What financial challenges should I be aware of when I get promoted within investment banking or move to a new firm?
Zoe: I work exclusively with investment banking professionals and understand that joining a new firm or being promoted can be a big change. While it’s a potentially lucrative career move, the demands of a new role mean an efficient private banking and wealth management experience is more important than ever.
We understand that investment bankers typically receive as little as 30% of their total compensation through a cash salary, and tend to have a complex income structure that includes bonuses, deferred income or profit distributions. This can make it harder to get a mortgage from a mainstream lender that reflects your true earning potential so that’s where a bank like Investec can help.
New income patterns can also create other needs too. For example, if you’re receiving some or all of your remuneration in another currency, suddenly foreign exchange becomes a bigger issue than before.
Simon: On the financial planning side, a promotion often comes with an increase in earnings and this could cut the amount you can contribute to pensions to just £4,000 a year. This means you might want to review the investments you have in place and ensure that you remain on track for an adequate income in retirement which is something that Investec Wealth & Investment can help with.
A change in circumstances is always an appropriate time to review the measures you have in place, ensure they remain suitable for your situation and examine whether there are other planning opportunities that now need to be considered.
How can you help? Can my promotion affect how much I can borrow or how my mortgage repayments are structured?
Zoe: At Investec we’re able to take a holistic view of our client’s income across salary, bonus and profit distributions. Depending on your circumstances, we might be able to look at forecasted earnings when calculating affordability too. This means you could achieve a higher loan amount than you think.
In terms of a repayment schedule, investment banking clients often have capital reductions built into their repayment plan that coincide with liquidity events such as bonuses. This reduces the overall LTV and means interest-only monthly repayments may be possible.
We take this approach across our lending. For example, we offer Buy-to-Let (BTL) mortgages, including lending to Special Purpose Vehicles, which many clients are using for their BTL portfolios at the moment.
We’re able to take a holistic view of our client’s income across salary, bonus and profit distributions. Depending on your circumstances, we might be able to look at forecasted earnings when calculating affordability too. This means you could achieve a higher loan amount than you think.
Does having a foreign currency income complicate the picture?
Zoe: We can take a client’s foreign earnings and assets into consideration when looking at affordability for mortgages or other lending, and on a day-to-day basis we can hold up to 15 different currencies in our Currency Access Account free-of-charge.
We also have an FX team directly integrated into our private banking offering who can set an exchange rate up to 24 months in advance for eligible trades (FX forwards), monitor the markets and execute transfers when agreed rates are met.
Congratulations on your career success.
How can you help with financial planning or wealth management?
Simon: At Investec Wealth & Investment we work with clients to structure their affairs to reflect their short, medium and long-term goals and to grow and protect their wealth throughout their lifetime.
When it comes to tax efficiency, for high-income individuals we can look at pensions, ISAs and, where appropriate, investments such as Enterprise Investment Schemes or Venture Capital Trusts, but we start with getting the basics right for the family, and that includes spouses and children too.
It may be more tax-efficient for family assets, such as a buy-to-let property, to be owned by a spouse who has a lower overall income and for children’s savings to be held in dedicated Junior ISAs for example.
On the investment front, if you’ve had a long career you may find you hold a large amount of stock in one firm. Exposure to a single company – which might be your current employer and provider of all associated benefits – can represent a real risk if things don’t go to plan. In order to manage this risk you may choose to sell down this stock and diversify your portfolio – and our investment management service can help with this.
Zoe: There is real value to having banking and wealth management services under one roof. If you are an Investec client you may be able to borrow against an investment portfolio held with Investec Wealth & Investment. In a low-interest rate environment this can be attractive to investment bankers who want to try and grow their wealth while maintaining liquidity.
At Investec Wealth & Investment we work with clients to structure their affairs to reflect their short, medium and long-term goals and to grow and protect their wealth throughout their lifetime.
Thinking ahead to retirement, what do I need to consider?
Simon: If you’ve been promoted in your 30s or 40s you may still have a long time to go until retirement. But with pension contributions limited for many, it’s important to explore all the strategies available to safeguard your future financial wellbeing. This is likely to include other directly held investments and the use of other tax wrappers which our Investec Wealth & Investment team can help with.
We can also help you to explore what income you might actually need in retirement, how that might be generated and help you put in place a plan to get you there.
Beyond understanding income, how else can you help?
Zoe: We understand that investment banking professionals are time-poor and we add value by providing an efficient, joined-up approach across private banking and Investec Wealth & Investment. Our team specialises in working with investment banking professionals which means we can understand and respond to your needs more quickly.
Congratulations on your career success.
The contents of this summary do not constitute a formal recommendation or personal advice and no action should be taken, or not taken, on account of the information provided. Tax treatment depends on the individual circumstances of each client and may be subject to change in future. All statements concerning tax treatment are based upon our understanding of current tax law and HMRC practise and can be subject to change.