G-Day – nothing to do with Australians

G-Day Something Down Under?

G-Day has nothing to do with Australians, but one might chuckle that it has something to do with down under. G-Day is actually Gender Change Day… yes you did read that correctly (no I didn’t – its actually Gender Directive). Before you start shouting at your computer that you’ve just about had enough of excuses for more greetings cards, this is in fact a European… no, not yet…directive (hold on) that makes it illegal for insurers to discriminate between male and female. In other words men and women must be charged on the same basis – much like this week’s news that equal pay for equal work, except of course that when it comes to insurance, there is nothing so unfair as equality. Eh? What I mean is that women live longer (sweeping generalism, but generally true) so they get cheaper life assurance. Now they won’t. It also applies to car insurance and annuities, in fact any insurance.

Brussels for Christmas?

So in the interests of showing what this may mean (because the truth is that we don’t actually know yet…. remember I am something of a truth fan, despite the cost). Anyway a fairly major insurer emailed me yesterday (Liverpool Victoria – credit where it is due). G-Day is set for 21 December 2012 (21/12/2012)… methinks that the Brussels powers like amusing numbers. Anyway the table below is LV’s attempt to outline their take on potential changes.

Product type	Currently, on average…	Potential impact of Gender and I minus E changes**
		Male	Female
Income Protection	Women pay 65% more than men	+20%	-28%
Critical Illness (with Life)	Men pay 10% more than women*	+6%	+16%
Term	Men pay 10% more than women	+3%	+22%
Underwritten Whole of Life	Men pay 20% more than women	-5%	+15%

As all tables come with a caveat or two…..”There are so many factors affecting premiums that it is impossible to give a single definitive figure that will apply to everyone. The extent of change will vary by provider, will differ by product class and be determined by the individual circumstances of the client. Added to this, we expect to witness a fair amount of re-pricing activity in early 2013 as providers attempt to get to grips with the new gender neutral world.”

More Unintended Consequences

You will quickly gather, that women will be paying more for most insurance. I’m going to stick my neck out and guess that this probably was not the Eurocrats intention. What it does mean is that you will probably need to review your protection arrangements if you are a woman with income protection. Admittedly this is one insurers take on life, but LV are generally pretty competitive. They also have a dedicated website called “no more guesswork“.

Early Christmas for commission hungry insurance salespeople? surely not!

I may have bored you senseless about the new adviser charging regime starting on 1st January 2012. Ironically this does not apply to insurance, so I’m guessing that commission based advisers will be fairly eager to get people to switch their cover (generating new commission) so be warned. There will will be some advisers (like ourselves) who simply charge a fee for the work and remove the commission entirely. I write this as yet another email arrives telling me that a very well known company can offer me even more commission with their new charging structures (note it wasn’t LV).

G-Day – nothing to do with AustraliansDominic2023-12-01T12:23:06+00:00

What We Believe About Investing

I’m working on the new website which will hopefully go live at www.solomonsifa.co.uk tomorrow. I was working on trying to describe our investment process and what we believe about investing, then came up with this (which is not our investment process) but thought it may be of interest. I’d welcome feedback, I’m very tempted to put it as a page within our new look site.

