base interest rate from 5% to 4.75%.

The inflation and interest rate announcements led to the S&P 500 – an index of the 500 largest public companies in the US – jumping 1.5% on 19 September.

Similar to Europe, data indicates the manufacturing sector in the US is struggling. Indeed, the Institute of Supply Management reported it contracted for the fifth consecutive month in August. The news led to a dip in the markets around the world at the start of the month.

Figures from the Bureau of Economic Analysis also indicate a business threat as the trade deficit increased by $5.6 billion (£4.19 billion) in July to $103.1 billion (£77.13 billion).

American company OpenAI, the firm behind ChatGPT, announced it was in talks to raise $6.5 billion (£4.86 billion) from investors at a valuation of $150 billion (£112.21 billion) – making it one of the most valuable start-ups in the world.

Asia

Investment market volatility in Asia highlighted how factors around the world can affect markets. On 4 September, Japan’s Nikkei lost 4.2% and South Korea’s Kospi fell 3.4% after investors were spooked by fears that the US could experience a downturn when poor manufacturing data was posted.

A survey of China’s manufacturers from Caixin suggests export orders were subdued in August and fell for the first time this year as it faced external challenges.

However, China announced stimulus measures aimed at boosting the economy and stock market, as well as supporting the property sector on 24 September.

The news led to stock markets across Asia-Pacific rising – China’s CSI 300 index was up more than 4%. In fact, the announcement led to world stocks hitting a record high when the MSCI World Stocks index increased by 0.3%.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

When you read that investment markets have fallen you might feel nervous or scared about the effect it could have on your future. Emotions like these sometimes lead to impulsive decisions that aren’t always in your best interest when you consider the long term. So, read on to discover some insightful pieces of data that could help you remain calm.

Volatility is part of investing – a huge range of factors might influence whether a stock market rises or falls. However, history shows that, over the long term, markets typically go on to deliver returns.

Recently, markets experienced volatility amid fears that the US was on track for a recession. Indeed, on 2 August 2024, US technology-focused index Nasdaq fell 10% from its peak. Just a few days later, the market rallied, and it was technology firms that led the way.

Concerns about the US economy weren’t confined to the US indices either. Markets fell in Europe and Asia too. In fact, Japan’s Nikkei index suffered its worst day since 1987 following the news. Again, it didn’t take long for the markets to bounce back.

Returns cannot be guaranteed and recoveries may be over longer periods. Yet, the above example highlights how making a knee-jerk decision due to volatility could harm your long-term wealth. If you’d responded by selling your investments when you saw markets were falling, you’d have missed out on the recovery.

So, if volatility is part of your experience when investing, how can you remain calm? These pieces of data could help you hold your nerve.

1. Investment risk falls over a longer time frame

It’s important to note that all investments carry some risk. There is a chance that you could receive less than the original amount you invested. However, the level of risk varies between investments, so you could invest in a way that reflects your risk profile and financial circumstances.

Usually, it’s a good idea to invest with a five-year minimum time frame. By investing for longer, you’re giving your investments a chance to recover if they fall due to short-term volatility.

Research supports this too. Using almost 100 years of data on the US stock market, Schroders found that if you invested for a month, you would have lost 40% of the time. Interestingly, when you invest for longer, your odds of losing money start to fall.

When invested for five years, the odds of losing money fall to 22%, and at 10 years it falls to 13%. The research shows there have been no 20-year periods during the time analysed where stocks lost money overall.

You can’t rule out risk entirely, but by investing for a long-term goal, you could minimise the chance of losing money.

2. Sharp drops in the market occur more often than you think

One of the reasons investors react to market movements is that sharp falls may feel like they’re unprecedented and that you should act as a result. Yet, the Schroders research suggests that sharp falls are more common than you might think.

Analysing the MSCI World Index, which captures large and mid-cap representations across 23 developed countries, the study found that 10% falls happen in more years than they don’t. Indeed, in the 52 calendar years to 2024, investors experienced a 10% fall in 30 of them.

Even significant falls of 20% may occur more than you expect – roughly every six years.

