Lowes Magazine Issue 128

ISSUE 128

“Embrace the seasons and cycles of your life. There is magic in change” Bronnie Ware

INSIDE TRACK

Realistic retirement expectations

Recent research by retirement specialist, Royal London found that 38% of people under 35 plan to retire by age 60, yet 73% admitted they are unsure how much money they will need to sustain their goal. Stopping work by age 60 would require saving enough to cover three decades or longer in retirement. According to benchmarks set by the Pensions and Lifetime Savings Association, currently a single person will need around £13,000 a year to achieve the minimum living standard, £23,000 a year for a moderate existence and £37,000 a year for a comfortable standard of living, excluding housing costs. Add inflation into the mix and those figures grow year on year. While those in their 30s have the advantage of time and investment compounding to help build their pension pots, these figures emphasise the need for strategic planning when it comes to your retirement or utilising your pension saving and investments – ideally with the help of an Independent Financial Adviser. Lowes wins Investment Adviser of the Year Lowes has added another Adviser of the Year in the 2023 ILP Moneyfacts Awards. Doug Millward, Investment Manager and Paul Milburn, Senior Investment Analyst, (both pictured centre) received the award on behalf of Lowes at the ceremony in London. The award win is not just a testament to the independent investment advice which Lowes provides but to the culture and hard work of everyone in the company. award win to our growing tally, having been named Investment

Daunting cost of university education Although the cost of putting children through university is growing ever more daunting, over half (52%) of parents surveyed by the Association of Investment Companies consider this to be their top priority when it comes to helping their children out financially. This is far greater than the 31% who prioritise financially helping their child on to the housing ladder. More than half (54%) of current or prospective university students surveyed, said the cost had made them consider not going to university. Many put money into deposit accounts when saving for their children’s futures, but with inflation still markedly higher than the best interest bearing cash accounts, it simply isn’t going to be enough. With a five to ten year horizon, we believe the long term growth potential of a diversified portfolio of investments has a better chance of delivering on this financial goal. There are greater risks involved with investing over cash saving, which must be considered, and this is where a qualified financial adviser can help.

The content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

Amsterdam, Netherlands in Autumn Photo: Shutterstock

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LOWES Issue 128 · Published October 2023

INSIDE TRACK

Fraudsters target victims over age 65

Fraud victims over the age of 65 in the UK have lost over £1.7 billion over the past four years, Action Fraud data shows. A Freedom of Information request by the Liberal Democrats highlighted the level of fraud occurring among this demographic, with more than 212,000 cases of fraud having been logged since the beginning of 2019. The average loss per victim over 65 is £8,314, making them valuable enough to be seen by fraudsters as prime targets. We urge you to be vigilant if contacted by anyone out of the blue offering a too good to be true deal, who tries to get personal information from you, or wants you to move money between accounts, by phone call, text or email. Bona fide organisations stress that they will never do this. More information on the types of fraud to be aware of can be found on the Action Fraud website: www.actionfraud.police.uk

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£1,000 - £85,000 £1,000 - £85,000

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Shawbrook

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Ahli United Bank

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£1,000 - £1,000,000 £1,000 - £500,000

Cynergy Bank 2 Year Fixed Rate Bond 5.95% www.cynergybank.co.uk

Fixed rate bonds

JN Bank

3 Year Fixed Rate Bond 5.97%

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Notes: Not to be considered an endorsement for any institution or account. 1 Minimum withdrawal of £500.

Measures of inflation - The average change in prices of goods and services over a 12 month period to September 2023 Retail Prices Index (RPI) 8.9% Consumer Prices Index (CPI) 6.7% Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfactscompare.co.uk 18/10/2023. All accounts subject to terms and conditions.

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If you would like to receive further information on any of the subjects featured in this issue please call: 0191 281 8811, fax: 0191 281 8365, e-mail: client@Lowes.co.uk, or write to us at: Freepost LOWES FINANCIAL MANAGEMENT. Lowes ® Financial Management Limited. Registered in England No: 1115681. Authorised and Regulated by the Financial Conduct Authority.

