Building and managing wealth effectively requires more than simply putting money aside. With the right investment strategy, your money has the potential to grow significantly over time, outpacing inflation and helping you achieve the financial goals that matter most to you. At Mike Smith IFA, we provide independent investment advice tailored to your individual circumstances, giving you access to the whole of the market and the confidence that your money is working as hard as it can.
Why invest?
Leaving large sums of money in cash over the long term may feel safe, but in reality it carries its own risk. With inflation eroding the purchasing power of cash savings over time, the real value of money held on deposit can fall significantly. Investing gives your money the opportunity to grow at a rate that outpaces inflation, helping to preserve and build your wealth over the long term.
Whilst investing does carry risk – and the value of investments can fall as well as rise – a well-constructed, diversified portfolio managed over a sufficient time horizon has historically provided returns that cash savings simply cannot match.
What investment wrappers are available?
The way in which your investments are held can have a significant impact on the tax you pay and the returns you ultimately receive. We advise on a range of investment wrappers, each with its own characteristics and tax treatment:
| Individual Savings Accounts (ISAs) | An Individual Savings Account (ISA) is one of the most tax-efficient investment wrappers available to UK residents. Any growth and income generated within an ISA is completely free from income tax and capital gains tax, and does not need to be declared on your tax return. The current annual ISA allowance is £20,000 per person, per tax year, and unused allowance cannot be carried forward, making it important to use it each year where possible. |
| Stocks and Shares ISA | Allows you to invest in a broad range of assets, including funds, shares and bonds, within a tax-efficient wrapper. This is the primary ISA we advise on as part of a long-term investment strategy. |
| Cash ISA | A savings account where interest is earned free from income tax. Whilst straightforward, cash ISAs are unlikely to provide the real returns needed to build wealth over the long term and are generally more suitable for shorter-term savings goals. |
ISAs also benefit from a valuable feature known as the Additional Permitted Subscription (APS), which allows a surviving spouse or civil partner to inherit the ISA allowance of their deceased partner, preserving the tax-efficient status of those savings.
| General Investment Accounts (GIAs) | A General Investment Account is an investment account with no annual contribution limit, making it a useful complement to an ISA once your annual allowance has been fully utilised. Unlike an ISA, a GIA does not benefit from built-in tax protection, meaning gains may be subject to capital gains tax. |
However, with careful planning, a GIA can still be used in a highly tax-efficient manner. Strategies such as managing gains within your annual capital gains tax allowance, utilising the allowances of a spouse or civil partner, and selecting tax-efficient funds can all help to minimise the tax impact of investing through a GIA. The current capital gains tax annual exempt amount is £3,000 per person, per tax year.
A GIA also offers greater flexibility than other wrappers, with no restrictions on access or withdrawals, making it suitable for those who may need to access their money at short notice.
Investment Bonds
An Investment Bond is a life insurance policy that allows you to invest a lump sum across a range of funds. There are two main types:
| Onshore bonds | Held within the UK and subject to UK tax within the bond. Basic rate tax is effectively deemed to have been paid on any gains, which can be advantageous for higher rate taxpayers who expect to become basic rate taxpayers in the future. |
| Offshore bonds | Held outside the UK, and benefit from gross roll-up, meaning that investments can grow without an immediate tax liability. Tax is deferred until withdrawals are made, which can provide significant planning opportunities. |
Both types of Investment Bond allow you to take withdrawals of up to 5% of the original investment per year without an immediate tax liability. This allowance is cumulative, meaning that unused amounts can be carried forward to future years. This can be a particularly useful feature for managing income in retirement or for those who wish to make regular withdrawals in a tax-efficient manner.
Investment Bonds can also be a valuable estate planning tool, as they can be assigned to beneficiaries or placed in trust to help manage a potential inheritance tax liability.
How we select investments
As an independent firm, we have access to the whole of the market and are not restricted to any particular provider, platform, or fund range. Our investment recommendations are based entirely on what is most suitable for you.
Before making any recommendation, we will take the time to understand:
- Your financial goals and investment objectives
- Your attitude to risk and capacity for loss
- Your investment time horizon
- Your tax position and existing financial arrangements
- Any ethical or environmental preferences you may have regarding how your money is invested
We use this information to construct a portfolio that is genuinely tailored to your needs, drawing on a wide range of asset classes, geographies, and investment styles to build a well-diversified strategy.
