In part 2 of this special podcast series, Roy is joined by Kelvin Riches, a Chartered Financial Planner at MHA Carpenter Box Wealth Management. Kelvin has done a lot of work over the last few weeks working with individuals concerned about their personal finances during the Coronavirus crisis.
Kelvin speaks through some common concerns he has encountered with his clients, including:
Please note that this podcast was recorded on 2nd April 2020 so the content reflects the Government announcements made at that point in time.
Visit MHA Carpenter Box's Coronavirus Hub for the latest information as well as other resources to help you and your business.
In part 2 of this special podcast series, Roy is joined by Kelvin Riches, a Chartered Financial Planner at MHA Carpenter Box Wealth Management. Kelvin has done a lot of work over the last few weeks working with individuals concerned about their personal finances during the Coronavirus crisis.
Kelvin speaks through some common concerns he has encountered with his clients, including:
Please note that this podcast was recorded on 2nd April 2020 so the content reflects the Government announcements made at that point in time.
Visit MHA Carpenter Box's Coronavirus Hub for the latest information as well as other resources to help you and your business.
Roy Thompson: 0:00
Hi, My name is Roy Thompson. I head up MHA Carpenter box wealth management firm, Independent Financial Advisors, on this podcast series, which forms part of the Retirement Gym, we're doing the Coping with Covid. It on this section will now look at how we can help individuals. I've got Calvin Riches with Make Calvin's uncharted financial planner. He's done a lot of work in the last month with very concerned individuals. Calvin, thanks very much for coming on. However, I thank you for inviting beaches, so yeah, I trust you can hear Okay, As I say, the communication is a little bit strange when you're doing everything remotely is
Kelvin Riches: 0:42
really any Get away from your voice the way I can definitely find
Roy Thompson: 0:47
it. So So, Calvin, you're at the coal face as it were. Your you're dealing with individuals and lots has been going on in the investment world. And with people's personal finances, Have you got anything in particular that people are asking about all that concerned about? I would I would guess the investment markets would bay would be one thing.
Kelvin Riches: 1:12
Yes, certainly I've had quite a few conversations, both when we first started giving comments from investment managers that investment funds are falling. That led to concerns from people who already have money invested. But then, even beyond that, I have some conversations with people who perhaps not invested at the point where markets, um, reacted to cove it on DH. They've been asking questions about whether they should get involved in investment, eh? So that there's almost too polarising groups that that we've been dealing with trying to help him sister of this period.
Roy Thompson: 1:45
Okay, and what sort of thing? So if we break those two down, if you're an existing investor and you got money invested, what's the sort of the thought process of someone in that position? And I guess, what sort of things should they obey seeking to do to try and protect themselves as much as possible?
Kelvin Riches: 2:04
Yeah, that at the moment, a lot of these people in a position where if they've been invested, they probably already suffered a downturn, or at least some loss of some of the growth that they've received in their investment. Thie articles that we see in the newspapers talking about a 30% drop in in America, or even a 30% in here in the UK that focus on a very narrow type of investment or type of asset. So what we're seeing from our own investors that Pat's we've given advice on to go into a diversified portfolio is that the drops that they've experienced it on nearly as high or as hard as thie drops that hit the newspaper's having said that on someone who has experienced a drop in their investment, maybe concerned about whether they should disinvest, maybe they should take their money out. Or maybe they should put more money. In our view, when we look at the each individual client on this is an individual basis is often a lot of our clients would have invested for a long period of time. And if they're still years or even decades away from that event, that I would see them try to use that money for a purpose such as retirement, that there's no real need for them to have a strong knee jerk reaction to something going on the markets. Certainly, investment volatilities is something we should expect to see on DH. Investor volatility is part of the reason that people get better growth rate through their investments than they get through bank interest because they get rewarded for the risk they take. So that the message really has been to most of our investors that have had funds that have seen perhaps drops is to really just remind them of the reason they invest in the first place. Remind them of some of the conversations. Perhaps we had Andi just make sure that the object is haven't changed, because really, fundamentally, we should be looking to invest in line with what the person wants to achieve, rather than because we think that the markets are a place to make a quick buck.
