September 2010 - Financial Planning in Wimbledon

ISA portfolio reviews

I have written to all clients with ISAs within the Skandia Investment Solutions platform today. I have advised making some changes to the funds within the portfolios. Please respond as requested by 18th October 2010. It would be of value if you would read “Our Approach to Investing” together with the emailed document “Investment Portfolios Summer 2010”. Do let me know if you need a new copy.

Many thanks.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

ISA portfolio reviewsDominic2023-12-01T15:31:58+00:00

Mortgaged Britain

After the election and the attempts of the new Coalition Government to tackle the UKplc debt mountain, we have finally reached the point where we now know who will be leading the opposition party. It remains to be seen how Ed Milliband positions the Labour party for debate and shinanygons (?) at Westminster.

I would certainly hope that he brings a fresh approach and helpful challenges to keep the Government thinking creatively about solutions to our problems. We all know that the last Government overcommitted itself – which massive increases in Public spending, however I’m not seeking to apportion blame here. Given the credit crisis, the actions that Mssrs Brown and Darling took certainly cost us all a lot of money in bailing out the Banks and yes it would be accurate to say that the Government are utlimately responsible for regulation, so there is a degree to which I can go with the notion that they have themselves to blame. Nevertheless, depending on your point of view they were rather forced to bail out the banks.

Of course the other public finances are certainly the responsibility of central Government and it would appear that these have swollen out of control and that there will be ample opportunity to “bring these back into line”. That said, cuts need to be made carefully and responsibly otherwise we may find ourselves in dire straights.

I certainly believe that we must get public finances under control and ensure that our public servants are serving the public good and not merely a glittering career in “nice things to do”. But there is a danger of throwing the proverbial baby out with the bathwater.

I’m not sure why we must adhere to a strict 4 year timetable. Imagine the debt as a mortgage (which is close to the truth), you can do several things with a mortgage – reduce the repayments so that only the interest is paid, leaving a big sum to find at the end (not a good plan for anything other than the short-term). Alternatively set the repayment schedule over 25 years and clear the loan – it ends up costing around twice as much as the debt borrowed, but is a more manageable monthly repayment. There’s also the problem of variable interest rates – so the total cost of the debt could increase rapidly, but provided payments are not missed, the debt will be cleared.

As financial planners, we try to encourage clients to reduce the cost of borrowing by high-speed funding their mortgage payments. This is akin to what the Coalition are trying to do. In practice very few can clear a mortgage in 4 years. Often we can get the term down to 10 years – paid from bonuses, income and perhaps getting rid of some rubbishy old savings policies. The point being that the process won’t be easy, but it should be possible.

As much as I would like to see the UK back on favourable terms as soon as possible, doing this over 4 years does seem to be more than a triffle optimistic. The depth of the cuts could do more damage than good.. think of the mortgage analogy – ok you may reduce spending on your holidays or car or whatever, but sometimes you do need to spend money on “normal” things to ensure that the journey of life is enjoyable and not just a pursuit of a number.

For the record, so far pretty good. My impression is that the Coalition are putting a lot of work into rising to the challenge. I just hope that every solution isn’t simply cut cut cut. Much like the sea snake that lies still, even whilst others take small bites of it.. suddenly it springs into life.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Mortgaged BritainDominic2023-12-01T15:31:58+00:00

What’s in a Name

Pretty much since the 1988 Financial Services Act Independent Financial Advisers have been staunchly defending the term “independent”. The FSA have rightly critiqued this, suggesting independence can only really mean providing impartial advice, considering the entire market. As we know, impartiality is pretty difficult to define in a real and lest face it “honest” way.

To my mind, impartiality is a difficult term to really use well. Let’s take the example of me. Well I have a vested interest in getting clients to invest money – I get paid more as the fund grows. I might actually lose money if I advise someone to surrender an investment or take their pension or repay their mortgage. This is where personal ethics come into play, because frankly it is a matter of context and subjective opinion whether one should take the pension now, cash in an investment or pay off the mortgage. There may be other valid factors, perhaps largely with attempting to help a client pay less tax. Sometimes it is obviously the right and best thing to do.

I concede that this is a difficult area for regulation, which wants to be precriptive (by nature) but is well minded enough to appreciate that this can lead to folly in practice. However, set in the context of long-term client relationships it seems entirely counter-productive to fleece wealthy, intelligent people in order to make a quick buck (I would suggest that it morally reprehensible, to fleece anyone regardless of wealth or education). I fail to see the sense in anyone doing so.

