WHAT IS THE AVERAGE ANNUAL RETURN IN YOUR INVESTMENTS OVER THE LAST FEW YEARS … SAY TEN YEARS ?
This can be answered in a number of ways.
It is important to say here that Big Picture Financial Planning doesn't run its own model portfolios. We believe that our clients get better outcomes in terms of access to the markets, constant monitoring and another pair of eyes, if we partner with selected investment managers. ( maybe that will be a subject of another FAQ waiting in the wings )
Average annual returns will be different depending upon your attitude towards investment risk, your time horizon and the asset allocation of the portfolio.
Returns in a portfolio are generally driven by the equity content ( ie the amount that is invested in company shares ) with bonds being there to give a cushion to the ups and downs of the stock market. In theory if you have a high equity content in your portfolio, the more you will be exposed to the ups and downs.
This is not necessarily a bad thing. If you are making regular investments you will be buying in at different price levels. During a time of a fall in prices, you will effectively be buying more units in the fund or the portfolio for your fixed regular investment. When the fund or the portfolio goes up in value these extra units will add to your returns.
Your returns will also differ depending on whether you hold a widely diversified portfolio across different sectors, geographies and market capitalisation or hold a deeply screened portfolios with a narrower investment universe.
It is important to say here that Big Picture Financial Planning doesn't run its own model portfolios. We believe that our clients get better outcomes in terms of access to the markets, constant monitoring and another pair of eyes, if we partner with selected investment managers. ( maybe that will be a subject of another FAQ waiting in the wings )
Average annual returns will be different depending upon your attitude towards investment risk, your time horizon and the asset allocation of the portfolio.
Returns in a portfolio are generally driven by the equity content ( ie the amount that is invested in company shares ) with bonds being there to give a cushion to the ups and downs of the stock market. In theory if you have a high equity content in your portfolio, the more you will be exposed to the ups and downs.
This is not necessarily a bad thing. If you are making regular investments you will be buying in at different price levels. During a time of a fall in prices, you will effectively be buying more units in the fund or the portfolio for your fixed regular investment. When the fund or the portfolio goes up in value these extra units will add to your returns.
Your returns will also differ depending on whether you hold a widely diversified portfolio across different sectors, geographies and market capitalisation or hold a deeply screened portfolios with a narrower investment universe.
The average annual returns will also differ dependent upon which ten year period is chosen. If we include the current market volatility and work backwards over ten years, this would make the average annual returns look very different.
Over the years of experience I have met a number of advisers who chase returns because they see see their value in trying to outperform Jones & Co down the road and in doing so they are constantly open to selling out and buying in based on their own emotional decisions or because they hope they will beat Jones down the road. We do not compete with our peers for returns and believe that investment returns are created through having a clear and appropriate investment goal, making sure the asset allocation is suitable, diversification is as broad as possible, controlling investment costs and maintaining perspectives over the long term.
The old saying its time in the market not timing the market that creates the long term returns.
It is important to point out that deeply screened ethical portfolios will have a smaller investment universe and will have the potential for heightened volatility, ie greater ups and downs and this will effect returns.
Part of the value of working with a financial planner, is making sure that tax allowances are used, assets are registered under the most appropriate name and in the right tax wrapper ( i.e. pension, bond, ISA ) and of course wills and lasting powers of attorneys are in place, this all adds to returns.
Thanks to Julia and Ralph for this question.
Over the years of experience I have met a number of advisers who chase returns because they see see their value in trying to outperform Jones & Co down the road and in doing so they are constantly open to selling out and buying in based on their own emotional decisions or because they hope they will beat Jones down the road. We do not compete with our peers for returns and believe that investment returns are created through having a clear and appropriate investment goal, making sure the asset allocation is suitable, diversification is as broad as possible, controlling investment costs and maintaining perspectives over the long term.
The old saying its time in the market not timing the market that creates the long term returns.
It is important to point out that deeply screened ethical portfolios will have a smaller investment universe and will have the potential for heightened volatility, ie greater ups and downs and this will effect returns.