Roy Thompson: 4:07
Yeah, I think that's Ah, you know, it's a valid point. I certainly I know myself from client conversations. There's an emotional consequence, Teo, your investments falling in value, but it's only it's only when you cash them in you crystallise that lost. So yeah, I've certainly been telling people it's safe, you know, if they got ongoing money's coming in Bible private income or if they've got some cash reserves, that means that they, you know, even if if they didn't need to have access to that money, they can push that you know the exercise. I love the investments out for a period of time. Then if they're in that position, then they should be seeking Tio. Let the investments do their thing, which may mean that they fall a little bit further and value. But what we would hope that we can guarantee is that over a period of time, that there will be a recovery on those investments will go back up. So So So? So you mentioned that people who are invested already what about people who are perhaps considering investing? What, what sort of strategies? Khun, Khun, should they go for it, or should they refrain from making those investments, or what would they know?
Kelvin Riches: 5:17
Yeah, it's really comes down to it again. It gets quite exciting when an individual feels that they want to enter the markets and they want to take advantage of all the opportunities they might hold. But one thing you just mentioned is that we don't know at the moment if we reach the bottom of the investment cycle, if investments you will, we'll fall or not. It may be that in the coming weeks and months that we do see points that people's investments are worth less than they are now, even though our hope is they'll increase. And there's a riel. Um, I was going back to the objectives that people have. Existing investors. Someone going into the markets are considering investing what to have the same sort of conversation with themselves and their adviser about what it is they're trying to achieve. We mentioned in the people already invested group that those people should hold on to their investment if their objectives air along a long way away. Anyone investing new money should have the same conversation. If their objectives are, I'm gonna put some money away now for my future, and that future is years or decades away. Then certainly there. There's an optimism that over many, many years and in fact decades the investment returns by investing what to be better than those we see in cash. So if someone who is looking to invest in the markets thinks that now might be an interesting time to go in there, really, they should ask themselves what they're trying to achieve in exactly the same way that someone who already invested is once they got past that point where they've decided if they want to invest. So so maybe they have got some money and they know that they can put it away for the distant future. And there are a number of things that they can do. Teo help protect themselves in the short term that they could decide to invest in a lower risk investment and they might normally, and the only the good side of that is if the markets for further then, of course, they will suffer less of a drop on. But if the markets do recover and recover quickly, then they'll see obviously less of an increase. Another way that they could help to protect themselves. They would be to pay in the money gradually over appeared time. Somebody's making a nicer contribution for the year. I could put £20,000 in on day one or they could decide. Actually, I'm going to make a contribution over a number of months on. They might decide to put the money in the Reiser on DH, then tohave it invest in the market £1000 or a couple of £1000 per month on That means that instead of buying all of their assets of one single price. They're buying it a range of prices that could go up and down, and they get the benefit of the average so that that protects them a little bit from making sure that they're not buying assets that will necessarily fall in value. But it also softened. Dispose any any lift. If it does happen quite quickly, then they won't be fully invested. But that averaging gives them or a sort of a blended way forward.
Roy Thompson: 8:19
Certainly for those people looking to invest that the conversations I've been having the last couple of weeks is that, you know, they made the choice to invest. And then actually what they might do is do exactly what you just hadn't spread that investment over a period of time. It doesn't guarantee a better outcome in the long run, but it just makes it emotional, a little bit easier, Teo, except that you're going to make that commitment to put money to the market, that those ah Kelvin against what was spoken about is investors. There's people who've got money to invest all your money already invested. There could be a lot of people, perhaps listening, who sadly, you know, seeing a reduction in their their income. Me there was an employee who has been put on to one of these furlough provisions that than speaks about Ah oh, perhaps someone who's just had a reduction in profits within their own business. What sort of things come people in that sort of situation start to consider to dough?
Kelvin Riches: 9:18
Yeah, I think anyone in a position that has a reduction in their income, and this would be whether covert has just happened or no, the lever that they can definitely for police to have a look at their expenditure. Our hope is that clients that we've met over a number of years would probably have stuck way. Some emergency funds may even have a new car, or for some house extension or something that they might delay, and that would give them a little bit more money to tide them over. But certainly if someone isn't lucky enough to have a big bowl of money available to solve a problem, then they can look at what they're spending money out on. I don't about you, Roy, but having barely left the house in the last week and 1/2 2 weeks. I haven't spent a lot of money over the period of
Roy Thompson: 10:05
more, More to the point I got, I got a family, so none of them have been out. And I'm not under any of them going out either. So yeah, like my my out guns have been considerably less and I've even shaved my head cabin, which is reduced the cost of a barber's bill. So maybe that's a tactic that we could employ to save a bit of cash.
