23 September 2016

Nationwide’s Richard Gray talks Investments Advice

“In my opinion, there are four key life stages when customers benefit most from investment advice, which I would describe as: ‘your first job/home’, ‘your first baby’, ‘possible sudden wealth’ and ‘your wind down from work’” says Richard Gray, Nationwide's Financial Planning Director.

“I believe it’s time we did more, as a nation, to educate young people about the benefits of saving for their future. An appreciation in the value of investments can’t be underestimated in the UK and in other countries which see real economic growth.

In my experience, the first time many people seek advice is when they start a family. Having a baby really brings home the importance of financial security, and typically they plan to buy a home and protect their loved ones against changes to their health and income.

People who are approaching retirement also benefit from careful financial planning advice. It’s a time when their children have left home or have become financially independent and they may find they have more disposable income. They could also find there have been shifts in the pension landscape which may be bewildering.”

Wealth down the generations

“While some of our customers are regular investors and are used to consuming information about the markets and making financial decisions, there is one final life moment that is worth mentioning – the possibility of sudden wealth.

A dramatic life event, such as when a partner or parent dies, means the person may suddenly come into an inheritance – potentially a sum of money which they may not accustomed to managing – at a time of great emotion.

That’s why we suggest that customers should take a few months to reflect before making any immediate decision about investing any of their money.”

Learning from the past

“Everyone is unique. We have all travelled different life paths. This is why we ask our customers to think about how they got to where they are today, how they have reacted to challenges and opportunities along the way and their aspirations for the future. Only then is it possible to plan for how they may achieve their future financial goals.

We also promote the idea that financial planning shouldn’t be a one-off event, but a regular habit. That way we can work with you to adapt your plan to account for shifts in the economy, changes to your personal circumstances and emerging opportunities.

Changes to the tax system is an excellent example of an area which sees regulatory change that may have a detrimental impact on your future income if your financial planning is not updated.”

Changing face of investment advice

“And there’s no doubt that technology is having a massive impact on the way we access financial information. It’s an exciting field that may continue to enhance the customer experience over the next few years. So while many customers prefer face-to-face, I see a future where there is a combination of personalised, person-to-person advice for life’s big events and more regular supplementary automated financial advice services.

As generations which are used to interacting with technology and automated interfaces in their daily lives begin to think more and more about what to do with their disposable income, we could see a further shift towards what is known as ‘robo advice’. Today, however, we are continuing to blend technology and the personalised approach at Nationwide.

Our new Nationwide Now service, for instance, allows customers in more remote parts of the country to gain access to investment advice at their local branch, six days a week through video conferencing facilities.

We offer investment advice to customers who have £50,000 in savings or as a joint income, as they are more likely to have surplus capital to invest and require advice.

Our approach is to cater to those who have a comfortable amount of disposable income to invest so that they are not locking away money they will need in the near future."

Let’s just understand your attitude to risk

When you talk about risk, it is not only about the potential for you to get back less than you originally invested. Doing nothing with your money also carries risk. If you leave your cash under the proverbial mattress, such as in a low interest deposit account, it won’t keep pace with inflation over a long period of time.

So we help our customers to spread their risk by forming both short and long-term financial strategies.”

Interest rates are interesting

“Interest rates are currently at the lowest they have been since we started recording interest rates 322 years ago, but we still recommend that customers use deposits for funds they will need to access over the next six years. We then propose a longer view for any funds that they don’t intend to spend during this period.

What’s interesting is that as you compare regular saving and higher risk investments over time, the risk scenario reverses, however past performance does not reflect future results.

Where a deposit account can be seen as risk-free, over the longer term it can actually lose value in real terms. Investments, on the other hand may take a higher risk approach but are invested in real assets that represent our economic growth and could attract higher returns, with the impact of any market volatility being smoothed out over time.

Based upon your attitude to risk, a portfolio can include everything from deposits through to property investment, and bond-based investments – or loans to companies or the Government – through to shares.”

Foundation for life

“Ideally, the trick is to start young if you can! The power of interest on deposits in savings accounts and growth on investments to smooth out peaks and troughs in the market over long periods of time, packs a real punch when it comes to helping to make your money grow. 

An investment strategy should look at spreading risk over different assets and product types. Property is a great example right now – we’ve all heard about the large builders coming under pressure. In my view this ‘bad news’ will probably be a pause for breath rather than a death knell for this sector, because we will still need houses and offices. 

London commercial property prices have dipped because foreign investors are concerned that future ‘Brexit’ changes – such as restriction of movement or taxation – might affect them, but at the same time an overseas buyer can get a 15% discount today compared to a few months ago because of the pound’s devaluation. I can’t imagine that large London offices will prove to be a poor, longer term investment, but to reduce risk in the shorter term, we limit our customers’ exposure to property.” 

Past performance is not a guide to future performance.

Crises are part of a natural cycle

“There’s no doubt that some customers may have been spooked by the recent EU Referendum outcome, but global events will always impact on the markets, whether it’s Brexit today or something else tomorrow.

That’s why we talk to customers about building a portfolio with a broad range of investments, across many assets and which matches their appetite for risk.

By diversifying, you spread risk because different assets, sectors, countries all react differently to any single world event.”

The value of your investment can go down as well as up so you may get back less than you originally invested.

Important information

Investments through Nationwide are provided by Legal and General. The Investor Portfolio Service is provided by Legal & General (portfolio Management Services) Ltd.

As part of Nationwide’s financial planning service, your Financial Planning Manager will advise and make a recommendation for you after assessing your needs. Please note, we offer restricted advice on a limited range of carefully selected products available through Legal & General. You may ask us for a list of the companies and products we offer advice on.

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