Despite these dips, markets have delivered returns over the 50 years analysed. So, holding your nerve during these sharp falls often makes sense when you take a long-term view.

3. Periods of “heightened fear” could be more lucrative

The Vix Index measures expected volatility in the US market– it’s often referred to as the market’s “fear gauge”. It can highlight when investors perceive there is a greater risk of losing money. For example, it last reached a significant peak in May 2022 in the aftermath of the invasion of Ukraine.

Schroders has assessed how your investments would fare if you sold assets during periods of “heightened fear” to hold your wealth in cash, and then shifted back to investments when the fear receded. Taking this approach when invested in the S&P 500 – an index of the 500 largest public companies in the US – would have yielded average returns of 7.4% a year between 1990 and 2024.

However, if you didn’t let fear affect your investment decisions and remained invested, you may have benefited from average annual returns of 9.9%.

So, even when it seems like investing isn’t a good idea because of the economic environment or geopolitical tensions, it could be worthwhile taking a step back to consider what’s driving your decision.

Contact us to talk about your investments

If you have questions about investing and how it could support your financial goals, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Anchoring bias is a common cognitive phenomenon that could affect your day-to-day and long-term financial decisions. The good news is that there are ways you could minimise the effect of bias, including anchoring.

First, what is a financial bias? The term refers to mental shortcuts and errors you might make when processing financial information that may lead to “irrational” decisions that don’t align with your long-term plans. There are many different types of financial bias, so read on to find out more about anchoring bias and how to minimise the effect.

Anchoring bias occurs when you focus or rely too heavily on a single piece of information when making financial decisions. It’s a bias that could lead to you dismissing other relevant data or it could skew your perceptions when you’re assessing a financial opportunity.

By “anchoring” your views to certain data, you could make decisions that aren’t right for you.

Anchoring bias could affect your short- and long-term finances

Anchoring bias could affect your financial decisions in several ways.

When it comes to your day-to-day spending, it might affect how you view the price of items. Let’s say you’re searching for a new TV and you find one you want priced at £1,000. You don’t make the purchase right away, and a few weeks later you see the same TV is now £800.

If you anchored the value of the TV to the first price you’d seen, the new, lower price might seem like an excellent deal. Yet, if you did some further research, you might find it was overpriced at £1,000 and it’s cheaper elsewhere. So, if you acted impulsively and purchased the TV when you saw it was £800 it might not be the bargain you first think it is.

Similarly, anchoring bias could affect long-term financial decisions too.

For instance, investors might purchase stock because they believe it’s a “good” price as they’ve anchored their view of it to a particular piece of information that suggests it should be higher. Alternatively, investors might hold on to assets that are no longer right for them because they believe the value will rise despite market conditions suggesting otherwise.

In short, anchoring bias could mean your investment decisions are based on an attachment to a certain piece of information, which might not reflect reality. It could lead to missed opportunities and poor decisions.

5 practical steps that could help you reduce the effect of anchoring

1. Be aware of the effect of anchoring bias

Often, the first step to reducing the effect of anchoring bias is simply to be aware of the effect it could have. Recognising that you may judge financial opportunities based on a single piece of information could give you pause enough to reconsider your initial thoughts before you act.

2. Assess the credibility of sources

There’s so much information available that it can be overwhelming. So, taking some time to assess how credible a source is could help judge whether it’s information you want to use when making financial decisions.

It’s not just the credibility of the source you may want to weigh up either. For example, reviewing when the information was released could be just as important – basing an investment decision on the price of a stock a year ago could mean you’re overlooking more valuable, recent figures.

3. Carry out further research

In addition to reviewing key pieces of information you already have access to, carrying out further research is often useful.

Let’s say you’re making a large purchase for your home, you’ll often shop around to see which retailer is offering the best deal. Taking the same approach for other financial decisions could also help you make better decisions for you.

4. Focus on your long-term plans

Focusing on your long-term plans or budget could reduce the chance of you acting on impulse because you’ve seen what seems like an excellent opportunity at first glance.

