The current volatile financial markets might be reviving uneasy feelings among investors. While completely natural, acting on those emotions could do us more harm than good.

The increase in market volatility is an expression of uncertainty. Sovereign debt issues in Europe and the US, renewed worries over financial institutions and fears of another recession, are leading market participants to apply a higher discount to risky assets.

Risk aversion
So, developed world equities, oil and industrial commodities, emerging markets and commodity-related currencies like the Australian dollar are weakening as risk aversion drives investors to the perceived safe havens of government bonds and gold.

It is all reminiscent of the events of 2008, when the collapse of Lehman Brothers and the sub-prime mortgage crisis triggered a global market correction. This time, however, the focus of concern has turned from private-sector to public-sector balance sheets.

Market recoveries
There are a few points individual investors should keep in mind:

• Markets are unpredictable and do not always react in the way the experts predict. The recent downgrade by Standard & Poor’s of the US government’s credit rating actually led to a strengthening in US treasury bonds.
• Quitting the equity market at a time like this is like running away from a sale. While prices have been discounted to reflect higher risk, that’s another way of saying expected returns are higher. And while the media headlines proclaim that ‘investors are dumping stocks’, remember long-term investors are buying them.
• Market recoveries can come just as quickly. In March 2009 – when market sentiment was last this bad – the S&P 500 in America turned and put in seven consecutive months of gains totalling almost 80 per cent while the FTSE added 22% over the course of the year – the biggest annual gain since 1997. This is not to predict a similarly vertically-shaped recovery is likely, but it is a reminder of the danger for long-term investors of turning paper losses into real ones and paying for the risk without waiting around for the recovery.

Spreading risk
• Never forget the power of diversification. While equity markets have had a rocky time in 2011, fixed interest markets have flourished – making the overall losses to balanced fund investors a little more tolerable. Diversification spreads risk and can lessen the bumps in the road.
• The world economy is forever changing, and new forces are replacing old ones. As the IMF noted recently, while advanced economies seek to repair public and financial balance sheets, emerging market economies are thriving. A globally diversified portfolio, like the Cavendish investment portfolio, takes account of these shifts.
• Nothing lasts forever. Just as smart investors temper their enthusiasm in booms, they keep a reserve of optimism during busts. And just as loading up on risk when prices are high can leave you exposed to a correction, dumping risk altogether when prices are low means you can miss the turn when it comes. As always in life, moderation is a good policy.

Emerging value
The market volatility can be concerning but through discipline, diversification, and understanding how markets work, the rollercoaster ride can be made bearable. At some point, value will re-emerge, risk appetites will re-awaken, and for those who acknowledged their emotions without acting on them, relief will replace anxiety.

Despite constantly helping patients to enjoy healthy futures, some doctors are averse to taking the simple steps to make the most of their own prospects.  Without careful financial planning, many will find themselves significantly poorer than if they had sought professional advice.  And in today’s volatile financial climate, this could make them even more vulnerable to changes in circumstance or fortune.

Most medical practitioners do not have the time to focus on financial affairs.  In addition, finding an adviser with the skills and experience to understand the complexities of a doctor’s employment structure, pension scheme and additional benefits can be a difficult task.

Yet seeking help in retirement planning need not mean enduring endless meetings or jargon-filled volumes.  Cavendish Medical Ltd is a specialist financial planning company for doctors working in private practice and the NHS.  Run by a former doctor, we understand completely the busy lifestyle of today’s medical practitioner, and importantly, how to make the most of his or her retirement.

Cavendish provides a bespoke and personalised service, supporting our clients with close personal relationships.  Our consultants have superior knowledge gained from working with practitioners, senior hospital management and the NHS Pensions Agency.   We are able to provide impartial advice whether you work within the NHS, private sector, independent sector or a combination of all three.

It is estimated that of the doctors who do seek alternative financial advice, most are paying significantly more for it than they need to be.  The cost of the service they receive is often cleverly concealed within commission payments to their adviser or in annual management charges.

