Very few of our clients do the lottery, or at least few admit to doing so. The numbers simply don’t stack up in favour of a win. I’m told that if you buy a mid-week ticket that wins the jackpot you are more likely to be dead before the end of the week than collecting the winnings. That said, another big winner was recently announced. This time a Mr. & Mrs. Caswell, (both in their 70’s) from Bolton, picked up nearly £25m which they intend to share with their family.

It will be interesting to see how the family cope with such sudden enormous wealth. I do hope that they manage to secure some good advice! I wonder how many people would wish to go public about their winnings which, let’s face it, probably attract an awful lot of interest from people wanting a share of the winnings. I note that several of the lottery millionaires have elected to remain anonymous and wonder why others choose to go public. Perhaps the smell of celebrity is rather intoxicating; perhaps there is even a sense of guilt and needing to appear to be “like the rest of us”. I suspect that such publicity cannot be an aid to thoughtful, wise decision-making and it is perhaps not surprising that big winners quickly find themselves asking the question – can I really trust this person?

Tuesday, 16 June 2009

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Today we have learned that Barclays has continued its efforts to repair its balance sheet without any Government aid. Barclays appear to have agreed the sale of a subsidiary fund management business, Barclays Global Investors (BGI), to Blackrock – who many will know formerly as Merrill Lynch.

The sale is reported to have generated a price of £8.2bn and there are likely to be considerable benefits to shareholders of BGI (many of whom are staff). The “merger” is expected to be completed by January 2010. BGI have been fairly instrumental in product innovation, particularly developing i-shares which are a form of market index funds. They have deep banking roots and are also significant players at the Gilt & Fixed Interest end of the investment spectrum. Blackrock are growing in global stature and this is likely to make a very good addition to their investment product range.

Friday, 12 June 2009

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

It is estimated that there is about £850m lying in unclaimed deposits in UK Banks, Building Societies and National Savings. Statistics like these would prompt most people to think about old savings accounts that they had at one time, perhaps a gift from a relative. There is a really helpful website www.mylostaccount.org.uk set up by the BBA, BSA and NS&I to help savers correctly identify and retrieve their savings. They currently receive over 680 requests a day and have already handled over 250,000 requests since the service launched at the start of 2008.

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

The BBC reporter with the apparent ability to scoop the financial story of the day appears to have done it again. Robert Peston is suggesting that a rescue package is being put together for the ailing West Bromwich Building Society.

West Bromwich is listed as the 8^th largest society based upon assets at the end of May 2009. As in the football world, West Bromwich have been attempting to break into the premier league of Building Societies for some time, but the difference between the top and bottom players is enormous. The vast majority of societies are positively gnat-like when compared against the mighty Nationwide, who with over £179,000m of assets are nearly 5 times the size of nearest rival Britannia – who recently announced a merger with the Co-operative Bank. Nationwide’s assets are more than the total of all of the other Building Societies put together, according to the latest data from the BSA. Indeed, as if to prove the 20/80 Principle (Pareto’s law of imbalance) the top 20% hold 90% of assets owned by Building Societies (and the top 20% of the top 20% hold 70% of the top 20%).

The strong get stronger in tough times and over the last year, Nationwide have acquired The Derbyshire, Cheshire and Dunfermline. So perhaps not only are they the favourite society of the nation, but also the Government who are presumably going a little cap in hand to offer preferential terms to help ailing societies. There are currently 53 Building Societies listed with the Building Society Association.

Building Societies make up about 21% of the total savings market, Banks being the obvious dominant players with 70% and NS&I (National Savings) making up 9% of the market worth a mere £1,101,073 million by the end of April this year.

Thursday, 11 June 2009

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

As summer approaches, finally it appears that we may see some improvement in our exchange rate for the Euro (€). As anyone that has recently been abroad knows, the pound has devalued considerably over the last year. In August 2008, £1 would buy about €1.25Euros. This collapsed from November to nearly €1.00Euros. Things have gradually improved since January and currently £1 will command €1.17 Euros. So putting this another way, 1 Euro is now about 85p whereas in December it was 95p, in June 2008 it was 79p, June 2007 67p and June 2006 was 69p. So shopping in Europe this summer is still considerably more expensive than it was 2 years ago, but there are signs of improvement. A €4.00Euro coffee is now £3.40 in summer 2007 it would have been £2.68 at pretty much its worst during the Christmas break the same coffee would have cost £3.80.

You can imagine the problems for UK businesses buying stock and materials from Europe and how the impact of exchange rates will have reduced their profitability. Conversely, firms selling into Europe will have enjoyed increased trade due to the poor value of Sterling.

As I am off to Europe for my annual break, I am mildly relieved but still anticipating paying inflated prices.