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3

COMMENT

Point of focus

When establishing Amazon, founder Jeff Bezos had a single point of focus. He wanted a company with: ‘A culture and an operating model that puts the customer at the center of everything Amazon does.’ Bill Gates when he founded Microsoft, had a similar focus, to put a computer on every desk and in every home. It’s having overarching drivers like these that make great entrepreneurs and great businesses stand out and achieve success. While Lowes is a far cry from the size of Amazon or Microsoft, over our 50 years we have held to the same principle. We ask: ‘Is this right for our clients?’ We believe only by asking that question in relation to everything we do, will we do right by our clients and continue to be the kind of business we want to be. It was the principle set for Lowes by my father, Ken Lowes, when he established the company. It is why Lowes has always been independent within the market, which means we can use our knowledge and experience to find the very best products and investments to help build and maintain our clients’ wealth. It is also an approach which has seen us win various accolades over the years and I am delighted to be able to tell you that Lowes has once again been named Investment Adviser of the Year in the annual Investment Life & Pensions Moneyfacts Awards. This is one of several awards Lowes has won in recent years and the trophy will sit alongside others in the reception at Fernwood House. In addition, I am very pleased that we have been named in the Financial Times Adviser Top 100 Advisers 2023. In the wider market, a significant winner over the past year is computer chip manufacturer Nvidia – which has seen its share price double – twice! Its meteoric rise is part of the artificial intelligence (AI) boom. Nvidia’s market was traditionally for graphics-heavy video games. Then researchers in the field of Artificial Intelligence found its products could handle powerful new algorithms that were leading to breakthroughs in AI, and the company’s market changed overnight. A huge surge in demand for its products saw Nvidia capitalise on the opportunity and it now produces a range of the most technologically advanced chips which sell for tens of thousands of dollars – and you need quite a few of them to maximise their potential. The applications that the next generation of these chips are going to run will be part of an evolution that will change the world as we know it. But there is still a long way to go. Throughout the year we have been keeping a watchful eye on developments and I have seen AI applications from some big names which are jaw dropping – in their catastrophic failure, spouting fundamentally incorrect information yet with a sense of confident authority! On the other hand, I have also seen AI processes which, if widely repeatable, represent the start of an evolution that will change every aspect of our lives.

The potential for exponential change means the AI race is well and truly on and while Nvidia is reaping huge rewards at present, we expect it won’t be long before its dominant position is challenged. We retain a watching brief on the market; where it is headed, and which companies are likely to win out long term. Whoever they are, there is no doubt in my mind that having a point of focus will be a significant driver in their success. Ian H Lowes, Managing Director

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PENSIONS

Pensions Lifetime Allowance and protection

Expect to pay more tax on your savings

In the past, the Lifetime Allowance, the amount an individual could pay into their pension in their lifetime without incurring a tax charge, was as much as £1.8million. Over the years, successive government policy changes reduced this to £1m before it increased again to £1.073million where it was frozen until 2026. When the lifetime allowance was introduced in 2006, ‘enhanced’ and ‘primary’ protection allowed pension scheme members to protect benefits over, or likely to be over, the new limit. Every time the limit was reduced HMRC introduced new protections, Fixed 2012, 2014 and 2016 and Individual 2014 and 2016, ensuring those who might breach the lower figure could protect the higher amount. Now that the penalty for exceeding the lifetime allowances has been reduced to zero and the allowance is proposed to be abolished from April 2024, the question is, can those with these protections start to pay into a pension again without losing them? Anyone who registered for protection by 15 March 2023 (and who didn’t invalidate or revoke it before 6 April 2023) cannot lose their protection. They can now pay into an existing pension again, transfer pensions and start new arrangements without being worried about invalidating the protection. However, those who registered for protection after 15 March 2023 can still lose their protection, as the old rules continue to apply in these cases. For anyone who has already accessed their pension, their annual allowance for money purchase pension contributions is £10,000 per annum. High earners also may have their annual allowance tapered to between £60,000 and £100,000. The annual allowance maximum contribution for the 2023-24 tax year has been increased to £60,000. Unused allowance from the previous three years (at £40,000 each year) can also be used, which means there is a potential to pay in up to £180,000. The allowance is used up by your own, your employers and any third-party pension contributions made to your pension and also by the increase in any salary related benefits you have. If you hold one of the protections and would like to discuss contributing more to your pension, take advantage of the three year rule, or want to transfer or start a new pension, please call us on 0191 281 8811.

