Lowes Magazine Issue 129

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ISSUE 129

“Celebrate endings - for they precede new beginnings.” Jonathan Huie

INSIDE TRACK

Lowes Client Competition Congratulations to Mr & Mrs N Fecitt the winner of our client competition 2023. We asked you to predict the annual percentage change, to two decimal places, in the average residential house price to November 2023. The answer was -1.1%. Mr & Mrs Fecitt guessed closest, and will Sad news We were sad to learn of the passing of one of the Lowes family, Ros Glaholm. Ros had a longstanding relationship with Lowes, first as a secretary to Ken Lowes, before he set up Lowes Financial Management, and later as a key point of contact for clients for many years as a PA within the company. Our thoughts are with her family at this difficult time. Midlife savers Recent research by Phoenix Insights revealed that 45 to 54 year olds are reprioritising their spending in order to save more, with nearly a fifth (18%) spending less money on holidays and luxury items. At the same time, 14% are increasing contributions to a workplace pension and 14% are putting more money into a personal pension. Phoenix Insights estimates that this group of people currently has £88,000 on average in retirement savings, meaning they will need to save a further £160,000 to achieve a ‘moderate’ standard of living based on thresholds set by the Pensions and Lifetime Savings Association. This would give a minimum of £23,300 income a year for a single person. The earlier we start planning for our retirement, the more our pension can grow, benefitting from years of accumulated investment. Encouraging family members to start planning for their retirement, even if it is a long way off, can significantly boost their retirement savings, helping to ensure they don’t have to make lifestyle sacrifices further down the line. therefore receive £500 of Amazon vouchers. For our 2024 client competition turn to page 11.

Rejecting robo-advice

One of our clients recently contacted us after receiving an unsolicited communication from a firm which promoted its use of robo-advice as part of its proposition. Robo-advice offers people the ability to undertake their own investments with the potential to ask for some advice when needed. This kind of service was launched around 10 years ago with much fanfare and predictions that it would take the financial advice market by storm. That has not happened. In our view, the reason is simple. Financial advice is personal, and centres around an individual’s unique needs, circumstances and goals. To understand this and develop holistic financial plans, it’s important that face to face conversations take place, and many of our clients would agree. Individuals, couples and families who come to us for advice want to have conversations with someone who can help them understand their options and help make the right decision. However, we do acknowledge the place for technology in supporting and delivering financial advice, such as research and information gathering to help ensure accuracy and efficiency. Regardless, at its core, financial advice is incredibly personal and will remain so.

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.

Blue Canyon, Taşyaran Vadisi Tabiat Parki, Turkey by Ozkan Ulucam

LOWES Issue 129 · Published January 2024

INSIDE TRACK

Dangers for younger investors in the digital age Reports show that many younger investors, 18-30, have been taken in by get rich quick/the next big thing stories on social media. This has seen them pile into investments such as crypto currencies without knowing or understanding the risks involved. What is termed ‘deep fake’ advertising also trips people up, offering ‘opportunities’ purporting to be endorsed by celebrity names – Martin Lewis has been very vocal about fake adverts using his name, for example. Online, we only see the 1-2% who have been successful with their investments and not the 98% who were not, and may have lost money. The 1-2% can be presented as the norm when in fact they are far from it. While the UK Regulator has rules in place and recently consulted further on what additional measures may be necessary, the internet is global and UK rules do not apply to overseas operators. History shows that the most consistent means for people to grow wealth is through four key actions: regular saving and investment; accumulating wealth over the long term; diversifying portfolios; and investing in assets managed professionally to help minimise risk.

Make your money work. Best bank & building society rates

Amount

Provider

Account

Gross Rate

Contact

Unrestricted instant access accounts

£5,000 +

NatWest Ulster Bank

Loyalty Saver

5.20% www.ulsterbank.co.uk

Easy access savings account Issue 67 1 Year Fixed Rate Saver 24 Months Personal Fixed Term

£1,000 - £1 million

Kent Reliance

5.11% www.kentreliance.co.uk

£10,000 - £85,000

SmartSave

5.31%

www.smartsavebank.co.uk

Fixed rate bonds

£1 - £85,000

iFast Global Bank

5.10%

www.ifastgb.com

£10,000 - £2 million Close Brothers

3 Year Fixed Rate Bond 4.60% www.closesavings.co.uk

Notes: Not to be considered an endorsement for any institution or account.

Measures of inflation - The average change in prices of goods and services over a 12 month period to December 2023 Retail Prices Index (RPI) 5.2% Consumer Prices Index (CPI) 4% Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfacts.co.uk 17/01/2024. All accounts subject to terms and conditions.