What We Believe About Investing

Long-term investment in equities and equity-like investments should provide a better chance of beating inflation over the long-term than cash, for which there is considerable historical evidence.
Cash is an important asset class and one that provides necessary reserves for living and unforeseen events. Everyone should therefore have some cash.
Inflation is a vital element in determining real returns.
It is not possible to consistently beat the market.
New investments are made with a time-frame of a minimum of 5 years.
Existing portfolios need to be carefully reviewed in light of target dates.
The future is unknown and that markets and investors behave erratically.
It is very unwise to borrow money in order to invest it and we do not advise it.
Nothing is guaranteed in real life, investment is risky.
It is possible to lose all your money.
Markets will go down, they will also go up.
Investing should not be entertainment.
If something sounds too good to be true it probably is.
If you don’t understand the investment, don’t invest.
There is little point in paying investment managers to outperform the market if they fail to do so consistently.
Part of our role is to minimize the cost of investing, not the entire role.
Tax should not the primary reason for investing.
It is very difficult, if not impossible to “time the market”.
Money is something to serve us, not the other way around.
There are very few successful DIY investors, but far more “how to” finance authors.
Investing is often emotional, successful investing is not, it is a disciplined process.
Compound interest is a lovely theory, but returns are not fixed, it remains theoretical.
You can only control the things you can control; you cannot control the market (legally).
Be prepared for disappointment, but remember that good things happen too.
Diversification reduces risk and returns, which is appropriate for most investors.
Sadly, you cannot have a high return without risk.
There is no such thing as the best investment, just a suitable one.
Insider trading is illegal, but being observant is not.
For any business to continue it must make a profit.
Historic performance data tells you what might have happened, not what did happen; actual performance is what you get because of what you did.
However harsh, tough or burdensome the regulation, there will always be crooks.
You cannot spend a %, you can only spend money.
The market is a place where people agree a price for disagreeing about the value of something in the future. Remember that it is a place for buyers and sellers.
If everyone else is doing something, that is not a good enough reason for you to do it too.
When your friends, colleagues or family offer financial advice, make sure that they are willing to be sued if it transpires that it isn’t legal, compliant or simply wrong.
You will not be the next Warren Buffett; even he struggles to be Warren Buffett each year.
You are wasting your time if you are looking for the next Apple or Microsoft.
A great investment strategy is worthless unless you implement it.
There is an awful lot more to life than “keeping up with the markets”, the media reports what has happened and speculates what might happen. If you think about it, this is remarkably like a trip to a fortune teller. If you throw enough out there some of it sticks.
Capitalism, by its very nature will morph into something that the market wants.
Insurance is something you need when you don’t have capital, it is a “replacement cost” if you do.
A bad investment experience should be used as a learning opportunity.
Don’t forget the investing lessons you have already learned.
As others have said, constantly repeating the same behaviour whilst expecting different results is a form of insanity.
Experts disagree.

What We Believe About InvestingDominic2023-12-01T12:23:05+00:00

Cash ISA latest rates

Latest Cash ISA Rates

There continues to be the expected speculation about inflation and interest rates – how on earth would the media use their time if they didn’t spend so much of it guessing the future? As we know, official inflation rates are falling, yet you and I probably pay more for the things we actually consume, strange but true. Anyway, here are some of the top rates currently available. Please note that this is simply a list, it is not advice. It is important to ensure that your funds are ideally within FSCS compensation limits and not restricted due to shared banking licenses.

Instant Access Accounts

On-line: Melton Mowbray 2.50%
Bank: Virgin Money 2.20%
Building Society: 2.35%

Cash ISA – Variable Rates

On-line: Sainsbury’s Bank 2.80%
Bank: Virgin Money 2.40%
Building Society: Earl Shilton 2.70% (90 day notice)

Cash ISA – Fixed Rates

On-line: Bank of Cyprus UK 3.20% (3 years)
Bank: Halifax 3.60% (5 years)
Building Society: Yorkshire 3.20% (fixed until 31 May 2014)

I have to admit that I’m not overly comfortable with a society that has supermarkets offering banking services, which probably says more about Banks than it does about supermarkets. However many people visit their supermarket more than they visit their bank. I have to admit that I prefer to visit neither and am rather an advocate of on-line service.

New ISA Allowance for 2013/14

You may wish to know that the ISA allowance is now linked to inflation and the September figure for inflation (2.20%) is used for the following tax year. So the 2013/14 ISA allowance will be £240 more. As a result the full 2013/14 allowance will be £11,520 with up to half this into a Cash ISA (£5,760).

Cash ISA latest ratesDominic2023-12-01T12:23:04+00:00

Financial Advisers – on best behaviour?

Have financial advisers changed their behaviour?