Part of the value of working with a financial planner, is making sure that tax allowances are used, assets are registered under the most appropriate name and in the right tax wrapper ( i.e. pension, bond, ISA ) and of course wills and lasting powers of attorneys are in place, this all adds to returns.
Thanks to Julia and Ralph for this question.
How Ethical ARE You?
Its sounds a bit flippant but the answer is as ethical as you need the research to be and free from our own personal biases.
We pride ourselves on making sure our clients can have their voice heard and can express their ethical values in their investments. As a reluctant investor myself, before I discovered the universe of sustainable, ethical and impactful investments, this is something we hold dear at Big Picture - indeed every investment has an impact.
One client we are working with at the moment, switched to 100% renewable energy years ago and to have her personal investments in companies that extract and explore for oil and gas, was simply a no go. We supported her resolve to move her investments to a screened portfolio, where she didn't have that internal conflict anymore.
Whilst we believe it is important to spend time in listening to and exploring our clients' viewpoints, we believe it is equally important to offer our guidance because it is too easy to neglect financial planning and investment fundamentals in pursuit of ethical goals.
It is also easy for clients to be seduced by advertising, greenwashing and inappropriately named investment funds and realise they are actually invested in companies whose business activities and profits are derived from practices that are at conflict with their own values.
Currently here is a heightened interest in ESG ( Environmental, Social and Governance) investment, in the main as a response to the threat of climate change and thus the direction of regulatory requirements. ESG has been a factor in financial risk management for many years, especially the G, as poorly governed companies are just making themselves un investable. Our main foundation portfolio is ESG risk screened for longevity and sustainability but this is not the same as ethical screening and neither is it the same as impactful investing.
Again, it is important to have a conversation with an experienced adviser in this field who understands the nuances and differences and who will take time to get to know you and what is important to you. On this point as the director of Big Picture Financial Planning I am grateful for the pioneering advisers that have gone before me and for the community of ethical advisers and the UKSIF.
We pride ourselves on making sure our clients can have their voice heard and can express their ethical values in their investments. As a reluctant investor myself, before I discovered the universe of sustainable, ethical and impactful investments, this is something we hold dear at Big Picture - indeed every investment has an impact.
One client we are working with at the moment, switched to 100% renewable energy years ago and to have her personal investments in companies that extract and explore for oil and gas, was simply a no go. We supported her resolve to move her investments to a screened portfolio, where she didn't have that internal conflict anymore.
Whilst we believe it is important to spend time in listening to and exploring our clients' viewpoints, we believe it is equally important to offer our guidance because it is too easy to neglect financial planning and investment fundamentals in pursuit of ethical goals.
It is also easy for clients to be seduced by advertising, greenwashing and inappropriately named investment funds and realise they are actually invested in companies whose business activities and profits are derived from practices that are at conflict with their own values.
Currently here is a heightened interest in ESG ( Environmental, Social and Governance) investment, in the main as a response to the threat of climate change and thus the direction of regulatory requirements. ESG has been a factor in financial risk management for many years, especially the G, as poorly governed companies are just making themselves un investable. Our main foundation portfolio is ESG risk screened for longevity and sustainability but this is not the same as ethical screening and neither is it the same as impactful investing.
Again, it is important to have a conversation with an experienced adviser in this field who understands the nuances and differences and who will take time to get to know you and what is important to you. On this point as the director of Big Picture Financial Planning I am grateful for the pioneering advisers that have gone before me and for the community of ethical advisers and the UKSIF.
WHO DO YOU HAVE WORKING WITH YOU OR ARE YOU A ONE PERSON BAND ?
It would be fair to say as the sole director of the ltd company I work as solo-preneur. In terms of responsibility and decision making, they rest with me. However, I make sure that I surround myself with support and know who’s who in my network of suppliers, product providers, research and support services.
