Benefits of financial advice

1. THE BENEFITS OF FINANCIAL ADVICE MIKE KAVANAGH

Why independent financial advice?

Investment planning

Protecting your loved ones

Retirement planning

Mortgage Solutions

Inheritance Tax planning

The next steps

AGENDA

Choice

As a client of Positive Solutions you will benefit from impartial, independent advice from the whole of the market place

You can be safe in the knowledge that the advice you will receive will be provided by highly qualified, professional Independent Financial Advisers

As an IFA Partner of Positive Solutions I am dedicated to providing clientswith the highest level of service, technical expertise and impartial advice possible

The advice youll receive will be truly tailored to your particular financial needs and goals.

FINANCIAL ADVICE?

We believe everyone is an individual so our Partners will spend a considerable amount of time getting to know you and your personal circumstances

Only then are we in a position to fulfil our legal and moral obligation to search the whole of the market to find the right advice for you

Our whole-of-market approach means that we can offer holistic financial advice that includes:

Investment Planning

Retirement Planning

Protecting Your loved Ones

Inheritance Tax Planning

Mortgage Solutions

HELP YOU?

The key to successful investing:

Spread your money across the right types of investment

Invest at the appropriate level of risk

Protection against inflation, ensuring its spending power

Understanding the basics

Returns from different investment strategies are generally linked to the amount of risk involved.

High risk investments have the potential for higher growth or income

Low risk investments where money is more secure, usually deliver a lower return

AND REWARD

Establish your attitude to risk:

Can you afford to risk part of all of your initial investment?

Is your capital ear marked for your impending retirement and requires protection?

Are you comfortable taking a little risk in return for potentially higher rewards?

Your investment portfolio should be based on your attitude to risk and your long-term aims.

ARE YOU

What are bonds?

Bonds are like loans issued by companies and government to borrow money

Pre-specified maturity date in which the borrower must pay back the capital

Bonds are distinguished from other kinds of loans is that they can be bought and sold on the stock market

Benefits

Higher Income can provide higher income than cash deposits

Regular Income can offer regular and fairly predictable income

Potential for capital gains portfolios can provide scope for limited capital growth

Changes in value as with stock market investments, the price will rise and fall

Government bonds considered to be low risk

Corporate bonds considered to be higher risk

What are equities?

An equity represents a share in ownership of a company

Shareholders carry full risks and rewards of ownership

Most shareholders have limited liability

Benefits

Growth typically shares have produced higher returns than either cash or bonds over the longer term

Rising income opportunity to benefit from a rising income

Protection against inflation over the long term, shares have historically offered greater protection against inflation than cash or bonds

Volatility share prices can rise and fall depending upon company performance

Timing price changes can be dramatic and unexpected

Past Performance be aware that past performance will not necessarily be repeated

EQUITY INVESTMENTS - SHARES

What are collective investments?

A collection of individual assets held within a wrapper

You buy an interest in a collection of assets, not in the component parts, known as funds

Benefits

Diversification offers a diversified basket of investments in a single holding

Professional management each fund group employs a large number of specialists

Access to global markets collective investments overcome the difficulties a private investor faces such as high dealing costs and limited research

Risk profiled funds manages both asset allocation and diversification

Volatility and timing unit prices can move sharply both up and down within a short period

Currency risk overseas investments carry the additional risk of fluctuations in foreign exchange rates

Past performance past performance will not necessarily be repeated and should not be considered a guide to future performance

COLLECTIVE INVESTMENTS

What are structured products?

An alternative way of gaining exposure to financial markets.

Common features of structured products are:

Fixed term you know exactly when your holding will mature

Capital protection some products guarantee to return at least 100% of your original investment

Formula based returns value on maturity is based on a formula defined when you initially invest

STRUCTURED PRODUCTS

Benefits

Flexibility something to suit everyone

Capital protection some guarantee to protect some or even all your initial investment.Suitable for event the most risk-adverse investor

Risk management share in the growth of specific markets at the level of risk for you

Portfolio diversification access to assets not typically available via traditional investment vehicles

Risk to your returns depending on the level of capital protection, investors risk achieving a return that is less than the original amount invested

Credit rating of issuer you assume the full credit risk of the products issuer

In some cases your money may be locked in for the fixed term of the investment

Benefits only apply at maturity.If you withdraw early, you may get back less than you invested

STRUCTURED PRODUCTS

Investing for income or growth ?

Growth;medium to long-term investors have the opportunity to choose solutions that can aim to provide a degree of growth for your capital.

Income;alternatively you could choose an income solution to top up your regular income. Your savings could bolster your income now or during retirement.

Investing to protect your capital?

Attitudes to risk vary from person to person and an IFA can help you choose investment strategies at a level of risk, versus potential return, that is suitable for you and that youre comfortable with.

