The trend for wanting your money to have a positive effect on the world when you invest has been growing. If it’s something you’ve considered, the terminology might seem confusing with phrases like “ESG investing” and “impact investing” used interchangeably.

Read on to discover what the difference is and how it might affect your investment decisions. 

ESG and impact investing share similarities but take different approaches 

ESG investing incorporates environmental, social, and governance factors

When you’re making investment decisions using ESG criteria, you’ll consider environmental, social, and governance factors. You might look at a company’s ESG performance. You’d then incorporate these factors into your usual decision-making process. As a result, it may be a useful way to identify businesses that have good ESG practices.

With this information, you might decide to avoid investing in certain companies because their ESG performance doesn’t align with your views, or focus your investments on those that do.

Impact investments aim to have a measurable social or environmental impact 

The Global Impact Investing Network defines impact investing as “investments made with the intention to generate positive, measurable social and/or environmental impact alongside financial return”. Impact investors might target specific sectors or issues that are important to them.

As you can see, while both ESG and impact investing have similar aims, the approaches are different.

In both cases, investors aim to make their values part of their decision-making when deciding how to invest and consider the long-term opportunities and risks. However, impact investing requires investors to measure the impact of their investments.

For example, if climate change is an important issue to you, when you’re taking an ESG investing approach, you might assess a company’s carbon emissions and the steps they’re taking to reduce them. This could lead to you excluding certain businesses from your investment portfolio, such as fossil fuel companies.

Now, if you took an impact investing approach, you’d search for companies that are having a measurable impact on reducing climate change risks, such as firms operating in clean energy or carbon capture technology.

There are ESG and impact investment funds available to choose from. A fund will pool your money with that of other investors to invest in businesses that meet the fund’s criteria. So, you can still incorporate ESG or impact investing values if you prefer to take a hands-off approach.  

Should you choose ESG or impact investing?

There’s no right or wrong answer when you’re deciding between ESG and impact investing – it will depend on your preferences and personal values.

Some investors prefer integrating ESG investing into their existing portfolio. For others, impact investing might allow them to focus on key issues that are important to them. You might even decide to incorporate both ESG and impact investing principles into different parts of your portfolio.

If you’d like to discuss which option is right for you, please get in touch. We’ll take the time to understand your priorities and offer tailored advice that considers your values and goals. 

It’s still important to consider your personal investment goals and risk profile

Whichever option you choose, if you want to incorporate your values into your investments, it’s still important to consider your circumstances. For example, you may consider your:

• Investment goals: While you might want to have a positive impact on the world through your investments, your personal goals are still important – what is your reason for investing? Whether you want to retire early or support loved ones, your answer will often affect investment decisions, including how much risk to take. 
• Investment time frame: With a goal defined, you should have a clearer idea about how long your money will be invested. Typically, you should invest with a long-term time frame of at least five years. Your time frame might also affect your risk profile. 
• Risk profile: All investments carry some risk, but it varies between opportunities. So, it’s important to understand what level of risk is appropriate for you. Several factors may influence your risk profile, including your goals, investment time frame and how comfortable you are with risk. As financial planners, we could help you understand your risk profile. 
• Diversification: Creating a balanced portfolio could reduce how much volatility you experience by investing in a wide range of sectors or geographical locations.

Making your investment decisions part of your wider financial plan could help you make decisions that are right for you and your aspirations. 

Contact us to talk about your investment portfolio

If you want your investment portfolio to reflect your wishes and have a positive impact on the world, please contact us. We could help you balance your values with your financial goals to ensure your portfolio continues to reflect your circumstances and risk profile. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Failing to set out your wishes in a will could mean your assets aren’t passed on to the loved ones you’d like to benefit from your estate. As a result, this could have a significant effect on your legacy. 

A will is one of the main ways to ensure your assets are passed on to your loved ones according to your wishes. So, if you don’t have a will in place, what will happen?

Intestacy rules are applied if you pass away without a will

If you pass away without a valid will, also known as “intestate”, the way your estate will be distributed will follow strict rules, which could be very different from your wishes. 

In England and Wales, if you’re married with no children, everything will go to your spouse or civil partner. If you’re married with children, your spouse or civil partner will inherit:

• Your personal possessions
• The first £322,000 of your estate, and
• Half of your remaining estate, with the other half being shared equally among your children. 

If you’re not married and have children, your entire estate would be divided equally between your children.

If you’re not married and don’t have any children, your estate would be shared equally among one of the following groups of people in this order:

• Parents
• Siblings, or nieces or nephews if your siblings have passed away
• Grandparents
• Aunts and uncles. 

Finally, if no living relative can be found, your estate will pass to the Crown. Most of these funds go to the Treasury. According to the BBC, as of November 2023, there were more than 6,000 people on the government’s list of unclaimed estates.