@LowesFinancial

Lowes Financial Management

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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COMMENT

FTSE 100 at 40

On the 3rd of January 2024 the FTSE 100 marked its 40th anniversary closing at 7,682 from an initial level of 1,000 in 1984. As long term investors will know, this has not been a linear rise. Stock markets reflect the sentiment of investors, who buy and sell both on news that might affect the price of companies, and the prospects they see ahead. There have been four times in the FTSE 100’s history when the index has fallen by more than a third. These were Black Monday in 1987, in 2009 following the global financial meltdown, when the Covid crisis occurred in 2020 and in the three years from the bursting of the dotcom bubble to March 2003, when the index declined by 53% from the peak to trough. The index’s high point, to date, was in February 2023 when it briefly rose above 8,000. However, sentiment around inflation and interest rates brought it back down again to the current level. This means following the index can make for a bumpy ride. It is why we prefer to utilise the expertise of professional investment managers, actively managing funds which are not tied to the companies in the index and can go where the best prospects lie. This is not to say following the index does not have a place in a portfolio. In tougher times, the larger ‘blue chip’ companies can be best placed to weather the storm. In particular, as many companies in the index are international operations, which means they derive their revenues from around the globe rather than being tied to, or reflecting, the UK economy. That said, less than a third of the companies in the index remain, or can trace their history back to the original 100 – Marks & Spencer, Prudential, Rio Tinto and NatWest are among them. It is also a reason we like the defined outcomes and protective qualities offered by structured products. Autocalls with the FTSE 100 as the underlying index on which returns are based, have performed very well for investors over the past two decades often outperforming the index by a good margin. That Lowes has been successfully investing for clients for thirteen years more than the UK’s iconic index has existed, I hope will help give our clients confidence in our ability to not only run a successful business, but also that we have the knowledge and experience to help grow and maintain their wealth through good times and bad. In this respect, while we see the positive effect that independent financial advice can have on individuals’, couples and families, on a daily basis, it is always gratifying when it is reinforced by external bodies. Studies such as that by the UK specialist think thank The International Longevity centre supported by Royal London, show that people who utilise independent financial advice personal to them achieve better financial outcomes than those that go it alone. The importance of personalisation has been further highlighted in a recent study by the Association of British Insurers, which showed that people made better financial decisions when the information they had was personalised to their individual circumstances, rather than generic, one-size-fits all.

Independent financial advice is about taking personal circumstances and finding the best solutions to deliver not only on what’s needed for clients’ financial and wealth goals but importantly, to give them support and peace of mind, especially when it is most needed. Or in other words: caring for personal finances personally. If you know someone else who could benefit from Lowes services, please do not hesitate to put them in touch. Ian H Lowes, Managing Director

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PENSIONS

Why pension plans need review

Whatever stage you are at in your pension journey, there are some key factors to take into consideration. Lowes Adviser, Barry O’Sullivan provides some insights.

Consolidating pensions Two other things to consider are whether it is worth consolidating your pensions into one, and where your pension sits within your overall financial plan. Managing multiple pensions can be very difficult and there can be a case for consolidating some pensions into one, but it does require a great deal of consideration. Consolidating can make your pension assets easier to manage. It can mean moving older pensions into a more flexible wrapper and/or one with lower costs, as well as into better investments. There are caveats to this, one of which is where a pension has built in guarantees or protected benefits which cannot be replicated in a new pension. Also, where your pension sits within your overall financial plan, notably in passing on your wealth to your beneficiaries. Until recently, pensions were considered to sit alongside the state pension as the main source of income in later years. For many people that will still remain the case. However, for anyone who will have sufficient income from some or most of their pensions, or their other investments, the pension freedoms rules provide the option to pass on a pension to their beneficiaries outside of their estate when it comes to inheritance tax. This is tax free if the benefactor dies before age 75 and at the beneficiaries’ marginal rate of tax after age 75. This can make them a tax efficient way to pass on our wealth. An important point here, however, is that not all pensions have this flexible arrangement as part of their policy rules. This can apply to any personal pension taken out before 2015 when the Pensions Freedoms – including the new death benefits – became law. It is crucial to check with your pension provider to see if their rules incorporate the new legislation. Your Lowes Adviser can help with setting up and reviewing your pensions, as well as finding the best investments to help you satisfy your retirement needs.

