Month: August 2024

Rachel Reeves has announced that she will delivered her first budget as Chancellor on Wednesday 30th October.

She pulled no punches in the Commons debate when she accused her predecessor of covering up a £22bn overspend in the government finances. To plug the gap, she told the Commons, money needed to be found elsewhere. That would include cancellation of some rail and road projects, including the tunnel under Stonehenge, and restricting winter fuel payments to those on pension credits or other means-tested benefits

Former Chancellor Jeremy Hunt stated this was simply an attempt to pave the way for further rate increases.

A power of attorney (POA) allows you to appoint someone you trust to make decisions on your behalf if you become unable to do so. It is a really important piece of financial planning, as it should provide continuity in the event that you are unable to make important decisions.

We’ve summarized below the key reasons for creating a POA and the main types available.

Reasons to Create a Power of Attorney

Financial Management:Ensures that your financial affairs are managed according to your wishes if you are incapacitated. This includes paying bills, managing investments, and handling property transactions.

Healthcare Decisions:Allows someone to make healthcare and personal welfare decisions for you if you are unable to do so due to illness or incapacity. This can include decisions about medical treatment, care arrangements, and end-of-life care.

Business Continuity:For business owners, a POA ensures that your business operations can continue smoothly if you are unable to oversee them. Your appointed attorney can make critical business decisions in your absence.

Legal Affairs:An attorney can handle legal matters, ensuring that your legal interests are protected even if you are not in a position to manage them yourself.

Peace of Mind:Knowing that a trusted person will make decisions on your behalf can provide significant peace of mind, both for you and your family.

Types of Power of Attorney in the UK

Lasting Power of Attorney (LPA):This is the most common form of POA in the UK, and it comes in two types:
Property and Financial Affairs LPA: Allows the attorney to manage your financial matters, such as paying bills, managing bank accounts, and buying or selling property.
Health and Welfare LPA: Allows the attorney to make decisions about your personal health and welfare, including medical treatment and living arrangements. This type only comes into effect if you lose the capacity to make these decisions yourself.
Ordinary Power of Attorney (OPA):Also known as a general power of attorney, this type is only valid while you have mental capacity. It is typically used for a specific period or purpose, such as if you are abroad for an extended period and need someone to manage your financial affairs in your absence.

Enduring Power of Attorney (EPA):EPAs were replaced by LPAs in 2007, but if an EPA was made before that date, it can still be used. EPAs cover property and financial affairs and can continue to be used if you lose mental capacity, provided they are registered with the Office of the Public Guardian.

We typically recommend applying for a Lasting Power of Attorney for both property and financial affairs, and health and welfare. The paperwork is easier and cheaper to complete than in previous years, but we would recommend taking some professional advice along the way.

We would be more than happy to discuss this with you.

When investors try to make a quick return by predicting the top or bottom of a financial market, to invest at the optimal moment, it’s often referred to as ‘timing the market’.

It sounds like a great idea, but timing the market is notoriously difficult for several reasons, even for professional fund managers. Here are the primary challenges:

1. Market Efficiency
Efficient Market Hypothesis: According to this theory all known information is already reflected in share prices. This means that predicting market movements based on public information is extremely challenging because prices adjust rapidly to new data. Take the US election, for example. US stock markets had anticipated and priced in a November Trump victory some weeks ago, based on Biden’s poor polling results. That may now be changing, but by the time November comes the amount of market reaction will probably be limited, regardless of who wins, as all outcomes will have been factored in way in advance.
High Competition: The market is filled with sophisticated investors, fund managers and institutions who analyze and act on information quickly, making it hard for any single investor to consistently outperform the market. Technology and the rapid exchange of publicly available data means nobody has any significant information advantage.
2. Unpredictability of External Factors
Economic Indicators: Variables such as GDP growth, employment rates, and inflation can impact market conditions, but their effects are often unpredictable.
Global Events: Geopolitical events, natural disasters, and pandemics can cause sudden market shifts that are difficult to foresee and time correctly.
3. Behavioral Biases
Emotional Decision-Making: Fear and greed can drive investors to make impulsive decisions, leading to buying at market peaks and selling at lows.
Overconfidence: Many investors believe they can outsmart the market, leading to frequent trading and increased transaction costs without guaranteed returns.
4. Technical Limitations
Data Overload: With vast amounts of financial data available, distinguishing meaningful signals from noise is challenging.
Latency Issues: Even minor delays in obtaining and acting on information can result in missed opportunities or unfavorable trades.
5. Transaction Costs and Taxes
High Frequency Trading Costs: Frequent trading incurs transaction fees, which can erode profits.
Tax Implications: Short-term capital gains are taxed at higher rates than long-term gains, reducing the net returns from frequent market timing.
6. Historical Evidence
Study Results: Numerous studies have shown that most investors, including professionals, fail to consistently time the market successfully.
Average Returns: The average investor tends to underperform the market due to failed attempts at timing, missing out on the best performing days which significantly contribute to long-term gains.
7. Opportunity Cost
Time in the Market: The concept that “time in the market beats timing the market” emphasizes the importance of staying invested. Long-term investment strategies have historically outperformed attempts at market timing.
A Better Strategy
Given these challenges, our own investment strategies for clients focus on long-term wealth preservation and growth. These include:

Strategic Asset Allocation: Diversifying across various asset classes to manage risk and capitalize on different market conditions.
Periodic Rebalancing: Adjusting the portfolio periodically to maintain the desired asset allocation.
Tax-Efficient Investing: Utilizing strategies like tax-loss harvesting and investing in tax-advantaged accounts to minimize tax liabilities.
Ultimately, a disciplined approach, aligned with long-term financial goals and risk tolerance, is often more effective than attempting to time the market. All the evidence points towards this being the most successful method in the long term, even if it sounds a little less exciting than trying to predict the future.