The Bank of England has been increasing the base rate of interest incrementally since December 2021 to curb rising inflation. While the Bank held off raising rates in September, keeping the base rate at 5.25%, there will be many people with savings now earning a decent rate of interest for the first time in the last 14 years. However, changes to the Personal Savings Allowance is likely to see increases in the amount of interest received on cash accounts, pushing more people into having to complete an annual self-assessment tax form and pay tax on their savings. For the 2023-24 tax year the Personal Savings Allowance is: £1,000 for basic rate tax payers, £500 for higher rate and £0 for additional rate payers. Any interest payments over that amount will be taxed at the individual’s marginal rate of tax. Interest which HMRC takes into account includes that from bank and building societies, investment vehicles, government or company bonds, trust funds, life annuity payments and some life insurance contracts, amongst others. For joint account holders, the interest is split equally between them. If you have £50,000 on deposit now earning say 5%, which maybe earned 1% this time last year, you stand to gain an extra £2,000 interest. Ignoring the personal savings allowance, you could be liable to an extra £400pa in tax if you remain a basic rate taxpayer or £800 if a higher rate taxpayer. One danger is that you might well have locked up your savings into the next fixed offer but now you will need to think about holding cash in a more accessible way to pay your higher tax bill. It is now more important than ever to be putting money into tax efficient savings and investment vehicles. Personal pensions have the advantage of a 25% uplift on payments made into them, through tax relief, for longer term saving. And UK savers can shelter up to £20,000 each tax year in an ISA, which are tax free for income and investment growth.

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PLANNING

Planning for the inevitable

This strategic move can reduce the tax rate from 40% to 36% meaning that the charitable act has minimal impact on your loved ones whilst disproportionally benefitting charities. Lowes Financial Management is dedicated to helping you secure a brighter future for your family and ensure that no aspect of your legacy is a burden to your loved ones, particularly at what would already be a distressing time. Let us guide you and your family through the complexities of estate planning, will preparation and probate, ensuring that your wishes are honoured, and your loved ones are well cared for during their time of need. Never hesitate to contact us or encourage family members to do so. Please call 0191 281 8811 and we will arrange for an adviser to get in touch. What is an expression of wishes? Unlike your will, an expression of wishes document is not legally binding, but instead, it provides guidance to your loved ones and those dealing with your estate and other assets on your preferred choices after your death. The enclosed expression of wishes document, once signed, should be placed on file with your will. It’s also important to discuss your wishes with your family. How to register your will? You can easily register your will, or someone can register your will on your behalf by visiting: nationalwillregister.co.uk It’s a simple process, with a fee of £30.

One of the most vital steps you can take to safeguard your family’s wellbeing is to ensure that you have a well prepared will. At Lowes, we understand that contemplating your legacy can be an emotional task, but it is a crucial one. By crafting a thoughtful will, you not only provide your loved ones with much needed peace of mind during an already distressing time, but you also pave the way for a smoother transition into the future. However, the journey doesn’t end with the creation of a will. Knowing its whereabouts and navigating the intricate world of probate can be overwhelming for your family and executors. Most people find themselves unprepared for this daunting and, at times, disproportionately expensive process. That’s where we come in. Lowes work hand in hand with a network of experienced solicitors to offer you comprehensive assistance. Beyond encouraging you to have a properly prepared and up to date will, we can provide your family with the guidance and support they need to minimise inconvenience and expenses following your passing. Whether you’ve never prepared a will or haven’t reviewed it recently, we’re here to help. Once your will is up to date, we encourage you to consider taking the extra step of recording and storing it with the National Will Register, adding an extra layer of security to your legacy. What sets us apart is our commitment to your family’s wellbeing. The expression of wishes form, enclosed within this edition of the magazine is not legally binding but serves as a request to your executors to turn to Lowes for assistance. When requested, we will diligently assess your needs and tender the work to our network of solicitors, striving to minimise fees whenever possible. We do not charge for this service. Furthermore, for estates subject to inheritance tax, the expression of wishes also presents an opportunity for your beneficiaries to consider redirecting 10% of the taxable portion to registered charities, under special rules.

If you do not currently have a will or the time has come to review your current will, please do not hesitate to get in touch. We’re here to help.

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PLANNING

Why more people value financial advice

Gershom Chan, Head of Financial Planning, considers some of the reasons for the growing demand for trusted Independent Financial Advice to help with financial and investment planning.