When we set up and pay into a pension plan, as long as we keep paying in over the long term, we could be excused for thinking that our pension planning is sorted. But that can be far from the case. First, it is estimated that most people will accumulate several pensions, up to 11 according to the Association of British Insurers, before they retire. From final salary pensions, personal pensions to self invested personal pensions (SIPPs), knowing where our pensions are, the policy numbers and how much they are worth is essential when planning our retirement. We also need to keep in mind and review where our plans are invested. Pensions are tax wrappers, inside which we will hold the investments that we want to grow over time to give us the income we need in retirement. Just as when we invest outside of a pension, we need to consider what risk we are prepared to take with our money, and invest accordingly. Final salary pensions are usually managed on your behalf by the fund’s pension manager. Personal pensions usually offer a range of funds, including default funds, from which you can choose. But these can be limited. A self invested personal pension, as the name implies, allows you to select the funds you want to put in your pension, which you can manage or let an investment professional such as your independent financial adviser do so. Ensuring our investments continue to meet our risk profile throughout our pension journey is essential. This can be especially important as we approach retirement, when usually we want to reduce our risk to maintain the gains we have accrued over the years. We also need to have in mind the kind of lifestyle we want in retirement and set our pension investments to help us achieve that goal. This means reviewing our pension pot(s) at regular intervals. Planning is the only way to know how much you need, how much to save, and how to make the most of what you have when it comes to retirement.

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PENSIONS

Tax free cash – take it or leave it?

The effect of taking the lump sum on income for the rest of your life. Reducing investment growth prospects and affecting pension pot values and

At retirement, we can take up to 25% of our overall pension pot(s) as, what is often termed, ‘tax free cash’ or a ‘tax free lump sum’. This is because the 25% is not subject to income tax, whereas everything you take as income from your pension(s) thereafter is taxed at your marginal rate of income tax. The maximum amount that can be taken tax free, in total across all pensions held, is £268,275. This is based on 25% of the maximum lifetime allowance of £1,073,100, the cap on how much could be saved into a pension; sums over this were subject to a punitive tax charge. Although the lifetime allowance has been reduced to zero for this tax year and it is the Government’s intention to abolish it in April 2024, the maximum limit will remain at £268,275 going forward. The large lump sum can seem like a cash windfall and we can spend it as we like. Many people want to take advantage of the cash when they first retire to go on a holiday of a lifetime, pay off their mortgage, or to help family. However, there are several things to consider before taking a large chunk out of your pension pot.

1 2

projected long term growth.

Where will the money sit once outside of your pension? Although some cash savings accounts are paying more than inflation currently, that has not been the case for a long while. History shows us that stock market investments outperform savings accounts over the long run. Death benefits of a pension. Typically, money in a pension can be passed on to loved ones and other beneficiaries outside of an estate for inheritance tax purposes. So, if your estate could exceed inheritance tax thresholds, leaving more of your wealth in your pension could make sense. Money taken out of your pension passes into your estate for inheritance tax purposes. This could take your estate over the nil rate band threshold and result 3 4 How we access our pensions can affect our financial security for the rest of our lives, and will determine how much of our wealth we get to enjoy, as opposed to pay in tax. Another important point to note is that tax free cash doesn’t need to be taken in one go. It can be taken in instalments. This can be a useful tool to use for income in the early years of retirement, for example enjoying a cruise, while keeping taxable income at a lower marginal rate. When approaching retirement it is important that we understand our options and have a fuller picture around what we need to consider, especially how and when to access our pensions. Your Lowes Adviser can help, or contact us on 0191 281 8811 and we will arrange for someone to call you. in your beneficiaries paying 40% tax on it.

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PLANNING

The Tax and Pension landscape 2024

The tax and pension landscape is changing in 2024. Wealth Manager, Michael Stowe looks at what investors and savers need to do to maximise their tax and investment position this year.

for investors to benefit from the growth of a wider range of companies. No date for the change has been announced as yet. However, direct share ownership comes with its own risks of course, and ownership has to be managed, such as knowing when to buy and sell a share. We would advise investors to continue to invest via mutual funds, managed by professionals. The advantages are that mutual funds have thousands or more investors’ money to invest, meaning funds are able to access these higher cost shares as a matter of course; the fund managers’ job is finding the best companies to invest in; and they have team of researchers to help them make their decisions. If you have money to invest and have not used all your ISA allowance for the 2023-2024 tax year, make sure you invest by 5th April. Consider also, investing as early as you can in the 2024-25 tax year, rather than waiting until the end of the tax year. Earlier investment into an ISA can boost your overall returns in the long run. Changes to pensions One of the most significant changes to affect pensions has been the Chancellor’s announcement that the Lifetime Allowance (LTA), the amount that anyone can save into a pension in their lifetime, will be abolished from April 2024. The lifetime allowance was £1,073,100, with the maximum amount of pensions tax-free cash someone can build up in their lifetime usually limited to 25% of this – £268,275. If any payments were made above this lifetime allowance and then withdrawn, they were taxed by HMRC at either 25% if taken as income, or 55% if taken as a lump sum.