Surely the key is to create a scenario where the adviser is not better off for reccomending using company X over company Y or product A over product B. Ideally a client should pay a fee for the advice as this makes the financial product cleaner and cheaper, but not everyone can afford this, so I’m not against commission – when there is a truly level playing field.

The FSA want RDR to redefine independence – this will mean to be an “IFA” the adviser MUST consider all options – including unregulated products (for which there is no investor protection) and structured products (which exist to make a very lazy product provider very rich and the client poor if things don’t work out) as well as investment trusts (which are really shares) in which case why not just reclassify us as stockbrokers. Anyone that fails to do this, irrespective of the way that they charge, how many exams they pass, what their professional indemnity insurance covers and how much “bail out” money they hold on deposit – will not be permitted to use the term “independent”. They would have to use the term “restricted”.

Unless this badly thought through plan is altered, I would suggest that notions of a 20% reduction in the IFA community are likely to be woefully inaccurate – more like 20% left (if that). An IFA does not want to be a stockbroker (although I know a few that think they are) and they certainly do not want to sell rubbish products (at least those that I know). So at this stage it would appear that many may end up being labelled “restricted advisers” which is perhaps the most stupid term for someone that searches the entire regulated market and will be the same term used for Banks.

In conclusion I can see an outcome where a small number of IFAs exist that can smugly call themselves independent, advise only the wealthiest of clients and potentially be about as impartial as some of our daily newspapers.

What a complete mess.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

What’s in a NameDominic2023-12-01T15:31:59+00:00

£50,000 Compensation limit is not being cut

Recent reports in the media have suggested that the FSCS plans to cut the compensation cover for investments. This is inaccurate. The FSCS has no plans to reduce compensation protection for investments as suggested, nor is it able to do so. The rules that the FSCS applies when assessing clams are made by the FSA. These include rules that set the FSCS compensation limits. The FSCS cannot depart from these rules.

The FSCS compensation limit for investment claims is currently £50,000 per person, per authorised firm. The European Commission is considering harmonisation of compensation limits across Europe to €50,000 for investment claims. This proposal is currently set out in a draft directive which is subject to debate amongst member States. A final decision has not yet been made by the Commission.

The currrent limit for deposits is £50,000. The FSCS limit for deposits will increase on 31 December 2010 following European legislation. The FSA plans to issue a consultation shortly on increasing the coverage limit to the equivalent of €100,000 .

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

£50,000 Compensation limit is not being cutDominic2023-12-01T15:31:59+00:00

Dramatic Rise in Pensioners – Baby Boomers

When the country is celebrating the Olympics in 2012, baby boomers will be turning 65in record numbers. Over 800,000 of them – a staggering 150,000 more than in 2011 – will reach this key milestone. This massive increase corresponds to the post-war spike in births in 1946 and 1947, and presents a challenge for the Government as many of those turning 65 will also start claiming their state pension.

Since the first of the baby boomer generation started to draw their pension at age 60in 2005/06, DWP spending on people over working age has risen by almost £14 billion. By 2012 spending will have risen by nearly another £4 billion.

With the latest research showing that many people can expect to spend around 20 years in retirement, the Government is currently looking into bringing forward increases to the state pension age. It also wants to ensure that older workers who want to keep working are able to do so, by phasing out the Default Retirement Age.

The three urban areas that will see the greatest increase in 65-year-olds over the next two years are Aberdeen (33%), Hull (30%) and Kingston upon Thames (26%).

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Dramatic Rise in Pensioners – Baby BoomersDominic2023-12-01T15:32:00+00:00

I wish I was kidding…

Wills & Co, is a stockbroker that the FSA took action against. This was for selling high risk investments (penny shares) and the FSA say that Wills & Co failed to properly explain the high level of investment risk involved. As a consequence the FSA fined the firm £49,000 and removed their license in February 2010. A floodgate was opened for people that had lost money to obtain compensation. Wills & Co acted very quickly to satisfy the FSA and as a result had a discount on their fine. The FSCS has already awarded over £650,000 in compensation costs to their clients which has pushed the firm into the position where they have had to close.

I have no idea if the FSA are/were right, whether Wills & Co explained risk properly or not – that is not my gripe. There is certainly an interesting video on the Wills & Co site which provides their point of view.

My gripe is that the tab for the clean up is passed around IFAs – who have nothing to do with this. We (the IFA community) will meekly roll over and cough up… or eventually run out of funds ourselves in the process.

