Q: When should barristers start to make financial plans for the future and where should they focus to begin with?
A: Buying a house tends to be the initial priority for most barristers who have been newly Called to the Bar. They want to save for a deposit and secure a mortgage. At Close Brothers, we offer a comprehensive range of mortgages and have very strong links with underwriters. As a result, we can often help barristers who only have incomplete or limited sets of accounts, or have a historical income pattern that does not follow a consistently steady or upwards trend.
When we talk to lenders, we present a broad view of an individual barrister and explain how that person’s career progression is likely to unfold. We have many barristers as clients, so we tend to know which lenders would be best to approach depending on the barrister’s situation.
Besides mortgages, the other first building block of planning for the future is to protect a barrister’s loss of income from accident or sickness.
Then, once their practices are more established and the basics of financial planning are in place, individuals then start to plan for the future by investing in ISAs, pensions and other tax-efficient saving vehicles.
Q: Are there any particular financial planning considerations that apply to barristers more than other professionals such as accountants or solicitors?
A: Yes, absolutely. A much higher percentage of barristers are self-employed so they can’t fall back on an employee benefits package that includes life cover, medical insurance and a pension. They need to provide and fund all of those benefits for themselves. Fortunately, that allows them to tailor their benefits packages to their own specific needs and requirements.
Another common concern for barristers at every career stage is uncertainty of income and cashflow. They don’t necessarily know when the next piece of work is going to happen, or when they will be paid for the last piece of work that they did. On top of that, they have to meet tax bills throughout the year. So they are less likely than other professionals to want to commit to a regular savings plan. Instead, they tend to make investments on an ad hoc basis, as and when their cashflow permits. For example, they might invest a cash surplus at the end of the tax year.
Since barristers usually want to concentrate on making a success of their practice, rather than managing their personal financial affairs, they often look to outsource their financial planning to professional advisers such as Close Brothers.
Q: What is the difference between ethical investment and socially responsible investment (SRI)?
A: With an ethical investment, an individual will invest money on the basis of his or her ethical views – choosing to exclude tobacco, for example. Socially responsible investment (SRI) is a subset of ethical investment. It’s where an individual looks to invest in companies that are specifically making a positive social impact, perhaps by developing life-saving drugs or batteries for electric vehicles. Typically, SRI portfolios aim to maximise long-term profits by investing in global businesses that are tackling wider social, environmental and economic issues.
At Close Brothers, our SRI portfolios are invested in a carefully selected group of sustainable businesses that are aligned with the United Nations’ Sustainable Development Goals. For us, SRI is not just about screening out certain sectors and industries from portfolios – such as arms and tobacco – it’s about proactively searching out companies that want to solve the world’s problems, both today and in the future.
Q: Why are investors interested in building SRI portfolios?
A: Increasingly, our clients say that they want their investments to contribute to a sustainable future, as well as generate good financial returns. This is particularly the case among the younger generation. Significantly, companies that incorporate environmental, social and governance (ESG) factors into their daily operations seem to outperform the broader market and experience lower levels of volatility. We believe that assessing ESG factors will become the norm for all investment firms.
Q: How will a barrister’s financial planning requirements change as his or her career progresses?
A: Requirements can vary considerably depending on the barrister’s own individual practice and factors such as whether they practise at the Criminal Bar or the Commercial Bar. There are some commonalities that crop up, regardless of somebody’s individual earnings, however. Generally barristers need life insurance as they grow older since they are likely to have financial dependents, mortgage debt and other debt.
Also, retirement inevitably draws closer as a barrister’s career progresses. So they want to focus on making sure that they are sufficiently ready. This is where the expertise of a financial planner can come in. A financial planner can help the barrister to identify their objectives and advise on strategies to meet those objectives. This usually means saving an amount each month, or on a lump sum basis, in the most tax-efficient way possible. Investment returns compound over time so the earlier that a barrister starts saving for retirement, the better.
Q: Are there any particular considerations for barristers when they reach retirement?
A: Again, this is very different for each individual and everybody’s situation is unique. Because the majority of barristers are self-employed, it’s very common for them to phase in retirement by reducing the number of days that they work, moving to the Bench and becoming part of the judicial arrangements, or possibly never retiring at all. They are also likely to have aged debt and perhaps publication income, which may carry on paying them for a period of time once they have physically left the Bar.
Inheritance tax planning is another important consideration for barristers, as many will have built up sizeable estates over the course of their working lives. So when they retire, they need to explore how best to draw their income, taking advantage of the pension freedoms and planning around the new inheritance tax rules.
For these reasons, it is key that barristers’ pensions and investments offer them maximum flexibility. For example, barristers who work past normal retirement age, or have other assets that generate income, may choose not to touch their pension at all and leave it completely uncrystallised so that that they can pass it down to their beneficiaries in a tax-efficient manner.
Q: What should a barrister look for when hiring a financial adviser?
A: Due to the increased regulatory burden that the Financial Conduct Authority is placing on advisory firms, the financial strength of a firm is very important. Close Brothers is a FTSE 250 listed company, with the depth and financial strength to be able to bear the regulatory burden.
Another important consideration is the firm’s understanding of the Bar and its experience of working with barristers. Barristers have very specific financial needs compared with other people so it’s critical that they work with professional advisers who understand their world. A good financial planner will also liaise with a barrister’s other professional advisers, such as accountants and solicitors, for matters such as accessing the barrister’s accounts, finding out about income earned during the year or organising the drafting of a will.
Close Brothers has had a Bar team since 2002, so we have a very clear understanding of the nuances around a barrister’s career and income, and how the Bar works. We have a significant share of the Bar among our client base, which ranges from newly called barristers through to High Court judges, and one of our strengths is providing them with bespoke financial planning advice. There is no income hurdle that you need to jump before you can employ a financial adviser. And no matter where you are in your career as a barrister, you can always benefit from good, solid, financial planning.
Q: What trends in financial planning do you expect to see in future?
A: We are being asked about SRI more and more all the time and I expect that to continue in future. Also, the legislation surrounding pensions, ISAs and other saving vehicles will keep changing. Since individuals will want to understand how these legislative changes affect them and their own individual circumstances, they will still want face-to-face, bespoke advice. It makes sense for busy barristers, who are growing their practices, to work with professionals who will keep abreast of regulation on their behalf, saving them precious time and giving them peace of mind.
Sarah Corney is a Chartered Financial Planner at Close Brothers Asset Management and a Fellow of the Personal Finance Society. She has worked for Close Brothers for 15 years and has been a member of its Bar team for more than a decade. She attends the Annual Bar Conference each year and is a previous contributor to Counsel magazine.
Please be aware that investments can go down as well as up and you could get back less than you invested. Tax benefits depend on your own individual circumstances and are subject to change. Your house is at risk if you do not keep up your repayments on a mortgage.
Contact us now for a no obligation financial consultation to see how our specialist Bar team could help you on 0344 264 0329 or email us at: firstname.lastname@example.org