This year we can expect some significant changes to the financial landscape, not least due to the announcements around tax and pensions made in both the 2023 March Budget and the Autumn Statement. How Lowes clients will be impacted will depend on individual circumstances, but nearly everyone will be affected in some way. Here are the major changes of which to be aware. Changes affecting investing Standard and sound advice when building our wealth is to ensure that we take full advantage of the tax allowances and exemptions that we have available to us. The ISA allowance of £20,000 a year is the first that springs to mind. Money invested into an ISA is free of income tax and capital gains tax - although it does form part of the estate for inheritance tax purposes. Currently, savers have a total allowance of up to £20,000 per year. This can be placed into a cash ISA and/or a stocks and shares ISA, but not more than one of each. The Lifetime ISA has a £4,000 limit per annum. From April, this changes. Savers will be able to subscribe to multiple ISAs of the same type and will be allowed to partially transfer funds between different providers. This can help with diversifying portfolios, particularly for stocks and shares ISAs. In the Autumn Statement the Chancellor announced the intention to enable fractional share ownership within the ISA wrapper. Currently, HMRC only allows investors to hold a full share within an ISA. But with some shares costing several hundred or even thousands of pounds to own, the opportunity to invest in fractions of shares opens the doors

Contined...

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PLANNING

inheritance tax purposes; and thirdly, pensions can be passed on to beneficiaries on death, either tax free or at the marginal rate of tax. In addition, any unused annual allowance from the previous three years can be carried forward. This means as much as £180,000 can be paid into a pension on or before 5th April 2024. If the individual has enough taxable earnings and remaining allowance available. A further change affecting the 2023-24 tax year, was the increase in the Money Purchase Annual Allowance. This restricted the amount that could be paid into a pension if the pension holder had withdrawn money from the pension. This was affecting people who had accessed their pension during the Covid pandemic or in the cost of living crisis and wanted to start paying back into their pension. The limit had been £4,000 but was increased to £10,000. Anyone who has accessed a pension and now wants to put money back in before the end of the tax year, can do so to that limit of £10,000. Good tax planning will always include maximising pensions contributions. Tax changes Two tax changes to highlight before the end of the tax year are in respect of dividend tax and capital gains tax. From 6th April, the dividend allowance, the amount an individual can keep free of tax from dividend payments is reducing from £1,000 to £500. This will affect anyone with taxable dividend income above £500, who will pay 8.75% if a basic rate taxpayer, 33.75% if a higher rate taxpayer and 39.35% if an additional rate taxpayer. The capital gains tax allowance is also being cut from 6th April 2024. This will halve the exemption from the current £6,000 to £3,000. Basic rate taxpayers pay 10% on eligible gains except for residential property which is charged at 18% (that is not their own home); higher and additional rate taxpayers pay 20% and 28% on residential property. If you have considerable assets you wish to dispose of which will attract CGT, it could be worthwhile selling them before the end of the tax year to benefit from the current £6,000 exemption rate. Finally, many tax reliefs/allowances have been frozen, which means more people will start to be drawn into paying more or higher rates of tax. This particularly affects income tax – it is estimated that as a result of the freezing of income tax rates, another three million more people will be paying higher rate tax by 2029. HMRC’s tax take from inheritance tax keeps on rising, netting the Treasury around £158 million a week. In November 2023, HMRC reported that £4.6 billion was collected from inheritance tax receipts in the first seven months of the year – £0.5 billion higher than the same period in 2022. But the inheritance tax nil rate band and residential nil rate band are now frozen until at least April 2028, which will draw even more people into the inheritance tax spotlight. It is ever more important, therefore, that careful estate planning is put in place to mitigate against unnecessary inheritance tax payments. If you are affected by any of these issues, your Lowes Adviser can help. Call us on 0191 281 8811 and we will arrange for an Adviser to contact you.

Contined...

