October is now upon us, which means darker evenings and having to turn on the central heating – at least in the UK. It also means children, and some adults, eagerly anticipating Halloween at the end of the month.
While some of the best horror films can be frightening, growing your wealth and managing your finances can be just as scary if you’re making one of these four financial mistakes.
1. Not doing your due diligence
Forget about vampires, ghosts, and ghouls. To my mind some of the scariest people around are predatory financial fraudsters trying to con you out of your hard-earned money.
Indeed, when it comes to “trick or treat?” they are very much on the trickier side of the ledger.
Sadly, there are a lot of them about. Particularly in the offshore world that we operate in.
As a professional financial planner, one of the most important roles that I can play is protecting our clients from bad investment decisions, which includes being safe from financial snake-oil salespeople.
Even though there are some simple steps you can take to help protect yourself, it is genuinely frightening how many people leave substantial financial transactions to chance.
If you’re ever making any important decision regarding a substantial outlay of money, it’s likely that you’ll go through some sort of process to make sure it’s the right choice for you.
In the world of financial planning and investing this is known as “due diligence” and, given the sums of money at stake when it comes to investing, your due diligence should be in-depth and thorough.
Yet there are still many financial advisers and unscrupulous fraudsters who make a living through the failure of some investors to carry out even the most basic checks before parting with their money.
Find out more:
Shining a “Brite” light on some offshore financial fraudstersÂ
The importance of due diligence when it comes to your financial managementÂ
2. Overreacting to investment market volatility
Sometimes you can be happy to be scared. After all, it’s part-and-parcel of the Halloween experience to let others frighten you.
But there are some things that you really shouldn’t be scared of, and where your reaction to them can actually damage your wealth.
One of these is stock market volatility.
Reacting to every market downturn by getting frightened and panicking can result in you potentially making expensive investment mistakes.
Changing your investment strategy in the event of any kind of market volatility is probably riskier than going into a haunted house without turning all the lights on.
It’s important to factor in an element of market fluctuations into your plan and making short-term adjustments may mean you end up jeopardising your future financial security.
You need to trust your investment plan and to stick to it, even when you feel unnerved by market upheaval and a loss in the value of your holdings.
Find out more:
How to mitigate risk in your retirement portfolio
8 great investment mistakes, and how to avoid making them
3. Failing to have effective estate plans in place
Ghost stories and images of people rising from the grave are a big part of Halloween. Some of the scariest films feature terrifying creatures in the afterlife affecting those who are still alive.
On that theme, not having a will, or having one that is out of date, is a scary legacy for you to leave your family on your death and could cause more nightmares than the most frightening horror film.
Dying without a will, known as “dying intestate”, could result in the distribution of your assets being decided by the courts rather than an appointed executor. Famous people as diverse as Bob Marley, Pablo Picasso and Howard Hughes have all died intestate, prompting predictable delays and disputes over the distribution of their assets.
Likewise, not updating your will when your circumstances change, may mean that your estate is not distributed in the way that you had planned.
The circumstances I’m thinking about could be a big change in your life, such as if you separate, divorce, or remarry.
Additionally, there may well be financially impactful events, such as a windfall or selling a business that should necessitate you reviewing your estate plan to ensure it is still relevant and fit for purpose.
Once you have an estate plan in place, make sure you review it regularly. You should also consider taking some simple steps to mitigate the effect of Inheritance Tax (IHT) on the value of your assets.
Doing this will help ensure your loved ones and beneficiaries don’t get a big shock after your death – not from a ghost, but an unwelcome tax bill.
Find out more:
What are the key issues when you are gifting assets to your children
How to approach the issue of estate planning with your children
7 important succession planning issues you need to review regularly
4. Not getting expert financial advice
One of the scariest financial mistakes you can make is to try and go it alone and adopt a DIY approach when it comes to planning your finances.
Of course, as financial planning experts you would expect us to say that, but there is empirical evidence to show that financial planning and investment advice can add real value to your wealth.
For example, a study by the International Longevity Centre over a period of a decade showed that getting advice boosted the average wealth of a particular cohort of people by an average of ÂŁ47,000.
Additionally, leading investment fund managers, Vanguard, quantified “advisers alpha” – the value of investment advice – as being 3% net annually.
Then there is the whole issue of estate planning you read about earlier. The regulations around IHT can be complex. While it may be tempting to try and do it yourself, mistakes could lead to serious financial problems for your family at a later date.
Working with a financial planner does not just bring monetary benefits and help you avoid costly errors. Effective long-term planning could help you get the most out of your money, and also give you valuable peace of mind.
Find out more:
Why DIY Inheritance Tax planning can be bad for your wealth
How to gift assets to reduce your Inheritance Tax liability
Get in touch
If you would like to talk about your financial plans, please contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
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