Lump sum or regular saving?

Decide whether to opt for a regular savings plan or a lump sum investment, depending on your financial circumstances and objectives.

An IFA can help you make the decisions that are right for you and your short, medium and long term goals

YOUR NEEDS

Will your family be financially secure if you die?

How would your family cope if something happened to you?

If you are sick or unable to work can you pay your mortgage and bills?

How long will your income last if you cant work through illness?

What provisions have you made to protect your family?

CAN YOU ANSWER THESE QUESTIONS?

Injury and serious illness are issues that can affect us all and unfortunately even the most conscientious workers can sometimes face the threat of redundancy.

Therefore it is wise to take steps to protect your standard of living, and that of your family, in case of an unexpected event.

An independent financial adviser can assess your needs, circumstances and existing arrangements and provide you with guidance on how to protect your finances and family in the event of redundancy, sickness or death.

YOUR LOVED ONES?

Three events fall under the topic of Protection:

Inability to work

Major (critical) illness

Financial advice could help you protect against the consequences of:

Dying too soon - (life cover)

Living too long (pensions and investment)

Major illness or incapacity in between (critical illness and income protection)

PROTECTION

What does it provide?

Capital to pay off your mortgage

Capital to pay off other debts and provide a rainy day fund for emergencies

Future income for dependants spouse/partner/civil partner, children, elderly relatives

What is it?

There are 2 main types of cover:

Decreasingto clear mortgage

Decreases in line with outstanding mortgage capital (capital & interest repayment only)

Levelbenefit remains same throughout

Provides lump sum to clear debts (can include mortgage), rainy day fund and future income

Critical illness cover provides protection against financial effects of major illness e.g. Heart attack, Cancer, Stroke, MS

It can allow you to clear your mortgage and other significant debts, adjust your lifestyle (e g shorter working hours) and adapt your home)

What is it?

Decreasing to clear mortgage

Decreases in line with outstanding mortgage capital (capital & interest repayment only)

Level benefit remains same throughout

Provides lump sum to clear debts (can include mortgage), rainy day fund and future income

An income if you are unable to work due to illness or accidental injury and suffer a loss of earnings

Benefit provides a proportion of earnings or mortgage instalments and related expenses

Benefit is paid tax free

What is it?

Level benefit through the period of cover

Increasing benefit increases each year to meet the cost of living

Will your family be financially secure if you die?

How would your family cope if something happened to you?

If you are sick or unable to work can you pay your mortgage and bills?

How long will your income last if you cant work through illness?

What provisions have you made to protect your family?

CAN YOU ANSWER THESE QUESTIONS?

When do you want to retire?

How many years in retirement do you think you will have?

Where do you want to live when you retire?

What will you spend your time doing?

What standard of living are you expecting?

YOUR RETIREMENT YEARS?

As an example

Male age 60 assumed non smoker

Income required 20,000 a year

Increasing each year by Retail Prices Index (RPI)

50% of income to be provided to partner (assumed 3 years younger) in the event of death

Fund required 593,100

If maximum tax free cash of 25% (i.e. 197,700) was also to be funded for, the total fund required would be 790,800

Source: FSA Comparative Tables 1 November 2006

NEED TO MAKE?

Some potential options

Downsizing property

Existing investments

Selling your business

Expected future inheritance

State pension/benefits

Employer sponsored pension provision

Private pension provision

YOUR RETIREMENT YEARS?

Existing pension provision

Benefits held in a previous employers pension scheme

Benefits being built up in a current employer sponsored pension scheme

Benefits held in a personal arrangement to which you are no longer contributing

Benefits being built up in a personal arrangement which you are currently contributing to

State pension benefits

Are you aware of what these pension arrangements will provide you in retirement?

Do you know whether these benefits may work better for you in an alternative pension arrangement?

PENSIONS GAP

Income tax relief on contributions paid in at highest rate paid (max 40%)

Employer contributions get tax relief as a deduction against profits

Investments within the pension fund grow virtually tax free

A tax-free cash lump sum

Butpension income is subject to income tax at highest marginal rate

PENSIONS?

No need to actually retire to take benefits

Pension age increasing from 50 to 55 in 2010

Womens State pension age will rise from 60 to 65 for women born on or after 6 April 1955. This will be phased in over 10 years from April 2010

BE TAKEN?

Tax-free cash lump sum

Lifetime annuity

Open market option

Enhanced, impaired, investment linked

Income withdrawal

Unsecured pension before age 75

Short term annuities

Alternatively secured pension post age 75 - There is some doubt about the availability of this feature in the future because of the perceived misuse of it.An announcement is expected in the pre-budget report.

Combination including phasing

PENSION BENEFITS

Buying a new home?

Re-mortgaging or switching your mortgage?

