It is always a treat to be gifted a nicely wrapped present, isn’t it?
Yet, at some point in our lives, we’ve all been given a beautifully wrapped present only to be disappointed at the gift inside.
I thought of this when speaking to a client recently, who has a relatively small amount of money with us. We have been talking about transferring several of her personal pensions for a while, but she has hesitated because the companies currently holding her money are well established and well known. The problem is, the funds and assets being held aren’t particularly good, on a number of levels. With time, it has just become an eclectic mix of holdings.
Granted, the running costs are a bit lower than if she moved her pensions to us, but through our management, we would expect to deliver significant outperformance compared to the existing funds. We certainly wouldn’t allow money to languish in asset classes/funds which are no longer performing. We have demonstrated the difference this would make for her future financial well-being and whilst offering no guarantees, it does suggest it would be beneficial to transfer.
Of course, it’s not about performance over a year or two, but the difference that is compounded over a number of years. Our cash-flow planning models demonstrate this beautifully; more money means more choices further down the line.
At our last meeting, I encouraged my client to view her pensions as a present she opens at the age 55/60. The wrapping may be attractive but when she opens it up, just at the time when she needs the money, she will more than likely be disappointed. As a package, the pensions may not be worth much. A bit like having a nice jewellery box but inside is just cheap costume jewellery.
She understood my point. I’m pleased to say she has agreed to proceed with the transfer and embrace the strategy we recommended, but it’s been hard work. Whilst I understand that there are a whole range of reasons behind inertia and remaining with the status quo, I feel I have a duty to help you understand how important it is to ensure that your money is working hard for YOU.
As Carl Richards said on Twitter recently… “There is a MASSIVE difference between a well-designed investment portfolio and and collection of investments”.
So, having nice wrapping is all well and good, but what’s really important is having the present you want.
Gary Neild B.Sc.Hons. DipIP PFA
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.