This video emphasizes the importance of wealth protection in financial planning, especially in light of recent global events like the 2020 pandemic and its economic repercussions. The video outlines the need for a defensive approach to financial planning, considering potential threats such as tax increases and inflation, which could impact assets, property, and investments.
Key points include:
- Taxation Concerns: The UK government’s financial strain suggests likely tax increases in the future. Wealth could become a target, with potential increases in taxation rates on property and investments, reduced allowances, or new tax types. The video warns of gradual tax changes, likening it to the metaphor of a frog not realizing it’s being boiled as the water heats up slowly.
- Inflation Risks: High levels of government debt might lead to inflation as a means of reducing the debt burden. Inflation can significantly erode the real value of wealth over time, as demonstrated with examples showing the diminishing value of £100 over 10 and 20 years at different inflation rates.
- Financial Planning Strategy: The video advises preparing for a range of scenarios, including changes in taxation and economic conditions. It suggests using all available tax-free allowances and schemes, considering the timing and method of income extraction from investments, and balancing investments and savings. Financial reorganization within families through trusts or gifting is also mentioned as a way to mitigate tax burdens.
- Dealing with Inflation: In an environment of potentially higher inflation, it’s crucial to structure savings and investments to keep pace with or exceed inflation rates. This involves reviewing and possibly adjusting the portfolio to include assets that perform well in high-inflation scenarios.
- Personal Circumstances: The video also highlights the importance of considering personal ‘what-if’ scenarios, such as early retirement, illness, care needs, or family support requirements. Stress-testing financial plans against various negative scenarios can identify potential shortfalls and allow for solutions to be integrated into the plan.
- Adapting to Change: The unprecedented events of 2020 are used as an example of why financial plans should be adaptable to a changing world and different future circumstances.
The video concludes by stressing the critical nature of having a robust financial plan and offers assistance in reviewing and establishing a plan to protect wealth against these varied challenges.