Kelvin Riches: 10:26
A longstanding baldy. I certainly sympathise with your position, although you
Roy Thompson: 10:30
will find
Kelvin Riches: 10:30
it easier to put a hat on when you're cold and is to take your hair off when you two hearts. Very true, what might be a new way forward for you, but yes. Oh, so certainly we might find that naturally, if people have a reduction in their income, they might even find that at the moment when they're not out spending money and perhaps doing things they would enjoy doing that they might already sort of compensate for some of that loss of income just by just by being indoors. So beyond that, though, we all have things that we pay out for and that we But we spend money on a day to day, and these might be things that were not currently using Could be something like a gym membership. It could be something, maybe even a daily newspaper. Or it might be any number of things that we we get delivered. Or perhaps we way can't access at the moment. That way, maybe don't need so much. So if someone does have a look through their bank account, it's really easy to find these things. They're normally on direct debit, so you could have a look through your bank account. Have a look at where you're paying money out regularly. And if any of these things are things that you don't feel that you need, then of course, you know it might just turn them off for a few months until things settle down on incomes restored.
Roy Thompson: 11:51
Yeah, that number climbs speaking to me about the things that nursery fees, private school fees. So I don't think there's anything in legislation says that you know, they don't have Teo still charge you, but might well be worth people having conversations. If, of course, they're not receiving the service so mortgage payment on holidays as well. That's being quite well publicised. I guess the only thing that people should consider when they're thinking about mortgage payment holidays were doing is adding the interests the loan to be paid later. So but it could be valuable from a from a cash flow point of view.
Kelvin Riches: 12:30
May I think the main thing with both school fees, nurseries and even thie mortgage fees is that people should try and actively involved themselves in a conversation with the service provider at what people shouldn't do is think, Oh, I don't pay my mortgage this month because I haven't got the income that they should make sure that they have contacted their bank, make sure that they they understand what the steps are to apply for a holiday, that we believe that the government are definitely encouraging and putting pressure on banks to make sure that people could do this. But these sort of things aren't necessarily an assumption of clothes. You you shouldn't stop paying your mortgage without first getting agreement from the bank that that's gonna happen for a period of time. Similarly, with school fees and nursery fees, it's more of a case by case basis, but I would encourage anyone to speak to their school or their nursery. Find out if there are any armed services they're still offering that you could access and game value from, if no other, any discounts. Or if no, is there. Is there something in the future that they benefit from? So I think that's the nice thing about being indoors. We got plenty of time to have conversations on the phone.
Roy Thompson: 13:44
Yeah, I think that's a big statement. Actually, you know quite often when we're it were challenged to pay something the way, don't almost want to face it. And actually having a full and frank conversation, especially at the moment, is very powerful. And most service providers, what would actively listen and try, cut, try to come something that would be helpful to the individual, you know, on books to maintain a long term relationship. So I think I think that's right. I guess one of my other colleagues, he's done a bit of work with ah number of these crimes recently trying to reclaim if the higher rate taxpayers are historically high rate taxpayers in some situations that could be the ability for people to reclaim pension tax relief over the last number of years. So I think if you're in the position where you've paid higher rates of tax and you've paid into a pension, it's worth having a look to see if that's something you could benefit from Andi certainly something that MH a carpenter box could assist with if needed on Calvin. I don't know if you've had anyone who's gone through that process.
Kelvin Riches: 14:55
Yeah, I think that's definitely the case, right. We're actually into the tax year end season for private individuals. I'm sure Dan will be someone who would be more had expert in this area. But when we think about pain tax, particularly business owners, we kind of think about maybe the end of January being a key time of year, but certainly wants the tax year ends, which is the fifth of April 2020 for this year. Any day after that, someone could complete their tax return for the 1919 20 tax year on DH. Certainly historically, the tax office have been keen to make sure that they that they both collect tax very quickly and indeed repaid tax refunds to people S O. And you can do this online Government gateway passwords. You start entering details into the government website, and it's actually relatively intuitive. So if someone is in a position where they may be earned for for 10 months of the year very strongly, but maybe the last month and 1/2 perhaps they haven't earned. Maybe if they've been self isolating for a longer period, they may have paid actually too much tax through the beginning part of the year, which may mean that they do a a partial refund for the overpayment. In the few months that haven't been a p a p a. Y e always assumes that someone's gonna keep burning the same amount each month till the end of the year. So we're in that weird time of year where, if people do, you have a reduction earnings at this sort of time that may actually be due a refund. You can't wait for HMRC to give it back to you, and of course they will eventually. But if someone does need would benefit from a few 100 or £1000 then I think they should be encouraged to complete the tax return, find out. If there's anything in there that they could get a refund on, which could be their pension contributions, it could be how much income they paid the that. There's no great penalty on this because the tax isn't due to be paid until next January, anyway. Eso even by completing that return, you know about to put a bigger headache into next month's next one's locker just by doing that?
