Trust, a non-judgemental approach and expertise

I read a great US based study this week that had to do with financial advice and found some bits of it really relevant. "The study cited several attributes that distinguish a remarkable adviser experience from just an acceptable one. “Someone I can fully trust to have my best interests at heart/not just out to sell product” emerged as the leading priority (57%). Other factors included:

  • “Not feeling judged on size of assets/financial decisions” (36%)

  • “Deep expertise across a wide range of financial solutions and strategies” (33%)"


In my opinion, trust is a process. Trust is earned over time by being reliable, timely in your responses, disciplined, professional and knowing your subject matter thoroughly. Your initial gut response is a good indicator of whether you want to continue your conversations, after meeting with an adviser for the first time. Every time, I have ignored my own intuition in choosing clients to work with, I have made a costly mistake- so it works both ways and as they say, the body never lies.

Not feeling judged

Different advisers do have different minimum asset size thresholds so best to ask this before the meeting, if it is a worry. I enjoy the diversity of working with younger clients who can have a lower asset size, unless they have an inheritance, so I am flexible in this area. Some of my favourite clients also started out with me when they were young and have gone on to be successful so asset size is not a deal breaker, if I really like the client and feel we have a good connection.

It is a fine balance to effectively challenge a client without judgements, review financial priorities at meetings and course correct over time as financial planning is a process. From anecdotal evidence, and conducting several money workshops, I would say it is a huge asset to have someone who offers a relaxed, non-judgemental space for you to talk about your past, present and future financial choices. You might also prefer an adviser who uses anecdotes, stories and light humour rather than technical arguments or factual information which leaves you feeling emotionally disconnected.

Deep expertise

Yes, this one is obvious too. And also, look for expertise in the specific area of financial advice you want - ex. ethical investing or pensions draw down, etc.

Further reading:

7 questions to ask your financial adviser

Loss aversion bias and checking your portfolio


How often should you be checking your investment portfolio? Does it matter? From the viewpoint of behavioural biases, there is evidence that experiencing losses leads to poor choices. Loss aversion - our intense dislike of losses can cause us to lose even more if we pay attention to our portfolio losing money. It hasn’t been an issue in the last eight years of a rising equity market and yet, being willing to accept a drawdown or loss is an integral part of managing behaviours needed to be a successful investor.

In the book, The Smarter Screen by Economist Shlomo Benartzi with Jonah Lehrer, an experiment helps shed more light on this:

In one lab experiment by Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz, subjects were more likely to invest in a bond fund when feedback was given more frequently. Unfortunately, these low-risk bonds also generated lower returns over the long haul. As the scientists noted, “ Providing such investors with frequent feedback about their outcomes is likely to encourage their worst tendencies...More is not always better. The subjects with the most data did the worst in terms of money earned.

Ten years ago, most clients got paper valuations twice a year and so, tended to look at their portfolio valuations twice a year. We now have access to information everywhere, thanks to our magical devices.

The abundance of feedback is not necessarily a good thing especially with medium to long-term horizons in mind- such as a retirement plan twenty years away. Being willing to ‘do nothing’ or hold bonds or investments that may temporarily lose value is necessary for being a successful investor - to avoid impulsive decisions and following the herd.  

Investing is simple, but not easy. Being self-aware and getting to know your own behavioural biases is useful if you want to hold onto your wealth from investing.

Further resources:


Autumn Budget 2017 – what it means for you

There were no significant tax changes in the Autumn Budget. Some of my clients were worried about changes to pensions taxation; thankfully this did not happen. Here are some of the key points to bear in mind with personal financial planning:


  • Annual ISA limits stay at £20,000 per person, with a range of different ISAs to choose from. Each has its own rules and limits and is designed for different purposes, whether that’s medium or long term investing, or saving for a house deposit.


  • The pension lifetime allowance will rise to £1,030,000 and reassuringly there are no changes to the pensions funding limits - i.e. the annual allowance remains at £40,000 and will not be tapered until adjusted income exceeds £150,000.

Income tax

  • The personal allowance and higher rate threshold will increase to £11,850 and £46,350. The income tax rates and bands which will apply to Scottish taxpayers will be announced in Scottish Budget on 14 December.

  • The dividend allowance will be cut to £2,000 as already announced. In particular, this will hit small and medium-sized business owners who take their profits as a dividend. Employer pension contributions will become an even more attractive way of extracting profits from a business.

  • There are no changes to any other income tax bands.

Capital gains tax

  • The capital gains tax allowance will increase by £400 to £11,700.

Inheritance tax

  • As expected, the IHT nil rate band will remain at £325,000 until April 2021 and the residence nil rate band will increase from £100,000 to £125,000. In total that will mean that, from April, couples can leave assets up to £900,000 to future generation free of IHT.

Source: Standard Life

Further reading:

Are pensions better than ISAs?