There are days when I breathe a sigh of relief. Days when I find reasons to take heart in the financial services industry. Today was one of those days. I spent the morning with a small group of some really good financial planners. They talk sense and certainly convey the impression that they do what they say. I know that my industry is full of some very good salespeople, so sometimes deciphering the fact from fiction is not easy and I’m not going to pretend that I have mastered the art of doing so, but some days, I get a sense that if all advisers were like this, there would be little need for a regulator or compensation system. Sadly, history gives the regulator good reason to be concerned. So I admit, it isn’t always easy to tell if financial advisers aren’t simply on their best behaviour, but some days – well, you just know it isn’t faked.

Small fish in a small pond?

Now its true that I attend events that probably only the better financial planners go to, so I do tend to meet some very good people within the “industry”. I haven’t met everyone and I haven’t met some of the most well-known, but I can say that the days of being embarrassed by my peers are largely long gone. Indeed many are inspirational, encouraging and willing to help me to build a better business and serve my clients even better.

Isn’t it terrible….

This flies directly in the face of stories I read in my trade press “pinks” that highlight FSA fines, advisers being imprisoned and generally outlining the “dark side” of financial services. Trust is a big deal and something that has to be earned and is very difficult to measure. So I was heartened to read in “The Behavior Gap” (American) by Carl Richards a delightfully honest take on conflicts of interest. Something that I have blogged about before, but not sure that I have conveyed terribly well. Here’s what Carl says:

“Here’s my take: conflicts of interest are inherent in almost any situation when you’re paying for advice. Lawyers, accountants, financial advisors, auto-mechanics…we all have to cope with situations when our interests may not fully align with the interests of our clients, at least in the short run“.

Chapter 8: You’re Responsible For Your Own Behavior, The Behavior Gap, Carl Richards Published by the Penguin Group 2012.

Something about reaping and sowing…

Carl goes on to make some great points, but he doesn’t fudge the issue. In a world where advisers are generally paid to invest money, it is no surprise that they attempt to control it and perhaps attempt to grow it in a way that doesn’t suit the client, or could be used more thoughtfully (such as clearing debt or giving it away). You only find out what your adviser will do when you get to such a point. My approach is to clear debt first as I hope is obvious from the website. This is because of my beliefs about good financial planning, which means that many people are not able to invest with me until this has been done. This is very much to my short-term detriment, but I believe that it is absolutely in the best interests of my clients – and those that are not able to be clients.

Holding onto principles

This cropped up again this week. An email from a prospective client asking for help which essentially wanted to know how to make a little bit of money into a lot more money over 3 years. This is not what I do. It is also not what I believe to be good for anyone except those that really are able to gamble without damaging their own security. The email wasn’t from a place of greed, but a place of speed and sadly some things simply take time, which is true of good financial planning as well, it takes time – and time as we all know, costs money.

Financial Advisers – on best behaviour?Dominic2023-12-01T12:23:03+00:00

Seeking Harmony – Lessons from “Quartet”

Wisdom From Experience

As I mentioned in my post on Friday, I have been somewhat engrossed in the BFI festival. Perhaps my favourite film of the festival was “Quartet” and I wondered what lessons from Quartet could be drawn. A story about musicians who find themselves spending their dotage together in a rather beautiful home for elderly musicians (which is actually Hedsor House, in Taplow). This was Dustin Hoffman’s very first film as a Director and one can certainly appreciate that he has gained much wisdom from years of experience as an actor. One might say that his has been a priceless experience.

Fantastic Ensemble

As you may imagine, a house of musicians has moments of tension as ego’s push against each other, but within this story there is a growing appreciation of the contributions and skills of others and the need to forgive previous wrongdoings. I won’t give too much of the story away, but let’s simply say that it is both comedic and tender. A fantastic ensemble of actors, who are all very well cast. The experience reminded me of some work that I have done with actors living in the local area.