Attitude to risk and diversification
Understanding your attitude to risk is fundamental to building an appropriate investment portfolio. Risk and return are intrinsically linked – the potential for higher returns over the long term generally comes with greater short-term volatility. We will assess your attitude to risk carefully, considering both your emotional comfort with market fluctuations and your financial capacity to absorb potential losses.
Diversification – spreading your investments across different asset classes, sectors, and geographies – is one of the most effective ways to manage risk within a portfolio. By not concentrating your money in any single area, the impact of poor performance in one part of the market can be offset by stronger performance elsewhere.
Ongoing investment management
Investing is not a one-off event. Markets move, circumstances change, and your portfolio needs to be monitored and reviewed regularly to ensure it continues to perform as intended. We provide ongoing investment management as part of our service, which includes:
- Regular reviews of your portfolio’s performance
- Assessment of whether your investments remain aligned with your goals and risk profile
- Rebalancing where necessary to maintain the intended asset allocation
- Keeping you informed of any significant market developments or changes in legislation that may affect your investments
What to expect from us
We believe that good investment advice should be clear, transparent, and genuinely personalised. We will always explain our recommendations in plain language, provide a full breakdown of all costs involved, and ensure you are comfortable with your investment strategy before proceeding. We are here to support you through periods of market volatility, help you maintain a long-term perspective, and ensure your investments remain on track to meet your goals.
FAQs
Why should I invest?
Keeping large sums of money in cash over the long term means your savings are likely to lose value in real terms once inflation is taken into account. Investing gives your money the opportunity to grow at a rate that outpaces inflation over time, helping to preserve and build your wealth. Whilst investing carries risk, a well-structured and regularly reviewed portfolio can help you work towards your financial goals in a more effective way than cash savings alone.
What types of investment can you advise on?
We advise on a range of investment wrappers and structures, including Individual Savings Accounts (ISAs), General Investment Accounts (GIAs), and Investment Bonds. Each has its own tax treatment and suitability will depend on your individual circumstances, which is why taking professional advice is important.
What is an ISA?
An Individual Savings Account (ISA) is a tax-efficient savings and investment wrapper. Any growth and income generated within an ISA is free from income tax and capital gains tax, and you do not need to declare it on your tax return. The current annual ISA allowance is £20,000 per person, per tax year.
What is a General Investment Account?
A General Investment Account (GIA) is an investment account with no annual contribution limit, making it a useful option once your ISA allowance has been used. Unlike an ISA, a GIA does not benefit from built-in tax protection, meaning gains may be subject to capital gains tax. However, with careful planning, a GIA can still be used in a tax-efficient manner alongside other wrappers.
What is an Investment Bond?
An Investment Bond is a life insurance policy that allows you to invest a lump sum across a range of funds. There are two main types – onshore bonds, which are subject to UK tax, and offshore bonds, which benefit from a different tax treatment. Investment Bonds can be a useful planning tool, particularly for higher or additional rate taxpayers, those who expect to become basic rate taxpayers in the future, or those looking to pass wealth to the next generation in a tax-efficient manner.
Investment Bonds allow you to defer tax until you make a withdrawal. You can also take withdrawals of up to 5% of the original investment per year without an immediate tax liability – this allowance is cumulative, meaning unused amounts can be carried forward. The tax treatment of Investment Bonds can be complex, and we will always explain clearly how they work before making a recommendation.
How do I start investing if I’ve never invested before?
The first step is understanding your goals, time horizon, and how comfortable you are with your money rising and falling in value. We then put together a portfolio aligned to those factors, using tax-efficient wrappers such as ISAs. You don’t need a large sum to begin – the important thing is starting.
How much risk should I take with my investments?
Risk should be matched to your goals, time frame, and personal tolerance. Money you won’t need for ten or more years can generally take more risk – time allows recovery from market falls. Money needed sooner should be in lower-risk assets. We assess both your willingness and your capacity to take risk before making recommendations.
What charges should I expect when investing?
Charges typically include an ongoing adviser fee, a platform fee for holding your investments, and fund management costs. We are fully transparent about all charges before you commit to anything, and we compare the total cost of different options.
What returns can I expect from investing?
Returns vary depending on risk level and market conditions. We focus on long-term, evidence-based investing rather than short-term speculation. We never guarantee returns, but we do plan for realistic outcomes within your financial plan.