32 finance
The financial landscape needs skilled navigation
Managing wealth has always been a complex business and today, more than ever before, investors navigating the current financial landscape have a difficult job ahead of them, says John Scurlock-Davies, head of UBS southern business. Here Scurlock-Davies outlines the views on the benefits of asset allocation and diversification
Over the past five years we have experienced the biggest financial crisis since the Great Depression. In unpredictable times, it is more important than ever that investors have a disciplined investment process to help them meet their financial goals. We believe in a core asset allocation approach that includes a longer-term strategic setting, overlayed with the flexibility to navigate market opportunities. Whether an investor's primary investment objective is to protect or grow their wealth, understanding their objectives, investment time horizon, and risk tolerance are key elements to successful investing.
Some investors’ primary goal is capital growth while for others it is wealth preservation, whereby they generate sufficient returns to keep up with inflation. Regardless of the objective, perhaps the most critical stage of the investment process is deciding upon the appropriate mix of assets in a portfolio in a way that balances the future expected return with the risk tolerance of the
investor. Many investors spend a lot of time agonising over single securities at the expense of optimizing their overall mix of asset classes. Research suggests that this focus is misplaced. While instrument selection is important, asset allocation has been shown in multiple studies to explain the majority of the variation in portfolio returns over time.
One of the few “free lunches” in finance is the value of diversification – spreading your investment across asset classes, securities and currencies. By diversifying broadly across multiple asset classes – such as government bonds, corporate credit, equities, real estate and hedge funds – investors can exploit different sources of return potential. The result is a more efficient portfolio that, over the long term, should generate higher average returns with less risk than any one of its individual components. A well diversified portfolio is less risky, since different asset classes tend to perform differently depending on the market environment.
Dragon-style SEIS investment
The scheme offers top-rate taxpayers unrivalled tax relief on investments into small start-up companies. The Treasury, in a bold step aimed at boosting business growth, has introduced the SEIS to encourage investors to provide financial backing for new business ventures. By their nature these investments tend to be high risk, which is why the Treasury is offering compelling tax benefits for higher-rate taxpayers who are comfortable with riskier investments.
The SEIS scheme is relatively unknown among investors, despite having being introduced by the Treasury in April 2012 – it just hasn’t received the publicity it deserves. In terms of tax-efficient investment opportunities, the SEIS scheme is hard to beat. It’s revealing that Doug Richard, of BBC TV’s Dragons’ Den fame has referred to SEIS as "potentially one of the most extraordinary incentives ever created".
Unrivalled tax breaks
The main tax reliefs in 2012/13 for SEIS investments are income tax and CGT reliefs. The SEIS offers upfront income tax relief of
www.businessmag.co.uk
The events of 2008 serve as a good reminder. Developed stock markets declined 43%, and emerging market equities lost more than half their value in 2008. However, US government bonds rallied more than 12% in 2008, helping cushion the portfolio losses of well diversified investors.
Another key principle that 2008 illustrated is the importance of staying the course. Investors who bought broad-based US equities in 2008 did not realise any losses if they stayed invested until 2012. However, investors who abandoned their strategic asset allocation and sold equities for cash, would not have recovered their losses. Asset allocation is also about managing risk. Risk management helps ensure that investment goals are met and that the strategy is not abandoned when the portfolio endures losses.
It is also our responsibility to remind you that the price and value of investments and income derived from them can go down as well as up. You may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. UBS Wealth Management is a business division of UBS AG which is authorised and regulated by the Financial Services Authority.
Details: John Scurlock-Davies 07425-017266
john.scurlock-davies@
ubs.com
offers 'extraordinary incentives' Many financial observers agree that the Seed Enterprise Investment Scheme (SEIS) is one of the Treasury’s best-kept secrets, writes chartered financial planner Neil Buckingham of Griffins
50% for investments of up to £100,000 per tax year in newly issued shares. The SEIS also offers an exemption from capital gains tax if the investment comes from gains realised in that tax year. If the company fails, losses can be offset against an income tax liability.
To qualify for the scheme companies must be less than two years old, with less than £200,000 in assets and fewer than 25 employees. Investors are limited per tax year to investing £100,000, and restrictions are in place for putting money into a relative’s business. The maximum SEIS investment any one company can raise is £150,000, and tax relief can only be carried back to 2012/13. The relief is given as a tax credit against your tax liability, so you must have an income tax liability of at least equal to the tax credit claimed in order to obtain full relief. Relief is forfeited if you dispose of the shares within three years.
Balancing risk and returns
While starting up a business is not a venture for the faint-hearted, those choosing to invest in start-ups must also be realistic about the chances
THE BUSINESS MAGAZINE – THAMES VALLEY – MARCH 2013
of success. A high proportion of new businesses don’t succeed. However, by investing through SEIS, investors can substantially mitigate the risks associated with funding small companies.
Seek professional advice
SEIS investment is a specialist area, and those considering applying should seek professional financial advice first. If you’d like to find out more about investing through SEIS and claiming tax relief on your investments, see details below.
Details: Neil Buckingham 01635-551333
financialsolutions@griffins.co.uk griffinsfinancial.co.uk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44