Managing money for life goals The cost of living crisis has also brought into sharp focus the need for people to manage their finances effectively. People looking to successfully balance their income with expenses, whilst also saving for goals such as home ownership, education or retirement, sensibly have been seeking out professional advice. Likewise, economic uncertainties have acted as a catalyst. There is plenty to contend with at the moment – volatility in stock and bond markets, the looming threat of a recession, longer term inflation issues, and interest rate rises among them. These factors have prompted a growing number of individuals to want to better understand the market conditions, evaluate their investments, and be helped in managing investment and risk within their portfolios. If this isn’t enough, geopolitical issues, such as Brexit, the war in Ukraine, and tensions between China and the US, among others, have played their part in building on the uncertainty people are feeling. Independent Financial Advice not only helps establish a financial planning strategy aligned to individual circumstances and goals, but it also ensures financial plans receive regular review and, where necessary, are adapted to the changing economic and investment landscape. Our aim is to help people make better financial decisions and have the best chance of achieving their goals and building a more secure financial future.

A combination of the rising cost of living, UK economic situation, changes to tax legislation and geopolitical issues, have been driving up demand for financial advice over recent years. With the current uncertainties in the economy and the markets, more and more people have been recognising the value of independent financial advice to help in their tax and investment strategies and deliver more surety over their long term financial goals. Tax management has always been a key reason people seek out Independent Financial Advice. The significant rise in the number of people now paying inheritance tax on their estate, has seen more families affected and with the nil rate band frozen until April 2028, the next three to four years will see more people caught in the net. In addition, frozen personal tax bands, tax allowances and exemptions will start to see more people become liable for tax in other areas. This will include some people moving into a higher rate tax band, which can have a knock-on effect on the rate at which other taxes are paid. And the lowering of the CGT exemption amount will need these tax liabilities to be managed more carefully. Pensions are another area where people can get caught out. Taking money out of a pension injudiciously could result in a jump up in tax bracket and/or if a large sum is taken, HMRC determining that sum as a regular monthly income and taxing it accordingly. Helping clients navigate their path through complicated tax and pensions legislation is where our technical teams come to the fore.

Contined...

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PLANNING

Contined...

What our clients say about us Many Lowes clients leave us reviews on . These are very public reviews which anyone can read. People can leave a comment and rate us using the star method, with one star being poor and five stars excellent. To date Lowes has received over 200 reviews, with an average of 4.9/5 stars. An accolade we are justly very proud of. Here are a few of the comments people have left on Google about Lowes. Rod Longshaw “We have been clients for over 10 years and we have yet to experience failure in the advice we have been given. We have gained wealth over this period and have grown to trust the company and our own advisor. Phones are answered promptly and courteously by a human being, and if the person we are calling is not available then the switchboard operator gets them to phone back when arranged. It’s these seemingly little attentions to detail that make for excellent ‘customer relations’. “We have no hesitation at all in recommending Lowes to others.” Ian Lawson “Year after year Lowes continue to provide sound financial advice. The recommendations for their structured product investments have so far resulted in significant returns, which is very welcome in these times of high inflation. I would highly recommend their service.” David Park “I have used Lowes for many years. They have offered excellent advice. They are trustworthy and friendly. Lowes are totally focused on customer satisfaction. I have recommended the company to friends and relatives.”

Peace of mind Over and above better management of tax and investments, one of the key motivators that I have come across for people to seek help from an Independent Financial Adviser is the peace of mind it brings with it. Clients tell me that knowing their financial planning, pension, tax and investment arrangements are being overseen and arranged by professionals, takes a weight off their shoulders. This is backed up by recent research by Royal London. The assurer found that people receiving advice feel more confident about their ability to cope. In a survey among consumers nearly half (46%) said they’re extremely or very worried about the cost of living, compared to just 21% of advised clients. Clare Moffat, Head of Technical at Royal London, summed it up nicely in my view, saying: “Having a financial adviser to actively manage a client’s wealth brings many benefits, other than just the expected financial benefits. It’s the softer skills that advisers deliver alongside advice, like reassurance and peace of mind, that bring the value of financial advice to life for clients, helping them to feel better about themselves and their finances, especially in times of crisis.” With over 50 years of helping clients under our belt, Lowes has decades of knowledge and experience, which we use on behalf of our clients to help them get through periods of uncertainty, like we are currently experiencing. If you know someone who might benefit from having Lowes at their side, please do put them in touch.

IHT tax trap HMRC’s receipts from IHT keep on rising and frozen allowances will see more and more estates become liable to the tax. The Office of Budget Responsibility has predicted that the amount collected from IHT receipts will grow from £7.2 billion for this tax year to £8.4 billion by 2027/28. We all want to look after our families and avoid paying unnecessary tax. In order to get the best possible solution in place, we recommend that clients undertaken IHT planning as early as possible. There are various ways we can help you, depending on your circumstances. These can include establishing a trust, using gift allowances and investing in vehicles that qualify for tax relief. If you’ve not done so already, please talk to your Lowes adviser.