Whether a retailer has cut the price of that TV when compared to your anchor or the latest technology company’s shares are falling, take a step back and ask if it fits into your plans – is this potential opportunity right for you and how would it affect your finances?

5. Work with a financial planner

Sometimes an outside perspective could help you see where financial bias, including anchoring bias, could be clouding your judgement. As a financial planner, we’re here to work with you to create a long-term plan that considers your aspirations. Having a plan that’s been tailored to you could help you reduce the influence of bias and make better financial decisions for you.

Please contact us to talk to one of our team or arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

More than 70% of Brits think Inheritance Tax (IHT) is unfair, according to a poll carried out by Tax Policy Associates in 2023. You might consider how other countries handle taxing assets when you pass away to be “fairer”, read on to find out more.

Over the last few months, you’ve read about how IHT works in the UK and some of the steps you may take to reduce a potential bill.

In the UK, IHT is a type of tax that’s levied on the estate of someone who has passed away if the total value exceeds certain thresholds. The portion of estates above the threshold may be liable for IHT at a standard rate of 40% in 2024/25.

Many countries have some form of IHT. Indeed, according to euronews, 19 countries in the EU levy some form of tax on inheritances, gifts, or estates.

So, how does the UK differ in the way that it taxes estates? Read on to discover how other countries tax assets after you’ve passed away.

Several countries have no form of Inheritance Tax

While many countries do levy a tax when passing on assets, there are a few that don’t have any form of IHT. For example, Austria abolished IHT in 2008, and Norway followed suit in 2014.

In the UK, modern IHT tax dates back to 1894 when an estate duty was introduced. However, there were different types of IHT going much further back. While there have been calls to abolish IHT in the UK, it’s not a step Conservative or Labour governments have taken so far.

The threshold for paying Inheritance Tax varies significantly between countries

Among countries that have IHT, the majority of estates fall under tax thresholds and aren’t liable.

As a result, taxes on estates typically make up a small proportion of total tax revenues. In fact, the Financial Times reports only four of the 38 countries that are part of the Organisation for Economic Co-operation and Development (OECD) derive more than 1% of their total tax revenue from inheritances, estates, or gifts – Belgium, France, Japan, and South Korea.

The threshold for paying IHT varies significantly. In the UK, in 2024/25, the nil-rate band is £325,000. If the value of your estate is above this figure, IHT might be due.

In contrast, a Belgium citizen might need to consider an IHT bill if the value of their estate is more than just €12,500 (£10,505) depending on the region they live and who their beneficiaries are.

On the other end of the scale, in the US, federal estate tax is only required if the value of the estate exceeds $13.61 million (£10.25 million), and only six states levy additional IHT.

Many countries tax the recipient rather than the estate

The UK is an outlier in how it taxes the assets of the deceased. The UK is one of a small number of countries that tax the estate and consider the total value, not how the assets will be distributed. Denmark and the US also take a similar approach.

In many other countries, rather than taxing the estate, the recipient is taxed. So, an IHT bill would consider the gains each recipient has made and their personal circumstances.

In a 2023 report, the Institute for Fiscal Studies stated that taxing recipients and considering their wealth would be “the most appropriate way of taxing inheritances”, if IHT aims to reduce the effect of inherited wealth on inequalities. It notes this would allow a “transfer of £500,000 to a millionaire to be taxed differently from a transfer of £500,000 from the same estate to someone who is poor”.

The majority of countries favour a progressive Inheritance Tax rate

Again, the UK is an outlier by having a flat rate of IHT. In 2024/25, the portion of your estate that is liable for IHT would be taxed at a standard rate of 40% in most cases.

In contrast, many other countries favour a progressive tax – where the tax rate is increased for estates that have a higher value. For example, in Denmark the IHT rate is between 15% and 25%, and in Belgium, it could range from 3% to as high as 80%.

Many other taxes in the UK are progressive. For instance, you may pay a higher rate of Income Tax on the proportion of your income that exceeds the higher- or additional-rate thresholds. So, making IHT progressive could align it with other taxes.

