With the second week of the year upon us, you might have had a fair dose of top financial planning resolutions, fitness diets and monthly goals. Navigating through the amount of financial planning advice out there can be a daunting task at this time of the year. And given that the end of the tax year is less than three months away, there is the added pressure of sifting through the multiple government reforms and recognising the ones which may impact your personal income and portfolio bottom line.
To help you order your financial planning priorities and take maximum advantage of the recent equity market strength and the marked growth in certain asset classes and regions, we have addressed our three most burning questions, on top priorities for 2011, on portfolio rebalancing in the current market environment and on upcoming policy changes, to four financial planners:
Yvonne Goodwin, founder of Yvonne Goodwin Wealth Management 
Dennis Hall, founder of Yellowtail 
Alex Riley, director in Bunker Riley 
Peter Sudlow, principal of Sapienter Wealth Management 
We will offer you their takes on each one of the three topics in three instalments, starting with the first one today.
Question: What investors should prioritise in order to start 2011 on a good footing, from a financial planning perspective?
In response to our question, advisors highlight two general rules – start with re-evaluating your own financial responsibilities and objectives but do not take the turn of the calendar as a tip to completely revamp your current portfolio.
Account for your Financial Responsibilities
“Know thyself,” quotes the Ancient Greek aphorism Peter Sudlow in his 2011 list of priorities and recommends that investors consider firstly their projected annual income and expenditure and, in the case of deficit, consider how they will plug the gap and then pay for the “plug” of choice. If you project to be in a surplus, use the opportunity to review and pay off debt. Pay off expensive debt first and review the interest rates you are paying on credit cards in comparison to the returns you are receiving on savings, adds to this point Dennis Hall. In his opinion, there is a high probability that interest rates will increase this year.
In addition, Sudlow says, investors should look into the state of their emergency fund. Sudlow advises on keeping two year’s worth of income as a financial buffer – an admittedly ambitious target, but one that will be worth all the effort in case of redundancy. Yvonne Goodwin agrees on the importance of having “what if” funds and adds educational funds and resources for unpredicted and unfortunate events to the pile of expenses one should plan for. In terms of the latter, both Goodwin and Sudlow remind investors to look into ensuring that their loved ones are financially stable in case of sickness or death. Think of what you have already, what provisions you want to make, and calculate the gap between the two, says Sudlow.
Go Back to the Investment Basics
“I think that the New Year is an excellent time to remind investors of some essential investment basics that often get forgotten throughout the course of the year due to short term influences and general market ‘noise’,” says Alex Riley and points out how easy it might be to forget to step back and consider the cash/bond/stocks mix in your portfolio amid the flurry of news on the appeal of gold and emerging markets. To this end, Riley’s three ‘back to basics’ tips are:
1. Review your exposure to cash, bonds and stocks. Don’t put ‘all of your eggs in one basket’ as we have seen in the last few years that sentiment surrounding an asset class can change at any moment.
2. Review your portfolio costs. Charges are the one variable that you can control and excessive charges create a performance drag. Expensive funds do not guarantee better returns.
3. Fully utilise tax privileged ISA allowances and CGT annual exemptions before 6th April 2011 if you have not done so already. It doesn’t sound exciting and everyone bangs on about it, but it is just plain sensible.
Be on Top of Your ISA
Dennis Hall agrees full-heartedly on the latter point. Check the notice periods on any money that is tied up so you can invest in new ISAs from April 6th, he reminds investors. In fact, Hall says that leaving your ISA contributions for the last minute is a homework poorly done. “It always amazes me too how people clamour to use their ISA allowances at the end of a tax year rather than the beginning, it means a whole year of tax savings wasted. There should be a greater effort at the beginning of the tax year to maximise tax efficiency and avoid paying more tax than necessary,” he says.
Ultimately, Hall says Financial Planning should be an ongoing process, not something that is revisited only as part of New Year’s Resolutions.