Uncomfortable Truth

Residential care is not something that many people think about and far fewer do much to plan for. There are a variety of options for people to consider and I would suggest that having these discussed and properly assessed is an important aspect of long-term financial planning. The danger of not reflecting on issues that are uncomfortable is that they may become a decidedly uncomfortable reality. Long term care is not something that is needed by everyone, but with improvements to diet and medicine, we are living longer and sadly the Government of the day is unlikely to be in a position to make the best decisions about your well-being. It is important that good financial planning does not hide or neglect potential concerns, good financial planning is not about providing pleasing information, but about providing truthful, objective information to help clients make informed decisions. To my mind this means having a plan that is immersed in your values and choices. It should be, well… a harmony.. each has a unique part that complements the others.

Seeking Harmony – Lessons from “Quartet”Dominic2023-12-01T12:23:03+00:00

When Reducing Tax Backfires

Reducing Tax Backfires

Starbucks and Facebook have been in the news this week because they used a system for reducing tax which has backfired, resulting in the paltry amount of tax that they have paid to HMRC despite huge revenues. They haven’t done anything illegal. They have used the system to its advantage. This is a classic case of “when reducing tax backfires” a PR disaster. However, one has got to question that ethics of the practice, known as transfer pricing. In general it would be fair to say that transfer pricing is the tax domain of international business – and really big international business at that. The principle is actually quite fair – being able to allow costs incurred for a company that is faced with operating costs in different countries. There is a sense that this starts in a place of wanting to avoid double counting or not counting. However there is a flaw in the system – one that enables big business to effectively pick and choose where the tax is paid. Naturally any half decent business analyst would suggest finding somewhere where tax rates are very small if they exist at all. This is essentially what Starbucks and Facebook – to name just two, international businesses have done.

System overloaded with loopholes

Yes “the system” is wrong, because it is open to significant “abuse”. However, the world of tax is complicated by all countries having completely different taxes and tax rates. Not helpful. The bright sparks (and they are) at some of the top Accountancy firms get paid significant sums to help businesses avoid tax. The principles are the same as any of us using our own Accountant to help reduce our own tax bill – legitimately. So be wary of throwing stones in glass houses. Yet clearly there is something unsettling when the sums seem to stack up in favour of big business having its cake (make mine a blueberry muffin) and eating it. Tax is a civic responsibility, we don’t dance with joy when paying it, frankly because we know that so much of it is wasted on really rather daft political measures. I still advocate a single rate of tax, irrespective of what the form of income or capital gain. This would, in my opinion, reduce the loopholes and stop people doing what they can to pay as little as they can. Tax needs to be fair to both payer and payee, at the moment it isn’t fair to either, but I see little chance of this changing in the near future. However, transfer pricing rules are being reconsidered. The UN has published its thoughts within a new transfer pricing manual. So there is some hope that a greater sense of fairness might be applied. However, as I have said before, Starbucks and Facebook did nothing wrong in law. However. if you find their actions objectionable you could always use your much under-rated consumer power.

Money, Values and Ethics

Financial planning when done properly should connect your values and ethics with your finances. This is what seems so “off message” with Starbucks. However most individuals are caught in the same trap of not thinking through the bigger picture – what it is that they want or indeed how much is enough. This is something that I help clients to think about and apply to their financial plan. There are two types of people, those that do and those that don’t, so give me a call.

When Reducing Tax BackfiresDominic2023-12-01T12:23:02+00:00

Everybody Has A Plan

Everybody Has A Plan (Todos tenemos un plan)

This week has been a cinematic one for me. It is the BFI (British Film Institute) London Film Festival. One of the films that I saw was “Everybody Has A Plan”. Now call me a cynic, but no they don’t. In fact my experience is that the majority of people do not have anything vaguely resembling a plan. By “plan”, I mean a deliberate, thought through approach to what they want from life and how to set about making it a reality. That is in no way to detract from what is otherwise a really good film about the choices that twin brothers make and how wishing for someone else’s life may not be the best approach to changing your lot.

