ICP054 - Really understanding investment risk

This week in episode 54 of the Informed Choice Podcast, Martin talks about really understanding investment risk, a growing imbalance between the wealth of the generations and dressing smarter for success.

Find show notes and more at icfp.co.uk/podcast. 

There’s also a roundup of the latest news from the world of personal finance and investing.

-The Financial Conduct Authority (FCA) published a name-and-shame list of banks and building societies offering low interest rates to savers.

-A thematic review by the FCA has found widespread failings in wealth management firms.

-A cut to the pension lifetime allowance from £1.25m to £1m next April is going to cost employers and pensions schemes nearly £50m to implement.

-Pensioners who wish to sell higher value annuities once a new second-hand annuity market is launched will be required to take ‘appropriate financial advice’.

-Oil prices fell this week to nearly a seven-year low, with an expectation that crude prices will continue to fall in 2016.

Main topics

Does your financial adviser understand how much investment risk you can take with your money?

Martin explores an article published recently in Canadian publication The Globe & Mail by Rob Carrick, with findings by the Ontario Securities Commission’s investor advisory panel which found that the risk questionnaires used by financial advisers are mostly junk.

He argues that risk profiling questionnaires should only ever be a starting point for understanding investor risk attitudes, and issues such as the need for risk and capacity for risk are far more important to consider.

What’s happening to financial demographics in this country at the moment?

The Resolution Foundation has published some new research which has found the recently retired now enjoy a larger share of the UK’s wealth than the under-45s.

According to the think tank, households headed by a 65-74 year-old hold about 19% of the country's wealth, compared with 16% for the under-45s.

Martin explores these findings and shares some constructive criticism from an Informed Choice Podcast listener about 'affordable housing'.

How does the way we dress affect the way we feel?

Carl Richards talked about enclothed cognition in his latest episode of Behaviour Gap Radio; this is the link between what we wear and how we feel.

Martin explores this link between sartorial standards and success in life, asking whether he should start wearing a suit to work.

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