Contact us to talk about Inheritance Tax

If you’d like to talk about your estate’s potential IHT liability and the steps you could take to reduce the potential bill, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Inheritance Tax planning.

Did you know that a survey found that the UK consumed the equivalent of 1.77 billion bottles of wine in 2020?

Whether you’re a wine connoisseur or are looking to improve your knowledge by visiting a region known for its exquisite wines, these incredible destinations in Europe could be perfect for you.

From the delicious amber wines of Kakheti, Georgia to the brilliant wine festivals of Plovdiv, Bulgaria, read on to discover the top five weekend getaways for wine connoisseurs.

1. Kakheti, Georgia

Georgia is often referred to as the “birthplace of wine”, thanks to its long winemaking history spanning over 8,000 years.

Kakheti is the country’s main wine-producing region. The warm climate on the eastern side of Georgia is home to their iconic native grapes, the dark red saperavi and the unique white rkatsiteli.

The region is also famous for its popular amber wines. These are made from their delicious local white grapes, which are fermented in contact with their skins and stems in a clay amphorae called “qvevri”.

The process is a UNESCO world heritage-listed tradition and is what gives these amazing wines their distinct complex profile and famous colour. On your visit, be sure to keep an eye out for the wineries who are happy to let you observe this ancient technique.

Kakheti is only an hour from Georgia’s capital city, Tbilisi. In between exploring their beautiful vineyards and enjoying the local wine, you can also visit their historic monasteries and the picturesque Tusheti National Park.

2. Setúbal, Portugal

Portugal has grown in popularity over the past few years, which means their previously underrated wines – from regions such as the Alentejo, the Douro Valley, and Vinho Verde – are starting to get the appreciation they deserve.

However, there are still some wine regions flying under the radar that you can explore.

The Setúbal Peninsula is only a 30-minute drive from Lisbon and is known for its fortified wines made with moscatel grapes. The picturesque coastal region also produces amazing dry wines, including aromatic whites made from these local grapes and bold reds from the native castelão.

Beyond tasting their delicious wines or visiting the local wineries, such as Quinta do Piloto, you can also relax on sunny beaches, enjoy delicious seafood specialities, and tour the gorgeous Castelo de Palmela.

3. Bordeaux, France

A holiday to Bordeaux has become a rite of passage for wine lovers thanks to its iconic winemaking history.

Bordeaux had already started to earn fame for its wines as far back as the first century AD when the Romans first started to plant vineyards and produce wine, and it remains one of the most popular destinations for wine tourists today.

The two most popular grapes from the area remain the cabernet sauvignon and merlot, but Bordeaux is also home to the world’s finest white wines.

For example, Chateau d’Yquem produces high-quality sweet wines from their sauternes and barsac grapes, which are exported all over the world.

Between exploring the famous Chateaus and stunning vineyards, you can also soak up the rich history of the area by exploring the ruins scattered over the region as well as enjoying a gentle cruise down the river.

4. Edinburgh, Scotland

If you fancy a staycation, why not spend a weekend exploring the incredible city of Edinburgh?

Although Scotland isn’t the ideal place to grow the grapes that make your wine, it does have a rich history of creating and distributing wine and other spirits.

Cockburns of Leith is Scotland’s oldest wine and spirits merchant. Founded in 1796, they have bottled and shipped wine and spirits across the UK and the world for over two centuries, and continue to do so today. You can visit their shop or book a wine tasting session to explore their wide variety of delicious wines.

If you’re looking for something more modern, there are also plenty of wine bars for you to explore across Edinburgh.

For naturally made wines, visit Spry for their delicious small plates, knowledgeable staff, and constantly revolving wine list. Or, if you fancy some Scottish tapas alongside your wine, enjoy a delicious experience in The Bon Vivant.

5. Plovdiv, Bulgaria

The valley of the Maritsa River is where the best winemakers grew their grape varieties 5,000 years ago, and still do to this day.

Plovdiv is a favourite destination for people searching for mouth-watering cuisine to go with their wine. Whether you choose to indulge in their gourmet cuisine or homestyle food, you can rest assured that your meal will be completely authentic and accompanied by a large wine list from the biggest wine region in Bulgaria.

