Investing compensation
It is rare that the investment of an award of damages is the sole solution to our clients' lifetime needs.
It is far more likely that the solution involves complex interactions between:
- The invested award of damages;
- Ongoing benefits and statutory funding;
- Family care and support; and
- Changing priorities and compromises.
But the importance of investing an award of damages with a suitable degree of investment risk, in a manner that meets expectations, should not be underplayed; it takes many skills, understanding, experience and a tested methodology.
We need to understand your needs:
- We undertake a thorough fact-find of your circumstances and needs, which forms the basis for our recommendations and advice.
We need to make sure that you understand our approach:
- Our approach is founded on patient, long-term investing. It has to be, because this area of financial planning often has uniquely long time horizons. Having said that, there is no investment style that produces the expected results 100% of the time. Indeed, investment fundamentals (and markets) can move in unexpected ways for disappointingly long periods, with the upshot that the best opportunities tend to come just at the times when throwing in the towel and trying something else is very tempting.
- Therefore, we seek to select and blend fund managers, whose people and processes give us sufficient conviction that they are appropriate to look after your money for long periods of time.
- That said, change is sometimes appropriate, and we are not afraid to take tough decisions when necessary.
We need to construct a suitable portfolio for you:
- The starting point is risk: the extent it is necessary to take risk, and the degree to which you will accept it.
- Having agreed risk with you, we then seek to diversify investments across a broad range of assets with a wide geographical spread.
- To achieve this, we narrow down the choices from a vast universe of possible solutions, in order to seek the most cost-effective and transparent means to achieve an actively managed and well-diversified portfolio of investments.
- Our investment process draws upon the whole of the relevant market, and filters choices by specific ‘hard’ criteria (such as fund size, volatility, track record and sector), and ‘soft’ criteria (such as the people and processes employed by a particular fund management firm).
- The result is a short-list from which recommendations can be made, and funds can be blended to suit individual needs.
- We consider that active fund management, which allows the continuous assessment of the state of a particular market, and deliberate choices about how to take advantage of opportunities and mitigate risk, is preferable for the majority of your capital.
- However, for the very long term, and a small proportion of your capital, we may be prepared to recommend tracker funds, which offer a cost-effective solution to long-run asset returns.
- Where appropriate, we seek to minimise the impact of tax on your portfolio, for example by use of ISAs (this will not generally apply where an award is held in trust) and annual tax allowances and exemptions.
We need to review your portfolio:
- Financial markets are in a constant state of flux.
- The economic cycle is at different stages in different regions of the world.
- Tax rates and rules change.
- Unexpected events occur.
- Life happens.
- Therefore an ongoing annual review is as important as the initial construction of your portfolio, to ensure it remains suitable for your needs and, if not, changes are made.
Investing compensation FAQs
Will you invest my award immediately?
Probably not. Most often we will advise you to do it gradually, to avoid the risk of a sudden fall in the markets.
Will my money be protected?
Cash deposits will be fully protected, either under the deposit guarantee scheme or by HM Treasury in National Savings & Investments. We are directly regulated and authorised by the Financial Conduct Authority, and the financial products we recommend are covered under the Financial Services Compensation Scheme. However, this does not cover the normal ups and downs in the value of long-term investments. We also hold professional indemnity insurance in respect of our advice.
Do you hold my money?
No. We choose not to hold client money, and are not authorised to do so. All deposits and investments are held directly with the institutions we recommend.
Will I have to pay tax?
There is no special tax status for personal injury awards except periodical payments, which are tax-free income. Depending on your circumstances, you are likely to have personal allowances that allow you to have set amounts of tax-free income and capital gains each year. You may also be eligible to shelter some of your investments from tax by using your ISA allowance each year.
How often should I be checking the value of my investments?
Their value is likely to go up and down over short periods of time and once a year is probably enough. There is evidence that the more often you look, the less willing you will be to take on risk, not least because you will see more of the ‘downs’, which may harm your wealth in the long run.
What if the value of my investments goes down?
Obviously, that is not the aim, but it happens as part of the normal functioning of markets. A fall in value is not the same as a loss, just as a change in the value of your house is neither a loss nor a profit until you actually sell it. Everyone feels the pain of losses more than the pleasure of gains, and part of our role is to help guide you through the tough times as well as the good ones.
How will I know how much advice is costing me?
We will be completely open with you about our fees, which will be discussed and agreed with you before carrying out any work, together with the costs of managing and administering your investments.