Living Deliberately

Financial planning when done properly doesn’t come from a place of envy. It comes from a sense of connecting your personal values and integrity with your money. Clients use us to help them maintain or improve their existing lifestyle, it is very rare that I meet clients that want to downsize their lifestyle – though I do meet some, who are always very interesting people. Many people drift in life as it throws up its challenges and changes. Some of this we can control and some we cannot (or at least if you really figure out how, let me know). We can determine our focus, what we want, yet few people actually verbalise this in a clear manner, let alone share it with their spouse or partner or financial adviser. I think that this has something to do with the fear of failure, if it’s not said or written down and it doesn’t happen, then who can tell? Whilst entirely understandable, fear should not be our main guide in life.

Are You Ready For The Truth?

The film explores the difficulty of several relationships – one where a husband and wife have very different expectations of their marriage and desire for children, another the belief that there is no escape from a life of crime – to become a bully or become a victim seem to be the only choices. Good financial planning is more than a binary set of choices +/- life is rather more complex. Good financial planning takes hope and gives it a strategy. Helping clients to visualise what it is that they want from the future can also help – there is certainly some resonance in the notion that “seeing is believing” (now I’m in danger of living up to my own surname). Anyway, enough said – here is the trailer for the film. It is in Spanish and well subtitled. The lead actor is very impressive (Viggo Mortensen, who was in the Lord of the Rings trilogy).

Why do I like film so much? well probably because I like stories, which is why I am interested in my clients, I genuinely want to hear their story so far and where they want to take it, what’s yours?

Everybody Has A PlanDominic2023-12-01T12:23:01+00:00

Real Life Financial Planning

I know that this is a blog and therefore part of my marketing strategy, but I hope that is helpful and not simply marketing messages. I thought that it may be helpful to provide you with a real life financial planning example of work that I did today for a client. The couple concerned have good jobs, Mr E runs his own business. They have a reasonably large mortgage and surplus income each year. They had very modest ISAs. They make payments towards their pensions and are planning fairly normal retirement dates, though would like to consider options about bringing this forward.

Alternative Financial Planning – Unlike Most Financial Advisers

Most financial advisers hear the term “early retirement” and tend to direct people directly to maximizing their pension and ISA contributions as far as possible. This is all well and good, but isn’t exactly “impartial”. Impartiality to my mind means comparing different solutions to a problem and advising on the most suitable. As we charge fees (and always have) this is not a big deal for us.

Net Worth Illumination

Long story short, I advised that they sell the ISAs and use them to reduce the mortgage. We had identified and drawn up a proper budget for their lifestyle and we had already put enough cash in the bank for emergency reserves. The surplus income was directed at clearing the mortgage. This reduced the mortgage payment term by 6 years. As a result from the age of 53 Mr E would be able to reduce his earnings considerably to support his lifestyle (another set of questions). If he doesn’t want to do that, then from that point onwards we simply squirrelled the surplus cash (no mortgage payments) into their bank. Their net worth doubled against their original plan. This surprised even me, but delighted the clients. This is before we do anything sophisticated such as decent tax planning and investment. This was a “no risk” approach, that meant no adjustment to lifestyle, just a better organised and more disciplined and focused plan.

Of course the clients have to implement the plan and I shall be helping them to do just this, but the point is that great financial planning can make a massive difference to your future. So the real question is, isn’t it time you had a proper financial plan and gave me a call?

Real Life Financial PlanningDominic2023-12-01T12:23:01+00:00

Skandia Increase Charges

Skandia Life are increasing charges on several of their older policies. Skandia call this the monthly maintenance charge, most call it a monthly policy fee. As inflation appears to be falling, it is a little surprising that Skandia have decided to generally increase their charge by over 5% in most instances. However be advised that these charges apply to pretty old style policies. If you have one of these old style policies, you will be contacted by letter from 22nd October. Skandia have historically only worked with independent financial advisers, so the policies listed below are those that you would have taken out through an IFA at some point in the last 20 years or so.