As you can see, intestacy rules might mean some family members or friends who you’d like to benefit from your estate are overlooked. It’s not just about wealth either, as you may have sentimental items you want to go to a particular person. Perhaps you’d like your granddaughter to inherit your jewellery, or pass on your record collection to a music-loving nephew. 

Intestacy rules also don’t consider whether you’d like a portion of your estate to go to organisations or charities you might wish to support.

By not writing a will, you’re missing out on an opportunity to set out exactly who you’d like to benefit from your estate.

Despite this potential impact on your legacy, research from the IRN Legal Wills and Probate Consumer report suggests just 36% of UK adults have a will. 

5 other practical reasons to write your will

Ensuring your assets are passed on to your intended beneficiaries isn’t the only reason to prioritise writing a will if you haven’t already. Here are five other practical reasons.

1. Name a guardian for your children

If you have children under the age of 18 or other dependants, you can use your will to name their appointed guardians if the worst should happen and you pass away. A guardian would take full responsibility for your children until they reach adulthood. If you have not named a guardian, the court will appoint one, who may not be the person you’d choose. 

2. Set out your funeral wishes

While funeral wishes listed in a will aren’t legally binding, they can be very useful for your loved ones. Organising a funeral while grieving and putting affairs in order can be stressful, and your family may worry about making the “wrong” decision. Making a note of your preferences could provide much-appreciated guidance. 

You might also decide to set money aside to pay for your funeral in your will too. 

3. Potentially reduce an Inheritance Tax bill

If your estate exceeds the nil-rate band, which is £325,000 in 2024/25, it could be liable for Inheritance Tax (IHT). In some cases, your will could be used to potentially reduce the bill.

For example, if you leave your main home to your children or grandchildren, you’ll usually be able to use the additional residence nil-rate band, which in 2024/25 could increase the amount you can pass on before IHT is due by £175,000. 

There are often other ways you can reduce an IHT bill. If you’d like to discuss estate planning that considers IHT, please contact us.

4. List the executor of your will

An executor is responsible for carrying out the instructions in your will and handling your estate. It can be a time-consuming task, and one that some loved ones may find difficult. So, you might want to take some time to consider who would be suited to the role and name them as the executor in your will.  

You can choose a family member or friend to be an executor. Alternatively, you may appoint a professional executor, such as a solicitor or accountant, which could be especially useful if your estate is large or complex.

5. State who you’d like to care for your pets

If you have pets, you can use your will to set out your wishes regarding their care, including who will look after them. While you can’t leave assets directly to your pets, you might want to set aside some money for the person who will care for them to cover the costs. 

Understanding your estate could be valuable when you’re writing a will

If you need to write a will, understanding your estate could be a valuable place to start. Considering your assets and how the value of them might change during your lifetime could affect how you wish to pass them on. 

Please get in touch to talk about your estate plan, from what you want to include in your will to how to mitigate a potential IHT bill. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.

It doesn’t matter how much you prepare; sometimes unexpected life events could mean your carefully laid plans go awry. While you can’t know what’s around the corner, you can change how you respond to unpredictable events to help keep your financial plan on track.

A life event could have a huge impact on your wealth, both now and in the future. Circumstances outside of your control might even lead to you changing your long-term goals. So, even if you already have a robust financial plan in place, a review following major life events could be helpful. 

Here are four unpredictable life events you might have experienced that could mean you’d benefit from updating your financial plan. 

1. Experiencing redundancy

Redundancy could have a huge effect on both your short- and long-term finances.

In the short term, you might need to dip into savings or other assets to cover your essential outgoings. As you may stop contributions towards your long-term goals, such as adding to your pension for retirement, it could also mean you face an unexpected shortfall in the future. 

You might also receive a redundancy payout, which you want to understand how to use to improve your financial security. 

According to data from the Office for National Statistics, around 3.4 employees in every 1,000 were made redundant between March and May 2024. A separate poll from SurveyMonkey also found that 58% of employees feel uncertain about their future job security. 

If you’ve been made redundant, a financial review could help you identify ways to manage your finances while you search for employment, and then assess the potential long-term impact. 

2. Taking time off work due to an accident or illness

Needing to take a long time off work due to an accident or illness could leave you in a financially vulnerable position. Much like redundancy, it could affect both short- and long-term finances. 

You might think the chances of you being unable to work for an extended period are slim. However, figures released at the start of 2024 and published in the Guardian, highlight how many people are affected by unexpected illnesses. According to the data, 2.8 million people were not working due to long-term sickness at the start of the year. 

If you’re unable to work, a financial review could help you assess how to use your assets to create a regular income to cover essential outgoings. It might also consider how you could keep long-term goals on track. 

