Investments
Personal investment management is volatile, we’re here to guide you through the difficult times into the better times.
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What we do
Just as we aim to save and protect capital, we also work with you to manage and create capital. As fiduciaries, we have a broad range of vehicles available to us, advising on new and existing investments, acting with your best interests in primary focus, always. We advise around investment goals for the future, capital growth, income, taxation, trusts, factoring attitude to risk and inheritance tax mitigation making sure your money works for you!
How we do it
At Open Financial advice, we focus on the key details, and this allows us to understand your needs completely and to advise on what will work best for you. Each client is different. Risk appetite and loss aversion, capital growth or income requirements, the range until retirement, overall goals, current and future income, CGT and IHT liabilities are all part of advising and complimenting your particular investment path.
Why work with us
Simply put, low investment management charges. Here we ensure your future investment growth is in absolute focus, not being impeded by excessive fund, platform or adviser charges. We are more cost effective than the vast majority of financial advice firms open today – total charges can be typically between 2.4% – 6.0%p.a.1
Here at Open Financial Advice, any investment we initialise, transfer or manage for the long term will not incur costs of more than 2.0%p.a. and usually less depending on your requirements. We’re happy to review and compare any existing investment for potential improvement in charges and performance entirely free of charge.
Individual Savings Account (ISA)
Individual Savings Accounts are the bedrock of private UK Investing, capital growth and later wealth management as they enable the holder to Invest in cash, funds, collectives, bonds or individual equities sheltered from Income Tax and Capital Gains Tax that could otherwise be payable on later disposals. ISAs give freedom to invest diversely to match risk/growth expectations and to drawdown or cash in the ISA without any penalty, though once taken out in full, only the maximum allowance for the tax year can be paid back into the account. It offers a key method to begin creating and managing long term wealth effectively, especially when a saving goal is commenced early, and plays an integral part in later life financial and retirement planning.
Each tax year, ISAs have maximum allowances that are available each April. This is a maximum amount that can be placed into an ISA per tax year. For the 24/25 tax year, the maximum allowances are:
Personal ISA – £20,000 – This can be made up of solely shares, or cash, or a combination of both.
Junior Individual Savings Account (JISA)
Investing for a child can help to give them a great start to adult life and Junior ISAs can be opened for a child at any time before they are age 18. This could be in saving to pay university tuition, for a house deposit, their own personal venture or even smaller freedoms like the option to take a gap year. Even a small amount saved each year, especially when started early, can snowball into a sizeable sum over the long-term. Of course, there are no guarantees as investments can fluctuate in value so your child could get back less than you invest and It’s important to note that access to the Junior ISA fund value Is fully accessible by the child at age 18.
Like adult ISAs, any growth in a Junior ISA is free from UK tax. Once opened by a parent or guardian, anyone can contribute to a Junior ISA making it even easier to invest for their future. The maximum allowance for Junior ISAs for 24/25 tax year are:
Junior ISA – £9,000 – This can be made up of solely shares, or cash, or a combination of both.
National Savings Products (NS&I)
National Savings products are offered by the UK Government to raise money for the UK Government and as with any kind of investment that is UK government backed, this is very low risk. Investments can be for deposit accounts to create interest growth or for other schemes like premium bonds. Because of their high level of security, low returns are offered and are to be expected though they do offer stability and in some cases, returns can be paid tax free.
Unit Trusts
Unit Trusts are a collective investment fund of pooled monies and investments controlled by trustees with the aim of creating capital growth, income, or both relative to their risk allocation. The distinction between the individual aim of different unit trusts is important as these can be used at different times to create different outcomes of growth or income which may be suited to your needs at different times in your life. For example, early investing vs later retirement or perhaps the loss of an income.
The ‘units’ within a unit trust have a buy and sell price, similar to equities, though the difference between these prices also includes the fund management charges. Whenever new capital enters the unit trust pooled investment, new units are created, and units are cancelled upon the drawdown of capital from the investment in order for the unit trust to react to demand freely.
Open Ended Investment Companies (OEICs)
An OEIC is similar to a Unit Trust in its operation, though rather than being a trust with a trustee effectively managing the pooled investment, it is a limited company PLC. The equivalent to the trustee is the named depository who has similar duties. Again, these can be utilised for aims relating to capital growth, income, or both and they operate within the prescribed risk allocation to meet their investors demands.
Unlike Unit Trusts, OEICs are authorised to develop and set up sub-funds at their discretion and risk allocation under their umbrella scheme. These sub funds have different specific investment aims, for example geographical or sector related, and the outcome is the aim for greater diversification, expert sub fund sector management and scale of economy. Typically there is one price for the purchase of OEIC units as opposed to unit trusts which have a buy and sell price.