Skandia Increase Charges

Life products		Percentage increase
Maximum Investment Plan	Maintenance charge to increase from £3.27 to £3.45 a month.	5.5%
Skandia Endowment Plan	Maintenance charge to increase from £3.27 to £3.45 a month.	5.5%
Skandia Lifetime Plan	Maintenance charge to increase from £3.27 to £3.45 a month.	5.5%
The Skandia Plan	Maintenance charge to increase from £3.27 to £3.45 a month.	5.5%
High Investment Bond	Maintenance charge to increase from £40.56 to £42.84 a year.	5.6%
Pension products		Percentage increase
Executive Pension, Free Standing Pension and Personal Pension – series 4	Maintenance charge to increase from £2.85 to £3.01 a month.	5.6%
Executive Pension, Free Standing Pension and Personal Pension – series 3	Maintenance charge to increase from £4.33 to £4.57 a month.	5.5%
Executive Pension, Free Standing Pension, Personal Pension and Trustee Investment Plan – series 2	Maintenance charge to increase from £4.17 to £4.40 a month.	5.5%
Personal Pension Income Plan – series 1	Maintenance charge to increase from £4.17 to £4.40 a month.	5.5%
Executive Pension, Free Standing Pension and Personal Pension – series 1	Maintenance charge to increase from £4.17 to £4.40 a month.	5.5%
Executive Pension Plan	Maintenance charge to increase from £4.06 to £4.28 a month.	5.4%
Skandia Pension Plan	Maintenance charge to increase from £4.06 to £4.28 a month.	5.4%
Self Administered Pension Plan	Maintenance charge to increase from £4.06 to £4.28 a month.	5.4%
Skandia Professional products		Percentage increase
Executive Retirement Account	Fixed rate administration fee to increase from £3.59 to £3.79 a month.	5.6%
Free Standing AVC Account	Fixed rate administration fee to increase from £3.59 to £3.79 a month.	5.6%
Personal Retirement Account	Fixed rate administration fee to increase from £3.59 to £3.79 a month.	5.6%
Select Personal Pension Account	Fixed rate administration fee to increase from £3.59 to £3.79 a month.	5.6%
Personal Retirement Income Account	Fixed rate administration fee to increase from £3.59 to £3.79 a month.	5.6%

Skandia Increase ChargesDominic2023-12-01T12:23:00+00:00

McLaren Set Pace For Businesses

Businesses can treat fines as deductions

The world of Formula 1 is a rapidly evolving one, however whilst drivers may be awarded penalties for dangerous

driving, rarely is it that they get to go head to head with the taxman. Financial engineering met elite engineering in the form of Formula 1 and HMRC. You may recall that the F1 McLaren team were fined a couple of seasons ago,(2007) for allegedly spying on their rivals Ferrari, in the hope of gaining a competitive advantage. The governing body (FIA) handed a pit-stopping £66m fine to the McLaren company which became £32m. Well it seems that McLaren are not simply in the business of setting fastest laps, pole positions or GP wins, but have now won a landmark case against HMRC, this is potentially a help to those firms that operate in industries where fines can be imposed. In essence this makes the case that businesses can treat fines as deductions. Frankly the one industry that comes to mind immediately for me is financial services – but also the sports world and perhaps media world.

A statutory penalty cannot be a deduction

McLaren have successfully argued that their fine, is not a statutory penalty, but one under the FIA rules. As a result this could be claimed as a business expense and therefore deductible. HMRC had argued that it wasn’t – on the grounds that a penalty violated someone else’s civil rights and therefore not deductible. The courts ruled in favour of McLaren. HMRC can still appeal (and may do so). So whilst being fined rarely carries good news, it would seem that in such circumstances, at least it can be described as a business expense and therefore used to reduce profit and associated tax. This may provide some comfort to a disappointing season for McLaren, who are currently third in the Constructors Championship with 4 races to go, but little chance of either Jenson Button or Lewis Hamilton winning the Drivers Championship this season.

McLaren Set Pace For BusinessesDominic2023-12-01T12:23:00+00:00

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