A Book That Got Me Thinking
I have just finished reading They Ask You Answer by Marcus Sheridan.
In it, he suggests that one of the best ways to communicate, in particular with potential new clients but also with existing ones, is to simply share the stuff we write about every day.
At first I thought, hmm, the regulator, our data protection licence, and so on. Then I thought, actually that sounds like a really good idea.
Jonathan’s Story
A couple of months ago, a chap from Heswall named Jonathan contacted me with a view to consolidating four old pensions he had been carrying around for years.
After our initial meeting, I sent him a suitability note containing, amongst other things, a regulated recommendation to switch three of his old plans onto our platform of choice, Transact.
He wrote to me earlier this week with a few questions for clarification before engagement. I thought I would follow Marcus’s advice and share my answers, as they jumped out as being of potential use to others too.
Anything personal to Jonathan has been removed or redacted.
My Response to Jonathan
In my note sent in March, under the recommendation heading, I suggested we consolidate the current Aegon, Standard Life, and Hargreaves pensions onto our Transact pension.
We have a risk test that goes out by email and scores you 1 to 10, but as discussed when we were together, the best guide is to look at page 85 of the Matrix Book. Take a look and gauge which portfolio you feel most comfortable with. Look at the worst 1 and 3 year annualised returns during various declines, and then also look at the best 1 and 3 year gains during the advances. That is generally the best place to start.
That is risk in action. Or rather, because we do not do risk in the traditional sense, it is just the real-life ups and downs from actual price gyration, all the way back to 1985.
I always start with that, rather than a test that asks a lot of questions, some of which seek to stick pins in you to see how much pain you can take.
I dislike risk tests and I have told the FCA directly about this. I also have an issue with some of the large insurers who put ridiculous text in their literature. One in particular has a chart that shows:
- Cash: Low Risk
- Bonds: Medium Risk
- Stocks and Shares: High Risk
That is not made up. I used the example in my book Bulletproof Retirement. It should be ripped up and thrown away. It is inaccurate, misleading and very unhelpful.
The Dimensional funds I deploy are all OEICs. The Matrix Book core plus model is a guide, as our model is built on that framework.
If I were making the call, I would say a minimum of 80% equity, even for the more cautious among us. Right now, your collective balance is way below that across the three plans.
For your cash, we would use your ISA wrappers each April. Remember it is just an allowance, not a thing in itself, and the money is invested in exactly the same funds.
We deploy approximately 61% within the US and 4% within the UK, following a global market cap weighted model.
It is super easy to dip into your pot. You can take 25% tax-free at age 55 if needed, and taking income is also simple. I would manage that whole process with you as the years play out.
We can also deploy your mum’s capital, maintain her ISA allowances, and the entire tax-free wrappers come over from wherever they are at the moment. On receipt we can get to work exposing it to the institutional-grade growth assets we deploy. We can also name the wrapper with your mum’s name for simplicity.
I am not surprised you have had a problem with Aegon. Here is an extract from an email I received from another client, Gary, which is self-explanatory:
“Aegon still have not paid my S32 pension benefits. It is like pulling teeth, so I have registered a formal complaint. But guess what? They are behind schedule in dealing with complaints. I may have to complain about the complaint.”
Trying to deal with any of the big insurance companies nowadays, in my experience, is a Nightmare on Elm Street. It really is.
Ready when you are, Jonathan. Just say the word. We can sit down and talk, or proceed with your email confirmation and get together once it is moving forward and the funds are in transit. It is all very easy to mobilise and handled electronically.
The Bigger Point
I have got about 22 years of emails, all of which contain similarly useful information. When I get a chance, I will start sifting through them.
The strategy feels like the right one. Share what we know, answer what people ask, and let the work speak for itself.
If you have questions about consolidating old pensions or would like to understand how our model works, we are always happy to have that conversation.
Contact us today or call 0345 200 4041 to arrange a free 20-minute consultation.
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