10 Tips to Grow Your Money

It is worth understanding how financial services advice has changed since 2013.  On 1 January 2013, the Retail Distribution Review came into force for financial services.

• Financial advisers must have minimum qualifications up to National Diploma level (equivalent of 1^st year degree course) and be progressing to Chartered status e.g.  Chartered Financial Planner or Certified Financial Planner (equivalent to 1^st Class Honours Degree).
• Commissions were banned for financial advice on pensions and investment and must be carried out on a fee basis.  Fees must be disclosed to consumers before agreement to proceed with any advice.  The agreed fee can either be paid direct or by deduction from the pension or investment fund value. 
• Full commissions can still be paid for non-pensions and investment works such as mortgages, equity release, life insurance, income protection insurance, private medical insurance and general insurances such as home, motor or commercial.
• Full commissions can also still be paid on pensions and investments where no advice has been given.  Be careful of ‘direct to consumer’ deals where you chose/select your own pension and investment as no advice has been given, so you have no ‘comeback’ as you self-selected rather than an agreed fee where you seek advice for the same.

What are the 10 ways to grow your wealth?

Rule 1.  Stop Hidden Trail Fees

Despite RDR and the requirement to disclose and agree fees for pensions and investment advice, many financial advisers simply started to disclose a % fee upfront and an ongoing % trail fee e.g., 3% upfront plus 1% pa ongoing trail fee.  This virtually mirrored the commission model i.e., % fees are commissions in all but name.  Many consumers may not be aware that they have pensions and investments that are still paying % trail and renewal commissions for policies started before January 2013 and paying % ongoing trail fees for policies started after 1 January 2023.

• Where possible, find out if there are ongoing % trail commissions of % fees and stop them.  This will allow your money to grow quicker with lower ongoing adviser fees on top of any fund management fees.

Rule 2.  Use All Tax Allowances

All tax allowances have been frozen now until 2028.  This means over the coming years we will all be paying even more taxes.  Personal Tax Allowance, ISA allowance and the inheritance tax allowance is all frozen and both your capital gains tax allowance and dividend allowance is being reduced (2023/24 to 2024/25).  Only the pensions Annual Allowance has been increased and the Lifetime Allowance tax charge was reduced to zero (2023/24)and then abolished (2024/25). 

• Make sure you use all your yearly tax allowances.  Make sure you use your capital gains tax allowance, make sure use your pension allowance, make sure you use your ISA allowances.  Make sure you use all your tax efficient allowances because the money is better there in your pocket than in the Treasury's pocket where you will have paid too much tax.

Rule 3.  Actively Review and Manage

The two laws of management that we use are:

• ‘something that is not managed or reviewed regularly will deteriorate’.  

• It’s the same if you manage staff.  If you're not managing staff or monitoring your staff, if you're not monitoring the performance.  If you're not checking the work that they are doing or if you're not checking your car or if you are not checking your electricity or your gas boiler or whatever it might be, sooner or later it breaks.
• ‘things that are measured and monitored improve’.  
• If you check your measure and check oil, water, brakes and even tyre pressure, the efficiency of your car will be improved and maintained.  It is the same for your wealth, monitor, manage and your investments will fly.

Warren Buffet famously said: : “Be fearful when others are greedy and be greedy when others are fearful”.   “Buy low sell high, buy low sell high”.  This is what professional investors do.  This is what you’ve got to do with your investments.

• When you see headlines like: “stock market has hit an all-time high today” - that's the time to get out, that’s the time to lock in profits.  Don't sit there and be greedy and think ‘gosh it might grow some more’, it probably won't.  Or even if it does a little bit, it’ll still come back down. 
• When you see: “stock market has crashed today, world markets crash, China crashes, America crashes” - that’s the time to get in, that’s the time to invest your money.
• Be much more active with your regular fund selection and management and do, sometimes switch your investments into or out of stock market funds, property funds, bond funds or cash.
• Be much more active in regularly reviewing your position as markets, the economy and geo-politics can change very quickly.

Rule 4.  Never Allow Commissions

We mentioned earlier that commissions are still allowed for non-advised sales.  Never, ever allow commissions to be paid on any of your pensions, investments, life insurance policies, sickness insurance policies, travel insurance or anything.  Pay a fee because those commissions come out of your pensions or investments.  We know the RDR rules where supposedly the word 'commission' can’t used any more, but many, many investment, insurance companies, banks, financial advisers still take a percentage of your investment or your pensions as a full commission.

• Always pay a fee for financial services (not commission), it will improve your wealth long term.