Bulgaria is most famous for its ancient wine varieties. The dimyat grape produces a well-structured white wine with a sweet edge, while their mavrud grape – indigenous to the Thracian Valley – produces a spicy, full-bodied wine.

Plovdiv boasts a beautiful Old Town and a fascinating Kapana Creative District, filled with incredible restaurants and shops for you to explore. The city is also gaining popularity for its culinary festivals.

Whether you visit during The Wine and Gourmet Festival in May or The Young Wine Festival in November, you know you’ll get to experience delicious local food and drink.

There’s an abundance of unregulated financial advice available, and research suggests it could harm your security and long-term plans. Whether you receive advice through social media or follow the financial decisions of friends, you could take more risk than is appropriate or miss out on opportunities.

Read on to discover some of the potential perils of taking unregulated financial advice.

Almost 14% of Brits use social media for financial guidance

Social media has become an important part of daily life for many. Indeed, it’s estimated that in 2022, 4.59 billion people used social media worldwide. So, it’s perhaps unsurprising that a growing number of people are seeking financial advice on social media platforms.

According to a study from Capital One, 13.7% of Brits use social media as a primary resource for financial guidance. Interestingly, men were twice as likely to use social media platforms when seeking financial advice.

While social media can be informative and may contain advice from experts, the research suggests it may be more likely to harm your wealth.

In fact, almost three-quarters (74%) of people who have taken financial guidance from social media lost money or experienced an “undesired outcome”, such as harming their credit score.

Social media isn’t the only place you’ll come across unregulated financial advice either. You might also speak to friends and family, hear advice in the media, or read blogs that offer guidance. So, it can be difficult to avoid unregulated advice, but recognising when it could harm your finances may be important.

4 reasons you may choose to avoid unregulated financial advice

1. You might not know whether they’re qualified or experienced

The Capital One research found that 30% of survey participants said qualifications were a sign of trustworthiness.

The Financial Conduct Authority (FCA) requires all regulated financial advisers to have the relevant qualifications. This means you can rest assured that your finances are in safe hands.

If you choose to take advice from social media or other unregulated sources, it can be difficult to assess the qualifications and experience that the person has. Indeed, the Capital One research found that 80% of financial content on YouTube was made by someone with no qualifications.

2. You’re not protected if something goes wrong

Taking regulated financial advice means you could be protected by the FCA if something goes wrong. All regulated financial advisers will have internal complaints handling procedures and, if you need to, you can approach the regulator.

In contrast, if you’ve taken unregulated financial advice, it might be difficult to hold the individual or firm accountable or get justice if you encounter a problem. For example, you might not receive compensation if you were given inappropriate advice or mis-sold an investment.

3. The advice may not be tailored to you

Watching a quick social media video might seem like a simple way to receive financial advice, but it’s important to note it hasn’t been tailored to you. As needs and goals can vary hugely between people, a one-size-fits-all approach could lead to some acting on advice that isn’t right for them.

Similarly, a well-meaning family member might offer investment advice that suits their needs, but that doesn’t mean it’s the right solution for you. A host of factors might affect your investment decisions, from your investment time frame to the other assets you hold.

Despite this, almost 20% of people told Capital One that their friends and family are their primary source of financial information.

Working with a regulated financial adviser means you have an opportunity to talk about your aspirations, concerns and wider finances to create a plan that’s tailored to you.

4. You could increase the risk of falling victim to a scam

It can be difficult to check the credentials of online personas. So, if you’re taking advice from online sources, you could be more likely to be targeted by a scammer.

The Annual Fraud Report 2024 from UK Finance also notes that scammers are increasingly using social media to connect with victims and gather information. For example, the report states that adverts on social media are “used heavily in investment scams”.

When seeking financial advice, you can use the FCA’s Financial Services Register to find the details of legitimate, regulated firms.