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TAX

Dividend allowance cut creates more tax-payers

Claiming grandparents’ NI credits Working parents struggling to find affordable childcare often turn to grandparents to help care for their grandchildren. Any grandparents under state pension age that look after their grandchildren on a regular basis can apply for National Insurance (NI) credits, helping them qualify for a full state pension. Gaining valuable pension credits will boost their future retirement income. Adult childcare credits can be backdated until 6 April 2011 and the Government encourages everyone who is eligible to apply. At least 10 years’ worth of NI credits are needed to qualify for the state pension, with 35 years’ worth of credit needed to get it in full. Missing a year of NI contributions will result in a loss of 1/35th of the full rate state pension. Currently, that's equivalent to £5.82 a week or £304 a year. Claiming credits involves working parents giving up the Child Benefit credits they receive and donating them to the grandparents, but grandparents and parents must apply for them to be transferred. Lowes pension tracing service Finding a lost pension could not only make a big difference to your overall wealth but it could also give you the potential to retire earlier than you expected. To find out more about our service, please email Marketing@Lowes.co.uk or contact us on 0191 281 8811 .

More investors and company directors are being dragged into the tax net by the cut to the dividend allowance. In November 2022, the Chancellor announced that the tax free allowance for dividend income would be cut from £2,000 to £1,000, with a further reduction to £500 to be introduced in April 2024. According to HMRC’s figures, the Government is expected to take £17.6 billion from investors and company directors in the 2023-24 tax year, an uptick of more than £2 billion from the previous year. In addition, Government estimates for the dividend tax in 2022-23 have increased from £14.4 billion to £15.8 billion – providing an additional £1.4 billion for Government coffers. For any dividends over this allowance, basic rate tax payers will be charged 8.75%, higher rate 33.75% and additional rate 39.35%. The combination of the additional-rate threshold being lowered to £125,140, and the dividend tax allowance being cut, means far more people are facing tax on their dividends up to the highest rate of 39.5%. More people will be drawn into the dividend tax net in April 2024, when the allowance is cut again to £500, which could now affect those receiving modest dividend payments. Anyone brought into paying dividend tax is required to fill in a self-assessment tax return, many for the first time. The changes to the tax regime which has seen the raising of dividend tax rates, a reduction in the tax-free allowance and changes to the additional rate threshold, will have led to higher tax bills for many. If this is an issue for you, there are tax-efficient methods to help. Lowes Advisers can discuss your circumstances to see if and where they may apply.

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INVESTMENT

How we help our clients

What if the markets crash? 2022, with its economic and geo-political issues, saw the FTSE 100 index fall by around 9% from start to its lowest point during the year. Yet by the end of December it had regained the losses. With an actively managed strategy, we look for funds that don’t just follow the index but aim to find the better performing companies and avoid the negative ones, to deliver better returns for our clients over the long term. Crashes and downturns are inevitable and are part of the risk accepted when investing over saving into cash. We’d suggest no investment is considered for less than five years and taking a long term view is key to weathering a market downturn. There are no guarantees, of course, and a buy-and-hold strategy takes patience and discipline. But we have found this to be the most consistent way to obtain returns on our investments. By helping our clients understand this, and the risk and rewards of investing, we aim for them to be able to sleep easier at night, no matter what the markets are doing, knowing their investments are being looked after by professionals. Currently, another regular question we are asked is whether to keep more money in cash now deposit accounts are giving better rates of return. The fact is, inflation is still higher than the best cash account rates of return, which means the purchasing power of cash is decreasing by the difference between them. It still makes sense to hold some of your money in cash, within your portfolio and as an emergency fund, but a well- diversified, actively managed investment proposition, offers better potential for delivering on our clients’ long term financial planning aspirations.

When and where to invest are questions we often get asked, as Debbie Ramm, Financial Planner explains.