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Investment Trusts
Investment Trusts have common features with Unit Trusts and OEICs in being a pooled collective investment though one of the primary differences is that they are public listed companies and traded on the London Stock Exchange with a limited number of shares. The fact that Investment Trusts have a limited number of shares is part of what creates the share price itself along with the underlying assets held within and the market capitalisation of the Investment Trust company. The buying and selling of Investment Trust shares, rather than units in this case, must be during stock exchange opening hours and within this time the assets within the investment trust, including equities, bonds and property will vary in value which then has a live impact on the Investment Trust share value.
Further to this, the Investment Trust has the facility to decide to trade at a discount to invite additional capital holdings, hold reserves for poor performing years and can use ‘gearing’ to increase performance in rising markets. Gearing is borrowing obtained by the Investment Trust to purchase additional viable investments on behalf of its investors. Investment trusts are regarded as higher risk to Unit Trusts and OEICs due to their ability to gear but equally have viable solutions to complex market issues that can create unique gains for the fund and for their long-term investors.
Investment Bonds
Investment Bonds are typically classed as a single premium Life Insurance policy purchase through a Life Insurance provider as the bond has a nominal Life Insurance payable upon death, though in reality they are a dedicated investment product. Investment Bonds are of particular interest to those who have a cash lump sum available and do not need full continued access to this in the medium to long term, who may experience income through capital events rather than regular employment or self-employment, and for those who have a particular focus around managing taxation levels or may have an upcoming CGT or IHT planning area of interest.
The aim of an investment bond will be to generate capital growth by being invested within a fund tailored to future plans and risk appetite while creating income and disposal allowances that are tax efficient. There are two main types of Investment Bond, Onshore and Offshore, and depending on your personal tax situation we can advise which may be more appropriate. Each year 5% of the bond can be accessed and drawn down as income to which no further tax would be paid up to the full basic rate tax band threshold (onshore only), this can be rolled up as a tax deferred allowance, or this can be assigned to kin without triggering an immediate IHT charge. Onshore investment bonds also carry no CGT liability.
Fixed Interest Investments (Government and Corporate Bonds)
Fixed interest investments are an instrument to create stability as they offer a level of surety relative to the return, or coupon, to be provided back from the investment. Government and Corporate bonds are loans to a Government or a Company in return for a set level of income for a set period of time. After the expiry of this term the bond issuer repays the capital back to the investor. Because of the set level of income or expected return during the term, when balanced with equities and other asset classes, there can be a mitigation of overall risk. A higher risk fund may have a small percentage of fixed rate investments, with more in equities to aim for higher returns. A lower risk fund may have a higher percentage of fixed rate investments, with less return but more stability in the event of a market downturn.
The main three classes of bond are Government, Investment Grade (not to be confused with Investment Bond) and High Yield. In the UK, our Government Issued Bond is a Gilt and due to the UK’s high credit standing and a very low likelihood of default, these are typically offered at a low coupon compared to other bond alternatives. Investment Grade coupons are for companies with strong credit ratings and finances and offer a low chance of default at a higher coupon than Gilts. High Yield bonds, which can also be known as Junk Bonds can offer a higher coupon return for additional risk relative to a company creditworthiness and likelihood or history of default. During the holding period of an Investment Grade bond, it is possible for the company to enter into financial difficulty and to become a High Yield or Junk Bond. In balancing risk, Gilts, other government bonds and a wide range of Investment Grade bonds are used whereas High Yield bonds are typically in use for unique future speculation rather than creating a risk blend.
Equities (Shares/Stocks)
Equities are stocks and shares within companies available to be traded on stock markets around the world which have the potential to not only provide a dividend, a share of company after tax profit, but also an increase in value as deemed by the market. Equities are key component in capital growth as they have historically proven to provide greater rewards than investing in bonds, bank accounts or property and this is why some exposure to equities is a true requirement to reach modern investment goals. Equities can be purchased from the companies within the UK, around the world, from within different sectors, for example banking or industrials, or within emerging markets, technologies or newly founded but well performing businesses.
When we review equities, and how to use equities as a tool for your investments, we take a diversified approach to ensure that while risk for gain is established, this is only at the required appropriate level for your requirements and the chosen funds can react and adapt to market movements, downturns, exceptional trading years and stay versatile for what may be ahead. Equities are one of the more volatile investment instruments which is why it is vital to be well diversified in order to deliver on your overall investment goals and to maintain fluidity.
Your specific requirements, attitude to risk, goals and retirement plans are a large part of what informs which overall risk exposure level and strategy is appropriate. Where we have a long-term growth strategy many years before retirement, a more higher risk perspective may result in higher-than-average market gains in the future by having a larger percentage invested in equities. Where we are looking to create a lifestyling approach in preparing for imminent retirement, a lower risk perspective and a higher percentage invested in fixed interest may be suitable. This ensures that in the event of a market downturn just before retirement, less of your total fund is invested in equities, limiting the impact on your fund of a large negative market event and maintaining fluidity, but with lesser growth potential.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.