Building an investment portfolio often happens gradually. You invest consistently, make decisions along the way and, over time, what started as a relatively modest portfolio can grow into a significant part of your overall wealth.
However, as the value of your investments changes, the way you manage them may need to change too.
An approach that worked well when your portfolio was worth £50,000 may not necessarily be the right approach when it reaches £300,000, £500,000 or more. Your circumstances may have changed, retirement may be closer and the financial impact of investment decisions can become much greater.
It is not simply a question of investment performance.
As your wealth grows, considerations such as diversification, tax efficiency, pension planning, fees and how you will eventually draw an income from your investments can become increasingly important.
For example, a 20% market fall on a £50,000 portfolio represents £10,000. On a £500,000 portfolio, the same percentage fall represents £100,000. Market movements are part of investing, but the larger the portfolio, the more important it becomes to understand the level of risk you are taking and whether it remains appropriate for your circumstances.
So, has your investment approach evolved alongside your wealth?
The blind spots that matter more as your wealth grows
Tax drag you do not notice, but it scales with your portfolio. You might be holding investments in a general investment account that could potentially sit inside an ISA, or realising capital gains without considering how disposals could be spread across tax years. You may also be missing opportunities to make use of your partner’s available allowances. On a smaller portfolio, the impact may have been modest. On a larger one, small inefficiencies can add up to significant amounts over time.
Concentration risk that has crept in. A stock you bought five years ago has performed brilliantly and now makes up 20% of your portfolio. That is great, but it also means a single company having a bad year could have a significant impact on your wealth. When you picked that winner yourself, it can be emotionally difficult to trim it. As your portfolio grows, however, that concentration becomes more significant. At £50,000 it may have been a bold investment decision. At £500,000 it could represent a significant vulnerability.
Asset allocation that has not moved with your life or your portfolio size. The split between equities, bonds, property and cash that made sense when you were building wealth might not be appropriate now that your circumstances have changed. Many DIY investors set their allocation once and rarely revisit it systematically, even as the amount at stake has tripled or quadrupled.
Platform and fund fees you have stopped questioning. The fund you chose in 2016 might have been the best option for you then. However, the investment market has changed considerably since, and there may now be other options available. Small differences in fees can become increasingly significant on a larger portfolio when compounded over many years.
No stress testing against real scenarios. When your portfolio was smaller, a market crash may have been a setback you had time to ride out. Now, a significant fall shortly before you plan to retire could have a much greater impact on your plans. What would happen if markets fell 20% or 30%? Could you still retire when you planned to? Would you need to change the amount you withdraw? Understanding how your portfolio might respond to different scenarios becomes increasingly important as you get closer to relying on it.
The pension blind spot
This can be a significant blind spot. Many DIY investors pay close attention to their ISAs and general investment accounts, but their pensions can receive considerably less attention.
Old workplace pensions may still be sitting in default funds. Contributions may have been set years ago and never reviewed. You may not have a clear picture of whether your pensions are on track for the retirement you want, whether you are making appropriate use of available tax relief or how your pension and ISA strategies work together.
For many people, pensions represent one of their largest financial assets. If they are receiving less attention than the rest of your investments, it may be worth reviewing whether they still fit your wider financial plan.
What a review is not
Even experienced investors can benefit from a second pair of eyes. A review may confirm that your current approach remains appropriate, giving you greater confidence in the decisions you are already making. It may also highlight areas that are worth reconsidering.
The aim is not to take control away from you. It is to make sure the approach you have built still works as part of your wider financial plan.
The questions worth asking yourself
Before you decide whether a review is worthwhile, consider:
Do you know your actual annualised return after fees? Not simply the headline number shown by your platform, but what your investments are actually delivering once the costs of investing are taken into account.
When did you last rebalance? Not when you last thought about rebalancing, but when you actually reviewed whether your portfolio still reflects the asset allocation and level of risk you intended.
Are your investments and pensions working together? Consider whether they form part of one coordinated strategy or are effectively being managed as separate parts of your finances.
Do you have a clear plan for taking an income in retirement? Not simply that you will sell investments when you need money, but how your pensions, ISAs and other investments could work together when you begin drawing an income.
What is your plan if markets fall significantly shortly before you want to retire? Would your plans remain achievable, or would you need to make changes?
If some of those questions are difficult to answer, it may be worth looking at your investments as part of your wider financial plan.
Looking beyond the portfolio
At Lathe & Co, an investment review is about more than looking at individual funds or recent performance. We consider your investments as part of your wider financial plan, taking into account where you are today and what you want your wealth to achieve in the future.
Portfolio construction – Your portfolio should reflect your objectives, timeframe and attitude to risk, with appropriate diversification across your investments.
Tax efficiency – How your investments are held can be just as important as how they perform. We consider whether available tax wrappers and allowances are being used effectively.
Pension strategy – Pensions form an important part of the wider picture. We review how they are invested and how they fit alongside your other investments and longer term retirement plans.
Fees and charges – Understanding what you are paying matters. This includes charges across platforms, funds and investments, as well as whether your current arrangements continue to provide value.
Retirement planning – Your pensions, ISAs and other investments should work together to support the retirement you want, including how you may eventually draw an income from them.
Estate planning – Where relevant, we consider the wider picture, including how your wealth is structured and whether your arrangements continue to reflect how you would like it to be passed on.
Ultimately, it is about making sure the different parts of your financial life are working together, rather than looking at your investment portfolio in isolation.
Is an investment review worth it?
As your wealth grows, it makes sense for your investment approach to evolve with it.
A review can offer a fresh perspective and help you feel confident that your strategy still reflects where you are today and what you want to achieve in the future.
Ready for a second pair of eyes? Book an initial consultation with one of our advisers.
Important Information
This information is for general guidance only and does not constitute personal financial advice. You should seek professional advice tailored to your individual circumstances before making any financial decisions.
The value of investments and any income from them can fall as well as rise and you may not get back the amount originally invested.
Pensions are designed to help fund retirement, so money cannot usually be taken out again until at least age 55, rising to 57 from April 2028. Pension and tax rules may change, and benefits depend on your individual circumstances.
Tax treatment depends on individual circumstances and may be subject to change in the future. HM Revenue and Customs practice and the law relating to taxation are complex. The Financial Conduct Authority does not regulate personal or inheritance tax planning.
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