When and where is it best to invest are questions that often arise when we talk to new clients. We appreciate that taking a first step or investing more into the markets can be a daunting prospect. As to when to invest, the simple answer is that the ‘best’ time is when you are ready to invest and ideally, can do so with a long term perspective. The longer you invest the more opportunity there is for your money to grow. If you keep investing and re-invest the returns you make, then your portfolio and your wealth will accumulate over the years. Where to invest can be more complicated. There are other inevitable questions that arise, such as which investment ‘vehicle’ to use and ‘what if the markets crash?’ This is where the experience and expertise of our team has proven to be invaluable. There are thousands of investment funds available to choose from plus a myriad of other investment solutions that can be used to create portfolios. Our award-winning investment team analyse and filter most of the investment universe so our Advisers can recommend a portfolio of investments that fits with each individual client’s financial planning goals. After over 50 years of helping people get the best out of their investments, we believe actively managed funds are better positioned to deliver returns and protect capital through various market scenarios. Careful selection of funds (and fund managers) is essential, as is diversification of assets within a portfolio – the old adage of not having ‘all your eggs in one basket’. This is one reason why we also favour having structured products within a portfolio, as they provide diversification, defined outcomes and a level of capital protection.

“

This is where the experience and expertise of our team has proven to be invaluable.

”

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INVESTMENT

How our emotional biases can affect our investing

We may not be aware of it, but our emotions can affect how and where we invest. Our emotional and behavioural biases can subvert our rational thinking and impact our financial decision making. Whether investments are rising or falling, investors have a journey of emotions that, if allowed, can affect investment returns. This journey may be completely disconnected from actual stock market performance. Yet at each stage, we make trade-offs between immediate emotional comfort and long term returns. Below is a graph that typifies the investment journey of many investors, especially when investing for themselves. This graph shows the behavioural journey as stock markets rise and fall. When markets are on the rise, we feel more encouraged to invest – experiencing optimism and then excitement as we see investments going up. But this can mean we buy when the markets and prices are high. Should markets fall, our emotions can turn to denial, fear and even panic as we see the value of our portfolio and our overall wealth fall, which can also drag down our expectations. This can prompt us to sell when prices are low. Even when we know it is in the nature of stock markets to fluctuate, because we don’t know how long the upward and downward curves may last, we may take short term action based on fear or optimism.

Negativity bias: Short term market falls can worry investors, especially where they are seeing their wealth decrease. Contrarily, short term increases are not viewed with the same level of emotion. Why is this? Behavioural finance theory suggests that the pain from a loss is felt twice as much as the pleasure from a gain. Confirmation bias: This can be where we seek out information that supports an existing opinion, which increases our confidence to take a certain course of action. On the graph this might be the line between optimism and euphoria – where we look for news stories that support our view that markets will go up. Recency bias: This is where we base our decisions for the future on recent events. This often comes from information that is easily accessible and available but which can lead to poor investment choices. For example, seeing quick gains made on specific assets which lead us to think they will continue to do well. Herd mentality: This is another bias. Leaping on a bandwagon because we see others doing it. The dotcom bubble of the late 1990s is a clear example of this, where investors piled into technology stocks, and sentiment drove up stock prices beyond true valuations, until the bubble burst. Anchoring bias: This is where we make decisions by relying on a single piece of information we hear on a topic. For example, we may hear that crypto currencies are the place to invest without investigating how they work or their risks. Overconfidence bias: Where our subjective confidence overrides our objective judgement. For example, investors believing they can time the markets and investing on short term trends. Do any of these biases resonate with you? Stock markets are driven by sentiment, which is why we have to avoid these biases wherever possible and put in place a rational, long term strategy. Working with a professional financial adviser enables the creation of an investment portfolio that is specific to individual needs and financial objectives and establishes a long term investment plan to follow, regardless of the market’s movements or the latest trends. Over our 50 years of helping clients invest, our professional investment team has seen market crashes and market rallies. Investors who have won out are invariably the people who have taken professional advice which has steered them away from these behavioural biases. Let us take care of your investments so you don’t have to. There are a number of other behavioural biases that typically can affect financial decision making. Here are a few.

Euphoria

“It’s OK as I’m investing longer term”

Thrill

Anxiety

Excitement

Fear Denial

Optimism Relief

Optimism

“Everyone has been making great returns - I’d better get involved”

Desperation

Panic

Hope

Capitulation

Depression

“I’d better get out of this now”

Despondency

Source: Dynamic Planner

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11

INVESTMENT

Structured product maturities

The table shows the Q3 2023 maturing structured products most commonly held by Lowes clients. Eight of these structures were designed for our clients with our input. All were autocalls linked to the FTSE 100 or its close cousin the FTSE CSDI and all produced returns greater than the rise in the underlying indices over their investment terms.