(see www.finance.yahoo.com currency-converter)

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

I get a real kick out of business. I love seeing the impact that good businesses can have on the lives of individuals. I’m also an avid reader of business books and am constantly looking for good ideas and learning from others. So I know it’s “not everyone’s’ cup of tea” but I was taken with a series on BBC2 that is also available on the BBC iPlayer. In summary, retail expert Mary Portas has taken on the world of charity shops. Now I’m not a great shopper, so the prospect of wading through mountains of disorganised stuff to find a hidden treasure is about as appealing as a day trip to Croydon. Yet the idea of supporting good causes by giving items that I no longer need or want that someone else can make use of resounds with me.

Mary has some entertaining challenges – dealing with employers, employees, volunteers and customers – and shares some great insights about the changing environment of retail. The obvious (?) point being that there is certainly a gap in the market for a good charity shop, perhaps better termed as a second-hand shop for a wider audience. She rightly challenges the problem for those that have “expensive taste”, who feel let down by the charity shop sector who, whilst grateful, fail to properly value (… or should that be price?) items. The killer point being – why donate a £900 designer bag if it will be unwittingly be sold for £5, perhaps to someone that cannot tell the difference between Primark and Versace. The only way to successfully encourage such donations is to correctly price them and as a consequence restructure the shopping experience itself. As you may imagine, the challenge is largely due to the ingrained thinking. Similarly, Mary challenges us all to re-examine our consumer lifestyles, to regularly purge our homes of things we simply don’t use within a year and to give quality not simply cast off junk.

Mary has some great ideas and pin-point observations. If successful, she will change the face and content of charity shops around the country, perhaps even our consumer behaviour. She faces many struggles at the coalface, of the inability or reluctance to cope with change – a microcosm of our own resistance to all that is going on around us. So I look forward to seeing how she progresses with her Orpington shop.

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

The news about the loss of hundreds of jobs at Cheltenham & Gloucester comes as a minor surprise. The rationale behind the decision seems to have been to reduce the over-supply of high street branches across the UK. Arguably this should (and could) have been done much earlier – after all Lloyds have allowed this situation to persist since taking over C&G in 1995. Since then C&G focused on what they had been good at; mortgages and deposit accounts.

Over the last 15 years or so we have witnessed many Building Societies become Banks and then get swallowed up in the pursuit of market share. The consequences of the banking sector gradually shrinking seems to have been largely ignored. You may remember the Barclays TV advert featuring Anthony Hopkins suggesting that being a big bank is quite a virtue. Yet one cannot help thinking that many of the reasons behind the current financial crisis are due to not really knowing your customer, one of the basic principles of financial regulation.

The most notable development in Banking over the last 15 years has been online banking. For many of us this has made life considerably easier. However aside from convenience, it is difficult to see where advantage has been derived from bigger banks, indeed fewer suppliers means reduced competition and choice. We seem to become less with more. The high street is increasingly homogenized. It becomes very difficult to be distinctive. On a practical level this means less choice for mortgages and deposit accounts and therefore increased power of the supplier, which is always likely to cause concern when the product is essentially access or availability to money.

This cannot be good for competition, or any likelihood of returning to sensible lending based upon knowledge of circumstances. In the pressure to achieve increasing market share and profitability, lending decisions become a conveyor-belt of tick boxes. Online money portals operate in this way, with little real knowledge of the individual and assume that everyone is the same (not equal). Our own software reveals flaws in the “system”. We know (due to relationships and the quality of our clients) that some lenders will go outside of their “tick box mentality” and trust our knowledge and advice based upon the history between us. This is an often overlooked advantage of using an IFA, it is not simply that we do the shopping around, but primarily what and who we know.

I quite liked C&G as a mortgage lender, good products and pretty good service – with one of the best mortgage application forms. There is more of the same to come with Alliance & Leicester, Bradford & Bingley and Abbey all becoming Santander. I can certainly understand the logic in that there is no need to have 2 branches when one will suffice. It occurs to me that one of the main arguments for merging is that 1+1 =3. I wonder though if the management consultant types might consider that 2-1= ½. Perhaps more creative ideas could be used to actually improve banking services with the increased capacity..?

A friend of mine is a fan of BBC comedy sitcom The League of Gentlemen and would take delight with his “you’re not local” sketch. I’ve not seen more than 5 minutes of the programme but, whilst it parodies the often decidedly odd “local” customs, it also seems to reach a sense of connection to place. When we lose local building societies (and I do understand that the world has moved on) we also lose a sense of the local community. Local businesses exist based upon reputation; those with good reputations tend to provide a good service, perhaps a fantastic service. I have yet to find a big business that maintains any sense of the personal that continues to provide high quality goods and services, but am open to persuasion – that big banks mean better service (but my experience suggests exactly the opposite is true). So RIP C&G, BBB, A&L et al…

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]