Roy Thompson: 17:06
Yeah, so So you're talking there about your standard tax return, and if you weren't a good amounts of it in the year, you might have, in effect over pay tax or the earlier that you put your tax return in. There may be a possibility to reclaim taxes, but I get also, if you've been paying into a pinched on a regular basis over a period of a number of years. Andi haven't claimed your hire a tax relief. It could be that you're entitled to some tax back from the revenue. So both those points, I think relevant and worth looking into. If you're seeking Teo access some money, I guess the other thing that some individuals have spoken, they're already you know, they're in a kind of needs must scenario s O for whatever reason, they have very limited personal resource is on. But they started asking about whether they can access their pension money. So I think it's worth stating that if you're over 55 that's a possibility. But there are a number of considerations. It should be a last resort. Action on DH. There are a number of considerations that you might want. Teo factor in Calvin. I don't know if you had anyone speak to you about that. It'll already particular comment.
Kelvin Riches: 18:24
Yeah, I've had a few people that certainly in that camp, where they are of an age. I've certainly had a few people that are looking at whether they want to contribute to pensions. Normally, they business owners might look at this time of year to contribute. You've mentioned that someone over the age of 55 is likely to be able to access some of their pension benefits, but we won't get into the technicalities of each different type of pension here. But certainly some pensions where someone saves into a pot through their working life is defined contribution pension that they would know how much is in there pension pot because they would have received a statement probably early in the year, someone over the age of 55 if they already struggling to put food on the table. That, of course, that is an asset that they may be in the drawer on. But we discussed before away from this conversation that there are some technical considerations to an individual accident access in their pension, for example. It may, if they received a lot of money earlier in the year through income, it may exacerbate attacks situation this year if they take more than the tax free cash from from a pension that mean that may restrict how much they can pay into the pension Pat's when they resume work. So I think for most people, their retirement party is something that they they look tio take. Perhaps later in life. They looked to take it at the point where they start to retire, or at least if they take it earlier. It's probably a very deliberate, preplanned event that they might seek some advice over, so I I'd be reticent to encourage someone toe necessarily dive into your pension pot if you're over the age of 55 a cz you've already mentioned If someone's in a position where it's do or die, then of course it's an area that significant savings for some that they may be doing it to look at, to help them
Roy Thompson: 20:22
and and you rightfully reference number of technical and technical points against people in this situation can become one of a better word, a bit desperate, and they would rush to make a decision such as that. What you're really saying is, if you are at that point, yes, it's something that you could use. But it should be a last resort on. Absolutely an individual should get some guidance on their toe to understand how they would be affected from taking this action. And indeed, even ifit's possible with their existing pension arrangements. I think that perhaps what we would summarise from that
Kelvin Riches: 20:55
yeah, definitely think accessing a pension is not like wondering down to a cash machine and taking money out of it. It should at least be a planned event. So if you, if you are getting to the point, is any listener of this thinking, maybe about their family members who what can they do to make sure they've got something coming in, that there are a number of government agencies that can help give her a little bit of generic guidance, like pension wise. Or indeed, a financial like Carpenter makes a carpenter box can assist someone in giving a little bit of a helping hand and some ideas about what could be done. And suddenly I spot these pitfalls before they walked into
Roy Thompson: 21:36
Yeah, okay, kept Caroline. That's been really useful. I think there's you raise the number of valid points. I think if I was to summarise them, if you're already invested, it's to try and remain calm. It could be a distressing time, but to try and remain calm if you're considering investing, then there are a number of ways that you could do that to mitigate some of the risks that are involved at the moment. Given what's happening with the Corona virus on, there's a number of activities or actions and individual can take if they're in a position where they're on reduced income, notably to review their spending, um, to consider the payment holidays. Consider whether they can claim some tax back from the revenue on if it's in a desperate scenario. There could be perhaps additional resources through something like a pension that they could access if they're of a certain age. But they do need to be very considerate about that. So we're hopefully for all those people listening that's been useful. Calvin, thank you for your time on DH were with Speak to You again in the next podcast, Siri's Thank you very much.
Kelvin Riches: 22:49
Here's what I think
Roy Thompson: 22:51
so hopefully those tio two sections of the podcast of being useful for listeners should you need further resource than I would point you to a carpenter box of Corona Vaughn. This hub, which can be found at www dot partner box dot com forward slash corona virus Thank you for listening.