Contact us to talk about your finances

As regulated financial advisers, you can have confidence in the guidance we provide. If you’d like to talk about your financial plan, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Effectively managing your finances to get the most out of your assets often means going beyond paying into a pension regularly or selecting a fund to invest through. That’s why lifestyle financial planning could help you better align your finances with the life you want to lead now and in the future.

Financial advice alone might help you understand the benefits of investing money and which opportunities may suit your financial risk profile. While this is useful, it doesn’t consider how investing could support your lifestyle goals. Lifestyle financial planning could help you bridge the gap between your finances and aspirations.

Read on to find out more.

A lifestyle financial planning conversation starts with your goals

While you might expect a financial plan to start delving into the numbers straightaway, lifestyle financial planning is as much about your goals as your assets.

So, often conversations will start with what you aspire to in the short and long term. This approach means you can start to understand why you’ve set money goals. While you might have a target for your savings, what you want to do with the money is often what drives you to diligently add to the account every month.

For example, when building a nest egg, you might be:

Planning to use it to retire early
Improving your financial security by creating a safety net
Dreaming about a once-in-a-lifetime cruise you want to take
Putting money aside to help your children or grandchildren get on the property ladder.

Not only could your goals give your financial plan a direction, but it may provide useful motivation too.

Putting money aside for a retirement that is still a decade away might feel tedious, especially if there are experiences you’d like now. Yet, if you’re looking forward to a retirement that allows you to travel more or indulge in hobbies, you might be less likely to cut your contributions.

Having a clear idea about what you’re working towards may mean you find it easier to make sacrifices now. Yet, according to an Aegon report, just 1 in 4 people have a concrete vision of the things and experiences their future self might want.

So, as part of creating a lifestyle financial plan, you might want to dedicate some time to thinking about what your goals are.

In addition to goals, you may also want to consider what you’re worried about. For example, when you consider your future, you might be concerned about how:

To pay for care costs if needed
Inflation might affect your retirement income
Your partner would cope financially if you passed away first
To pass on your wealth tax-efficiently during your lifetime or when you pass away.

Speaking about your worries as part of your financial plan might help you identify ways to put your mind at ease. For instance, if you’re worried about how the cost of care could affect your wealth and loved ones, you may decide to set money aside to cover a potential bill.

Your lifestyle goals are at the centre of your financial plan

Once your priorities are set out, it’s time to start thinking about the numbers – are your goals realistic and what steps might you need to take to reach them?

Starting with your goals means you can focus on how to use your wealth to live the life you want rather than simply looking at how to grow your assets.

Take retirement, for example. You might calculate that if you work until you’re 65, you can use your pension to create an income of £45,000 a year. But, if retiring early is what you really want, and you can retire at 55 with a lower, but still comfortable income, you might decide that building more pension wealth isn’t the right option for you.

Lifestyle financial planning could help put your wealth into perspective and allow you to see how it might be used to turn aspirations into reality.

Regular reviews could help ensure your lifestyle financial plan continues to align with your goals

During your lifetime, you’re likely to encounter obstacles, be presented with opportunities, or simply change your mind.

Your lifestyle financial plan isn’t static; it can evolve to suit your needs. Regular meetings are a vital part of ensuring your finances continue to reflect both your circumstances and aspirations.

For instance, seeing your grandchildren struggle to get on the property ladder might mean you’re keen to pass on wealth during your lifetime. If you’d previously planned to pass on wealth through an inheritance, you may benefit from reviewing how gifting could affect your wealth now and in the long term.

Knowing that you have someone to discuss your changing wishes with could give you the confidence to pursue new goals.

In the above example, calculating if you’d still have a financially comfortable retirement after providing grandchildren with a property deposit could offer you peace of mind.

Contact us to create your lifestyle financial plan

If you want to create a financial plan that considers the lifestyle you want to achieve, please contact us. We’ll help you understand the steps you may be able to take to turn your dreams into a reality.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

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August was a rollercoaster month for investors, with the global stock market experiencing significant volatility. Read on to find out what may have affected your investments.

Many market indices saw sharp falls early in August sparked by fears that the US is on track for a recession. However, investors are likely to have experienced some recovery in the weeks that followed.

