Month: August 2020

Booking a winter holiday? Make sure you know this information before you book…

Covid-19 has devastated travel around the globe. Although many lockdown restrictions have been lifted, airports remain eerily quiet with airlines operating just a skeleton service. 

This summer, most people’s holidays will more closely resemble summer holidays in the era before cheap international flights allowed us to travel to warmer climes and avoid the undependable British summer. 

Last year, Brits took 72,610,000 trips abroad. The 2020 figures will be far slimmer – many will favour homely caravans and campsite staycations over luxury cruises and Canary Islands vacations. After all, the government warned against all but essential foreign travel up to 4 July.

It’s hardly surprising that most are postponing their summer foreign holiday until next winter or the following summer, when the international travel situation might be closer to normality. However, the risk of a second wave and further travel restrictions mean that the travel insurance situation is still rather complex. Here are a couple of key need-to-knows:

Do new insurance policies cover coronavirus cancellations?

It’s now impossible to get new policies that cover coronavirus cancellation.

After the FCO warned against all non-essential travel in mid-March, insurers stopped selling policies that covered cancellation due to coronavirus travel disruption or restrictions.

This means that you will have to cover the costs of coronavirus disruption. However, it is still worth getting travel insurance if you don’t have it. There are a whole host of reasons that you might need to claim that are not related to coronavirus.

What’s more, while new policies will not cover you for Covid-19 disruption, some may cover you if you or a family member catches coronavirus before you travel and you need to cancel for this reason.

I already have a policy. Am I covered if travel restrictions are reintroduced?

If your insurance was taken out and holiday booked before mid-March, you should be able to claim for coronavirus travel restriction disruption. 

To make a claim, there will need to be a Foreign and Commonwealth Office (FCO) warning for your destination. In this scenario, your travel insurance company will expect you to try for a refund from your airline or travel firm first. 

Some policies may cover a coronavirus cancellation when there’s no FCO warning. For instance, if there’s no official FCO advisory and your flight or hotel is cancelled so you can’t travel, some policies will pay out. This depends on your insurer.

As with all things coronavirus related, the situation is very fast moving. We recommend that you keep a close eye on the latest travel developments before booking anything.

Where does the value lie in the client/adviser relationship?

There are many ways that value is expressed in the relationship between a financial planner and a client; the most obvious being the way that an adviser can guide a client towards their financial goals, enabling a client to live the life they want in the future. Offering clear, unbiased advice is also viewed as an important source of value.

There are other, more subtle, ways that advisers deliver value – ways that might not be quantifiable as increased returns. 

For instance, financial advisers can demonstrate whether you have the financial security to move your life forward in the direction you want to take. Knowing you have this kind of security can provide you with a general confidence boost that can permeate through to other areas of your life. After all, the feeling of financial insecurity can have a large effect on your moods, emotions and personal relationships.

Measuring value

Researchers from Morning Star conducted a survey with 693 individual investors and 161 financial advisers about which attributes of the client/adviser relationship they thought were most important. Respondents were asked to rank 13 attributes of the service financial advisers offer from the most important to the least important.

On the whole, there was a ‘moderate agreement’ between both groups’ lists – a correlation of 0.46 for those of you who appreciate statistics. Investors placed “Helps me reach my financial goals” first, and advisers put this second, showing the importance that both parties place on creating a cohesive financial plan that works towards clients’ personal goals.

The survey results are most interesting when we begin to look at the points of disconnect between the two groups. Here, you can see the places where advisers really think they can deliver value that their clients might not be aware of.

The biggest disconnect that the survey found was with the goal “Can help me maximise my returns”. Investors put this fourth and advisers put this twelfth.

There is a reason why financial advisers place this further down their list of priorities. 

If, for example, a client approaches an advice firm with three years to go before retirement, with a desire to maximise investment returns before their retirement, they may say, “I want you to structure my portfolio so that it will grow rapidly, allowing me to retire with the largest possible nest egg”. 

Here, most advisers would try to communicate a goal-based approach in favour of one that prioritises short term gains.

An investing approach that aimed ‘to maximise returns’ would add a lot of risk into the equation, risk that could potentially jeopardise the client’s ability to retire comfortably.

Most advisers would try to explain to the client that the importance of adopting a goal based approach that reallocates funds to low risk investments would be a better idea in this situation, as it would increase the client’s chance of achieving their goal of a comfortable retirement.

Financial advice is about more than high returns

A financial adviser is in an important position to show clients the  value of a broader goals-based approach to investing and build long term trust that doesn’t fall when the market swings. Research shows that this interpersonal side of advice might be the most valuable aspect of professional advice.

In the above example of a client approaching retirement, the valuable interpersonal skills would involve the clear communication that demonstrates to the client the value of a goals-based approach, rather than emphasising short term returns.

Returns aren’t the be-all and end-all – advice should be about much more than stock picking on behalf of an investor. Much of the value comes from the relationship itself, a relationship that can lead to a cooperative financial planning approach that places the client’s life goals and finances in alignment.

Stamp duty’s been slashed! Is it worth buying a holiday home to let out when you’re not there?

On 8 July, Chancellor Rishi Sunak announced a cut to stamp duty that could save holiday home buyers up to £15,000 if they complete the purchase before 31 March 2021. The government raised the threshold on stamp duty to £500,000, in a move to restart the stagnant housing market. 

Second home buyers will still have to pay the additional stamp duty surcharge at a rate of 3% for properties up to £500,000. For properties over £500,000, you would have to pay 8% rate of stamp duty up to £925,000. This figure includes the second home surcharge.

With a ‘staycation’ likely to be as much as most holidaymakers feel comfortable taking this year, it’s not surprising that demand for holiday lets has surged, meaning buyers could profit from letting out their property when they’re not there.

All this seems to make the prospect of buying a holiday property rather tempting. But is now the best time to buy?

Data from shows that queries from investors wanting to buy holiday lets are already up 25% since Sunak’s statement.

What’s more, demand for such properties was already surging because of the fact that most Brits will holiday at home this year. Unsurprisingly, coastal areas like Cornwall have seen the highest rise in interest. 

Paul Le Blas, Regional Director of Millerson estate agents across West Cornwall, says his firm has done as many deals in the six weeks since markets reopened as it usually would in three months.

In holiday hotspots, it’s very much a seller’s market. There are reports of people making offers even before viewing properties and houses selling for as much as 7% above asking price. 

Despite forecasts that house prices could fall by as much as 5% this year, experts believe that holiday lets and second homes are outperforming the rest of the market and prices could even increase because of the extra demand. 

Now could be a good time for buyers to get in the market before prices increase any further.

At the moment, holiday let owners can take advantage of tax breaks no longer available to buy-to-let landlords. 

As of this financial year, buy-to-let investors will no longer be able to deduct the interest they pay on their mortgage from the rental income they declare to HMRC. 

However, holiday lets are still classed as a business rather than an investment, so holiday-let owners can continue to deduct their mortgage interest from their rental income.

Please get in touch if you’d like to discuss your options with regard to buying a holiday home. We would love to help.