3. Separating from your partner

Whether you’re married or not, separating from your partner may have large implications for your financial security. Separating when your finances are intertwined could have a substantial impact on your household income, regular expenses, and even long-term wealth creation. 

Indeed, research led by the University of Bristol found that equal division of joint assets, including property and pensions, was not the norm during divorce. It only occurred in around 3 in 10 cases. This means that one person was likely to miss out financially.

Working with us to assess your financial plan following a separation could help you understand how your assets have changed and what steps you might need to take to improve your financial resilience. 

A financial review isn’t just useful for assessing your assets. Following the breakdown of a relationship, your lifestyle goals and long-term aspirations might have changed too. So, updating your financial plan could ensure it continues to reflect the future you want. 

4. Receiving an inheritance 

Unexpected events don’t always harm your finances. Indeed, if you receive an inheritance or a windfall, it could provide you with greater financial freedom than you previously had.

Receiving a large lump sum out of the blue might feel overwhelming, especially if it’s through an inheritance and you are dealing with the loss of a loved one. When you’re ready, seeking tailored financial advice could help you understand how to use the wealth in a way that aligns with your goals. 

Have you experienced an unexpected life event? Contact us to review your financial plan

Whether you’ve experienced one of the four unexpected life events listed above or you’ve been affected in another way, we could help you assess your financial plan to ensure it continues to reflect your new circumstances. Please contact us to arrange a meeting with one of our team. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.

When you received your last promotion or pay rise, your first instinct might have been to celebrate by splashing out on a new gadget, booking a holiday or allocating more of your money to your disposable income. However, if you overlook reviewing your finances, “lifestyle creep” could affect your ability to reach long-term goals, including your retirement plans.

Lifestyle creep leads to your regular expenses rising

Lifestyle creep refers to your regular expenses rising in line with your income. So, after you’ve received a pay rise, your outgoings would start to creep up.

It can be more difficult than you expect to spot lifestyle creep. It might be as simple as choosing a more expensive bottle of wine when you’re at the supermarket or stopping by a café on the way to work each morning to pick up a latte. It could include larger expenses too. Perhaps you start to upgrade your phone every year instead of every three years, or eating out becomes a regular habit rather than a treat. 

Over time, lifestyle creep can lead to former luxuries becoming your new essentials. If you don’t keep an eye on your budget, the amount you spend could rise much further than you expect. 

According to a survey carried out by Aqua, 89% of Brits say they exceed their social budgets every month. The average person is spending around £61 more on social activities than they plan for. 

When you consider how lifestyle creep could affect other areas of your spending, it’s easy to see how it could lead to your regular outgoings rising by far more than you initially thought.

On the surface, lifestyle creep might seem like it’ll have little impact. After all, the £3.50 you might spend on a coffee during your commute is small change. Yet, grab a coffee three times a week, and you’ve added almost £550 to your expenses over a year.

Increased spending means you can become dependent on a higher income. Once you’ve established a habit of spending more, it can be difficult to go back to your original budget. 

Lifestyle creep could mean you don’t save as much for your retirement 

Small rises in your regular outgoings might seem relatively small in isolation, but when they’re combined, they could add up to thousands of pounds unwittingly spent every year.

As a result, you might divert a smaller portion of your new income to your retirement. Contributing less to your pension, investment portfolio, or savings could have a much larger effect than you first believe, especially once you calculate the returns you’ve potentially missed. 

Another way lifestyle creep could affect your future is by changing your desired retirement income.  

According to a 2022 survey published in FTAdviser, the top retirement aspiration among those nearing the milestone is to maintain their standard of living. If your regular expenses have crept up during your working life, your pension might need to provide a greater income than you’ve previously calculated.

As a result, some retirees could find they face an income shortfall in retirement or risk using their pension too quickly and running out of money later in life. 

A financial plan could help you strike a balance between enjoying today and securing your future 

While lifestyle creep may be harmful to your long-term plans, you don’t have to put all your new income to one side for the future – it’s about striking a balance that suits you.

From planning an annual holiday to an exotic location to days out with your family, there are lots of ways you might plan to spend a pay increase. Making these expenses part of your overall financial plan could help you assess what’s right for you. 

It may be worth considering which expenses add joy to your life when you’re prioritising them. For example, a cup of coffee on the way to work might become a habit that doesn’t improve your mood or outlook. On the other hand, regularly buying a coffee as you catch up with friends could be an important part of your social routine that you look forward to. 

Creating a financial plan and being aware of lifestyle creep is about more than cutting back your expenses. It’s about being intentional with how you use your wealth now and in the future.

Contact us to talk about your finances and how to avoid the negative effects of lifestyle creep 

If you’ve received an income boost or would like to review your finances, we could assist you in formulating a financial plan that could help secure the lifestyle you want. Please contact us to arrange a meeting. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.