Your IndustryJul 31 2019

Preparing for PM plans

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Last week the Financial Times ran a helpful feature entitled ‘Your money under a Boris Johnson government’.

It is the sort of article the FT’s excellent personal finance section runs regularly, but usually they are not so chilling.It pointed out that the new prime minister has hinted at policy shifts that “could dramatically affect tax, investments and housing”.

Is that just newspaper hyperbole? No it is not.

Mr Johnson has made some bold statements in recent times and if he does manage to put his plans into effect, that could have seismic repercussions for all our personal finances.

I am fascinated by how financial advisers are starting to prepare for the possible changes, if at all.

I wonder how many advisers will simply sit back and do nothing on the basis of let’s wait and see what happens

It does sound like an ideal time to get in touch with clients and take a good, hard look at their portfolios and plans.

It is never a good idea to panic and change things, but it is always a good idea to regularly review whether previous decisions still hold true.

I wonder how many advisers will simply sit back and do nothing on the basis of let’s wait and see what happens.

That is clearly a tempting position to take, especially as many of Mr Johnson’s bold claims may prove to be another ‘pyramid of piffle’ – a phrase the coiffured chief himself has enjoyed using.

He has been criticised a lot in the past for lying, but it is entirely possible that Mr Johnson will live up to the office he now holds and prove to be a person of integrity. Stop laughing at the back, there. Anything is possible.

So let us look at some of Mr Johnson’s promises and how they may hit people’s personal finances.

For starters, he has proposed raising the higher rate income tax threshold from the current level of £50,000 to £80,000.

If that happens, the top 10 per cent of earners will get an extra £2,500 a year.

That is a handy bit of extra cash, but what should they do with it?

Without advice, I would probably blow the lot on a couple of Chelsea season tickets, a move that could well end up leaving me feeling fed up.

But if a trusted adviser had got in touch with some ideas, then I may end up a happier client.

Advisers could suggest, for instance, that the potential windfall could be shoved into property ahead of a possible boost for house builders if Mr Johnson manages to confound the critics and hold true to his pledges.

But let us be honest, that scenario is unlikely to come to fruition.

Yet, there are plenty of financial talking points around Mr Johnson’s elevation that could prompt a useful discussion with a client.

It is not just Mr Johnson’s potential tax changes that could mean it is a great moment to take a fresh look at people’s plans.

The arrival of a new chancellor could signal a much more urgent need to review personal finances.

What do we know about Sajid Javid’s approach to finances? He is a former City banker, which is likely to influence his approach to running the nation’s purse.

He offered tax cuts for high earners as part of his pledges when he was campaigning for leader of the Tory party.

With some predicting a general election before the end of the year – or even before the October 31 Brexit deadline – a tax-cutting platform would be hugely popular with Tory votes, which suggests that the new chancellor will prioritise the move.

Again, that would put more cash in many of your clients’ pockets and prompt another reason to get in touch with them.

As an aside, how often do financial advisers contact clients? I have had mixed experiences with a notable silence for years from one, while another helpfully sent out regular newsletters.

I would rather have regular contact, not least because it increases my confidence that an adviser is keeping an eye on my financial plans and has my best interests at heart.

But I presume that some clients prefer to have advisers that keep their ‘meddling’ to a minimum.

One thing is certain, Johnson and his new cabinet will be meddling with the nation’s finances.

At least they will try to – although in our current age of political and economic uncertainty their ambitions may well be be thwarted.

The timing is obviously difficult for contacting clients when many of them will be already on the beach, or at least have their thoughts dominated by holidays rather than pensions or investments.

For that reason it may make more sense for advisers to hold fire until after the summer break to share their thoughts about the new government and how its plans may impact people’s finances.

The danger of waiting, however, is that the new government may have already collapsed in disarray around arguments over how to achieve the best outcome for Britain after the no-deal Brexit that he appears to have promised to deliver.

But that very uncertainty and turmoil is another reason to focus on finances, with the biggest question that clients are likely to ask being: how can I protect my finances against the ongoing problems?

I have absolutely no answers to that, but presume that you have a variety of suggestions to offer.

Simon Read is a freelance journalist