Borrowing additional cash for home improvements or a special occasion?

Looking for a buy-to-let mortgage?

Thinking of buying a property abroad?

MORTGAGE ADVICE?

There are many mortgage options

Fixed Rate Mortgages;give you the security of a set monthly repayment for a specific period, regardless of how interest rates perform. Perfect if youre planning ahead or working to a budget.

Tracker Mortgages ; give you options. Could be ideal for you if you want a mortgage that moves in line with the lenders base rate. So when their base rate falls, your monthly repayments fall. If the rate rises, so will your monthly mortgage repayments.

WHAT ARE THE OPTIONS?

Options continued

Offset Mortgages;mean the more you save themore you could save on your mortgage payments. An Offset Mortgage is a way of using whats in your savings and current accounts to reduce the mortgage balance you are charged interest on so by offsetting you could reduce your mortgage term or your monthly mortgage repayments and still keep instant access to your savings.

Buy-to-let Mortgages;more competitive in recent years and now almost as much choice as ordinary mortgages. An important decision is whether to go interest only or repayment as interest payments can be deducted from rental income for tax purposes. However, if you have a repayment mortgage, any capital payments can't be offset.

WHAT ARE THE OPTIONS?

Make sure you dont over-stretch yourself

Make sure you can keep up your repayments the warnings are true, Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Beware of additional costs, like stamp duty, survey, legal fees and monthly expenses, including insurance policies (life, sickness, buildings and contents, etc.) A rule of thumb is not to spend more than a third of your disposable income on your mortgage.

It doesnt pay to be loyal

Loyalty may not do you any favours when it comes to your mortgage and other financial products. Why limit yourself to dealing with a single mortgage lender, when there are around 150 lenders to choose from. Being loyal can cost you a fortune. Chasing the best rates and finding a better deal whenever you can should save you tens of thousands of pounds over the life of your mortgage.

MORTGAGE TIPS

Get the best deal possible

Lenders compete for your custom and re-mortgaging is big business. Before you move your business speak to your current lender as all the major UK lenders have a team, whose job it is to hang onto your custom. If you have a good payment history, you could be able to squeeze a much better deal from your lender by threatening to take your business elsewhere.If you lender cant offer you the deal youd like, an IFA can help you search the entire UK marketplace for the best deal.

Interest only or repayment?

Interest onlymortgage means monthly payments to the lender are all interest. You don't pay off any of the capital during the term of the mortgage - you do it at the end, having made simultaneous monthly payments into some sort of investment fund By the end of the term, if your investments performed well you have accrued enough funds to pay off the capital sum of the mortgage, and maybe even a little extra. The risk is your investments may not perform well enough to cover the final payment.

MORTGAGE TIPS

Repayment mortgagesguarantee that the property is yours at the end of the term. The monthly payments could be larger but you pay off a bit of the interest due and a bit of the capital until the debt is completely and utterly finished

The benefits of over-paying

Taxpayers who save money in taxable savings accounts have to pay tax on their interest: a fifth (20%) for basic-rate taxpayers and two-fifths (40%) for the UKs three million higher-rate taxpayers. So, a gross (pre-tax) rate of 5%, would fall to 4% or 3% after taxis deducted. Howeverif you overpay your mortgage, you effectively earn tax-free interest at your mortgage rate. So, if your mortgage rate is, say, 6.75%, your tax-free return is also 6.75%.

An IFA can help you decide which options are correct for your personal circumstances

MORTGAGE TIPS

Combined Gift Tax and Death Duty

Can apply to gifts you made during your lifetime, in addition to the value of your estate on death

Nil Rate Band

2009/10 tax year band is312,000 for individuals (624,000 for married couples and civil partners

As a UK resident, your estate is valued as the total of everything you own, including those things which you have only a share in or simply derive benefit from (including income).

Inheritance Tax then becomes payable on everything valued above the allowance by those to whom you leave your estate when you die.

If you make no plans in advance, this liability will be met through sale of assets before the inheritance is passed on.

WHAT IS IT?

If a person dies leaving the following assets:

SIMPLE EXAMPLE

Step 1 : Reduce the estates value

Consider Deed of Variation for any inheritance received within last 2 years

You could also create a trust by Deed of Variation and be a potential beneficiary if required

Step 2:Make a Will

Or if you already have one update it

Consider utilising Nil-Rate Band allowance

Consider use of discretionary will trusts

Step 3:Utilise exemptions

Use IHT exemptions where appropriate

Maximise Nil-Rate Band planning

MITIGATE IHT

Youve now seen how PS works and the quality of our independent financial advice

Speak to me to ensure you benefitfrom advice that is truly tailored to your particular financial needs and goals

A service that is impartial, independent and personal to you

A service that really isaltogether individual

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