The lifetime allowance will be fully removed from the pension tax rules from 6th April. This means people can continue to pay into their pension – subject to the annual allowance (see below) – without fear of facing potentially large tax bills in the future. However, the maximum tax free lump sum will remain at £268,275. It also means individuals will be able to take as much income as they want from their pension, although they will still be subject to income tax, and checks will only be made on lump sums taken. Two main new allowances are being created to facilitate this: • An individual ‘lump sum allowance’ set at £268,275 (25% of the current £1,073,100 lifetime allowance) – measuring the tax-free cash taken over someone’s lifetime. • An individual ‘lump sum and death benefit allowance’ set at £1,073,100 – which will include any tax-free lump sums someone takes while alive, plus any serious ill health lump sum and lump sums paid out when they die. There will be a third allowance – an overseas transfer allowance – also set at £1,073,100, measuring the value of pension benefits transferred to overseas pension schemes. Anyone who exceeds any of these allowances will see the excess taxed in the same way as income. Annual allowance In the 2023 Budget, the maximum amount anyone could save into a pension was increased from £40,000 to £60,000. Pensions offer significant tax advantages, firstly in that tax relief is given on cash paid in at the individual’s marginal rate of tax; secondly, pensions fall outside a person’s estate for

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How trusts can help when estate planning

Lowes Adviser, Chris Large, considers the use of trusts; where they are applicable and how they can help in estate planning and the transfer of family wealth.

When we are looking at passing on family wealth tax efficiently, one of the main ways to do so is by giving the money away. But often we want to retain some control over the money while also avoiding the rule that keeps that wealth as part of an estate for seven years. Trusts are an effective way to do this and have been used in estate planning for many years. There are various types of trust available and depending on the trust, money can be passed between family members with the trust creator retaining some control over the assets. So, what are the main benefits of setting up a trust? Estate planning: A trust can be a particularly useful tool for estate planning, allowing individuals to manage and distribute their assets according to their wishes, as well as potentially reducing inheritance tax liabilities. Asset protection: Trusts provide a level of protection for assets, safeguarding them from certain legal claims, creditors, or other potential risks. This can be particularly beneficial for protecting family wealth. Probate avoidance: Assets held in a trust typically avoid the probate process, enabling a more efficient and private transfer of wealth to beneficiaries. This can save time and costs that come with probate proceedings. Controlling asset distribution: When setting up a trust, specific instructions can be given on how and when assets are distributed to beneficiaries. This level of control can help ensure that assets are used responsibly and for the intended purposes, and are not frittered away. Privacy: Trusts offer a level of privacy, because they are not subject to public probate proceedings. It is important to note, the effectiveness of a trust depends on various factors, including individual circumstances, types of assets involved, and the specific goals of the person creating the trust. Seeking professional advice is crucial when considering the use of trusts in estate planning, to ensure the right trust is used and to avoid the pitfalls along the way.

Types of trust The main types of trust are: • bare trusts • discretionary trusts • mixed trusts • settlor-interested trusts

• interest in possession trusts • accumulation trusts • non-resident trusts

Why we should plan for long term care Latest research from retirement product provider, Just Group, shows that more than three quarters (76%) of over 45s say that they have not thought about care, planned for care or spoken to their family about it. Yet around two thirds of the same group (66%) say they don’t want to go into a residential care home, while 65% would be happy for carers to come into their home and just over half (51%) don’t want their children to become their care givers. The research also found that those with experience of finding a care home for a loved one with support from an adviser were nearly four times more likely to subsequently make their own plans for later life care than those who had made arrangements without adviser help. This was prompted in part by the realisation of how difficult it is to organise care, as well as how expensive it can be. The Government announced it was making changes to the social care system in England back in 2021. These included a social care cap: limiting the cost of personal care to £86,000 per person over a lifetime. The changes were due to come in from October 2023, but this has now been pushed back to October 2025. Financial support for long term care is a can that has been kicked down the road by the Government on several occasions. Therefore, it is important that we plan for the potential need for long term care as part of our retirement planning. Each type of trust is taxed differently and careful consideration must be given to which one is used if the right goals are to be achieved.

Lowes.co.uk

PLANNING

How we help our clients

Financial Planner, Chris Brown explains why we should forecast how our estates may change over time and what effect that may have on our financial planning.

