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Final Thoughts For 2020 With Elizabeth Scott

It is fair to say however that 2020 has been a tough year for us all and as we approach the year end, our very own IFA, Elizabeth Scott will assess the year so far and provide an outlook for 2021!

It has been a tough year for us all but how do you think 2020 will be remembered in terms of our personal finances?

I think this is the one we will remember how we had to drastically adjust our budgets, spending patterns and way of life. Our clients have seen their portfolios drop dramatically in value and have really had to lean on their advisers for support in order not to panic and crystallise their losses. Those who had the nerve to wait and see have seen an almost complete recovery, but it has affected everyone, effectively putting us back in time in terms of investment growth. People with pension income have really struggled with the losses experienced and have been hit the hardest, in my opinion.

On a wider note, the economy has taken a massive hit this year, what impact do you think this will have on pensions and savings in the year ahead?

I think we’ll see similar patterns in terms of reduced spending and increased lifestyle adjustment by our clients. This will impact the level of savings that people are able to make but will also highlight the need to make suitable provisions for retirement. I have had a lot of interesting conversations with people who want to leave their ‘city’ jobs and start something new, now that they have had a break from that lifestyle and time to reflect. I think what we’ll see overall is more people choosing financial advice, that they will be younger and the emphasis will be on long term savings to support a happier lifestyle.

The UK housing sector has bucked the trend and many are purchasing properties before the new stamp duties come in next year – how do you think the mortgage sector has adusted to the crises?

We’ve seen an overall increase in mortgage lending in 2020, no doubt spurred on by the stamp duty reduction from the Chancellor. This has had the unwanted effect of pushing up house prices in certain areas, and so we may see an increase in negative equity in the years to come. Some buyers have been priced out due to the increase in percentage deposit required, and so I have seen a higher interest in shared equity and help to buy schemes. Lenders and solicitors have been extremely busy with the increase in sales and purchases, so lead times have increased by a few weeks in most areas.

Many will have lost incomes this year – have you seen any upturn in protections insurance?

I have! Our clients have been very interested in life and critical illness policies over the second half of this year and have been willing to pay more for added extras for their children’s health cover as well. The insurance underwriters have had their work cut out in analysing the risks to health that we are experiencing, while trying their hardest to keep premiums affordable. Many more of my conversations have revolved around how to budget for insurance as an essential spend, whereas previously clients thought of insurance as a ‘nice to have’ for excess cash. I’ve also seen an increased uptake of discretionary trusts for life insurance as they add tons of value by ensuring that any insurance money ends up in the right hands as quickly as possible following a death, rather than being delayed by increased wait times for probate.

What would you advise your clients moving into 2021, do you have any hints and tips to maximise their portfolios?

I always advise caution and forethought before making any financial decisions, but this year I have had to advise clients to keep more readily available cash, and to invest only the money that they are absolutely sure they won’t need for 6 or more years. We’ve seen a lot of volatility this year and I don’t foresee that this will change in 2021. The healthcare sector has seen a huge rise in investment, with some platforms being so overrun with requests to buy that they have not been able to keep up with demand at critical times. As usual, American equities are strong, and investments in Asia could be a good bet over the long term.

Are there any regulatory or national policy issues that you see impacting your clients in the year ahead?

There has been talk of a ‘wealth tax’ in order to fill the holes in the Chancellor’s bucket, which can only get bigger thanks to the increase of furlough schemes well into 2021. How this will be managed fairly will be a difficult question for Government advisers to answer so it could be some years before we see any strategy implemented. We could also see state pension values fall if the triple lock is adjusted away from the 2.5% guaranteed annual rise, so we need to be looking out for our mums and dads health and welfare and saving hard for our own retirements as early as we can. That way we may be able to treat a state pension as a bonus rather than an underpin for our retirement.

Final thoughts for a tough year?

It has been tough, there’s no doubt about it. Our financial, physical and emotional health has been tested over and over again as we learn to live with our current circumstances. I feel sad for the hospitality industry but glad that we have seen some of these business starting to thrive again as they come up with new and inventive ways to help their customers. I think that they key takeaway from this year is that we have to plan ahead; we’ve seen the impact of a pandemic and how it affects everyone in society. Proper planning and sticking to a financial strategy that aims to buffer us in the future is going to be key to helping our clients feel safe and secure.

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