Newsletter: December 2023

As 2023 draws to a close, we’ve been looking back at our client feedback and what’s been important for you based on your experience with us.

We regularly provide market updates emphasising the importance of remaining diversified and keeping to your plan. When meeting with an adviser, it’s crucial to discuss how external factors – such as stock market fluctuations, governmental changes, new legislation, and personal life events like moving, or family dynamics – affect your financial plan.

Our goal is to equip you with the necessary information to make informed decisions and avoid impulsive choices, cutting through the complexity and noise in the financial landscape. As investors are many and varied, we’re sharing below some research produced by Vanguard, an investment firm relating to what they found when they have asked investors about their behaviour in a few different investment situations.

The insights from their research show how external factors impact decision-making among investors. The findings revealed intriguing aspects of behavioural science that shed light on investor expectations and market perceptions.

For instance, Vanguard explored whether investor expectations align with market conditions. They asked, do investors expect lower or higher returns when the market is high? Examining bear and bull markets since 1945, where bear markets signify low market performance and bull markets denote high performance, Vanguard discovered that more than 50% of their respondents believe a high market will continue to rise.

Our investment partners, SEI provided us with the above graph to show what has historically happened in the US stock market when there have been downturns, and they comment as follows:

  • Looking back at the past 60 years the US stock market has delivered an average annual return of 9%.
  • This 60-year period includes 9 times when markets declined.
  • No one likes to see their investments decline, however, holding on through a downturn to fully participate in the recovery has long been a discipline that’s served investors well.
  • It’s not about trying to time the market; investors are rewarded for time in the market.

Furthermore, in the Vanguard research, they delved into investors’ views on the advice market. They also asked whether their investors preferred emotional and financial planning services to be delivered by humans versus digital. 65% of respondents believe their planner works in their best interest; 73% “know me” and that their retirement goals are understood. 75% believe their advisers are empathetic to their personal situation and needs.

Given this diversity of beliefs, you can see that as advisers our role extends beyond the surface. While your meeting with us may seem serene, like a duck on the water making no ripples, what we and our investment partners are doing in the background is more reflective of what goes on beneath the water line. For example, the fund managers we use are continually adapting to balance risk and return objectives. We’re marking the results to ensure they meet our expectations for our clients.

Maintaining focus on long-term objectives is crucial especially when you’ve been so disciplined when saving. It’s important to keep that focus when you’re drawing from your investments.

So, do your beliefs in the market reflect the decisions you make; are you remaining disciplined and keeping your long-term plans at the forefront, despite behavioural biases?

Our time with you is where we believe we offer the most value to you. Not everyone needs frequent review plan reviews, but discussing your beliefs with your adviser ensures you remain on track to meet your ultimate objective. Our client meetings also address challenging topics, including future planning in the event of death. We can help you navigate decisions and plan for eventualities, providing clarity in uncertain times.

Stamps – Royal Mail have withdrawn their old-style stamps. If you’re posting anything to us, it needs to have the new ones with a bar code on them, or unfortunately, we might not receive your mail.

Our Tax Team issued their summary of the Autumn Statement last week. As always, there was more detail after the Chancellor’s speech to the House. Importantly for us as financial planners, we were pleased to see that our cashflow modelling will have to change to include the increased State Pension.

Clarification on some of the outstanding Lifetime Allowance points was also very welcome, and we look forward to more being issued in the draft legislation.

But what we do know is that it’s even more important to ensure your nomination of beneficiary is up to date. If you want more information regarding this, please let us know.

Finally, we’d like to wish our clients a very Happy Christmas. As usual, our offices are closed during the Christmas period. We will close on the 22nd of December and will be back on the 4th of January 2024.

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Here’s what’s happening inside and outside of Henderson Loggie Financial Planning – news, views and insights.