On 16 August, global stock markets boasted the best week of 2024 – the MSCI main index of world stocks was up 3.5% over the week.

UK

There was positive news from the Office for National Statistics, which reported the UK economy grew by 0.6% in the second quarter of 2024. The figure lent further weight to claims that the UK is leaving the shallow recession at the end of 2023 behind.

However, the data showed that GDP per head is 0.1% lower in real terms than it was in the second quarter of 2023. This measure is often used as a broad barometer for living standards and economic wellbeing.

Despite this, the UK is set to be the third-fastest growing economy in the G7, behind only Japan and the US.

The Bank of England (BoE) also had an optimistic outlook. The Bank more than doubled its growth forecast for 2024 to 1.25%. It also decided at the start of August to cut the base interest rate for the first time since the pandemic to 5%.

Official data shows inflation increased to 2.2% in the 12 months to July 2024. It’s the first time inflation has increased since December 2023, but it wasn’t as sharp as some economists were expecting.

With chancellor Rachel Reeves set to deliver her first Budget on 30 October 2024, news that public borrowing soared could place pressure on her plans.

Public borrowing hit £3.1 billion in July 2024 – £1.8 billion more than in July 2023. Worryingly, the Office for Budget Responsibility previously estimated the government would only need to borrow £100 million. The news led to speculation that taxes will be hiked and spending plans cut to plug the black hole.

Like many other markets, the UK experienced volatility at the start of August. On 5 August, the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – fell by 2%. It did start to recover the following day with a modest 0.23% rise.

There was good news for Rolls-Royce shareholders this month. The company announced it would pay dividends for the first time since the pandemic, as underlying profit is expected to be higher than previously estimated thanks to a turnaround plan. The announcement led to shares rising by almost 10%.

Interestingly, the High Pay Centre found that FTSE 100 chief executive pay reached a record high. The median pay in 2023 was £4.19 million. For the second year, AstraZeneca chief executive Pascal Soriot topped the list with pay of £16.85 million.

Europe

The S&P Purchasing Managers’ Index (PMI) for the eurozone indicates the bloc is growing. However, Dr Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, warned it was at a “snail’s pace”.

Rubia also noted that the eurozone has benefited from several large events so far this year, including the European Football Championship in Germany, the Paris Olympics, and Taylor Swift concerts. So, a slowdown could be experienced in the coming months.

Eurostat data shows unemployment increased to 6.5% in June 2024. Rising unemployment could signal that businesses aren’t confident about the future.

Similar to the UK, European stock markets experienced volatility early in August. The Stoxx Europe 600 index tumbled 2.2% on 5 August but moved back into the red the following day.

US

US job data sparked market volatility when figures from the Bureau of Labor showed unemployment increased to 4.3% in July 2023 and only 114,000 new jobs were created – far fewer than the 175,000 economists had anticipated. Coupled with poor earnings from some key technology businesses, stock markets fell.

On 2 August, technology-focused index Nasdaq fell by around 10% from its peak amid concerns that the US may enter a recession by the end of this year. Indeed, JP Morgan believes there’s a 1 in 3 chance the US will fall into a recession in 2024.

When markets reopened on 5 August, they sunk deeper into the red, with the Dow Jones falling by 2.8%, the S&P 500 tumbling by 4.2%, and the Nasdaq declining by 6.2%.

When Wall Street started to rally on 7 August, it was technology stocks that led the way. Salesforce saw its stocks rise by 3%, while Amazon (2.5%), Apple (2.27%) and Microsoft (2.2%) all gained too. The rally wasn’t universal though – Airbnb’s shares dropped by 14% as demand fell in the US and it missed profit expectations for the second quarter of 2024.

While gains were made, the Guardian reported that an estimated $6.4 trillion (£4.88 trillion) was erased from global stock markets in the three weeks to 7 August. Goldman Sachs also warned that the stock market correction hadn’t gone far enough.

There was some good news when PMI data indicated the service sector had increased “markedly” in July 2024, which could ease some concerns about an impending recession.