The costs are inevitably passed on to clients. The system is completely wrong. I can just about come to terms with the notion that as an IFA I have to put my hand in my pocket to pay for the errors of complete sharks that are IFAs… but stockbrokers too? our financial system is daft.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

I wish I was kidding…Dominic2023-12-01T15:32:01+00:00

A PAYEn in the NEST

Following many of the problems with collecting taxes and a general cost cutting review by the Government, not helped by the error in calculations by HMRC for some people within the PAYE system; a review is under way of the PAYE system (Pay As You Earn). A number of senior politicians and civil servants have been complaining about the out of date computer system that HMRC operate. One of the suggested options is that all PAYE is calculated by HMRC and gross payment details are sent to them by employers.

Anyway, long story shorter this has a knock on effect on NEST – the proposed automatic opt in pension scheme. It is suggested that as the two will inevitably tie-up this may result in further delays in launching NEST.

At this stage, if I were a betting man, I’d say that NEST probably won’t start until after the next UK election.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

A PAYEn in the NESTDominic2023-12-01T15:32:01+00:00

It’s an Equitable Life…

The current CEO of Equitable Life has told those caught up in Equitable Life’s collapse that they should accept a smaller pay out by the UK Government. Now, I have to say that the way that the figures are banded around you begin to wonder if there will ever be any real justice. Anyhow, the Parliamentary Ombudsman Ann Abraham recently advised that proposed payouts of between £400m-£500m were too small (about £250-£350 per policyholder) and suggested between £4bn-£4.8bn (a significant increase I think anyone would agree).

The CEO, Mr Wiscarson recently appeared on TV and basically did what I can only assume to be something akin to schoolboy maths. It goes like this… if we take the lower end of £4bn and we know that the Government are cutting costs by around 20-45% then £2bn seems like a reasonable number…for starters.

Whilst the logic is of course reasonable (from a numbers perspective) it doesn’t exactly deal with what has been actually lost by policyholders.. which is the point. The cynic in me is somewhat concerned that given the above average age of Equitable Life policyholders, the longer this drags on the more of them die off and the smaller the compensation cost.

If you are an Equitable Life policyholder or know somebody that is.. please review the “urgent” letter posted on the Equitable Life website.

Is it any wonder that people lose faith in the financial services industry!

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

It’s an Equitable Life…Dominic2023-12-01T15:32:02+00:00

Name Changes – Pioneer

Pioneer and Exeter Friendly Society are finally dropping the Pioneer brand name following their merger in 2008. They will soon be known simply as the Exeter Family Friendly.

They believe and state:

“We now see ourselves as an integrated healthcare company that provides a range of complementary protection products for the benefit of our customers and their families, enabling them to minimise the impact and cost of ill-health.

Our company is a mutual friendly society and we only work for our customers. Mutual organisations are not owned by external shareholders (like a PLC) but work for, and only answer to, customers like yours.

We believe this is important because:

With no shareholders to pay, mutual insurers like us can ensure that their profits are reinvested to give policyholders better returns, better value and higher levels of service. In contrast, a PLC has to pay shareholder dividends from the profits it makes each year.

We believe that our staff want to try that bit harder because our customers are members of the organisation they work for. We are proud of the fact that we provide protection products that paid 98.1% of all claims received during 2008″

Pioneer was formed in 1888 and whilst being a small organisation, certainly seemed to punch above its weight.

Source: Pioneer Website

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Name Changes – PioneerDominic2023-12-01T15:32:03+00:00

Ethics: Christian Aid

Christian Aid report that poor nations are missing out on an estimated $160bn in tax revenue because unscrupulous corporations can hide their financial transactions. They argue that this money could be spent on essential services like health and education.

At the start of the summer Christian Aid lobbied members of the FTSE 100 to respond to a survey which helped them gauge opinion on tackling tax dodging. The campaign has been pretty succesful with 63 FTSE 100 companies providing a response. The campaign moves on to a new stage, the Trace the Tax campaign focusses on four FTSE listed companies: Vodafone, Unilever, TUI Travel and Intercontinental Hotel Group. Christian Aid want them to support their call for greater financial transparency because they believe that this will help end tax dodging.

In an age where tax dodging is certainly unhelpful to the wider economy and our public services, perhaps you would like to get involved. Have a look at their site if it is of interest.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Ethics: Christian AidDominic2023-12-01T15:32:03+00:00