In the interest of full transparency the quarter witnessed a high-risk, share linked plan that we had ‘Preferred’ in 2017 mature with a uncomfortable loss, tracking the decline in Vodafone share price over the term.

Counterparty

Maturity date

Term (years)

Gain (%)

Société Générale

7/7/23 17/7/23 17/7/23 17/7/23 24/7/23 26/7/23 14/8/23 29/8/23 29/8/23 4/9/23 4/9/23 18/9/23 18/9/23

2 2 2 2 2 4 2 2 2 2 2 2 2

14 14

Citigroup Citigroup

18.4 14.5

Goldman Sachs Société Générale Société Générale

14

30.6

Citigroup Barclays

13

14.5

Credit Agricole Goldman Sachs Société Générale Morgan Stanley Morgan Stanley

14 15 14 14

17.5

Adviser and intermediation fees apply.

Lowes young achiever We are delighted to announce that Helen Grieves has been awarded the Deputy President’s Young Achiever of the Year Award 2023. The award, first launched in 2022, is presented by the Insurance Institute of Newcastle upon Tyne. Helen was judged to be the outright winner, standing out from the other very strong applicants. The judges were impressed by her commitment to financial planning. She not only heads up the Lowes Academy, helping to bring new advisers into the industry, but also has an instrumental role in Lowes’ partnership with the charity RedSTART Educate, going into local schools to deliver financial workshops. On a career level, she has achieved Fellowship of the Personal Finance Society and is now an extremely passionate and client centric adviser too.

Lowes.co.uk

12

SPOTLIGHT

Chair of the Lowes Board, Jerry Hall, has a history with Lowes stretching back to 1987. “I joined the company a week before the stock market crash of that year,” he says. “It was a baptism of fire and we learned a lot from that period.” An accountant by profession, Jerry started his working life with the Inland Revenue (now HMRC) acquiring his tax qualifications, before looking outside for a role with a private practice. “Then the agency I was using called me and said I should have a conversation with the owner of an Independent Financial Advice firm, Ken Lowes. “Ken and I hit it off and I looked at what was involved in financial planning, which offered a different and far broader path than accountancy, and in particular at the ethos of Lowes and what it wanted to do for its clients, and I joined the firm and stayed for eight years.” Spotlight on Lowes people

In 1995, Jerry joined a longstanding client of Lowes, local creative company DECIDE, as Managing Director, but he has remained a non-executive of Lowes ever since. In the intervening years he has also added a large number of credentials to his name, including an MA in Enterprise Management, fellow of the Chartered Management Institute and the Chartered Governance Institute, as well as membership of the Chartered Institute of Marketing and the Institute of Consulting, among others. He is also passionate about helping to kick start and grow businesses in his native North East, including as Chair and member of the expert panel for Design Network North. All of which feeds into his role as Chair of the Lowes Board. “Non executives are an important part of any successful company,” he says. “We bring external perspectives and experience to the Board. But also, three board members are ex Lowes employees and that is important. It brings an historical context and ensures everything we do has the long-held ethos and values of Lowes very firmly in mind.” Jerry puts the success of Lowes down to its ethos and sticking to its principles. “The Lowes strapline says it all: ‘Personal finances cared for personally’. It is the culture of the firm and everyone in it. “Many Lowes clients have been with the firm for decades and having ex-Lowes staff on the Board, we’ll often hear about clients we know from our time with the firm. That makes what we do far more personal.” What also makes Lowes stand out, he says, is its long history of using innovative products and services to help serve clients. “Ken Lowes set up one of the first truly Independent Financial Advice firms and Lowes invested in the development of one of first pieces of technology for supporting the advice process,” Jerry says. “But every innovation is firmly focussed on the growth and protection of clients’ wealth. Lowes values are always paramount.” Looking to the future of Lowes, Jerry says: “We will continue being innovative and looking for the best products and services for our clients. We will use technology not just to improve business efficiencies but to help support and improve our service to clients. So many businesses are now so technology focussed I think they have lost the personal touch in the process. That is not the route Lowes will be taking. We are a people business; for us, our clients come first. Everyone here genuinely cares about doing our best for them.”