Asia

US recession fears were felt around the world.

Japan’s Nikkei index fell by 5.8% on 2 August and then suffered its worst day since 1987 on 5 August when it closed more than 12% down, while the broader Topix index experienced a similar fall. The indices bounced back, with the Nikkei’s value rising by more than 10% a day later.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The study of how psychology affects financial behaviours is fascinating. Understanding the basics could improve your relationship with money and how it influences your financial decisions.

Behavioural finance looks at how psychological influences and biases affect the behaviour of investors. It aims to understand why people make certain financial choices and the effect it could have on returns.

The study argues that investors don’t always behave rationally or have self-control. Instead, your mental state and biases play a role in your decision-making.

As well as the effect it has on an individual’s wealth, behavioural finance notes that it could explain market anomalies, such as a sharp rise or fall in the value of a particular stock or even an index.

For example, one behavioural financial concept is the “emotional gap”.

The emotional gap refers to decisions based on extreme emotions. You might read a headline about how a company’s value is going to “plummet” in the newspaper. If you hold stocks with that company, it’s normal to fear or worry about what that could mean for your finances. These emotions might prompt you to sell the stock to avoid the perceived potential losses, even if that decision doesn’t align with your long-term financial plan.

If a large group of people read the same headline and also experienced fear, it could lead to the price of that company’s stock falling, even if its intrinsic value hasn’t changed.

So, how could improving your understanding of behavioural finance help you?

Awareness of behavioural finance may help you keep your emotions in check

It’s normal for your experiences to affect your emotions and decisions. Yet, when you’re investing, it could lead to you making decisions that don’t align with your goals and potentially harm your long-term plans.

Deciding to withdraw investments because you’re worried the value will fall might lead to lost returns when you look at the bigger picture.

It’s not just negative emotions that could influence your investment decisions either. You might also feel excited about an investment opportunity after you’ve read about it in the newspaper, so you proceed without fully assessing the risks or if it’s right for you.

According to an FTAdviser report, 61% of investors who take financial advice worry about short-term market movements. A similar proportion also regularly made decisions or proposals based on these concerns that “surprised” their adviser.

Being aware of financial bias could mean you’re able to keep your emotions in check.

Recognising bias could put you in a better position to evaluate information

Emotions are an important part of behavioural finance, and so is understanding how you evaluate information.

For example, anchoring is a type of bias where your view is anchored to a particular piece of data. You might hold on to this information, even if it becomes irrelevant or separate data offers a different view.

Let’s say you first see a stock listed for £50. You might become fixated on this price regardless of other factors that may affect its value when you’re deciding how to manage the investment.

Once again, these types of bias could lead to decisions that aren’t right for you.

Understanding investor behaviour could help you feel more confident about market movements

As an investor, it can be challenging to keep your nerves in check when the market is experiencing volatility. Understanding what might be driving this could help to put your mind at ease.

The market moving up and down is part of investing. Numerous factors affect the value of the market and short-term movements are normal. Yet, when you see values fall, it can still be nerve-wracking. It can make it tempting to try and time the market to minimise losses.

However, as investors, and as a result the market, can act irrationally, timing the market consistently is impossible. Rather than reducing potential losses, it could mean you miss out on returns overall. Recognising this may help you feel more confident during periods of volatility so you’re more likely to stick to your long-term investment strategy.

Historical data shows that, despite short-term movements, the long-term trend of markets is an upward one. Even after periods of recession or downturns, the market has recovered when you look at returns over years rather than days or months.

It’s important to keep in mind that investment returns cannot be guaranteed and there is a risk. However, for most investors, taking a long-term approach makes financial sense.

Working with a financial planner could reduce the effect of emotions and bias

Recognising when your emotions or biases are influencing your financial decisions can be difficult. Working with a financial planner means you have someone to turn to when creating your financial plan if you’re thinking about making changes. With the benefit of a different perspective, you can identify when you might be responding to emotions or bias in a way that might harm your long-term goals.

If you’d like to talk to us about your financial plan, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.