Rule 5.  Low Charges

Only ever look for the lowest charged pensions or investment policies.  This may sound obvious, and you may think 'I always look for the best value and I always look for cheaper'.  You will be staggered at the differences in investment charges on your pensions or investments between company A and company B.  We have seen some investment and pension platforms with say:

• A platform fee of 0.3% pa plus
• A fund management charge of 1% pa plus
• An adviser fee charge of 1% pa.
• That’s 2.3% growth needed each year just to ‘stand still.
• Always compare and if you don’t compare, get your financial adviser to compare, for example there are pension schemes out there with total charges of just 0.3% pa.

Rule 6.  Use Chartered Financial Planners

Only ever talk to higher qualified advisers who are chartered financial planners or certified financial planners.  These advisers have the equivalent of solicitor or chartered accountant qualifications in financial planning.  They are likely to be more knowledgeable to offer you a wider range of cohesive financial advice across a range of areas that affect your wealth.  An adviser with mortgage qualifications clearly will be able to to take into account your other needs or may have no knowledge, experience or have studied other areas that may affect your financial well being.

Rule 7.  Drip Feed/Pound Cost Average

What should invest in during volatile market times?  When markets are volatile or when markets are falling i.e., going down, look at moving to safer havens or drip feed new money into those investments sectors with regular premium payments or if already invested, regularly switch from a fund that is high to a fund that has already fallen, is falling or is a safe haven.  This is known as ‘pound cost averaging’, you have spread the risk of investment over a period and secured the average unit/share price rather than investing in one lump sum and buying at a higher price that subsequently falls.

• Remember Mr Buffet: “be fearful when others are greedy”.

Rule 8.  Be Greedy When Others are Fearful/Lump Sums

Are for lump sum investments, always look for markets that may be lower in value or are not overpriced and have the potential to rise.  We know this my sound obvious i.e.  ‘buy low, sell high’ but whilst you will never be able to time the market for the optimum low point, you should aim to invest in a market that has fallen, even if not quite at the bottom of its cycle to then benefit from recovery.  If the market has crashed, that’s the time to invest lump sums into that area because it will recover and your lump sum will grow as you buy lots and lots of cheap units as the markets are falling, in rising markets [rule 8] you need to invest at the start.  Invest and then it will grow. 

• Remember Mr Buffet: “be greedy when others are fearful”.

Rule 9.  Compare and Consolidate

We have already seen the wide range of fund, platform and adviser fee charges that may contribute to your wealth not growing as you might expect.  In addition, many older pensions and investments may have much higher charges than newer ones.  Always compare and do look at consolidation.  When you’ve got lots and lots of pensions that you might have taken out over the years with different employers and different companies and pensions that you paid into yourself a few years ago.  Their charges may be higher, for old policies taken out a number of years ago, compared to what you can get today.

• Always, always compare charges on old policies to newer type policies and even look at or get your adviser to look review whether to consolidate my pensions or investments.
• In addition, many investment and pension companies offer discounts on charges if you consolidate and have a slightly bigger pension or investment fund.
• Consolidation may make or save you many hundreds if not thousands of pounds over the coming years to improve your wealth position by comparing and consolidating.

Rule 10.  Maximise Tax Relief and Savings Bonuses

We have already seen that most of our tax allowances are frozen until 2028, so it makes sense where available to get tax relief where we can boost our wealth.

• Your own pension contributions attract tax relief at your highest rate of tax (20%, 40% and 45%).  For personal contributions, you are usually granted 20% basic rate tax relief.  E.g., you pay in £80, and it is automatically made up to £100 in your pension fund.  That’s 20% growth overnight.  In addition, if you are a higher rate taxpayer (40%) you will get a further £20 tax relief (20%), meaning the cost of the £100 pension contribution was £60 and if you are an additional rate taxpayer (45%) you will get a further £25 tax relief (25%), meaning the cost of the £100 pension contribution was actually £55.  Where else can you geta return of 20%, 40% or 45%?
• Lifetime ISAs (LISA) for people aged between 18 and 40 years old, you can pay up to £4,000 pa into a LISA and get a 25% bonus on the amount saved )up to £1,000 pa), that’s a 25% return.  You can save in LISAs until you are aged 50 and either use it for a house deposit or a tax-free retirement vehicle.  That’s up to 32 years potential savings with a 25% bonus added by the government.
• For lower income earners claiming universal credit or working tax credits, you can save in the government sponsored Help to Save scheme, where you get a 50p bonus for every £1 you save over a 4-year period, that’s 50% growth on the amount you save.  Where else can you get a guaranteed 50% bonus.
• For the wealthier or higher risk investor, you can invest in Venture Capital Trusts (VCTs) and get 30% tax relief immediately up to £200,000 a year invested.  For EIS (enterprise investment schemes) the limit is up to £2m pa and SEIS limit £200,000 pa, you can get immediate tax relief of 30% and 50% respectively.

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