‘Change is inevitable’, as they say, and this most definitely applies to financial services, personal investment and saving. As we go through life, our financial situation can be affected by the decisions we take, as well as external factors over which we have little or no control – births, deaths, marriages and stock market events, all play into the mix. It is important that not only do we regularly review our current financial situation, but we also plan for our future wealth. It is particularly paramount when we are estate planning to have an eye on the medium to long term too. Over our lifetime, as we grow and use our wealth, the value of our estate will change. For the majority of people, the main assets we gain in a lifetime tend to be property and pensions. While the property market may have experienced a slowdown recently, over the long term, property prices have tended to rise, meaning the value of our homes as assets keep rising. Through our working life we aim to increase the value of our pension pot, but in retirement, when we start to draw income from our pensions, the value of the pension pot will diminish. In terms of our investments and savings, we should consider where, if we act wisely and with proper advice, our wealth might be in 10, 20 or 30 years time? Bearing this in mind the importance of estate planning becomes clear. As our property and investment assets rise, they could see the value of our estate pushed into the inheritance tax bracket. HMRC’s ever increasing inheritance tax receipts would suggest this is happening. As we draw income from our pensions, we need to know that we will not run out of money later in life. We also need to factor in potential life events, such as the need for later life care. Some of us inherit wealth; how might that change our financial and tax situation? Future events cannot be guaranteed of course, so it is

important that we review our plans on what we know now. Making estate planning part of our overall financial plan means we can look ahead and be better prepared to manage events when they occur. Another point to consider is ensuring our wealth goes where we want it to. Making a will and keeping it updated, should be part of our overall financial planning. We can help you better understand how your plans and decisions could affect the value of your estate over time, and to create an effective plan that suits your individual circumstances. If you would like to know more, please talk to your Lowes Adviser or call 0191 281 8811 and we will arrange for an adviser to call you. Calculating the value of your assets and estate What are you worth and what does that mean for passing on wealth and inheritance tax? By bringing your assets together to calculate the value of your estate you can plan better for the future. A good place to begin is by listing your assets, along with their value, starting with the most valuable. Among your largest assets could be: Property – our homes have been rising in value for decades, potentially pushing us into the inheritance tax bracket. Pensions – while sitting outside our estate for tax purposes, whether we use our pensions as income or as a way to pass our wealth down to future generations, will affect our estate planning. Investments – regular investment, even within a tax efficient wrapper, forms part of our estate for inheritance tax purposes. Savings – cash savings, likewise, are part of our estate – even those held by the Treasury, such as premium bonds. Other: This could include any other assets of value, such as art and antiques.

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INVESTMENT

The importance of independent advice when investing

Lowes has always held the belief that great financial advice requires the research and analysis of an independent investment team. While a large proportion of the industry has gone down the route of restricting investment choice to a certain group of companies or a panel of investments, we believe this inhibits the investment success that is achievable. Our ability to look across the entire investment market means we can ensure our clients’ investments are placed where we believe they can best grow, maintain and protect our clients’ wealth. Our investment team spend their days researching, monitoring and analysing the markets and the available investments. Primarily we use actively managed mutual funds, because through experience, we believe professionally managed funds which allow the fund manager to seek out the best opportunities and avoid the areas of weakness, are most suited to our clients’ portfolios. We do use some index tracking funds, which aim to mirror an index like the FTSE Lowes client competition 2024 Our client competition for 2024 focusses on the UK domestic market. We want your predictions on where the Bank of England interest/base rate, the rate of inflation (CPI) and the UK GDP figures will be in December 2024. We start the year with market predictions that both the Bank of England interest/base rate and the rate of inflation will come down during 2024. The question is, will they and if so, by how much? UK Gross Domestic Product (GDP) figures have been thwarting commentator expectations of late and with talk of a potential recession in 2024, how might the UK’s performance be affected? Here is your task – predict the following figures as published by the relevant authorities in December 2024: a) The Bank of England interest/base rate – to two decimal places b) The inflation rate (CPI) – to one decimal place c) The UK GDP figure – to two decimal places We have provided data on each of these figures over the past year to help you with your predictions. The person who successfully predicts or is closest to all three figures when all the figures are available in December 2024 will win £500 of Amazon vouchers. In the unlikely event of a tie, the prize will be split between the winners.

100. Also, Lowes is recognised as an industry expert on structured products and the opportunities these offer our clients. Many of the successes achieved by our clients through investing in structured products have been missed or simply are unknown to other investors because their advisers won’t put in the time to research them. Our investment expertise means managers of top funds in the market are keen to talk with us about their views of the market and their investment strategies. It has also enabled us to develop our own funds in areas we believe offer long term opportunities for our clients - such as the Lowes UK Defined Strategy Fund and MI Diversified Strategy Fund - and work with product providers to create and develop structured products - changing the face of the structured product market along the way. Our investment team of six is not large, but it is very experienced and highly respected by fund managers and the industry in general. The team members have 70 years experience between them. It is also an award winning team, most recently winning the Investment Adviser of the Year at the ILP Moneyfacts Awards.

Data for CPI, interest rates and UK GDP for 12 months to 30th November 2023.

