In today’s low-income environment, it may not be possible to generate the required level of income for the client. Depending on the level of risk, on average an income portfolio could yield about 2.5 – 3%. This would mean an annual income of between £12,500 and £15,000 based on the £500,000 portfolio. If the client’s income requirement is higher than this, then they are faced with two options to either reduce their target income or increase the risk of the portfolio to include capital growth. At this stage, a meeting with a wealth planner would be advisable to provide example cash flow summaries and perform a detailed analysis of the client’s requirements. Such detail is out of scope of this article but at Brewin Dolphin we frequently help clients establish the finer details of their plan.
Turning to our second scenario. The client is only just starting out on their career path and will have very different financial objectives. In this instance they may only have modest savings along with the beginnings of an occupational pension scheme and little equity in their property or they may rent. There are a few options for which the lump sum could either be used, they may choose to reduce their mortgage or put a deposit down on a property, or they could invest the sum.
Should they choose to invest they would be at what is termed the “accumulation” phase. This stage of an investor’s life cycle refers to a time in which the individual builds up the value of their savings in order to maximise value later on and provide an effective foundation for their
future. The individual will have a longer time horizon and therefore could be expected to be able to tolerate greater volatility in investment returns and therefore assume more risk.
With the client’s main objective to maximise returns they would typically fall into the growth investor bracket. The types of assets used to populate their portfolio would be equity growth stocks or funds, emerging market funds, convertible debt funds and venture or private equity. These assets will generally not produce a yield, focusing on longer term capital growth. With the client’s time horizon of greater than ten years, they can withstand the short-term fluctuations on the value of the assets in order to seek greater value in the future.
There are many variations to the above scenarios, and I have hopefully demonstrated there is no straightforward answer to the question of investing for growth or for income. The strategy adopted by the individual client is unique to their own objectives and requirements. At Brewin Dolphin we can help clients quantify their main objective and help construct a portfolio to reach that goal. We conduct an in-depth review of our client’s circumstances and risk appetite and frequently review the requirements to ensure we are on track to deliver on their stated aim. We would always welcome the opportunity to have an initial discussion with potential clients on their specific circumstances to help them arrive at their investment objective.
WE ALTH PL ANNING AND INVESTMENTS
WHATEVER YO INVESTMENT MAKE THEM
brew
win.je
WITH US. PLANS, OUR
2ND F L OOR , KINGSG
KINGS G A T E HOU SE
HOUSE , 55 THE ES P
E SP L A N A D E
NADE , ST HEL ER , JERSE YJE 2 HELIERI Y
Thevalueofinvestmentscan fall andyoumay getbacklessthanyouinveste Philip Chambers on 01534 703130 or
philip.chambers@
Brewin Dolphin Limited is a member of the London Stock Exchange, and is regulated in Jersey by the Jersey Financial Services Comm Brewin Dolphin Limited, 2nd Floor, Kingsgate House, 55 The Esplanade, St Helier, Jersey JE2 3Q
3 Q B
ed. @
brewin.co.uk
mission.
Beyond 20/20 - Finance
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