However Cavendish Medical is a fee-based practice, offering complete transparency in the cost of the financial advice given.  Commission-based advisers are only able to offer their clients products or investments that pay commission where as Cavendish clients are presented with services that truly are best for them, not their adviser.

Dr Mark Martin, former anaesthetist and now managing director of Cavendish Medical, explains: “As a patient, I would not expect to be prescribed the drug from the company paying for the most overseas trips to the Consultant in charge.  I would like the considered advice of the expert practitioner and the drug he has carefully selected based on his experience and the appropriate clinical trials!  And so it should be with financial planning.

“We have created a financial practice based on trust, integrity and exceptional quality of service – engaging with our clients in a transparent relationship.”

In the UK, statistics show people are living longer.  Retirement planning is ever more crucial to ensure later life can be enjoyed to the full with the security of a considerable financial safety net.  The money invested in getting sound advice from experts could be paid back many times over in the long term.  In fact, spending just a short time planning now could save you hundreds of thousands of pounds in the years ahead – when smart money management will be vital.

Moreover, we will continually review your situation to ensure the agreed plan still meets your retirement needs.  Personal objectives can alter and new legislation can adversely affect your plans quickly.  We can assess your position and will verify that your plan is flexible enough to withstand change.  Knowing your investments are on the right course, and continuing to deliver first-rate performance, will give you total peace of mind.  

Act now to secure a happy retirement and the best long-term health of your finances.  To discuss how Cavendish can help you, please call 020 7636 7006.

From September, HMRC will issue application forms for a new Fixed Protection Scheme that could save doctors up to £165,000.  Yet some medical practitioners will lose this sum from their NHS pension scheme by not acting to protect it now.

There is currently a ‘lifetime allowance’ which limits the amount an individual can accumulate tax-free within his or her pension (NHS and private) funds.  The Government has announced this lifetime allowance will be reduced from £1.8million to £1.5million with effect from 6 April 2012. 

The penalty tax rate above this allowance is 55 per cent, which applied to the Government’s £300,000 reduction equates to handing over a ‘present’ to HM Treasury of £165,000.

However, a new form of protection has been introduced to give individuals a personalised lifetime allowance of £1.8million, provided certain criteria are met.  Those with pension savings above £1.5million or who believe their savings will rise to above this level (e.g. due to increases in salary), should consider applying for the new “Fixed Protection Scheme.”  It is important to remember the calculation should include the valuation of both NHS pension benefits plus the value of private pensions.

As a former anaesthetist and managing director of Cavendish Medical – specialist financial planners for doctors and dentists, I would encourage anyone with a current or projected future NHS pension of £50,000 and/or significant private pensions to urgently seek advice.  It is imperative to act now as using the ostrich approach could be very expensive in this instance!

Even savvy individuals who have already safeguarded their lifetime allowance with ‘enhanced’ or ‘primary’ protection could find themselves losing out significantly in relation to tax-free benefits.  Someone with a pension fund of £1.8million expects to be able to draw 25 per cent of this as a tax-free lump sum when they retire – £450,000.  Next year’s drop to £1.5million could see this tax-free sum reduced to £375,000. 

People who have worked hard for their income are not normally willing to hand it over to someone else but with these legislative changes we might see individuals doing just that.  The process of guarding that money is relatively simple and there are experts who can ensure the forms are completed correctly.

In order to maintain fixed protection, you must comply with certain criteria such as not starting a new pension arrangement and may have some restrictions on transferring benefits.

It is important to review your retirement planning periodically with ongoing advice to ensure you do not lose fixed protection in the event of a pay rise or upon receipt of a Clinical Excellence Award.

Fixed protection application forms are available from September 2011 and must be received by HMRC by 5 April 2012.

To discuss how fixed protection can benefit you, contact Cavendish on 020 7636 7006.