An important part of the financial advice process is to firstly establish a client’s current financial position including their investments and the insurance policies they have in place.
In my experience clients tend to accumulate various different financial products over time. Some of these products can get neglected and others, in particular insurance policies, can get forgotten about. This can lead to a client having multiple policies and investment products in place that may no longer be suitable for their desired purpose.
Declutter your investments
When making investments, some people like to read the Sunday papers and follow the different share tips or take recommendations from a friend in the pub! If a person follows this approach over the years it can lead to a hoarding of different investments and, in time, many of them may no longer fit with their latest financial objectives.
Similarly with insurance, policies may be taken out over the years which overlap or are intended for a purpose that no longer exists. It is also worth checking bank accounts for monthly, quarterly or yearly direct debits in case policy documents have been mislaid.
It is not unusual for clients to come to see me with boxes of old paperwork that they have amassed over the years and are in dire need of an overhaul.
Consolidate your investments into one location
Use a wrap account – this is a platform that can hold all your investments in one place; your pension, ISA and general investment accounts. This is similar to internet banking, so you can log in and view all your information in a single location. While the main benefit is that you can see all your investments in one place, it also allows you to access a wide range of funds including low cost ones.
Can you consolidate your pensions?
Many of us will have several different pension pots that have been picked up from different jobs over the years. Each pension fund will send you, as a minimum, an annual statement plus other relevant notifications letters and this can soon mount up to an overwhelming amount of paperwork.
Also, a number of old pensions may not have access to all the pension freedoms rules that came into force in 2015 and so may no longer suit the purpose that they were originally set up for. It is also likely that your appetite for risk now is different to what it was when the pensions were set up.
Generally, we tend to take less risk with our investments as we get older which means the older pensions are often taking more risk than we may be comfortable with years later. In some circumstances, it may make sense to consolidate all your pensions into a single pot. The new pension fund would be matched to your current risk profile and can be reviewed regularly to check it is providing the desired returns. Again, having a single pension fund will reduce the amount of administration and will make it easier to keep track of your investment. It is important to note that consolidating all your pensions may not be right for everyone. This is because once you transfer your pension you lose certain guarantees or benefits the pension provides.
I suggest the following action points
1. Get all your financial paperwork together. Take the paperwork out of the envelope it arrived in! Take the paperwork out of the drawer it has been festering in for way too long!
2. Bring all your paperwork to a financial planner. They will put the different policies and investments in order and write to the providers for an updated valuation and breakdown of the current holdings.
3. Once the updated valuations and policy information has been received by the financial planner, they will advise which policies should be retained and which ones cancelled in line with your financial objectives.
4. Shed the rest of the documents!
A cross cut shredder can be used for security or your financial planner can securely shred the documents on your behalf. Most policy terms can now be accessed online so there is no requirement for paper copies.
So what is the benefit of having your finances de-cluttered? Firstly, if you have less investments there is less to think about and less to distract you from what is important. The less there is going on in your head, the less stressful life can become! This will make it easier to focus on your overall financial goal and those things in life that are really important (such as spending time with friends and family and enjoying experiences rather than trawling through paperwork and valuations!)
The value of your investments can fall as well as rise and you may not get back the full amount invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
What you get back at retirement cannot be guaranteed and will depend on how much you pay in, investment performance and interest rates when you retire.
Wealthwise Financial Solutions Limited is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate taxation and trust advice.