UK GDP 2023 (GDP figures are published 2 months in arrears) Source: ONS /Bank of England

Bank of England Interest rates Jan – Nov 2023

Inflation (CPI)

Nov Oct Sep Aug Jun May Apr Mar Feb Jan Jul

3.9 4.6 6.7 6.7 6.8 7.9 8.7 8.7 10.1

Nov Oct Sept Aug Jun May Apr Mar Feb Jan Jul

5.25 Nov

0.30 -0.28

5.25

Oct

5.25 Sep 5.25 Aug

0.19 0.12

5.00

Jul

-0.58

5.00 Jun 4.50 May

0.73

-0.22 0.23 -0.31

4.25 4.25

Apr Mar

10.4

4.00 Feb 3.50 Jan

0.15

10.1 0.52 To enter, please visit www.lowes.co.uk/client-comp or use the tear-out card included with this magazine and send it to: FREEPOST LOWES FINANCIAL MANAGEMENT . No further address is required.

Lowes.co.uk

INVESTMENT

Structured product maturities The table shows the structured products most commonly held by Lowes clients, which matured in the final quarter of 2023. Twelve of those maturing products were designed in co-operation with Lowes, or exclusively for Lowes clients*.

Nine different banks (out of an available market of 10) were used as counterparties amongst the 16 products, offering investors a wide spread of counterparty risk. Lowes expertise in the structured product market enables us to work with a range of providers, enabling us to offer these exclusive products to our clients.

Counterparty

Maturity date 04/10/2023 04/10/2023 06/10/2023 16/10/2023 18/10/2023 30/10/2023 06/11/2023 07/11/2023 27/11/2023 30/11/2023 18/12/2023 18/12/2023 18/12/2023 18/12/2023 18/12/2023 20/12/2023

Term (years)

Gain (%)

Goldman Sachs Goldman Sachs

4 4 6 2 2 2 2 6 2 2 3 2 2 2 2 2

32.8

* * * * * * * * *

43.76

Natixis

Société Générale Goldman Sachs Morgan Stanley Credit Agricole

14 14

17.5

BNP Paribas

Société Générale

15 14 21

Citigroup

Morgan Stanley Morgan Stanley Morgan Stanley

15.6 14.3

Citigroup Citigroup

* * *

17.7 14.6

Credit Agricole

* Developed in cooperation with Lowes or exclusive for Lowes clients. Adviser and intermediation fees apply. All utilised FTSE 100 or its very close ‘cousin’ the FTSE CSDI as underlying measure and all outperformed the performance of the respective index.

Annual Performance Review 2023 Lowes’ annual report on the structured product market will be available shortly to download from Lowes.co.uk/spreview Produced by our investment team, the Structured Product Annual Performance Review will cover all products distributed via the intermediary market. It will provide valuable insight into how structured products performed overall in 2023, as well as detailing the performance

of ‘Preferred’ Plans selected by the Lowes Structured Products department. The report is the result of our dedicated structured products team monitoring the market throughout 2023. As recognised experts on the structured product market, our annual report is eagerly anticipated by investors and investment managers and analysts alike, who want to know more about the market and/or as part of their investment research.

Lowes.co.uk

SPOTLIGHT

Rob Quigley joined Lowes just over two years ago having started as a trainee financial adviser in 2018, and quickly working his way up to becoming a qualified adviser, helping people with their financial planning. His road into financial advice followed time in the recruitment industry. “A career in recruitment can be rewarding,” Rob says, “but I was going home every evening feeling like something major was missing. I realised I was lacking a passion for the role. “My father works in the advice profession and although I had steered away from doing what my dad did, as you do, because I knew what financial advice was and what it meant to the people who received it, I found myself drawn to become a financial adviser.” He started as a trainee adviser – “doing the research and analytics and writing the client reports” – but by 2019 he was advising clients. Spotlight on Lowes people