Lowes.co.uk

13

DOUG’S DIGEST

Is cash king?

class tends to produce positive returns over the following two years. There is a wide range from the 10.9% from June 1998 to the 18.2% and 18.8% achieved after July 2007 and August 2018 respectively, but it does highlight the potential for good levels of return to come from this asset class once interest rates reach their peak. It is a similar story with funds investing in corporate bonds. As an example, one of the strategic bond funds used within our portfolios currently has a yield to maturity of 9.45%. In essence, this means that if the fund manager does nothing more than let the existing bonds mature over the coming years investors could expect a return of 9.45% each year when capital growth is also taken into account. In reality the return would be less than this, as it is unlikely the fund manager could invest at equivalent rates of return in future years as at some point interest rates will fall, but it does give an indication of the potential that is available if we believe interest rates are close to their peak levels. This highlights another problem with moving to cash. Whilst the rates on offer are attractive now, at some point they will start to fall again. Since 1981, the first rate cut in the UK has come, on average, around 7 months after the last rise. That suggests that money put into a one-year deposit bond today will have to be rolled over next year when rates are potentially lower, and at that point other investment assets could also have moved on, offering a less attractive entry point then too. Like I have already said, past performance is no guide to the future and in reality no-one truly knows what will happen next. The war in Ukraine and the short-lived Truss government are two very different and recent examples of how things can change quickly and unexpectedly. Over the long term, however, history shows that equities tend to outperform cash. The Barclays Equity Gilt Study, for example, which covers data going back to the turn of the last century, shows that equities outperform cash in 76% of all five-year periods. That rises to 91% over ten years. Cash is, of course, an essential part of anyone’s portfolio, and we should always ensure that we have enough on hand to meet any emergency needs that can arise without warning, as well as providing a buffer when markets take a downturn. For those looking to the long term, however, it should only be one part of their portfolio and it is important to consider things coolly in discussion with your consultant to make sure your investment decisions are ruled by your head and not your heart.

No-one can deny that 2022 was a difficult year for investing. With most asset classes and regions falling significantly, it was hard for investors to generate positive returns over the period. After such a bruising experience it is not surprising that many are now considering moving their investments to cash, and with the interest rates on bank accounts rising over the last year, it is certainly understandable. But is it the right thing to do? The first thing to consider is that the rates on offer for cash investments are forward looking, and are a lot different from those available previously. The NS&I Guaranteed Growth Bond available this time last year only offered a rate of 1.85%, and the year before that it was down at 0.1%. If you had initially invested in an NS&I Guaranteed Growth Bond in September 2018, and rolled over the maturity every year into the Bond available at that time, your total growth to date would have been 5.93%; an annualised return of 1.16%. A positive return, and admittedly ahead of that available from UK Fixed Interest assets, but well behind equities, with the Investment Association’s (IA) UK All Companies sector average returning 8.97% over the same period, and the IA Global sector average returning 38.75%. Of course, not all investors are comfortable with the volatility that comes from investing in equities, and for those we would recommend a portfolio with a mix of assets suitable for their risk tolerance. Mixing together a combination of funds investing in equities, fixed interest bonds and alternatives such as commercial property, infrastructure and targeted absolute return funds. Fixed interest, property and infrastructure were particularly affected by rapidly rising interest rates over the last year, but again it is important to remember that we need to look forward when deciding where to invest. Rising interest rates are a hindrance for these types of assets, but falling interest rates can provide a tailwind. Although central banks may raise rates further if inflation proves to be stickier than expected, both the Federal Reserve in the US and most recently the Bank of England here in the UK have both “paused” their rate rises, to allow time to see the effect the recent rises will have. With the caveat that past performance is no guide to the future and may not be repeated, the accompanying chart shows the returns shown by the IA UK Gilt sector average, which includes funds investing across the range of fixed interest bonds issued by the UK government. The return in each case is measured from the top of the last three rate rising cycles by the Bank of England, and show that this asset

IA UK Gilts sector average - Total return after BoE’s last rate rise

25 20

15 10

5 0 -5 Percentage growth

Jun-98

Jul-07

Aug-18

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1516 17 18192021222324

Months since final rate rise

Source: FE Analytics. Total Return

Sources: Bank of England Base Rate changes – BankOfEngland.co.uk NS&I Guaranteed Growth Bond interest rates – www.nsandi.com IA Sector performance data – FE Analytics.

Lowes Financial Management and Lowes Investment Management are authorised and regulated by the Financial Conduct Authority. Visit: www.Lowes.co.uk | Call: 0191 281 8811 | Email: enquiry@Lowes.co.uk