Pension vs ISA

If you are saving for retirement and looking for better options than a pension, including comparing to ISAs, I simply haven't found one. As long as you can afford to invest your money, knowing it isn't accessible until 55 (or whenever the scheme rules say), pensions are undeniably the most tax efficient way to invest for your retirement.

A pension is simply a tax-advantaged investment wrapper. It's tax advantages are significant; the money you pay in is topped up by tax-relief. Moreover, the idea is to put money away where it cannot be easily accessed. So, the fact that it isn't accessible. I don't see it as a disadvantage.

Did I hear you say buy- to- let's are your plan for retirement? Please read my blog 'Dark clouds over buy-to-let investments' if you are open to a gentle challenge.

Not understanding how pensions work could hurt you financially. Here is an honest, genuine account from Jason Zweig, author of 'Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich', a book worth adding to the 'Money' section of your library.

In 1993, the mutual fund editor at Forbes magazine was contributing 5% of his salary, just half the allowable maximum, to his 401(k). When a friend asked why he didn’t put more into his 401(k), the editor shot back, “Because I can do better with my money than they can, that’s why.” Looking back more than a decade later, the former editor calculated how much this decision had cost him. I know the answer, because I was that editor. The cost of my overconfidence is more than a quarter of a million dollars- so far.

Tax Treatment (Are pensions better than ISAs?)

One area where pensions and ISAs differ is on the tax breaks given to individuals when payments are made, and when funds are accessed.


  • Money In: Pensions enjoy tax relief on contributions. For DC schemes, savers will typically pay in an amount net of basic rate tax, with the provider adding basic rate tax to the fund*. Any higher or additional relief is claimed through self-assessment. So a £10,000 pension contribution will require a payment of £8,000. A higher rate taxpayer would be able to claim a further £2,000 tax relief via their tax return, and this will reduce the tax they pay on their other income. So the net cost to an investor paying higher rate tax is £6,000. *Some occupational schemes will collect the gross employee contribution from total pay before tax is collected under PAYE. Employees will get tax relief at their highest marginal rates immediately and do not need to make any claims through self-assessment.

  • Money Out: Up to 25% of the pension fund can be taken completely tax-free. The balance is taxed at the saver’s highest marginal rate of income tax.


  • Money In: There’s no tax relief for payments into an ISA.

  • Money Out: All withdrawals from an ISA remain tax-free.

Source: Standard Life: Spotlight on Pension v/s ISA Other related resources:

How does an excellent IFA add value?

Humans can be their own worst enemy when it comes to investing. Also, everyone is not equal regarding their financial literacy or discipline, and an excellent IFA or independent financial adviser helps you to tune out the noise, keeping you focused on sticking with your plan. It 's hard to succeed as an investor without an understanding of one’s investment psychology drawbacks. A great IFA acts as a buffer between the client’s impulses or fears in reacting to the market; also as a behavioural coach, continually reminding the client to think in ways that will help them succeed with their goals.

I see my role as an investment adviser as follows:

  1. Helping my clients' have focus and clarity with their long-term financial goals
  2. Put a suitable and effective plan into place, one that can survive short-term shocks and volatility based on their own risk appetite.
  3. As my relationship with my client deepens, I ask open questions to help them understand their needs driving their fears and motivations in their relationship with money to help them have greater freedom in this area.

Sometimes a client wants safety, and low risk has ambitious plans for an early retirement and needs to increase her pension fund sharply. So, balancing a client’s attitude to risk as well as their capacity for loss along with their requirements to invest is not always easy.

I enjoy gently challenging my client's preconceptions and assumptions around investing, helping them notice the paradoxes and contradictions. We all suffer from cognitive biases, and this can muddy the waters when it comes to clear decisions around investing.

A central claim of prospect theory is that people are not consistently risk averse. Yes, they are much more sensitive to losses than to gains. But they are also risk seeking, both in their attraction to long shots and in their willingness to gamble when faced with a near-certain loss. To complicate things further, we know that people do not have a global view of their assets. They hold separate mental accounts and are much more willing to gamble from some of the accounts than others. To understand an individual’s complex attitude toward risk, we must know both the size of the loss that may destabilize them and the amount they are willing to put into play for a chance to achieve large gains. - Daniel Kahneman, psychologist.

Not having a clear financial plan can cause worries; reassurance is needed around a fundamental question ‘Am I doing enough to meet my financial goals?’ A great IFA helps frame investment decisions around the long term – reminding you to invest what you can while keeping aside funds in case of liquidity needs and emergencies.

Creating a comprehensive plan should address the following:

  • Creating clear, appropriate investment goals with realistic expectations
  • Developing a suitable asset allocation
  • Acting as a behavioural coach to maintain perspective and long-term discipline
  • Making changes to the portfolio when needed – rebalancing and optimising tax planning.
  • Ongoing communication, coaching and educating as needed

Action creates clarity, and an excellent IFA will help you create a suitable plan to work. It is getting you to your long term goals that count.