His first role with Lowes was within the client servicing team. “What I like about Lowes is that we are helping a range of people, not just the very wealthy but also ordinary people who have realised the value of advice. They have come to us to help them to grow their money over the years, and to help them achieve their goals, such as giving them a decent retirement. “It is very gratifying as an adviser to be able to sit down with a client, go through the numbers and show them that because of their foresight in saving and investing, they can retire with a healthy retirement pot – or even better, earlier than they expected.” But one of the most satisfying cases he has dealt with, Rob says, was when he was in the client servicing team, helping a client who had unexpectedly fallen on hard times realise he could claim benefits to improve his financial situation. “The gentleman did not feel he was entitled to help from the state system. I was able to show him what he was entitled to and point him in the right direction to claim it. His was a very unusual situation and I was pleased to be able to help him.” Recently, clients have been concerned about the performance of the markets, Rob says. “It’s not typical of market cycles, in that normally when a market fall is experienced, it is temporary and the markets recover within a relatively short period of time. But since the invasion of Ukraine by Russia, and on the back of the issues created by the pandemic, we have seen a longer period of stock market volatility, which has subdued returns. This, alongside higher inflation and rises in interest rates, have combined to create a perfect storm of negative impacts on investors’ wealth. “Biting the bullet for six months is do-able, but over two years it can be harder hitting and as advisers we appreciate that. “This is when having carefully managed investment portfolios is essential. With the Lowes investment team supporting us, Lowes portfolios have been performing well, but when markets and investments in general are atypical, we have to expect some choppy waters. “Most Lowes clients will know that this is how the markets work and historically, they do rise again. It’s a matter of having patience and looking to the long term. I’d say most clients understand this and are quite stoic in their view. When markets turn and start heading upwards again, we will all feel a lot better.”

Lowes.co.uk

DOUG’S DIGEST

Artificially inflated?

technologies which will no doubt be big things in the future, but we are now several years beyond their initial arrival. After the initial hype and excitement died down, it became apparent each time that things would not be happening as quick as everyone hoped. Personally, I think the same is true for Artificial Intelligence. It clearly has a huge potential to transform our lives on many levels. News stories about AI systems diagnosing illnesses as well as doctors, and helping find new medicines all show the possibilities that are there. These are specific, focused areas however, and as seen with driverless vehicles, developing a complex system which can deal with all eventualities in the real world is, well, complex. Of course, no-one knows how AI will play out, but history has shown us that once the initial excitement dies away, we can expect to see the early investors taking their profits, leading to those same share prices which have surged ahead falling back. At that point the concentration risk of those seven companies making up such a large proportion of the index will come to the fore, with the returns of the index, and any passive investments linked to that index, being dragged down by those seven, even if the other 493 perform well. There is also already some pushback from people worried about control being given to computer systems, and the potential loss of jobs which would arise as AI proves to be able to perform some roles more reliably and of course, at a lower cost. These societal concerns will not stop the development and introduction of AI, but it will inevitably slow it down. There will certainly come a time when significant elements of my job, as with many others, can be performed by a machine. As a test, I did ask ChatGPT to write an article about Artificial Intelligence and investing, and although at first glance the text it produced appeared well written and readable, in some parts it was inaccurate. None of it made it into this final version, but I will leave it up to you to decide if that was a good thing or not!

As 2023 came to a close, I was not surprised to see that Collins Dictionary declared “AI” as their word of the year. Artificial Intelligence was definitely the hot topic of 2023, with the popularity of ChatGPT, the UK hosting a global conference on the future of AI, and it even being the subject of Ian Lowes’ Comment in issue 126 of this magazine. Needless to say, AI was also a hot topic in the investment arena. A lot of the early, application specific research is being done by private firms, however, making it difficult for most investors to gain access. This has led to a focus on a small number of large companies with either an exposure to the field of Artificial Intelligence themselves, such as Alphabet (Google) and Meta (Facebook), or those seen as benefitting from the rise of Artificial Intelligence, such as the chip manufacturer NVIDIA. This focus in itself has led to a new term – the “Magnificent Seven” – being Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla. (See fig 1.) The interest in these companies as a way of gaining exposure to AI saw them perform well over the last year. As can be seen in the chart, their individual performance eclipsed the performance of the rest of the index, especially when you bear in mind that these seven companies make up around a third of the S&P 500 index as a whole. (See fig 2.) Let’s just consider that for a moment. Around a third of the S&P 500 index, an index which, as its name suggests, contains 500 companies, is concentrated in just 7 of those 500. So, anyone investing passively in an index tracker will have a third of their returns based on the fortunes of those seven firms. It would have served them very well over the last twelve months, but do they realise that their investment is largely based on such a small pool of companies? Those of us who have been around for a while have seen similar situations before. The biggest, of course, was the dot.com boom of 1995-2000, where anything linked to the internet was seen as a sure-fire winner. On a smaller scale, it is not that long ago since driverless cars would be the next big thing, and that was followed by 3D printing. They are both

Fig 1. Share Price Growth 2023

Fig 2. S&P 500 Composition by Weight

300%

Aphabet 4.70% Amazon 4.40%

250%

Apple 8.40%

200%

Meta 2.40%

150%

Microsoft 7.70%

100%

NVIDIA 3.40%

50%

Percentage growth in USD

Tesla 2.20%

Other 66.80%