Big Picture Financial Planning is an appointed representative of Valid Path who as a network of independent financial advisers, who are regulated by the Financial Conduct Authority and as such offer compliance guidance with our regulatory obligations as well as back office support services. They are only a phone call away ( numerous phone calls at times ) and a valued part of our business.
As a client of Big Picture Financial Planning you will have the benefit of a small, caring and thoughtful financial planning practice with all the benefits of consumer protection that come with regulated financial advice which is not exclusive preserve of large firms.
It has been difficult during the pandemic and up until lockdown, there was an administrator working alongside me but she was head hunted and also decided to move to Portugal. With the changes that the business has gone through and with more work being conducted online, she has yet to be replaced. However, to help with pinch points, we outsource para-planning and administration on an ad hoc basis to the organisation, Parasols, who are recommended and screened by Valid Path.
Valid Path are also part of Big Picture's business continuity strategy.
Find out more about Valid Path here.
Thanks once more to Julia and Ralph for the question
Big Picture Financial Planning is an appointed representative of Valid Path who as a network of independent financial advisers, who are regulated by the Financial Conduct Authority and as such offer compliance guidance with our regulatory obligations as well as back office support services. They are only a phone call away ( numerous phone calls at times ) and a valued part of our business.
As a client of Big Picture Financial Planning you will have the benefit of a small, caring and thoughtful financial planning practice with all the benefits of consumer protection that come with regulated financial advice which is not exclusive preserve of large firms.
It has been difficult during the pandemic and up until lockdown, there was an administrator working alongside me but she was head hunted and also decided to move to Portugal. With the changes that the business has gone through and with more work being conducted online, she has yet to be replaced. However, to help with pinch points, we outsource para-planning and administration on an ad hoc basis to the organisation, Parasols, who are recommended and screened by Valid Path.
Valid Path are also part of Big Picture's business continuity strategy.
Find out more about Valid Path here.
Thanks once more to Julia and Ralph for the question
ARE YOU INDEPENDENT ?
Absolutely YES. I am a strong believer in independence, as an approach to life and as a way of making sure everything revolves around our clients.
Our process starts with understanding your goals, concerns, what money means to you and what your ethical preferences are. Where investment or advice on a financial product is needed, in order to attain your financial goals, we research on an independent whole of market basis.
There are broadly two types of advice in the marketplace: ‘Independent’ or ‘Restricted’. We provide independent advice. If we recommend a financial product as being suitable for you, our recommendations will be based on an assessment of a sufficient range of relevant products that are sufficiently diversified in terms of type and provider to ensure your investment objectives can be suitably met.
As a minimum standard for investment advice, we will only advise on solutions, where the investment managers have applied ESG ( environmental, social and governance ) screening. We also support clients who wish to align their deeper ethical values and impact investing ambitions, to their investments and we do this with bespoke research, using our specialist knowledge, tools and connections in this area.
Our process starts with understanding your goals, concerns, what money means to you and what your ethical preferences are. Where investment or advice on a financial product is needed, in order to attain your financial goals, we research on an independent whole of market basis.
There are broadly two types of advice in the marketplace: ‘Independent’ or ‘Restricted’. We provide independent advice. If we recommend a financial product as being suitable for you, our recommendations will be based on an assessment of a sufficient range of relevant products that are sufficiently diversified in terms of type and provider to ensure your investment objectives can be suitably met.
As a minimum standard for investment advice, we will only advise on solutions, where the investment managers have applied ESG ( environmental, social and governance ) screening. We also support clients who wish to align their deeper ethical values and impact investing ambitions, to their investments and we do this with bespoke research, using our specialist knowledge, tools and connections in this area.
Tel : 01298 872200
[email protected] Big Picture Financial Planning Ltd is a chartered and independent financial advice practice and an appointed representative of ValidPath Ltd which is authorised and regulated by the Financial Conduct Authority ( F.C.A.)
FCA registration number 942946
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ACCREDITATION
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Big Picture Financial Planning Ltd is an appointed representative of ValidPath Ltd which is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 197107.
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