5 Wealth Management Myths: Busted

5 Wealth Management Myths: Busted

Alfie Reynolds

Alfie Reynolds  -  13th September 2023

Don’t let these common misconceptions block your path to investing success. In this article we bust 5 of the most common financial planning myths for HNW investors.

Myth 1 – Successful investing means compromising your principles

Despite the explosion in popularity of environmental, social and governance (ESG) investing in recent years, many HNW investors still believe that they must choose between high returns and ethical investments.

However, with the right strategic approach, sustainable investing enables you to achieve significant returns and make a positive impact. And while it’s tricky to analyse overall performance of ESG stocks and bonds globally, 60% of international investors reported that they have experienced higher performance yields through investing sustainably.

Whether you’re passionate about the environment, committed to ensuring that companies treat workers well or determined to advance board diversity, you’ll find a growing number of high-yield opportunities that align with your beliefs.

Myth 2 – High risk means high returns, right?

Wrong! Or – at the least – the answer isn’t black and white.

Traditional financial theory opines that stocks with higher volatility tend to deliver higher returns, compensating investors for the risk they’re taking. Equity is more volatile than debt, for example, and historically has delivered higher long-term returns.

However, according to numerous studies, stocks with lower volatility tend to outperform their high-risk rivals over the long term – which means that your portfolio may be better off if you pursue a low-volatility strategy.

Why? One reason is downside protection. When there’s a bear market – or a crash – low volatile stocks lose less and recover faster. Another relates to investors’ preference for highly volatile stocks – making them more expensive. And while they might underperform in a bull market, if you hold onto your low-volatility funds for the long term, you’ll benefit from the strategy.

Myth 3 – Now is a bad time to invest

Inflation is high and markets are turbulent. Are you tempted to adopt a wait-and-see approach to investing? Perhaps you’ve recently coming into a lump sum – from an inheritance or business sale – but aren’t sure where to put your money?

This is a common conundrum – with many high-net-worth investors tempted to ride out the storm before acting. However, do nothing and you’ll erode the purchasing power of your money. There are numerous strategies that enable you to get your money working for you now:

  • Invest more into existing portfolios while prices are lower – you’ll benefit from dollar-cost averaging
  • Diversify into other products and asset types – alternative short-term investments and real estate opportunities are particularly effective when inflation is high, for example
  • Remember to view any equities investments against a timeline of a minimum of 5 years – time in the market rather than timing the market, as the saying goes

Myth 4 – When it comes to investment decisions, you always behave rationally

Most of us believe that we’re able to think logically and make reasoned decisions about our finances. In reality, the opposite is often true. Investing can become emotionally charged: when prices move up, we’re keen to speculate further; when they begin to fall, we’re tempted to sell before experiencing greater losses.

However, when you’re guided by your emotions, you’ll always be one step behind the market. With a reactive approach, you’ll invest too late, sell after losses have been inflicted and miss out on the recovery gains that follow a crash.

At Hays Mews Capital, we take a proactive approach to wealth management. Not only are our advisers experts in their field; they’re also experienced at uncovering your attitude to risk and long-term goals. And with our systematic investment process, we optimise your returns with opportunities that match that profile and meet your objectives.

Myth 5 – Stick with your wealth manager, even if they don’t meet all your needs

Once upon a time, relationships between high-net-worth individuals and their advisers lasted for the long haul – despite client needs often not being fully met. As a result, far too many wealth managers became complacent about the service they delivered – with client outcomes negatively impacted as a result.

However, a 2022 pwc survey found that times have changed:

  • 46% of high-net-worth investors plan to change or add wealth relationships in the next 1-2 years
  • 39% of them have switched or added a relationship in the past 3 years
  • 66% of high-net-worth investors are looking for increased personalisation in their wealth management relationship
  • The preference for switching is particularly prevalent amongst investors under 55

Are you looking for a wealth manager and independent financial adviser that adds value in every area?

At Hays Mews Capital Wealth Management Division, we bring you wealth management as you’ve never seen it before. Think luxury service. A stand-out experience, digitally and in person. And comprehensive support at all the major milestones of your life, and every little moment in between.

From savings and investments to retirement, lifestyle and protection planning, we help protect your capital and grow your wealth. Not only do we offer adjacent planning services – tax, trust and estate planning, for example. We bring you an extensive range of sustainable investing options, plus our Alternative Investment division gives you access to short-term opportunities that combine high yields with robust security.

Alfie Reynolds
Alfie Reynolds

Alfie Reynolds

Director, Wealth Management Division

For a free, no-obligations chat about how our innovative strategies will protect your capital and you’re your wealth, please use the link below to book a slot in my diary at a time that suits you.

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