January 2011 - Page 2 of 2 - Financial Planning in Wimbledon

Please Sir, can I have some Gartmore

Henderson Global Investors continued its quest in buying up investment houses experiencing problems – perhaps making them experts in the field. This time it is Gartmore that they have agreed terms with – much to the relief of Gartmore share owners and staff. Henderson have a reasonably hefty punch with assets under management at £61.6bn by the end of 2010.

This is good news for investors in Gartmore – it remains to be seen if this is good news for investors in Gartmore funds.

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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Please Sir, can I have some GartmoreDominic2023-12-01T12:52:20+00:00

How 2010 looked in the end

The January Market Report is now available (data to the end of 2010). FTSE All Share up 10.9% all the indexes worth knowing about today are here.

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

How 2010 looked in the endDominic2023-12-01T12:52:20+00:00

10 ways to spot a financial con

Imagine the horror of learning that your life savings of £1.4m had turned into £14,000. That you had been fooled by a financial trickster who ran a Ponzi scheme that saw you unwittingly place all of your life savings with a guy that you trusted, that seemed to be doing the right things and making the right noises. Today you know that he was found guilty and will be serving time in prison, but this does not feel like justice.

As a financial planner, I am always interested in these stories. I am left wondering, why is it that clients trust me – apart from Terence Freeman’s obvious deceipt, how can a client tell if I am actually any different?

There are tell-tale signs – the most important being that I am regulated which means that I am a registered individual with the FSA as is my firm. As such I have to take out professional indemnity insurance in the event of a claim for bad advice (all adviser firms have to have this). Like most industry-wide regulators the FSA has flaws. However, it is a watchdog with teeth – issuing fines to firms in 2010 of £85m (a record). The FSA are there to ensure that rules are upheld, that practices are improved and that the standard of advice is lifted ever higher. All good stuff.

However these people seemingly ignored or did not understand that someone not regulated by the FSA is automatically malpracticing if acting as an “adviser”. So There are two points to make here – firstly that people still have a poor understanding of the financial services industry and regulation. Secondly, that the lure of high returns means that some people stop asking questions.

This a story as old as time itself – human nature will tend to overlook or ignore the “how” if the magic works. A Ponzi scheme is the equivalent of financial illusion. It appears that returns are going upwards (despite every piece of economic news) – in practice all that happens is that the newer investors are receiving income or growth from the money that new investors put into the scheme (unknowingly). In steps Mr Maddof and now Mr Freeman all in the footsteps of Charles Ponzi who set up the first enormous scheme in the US in the 1920’s – though obviously not the first financial scam.

I have to admit that I really don’t know quite how people make decisions that lead them to forget the basic truths that they know. I leave to those that know better than me about how people think – the psychology of money is something that Dr Maria Nemeth has spent most of her adult life studying and now teaches or coaches financial advisers to help their clients to focus on what is truly important. She has some very valuable insights that advisers would be very well advised to consider.

In terms of spotting a financial con, here are some questions to ask yourself.

1.If it sounds too good to be true, it probably isn’t true.

2. Is the company regulated?

3. What is it that appeals about the investment being offered?

4. How do the historic returns compare with the relevant market?

5. Is the data evidence reliable?

6. Who audits the fund?

7. How do they do what they do?

8. How come they are able to reproduce results that no one else can with consistency?

9. Who do the financial valuations / statements come from? can they be verified?

10. Are you being pressured into investing?

Most people take years to to build up their wealth and I am intrigued as to what makes them hand it all over to someone promising something that in reality we all know is not possible – otherwise everyone would be doing the same thing.

The list could go on… but actually things like the “advisers” qualifications and employment history are probably not that helpful. Just because someone has managed millions for a large Bank does not make them good at it or trustworthy – does it?

Here is the golden rule: whoever has the gold makes the rules

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

10 ways to spot a financial conDominic2023-12-01T12:52:21+00:00

Click shows flaws in RDR

Today, Money Marketing report that award winning Click, an online “execution only” protection broker is closing its general insurance arm with a loss of 80 jobs. On the face of it this is no big deal to most of us – obviously sad for the 80 that have lost their jobs. However there is a bigger issue here.

In essence Click provided an option to consumers – to sort out life assurance and loans. All of it without any advice. Marketed oddly as a free of charge service (to find the cheapest providers from a limited range). Frankly I’m surprised that this terminology is really still used. We all know that people don’t work for free and that commission pays the bill. Anyway as a firm regulated by the FSA to sell life assurance, critical illness mortgage and income protection they provided an option for the DIY minded and less affluent consumer.

The fact that the company has had to close is concerning. The most obvious point to make is that the numbers were presumably all wrong and perhaps not well managed (I am not privy to the information of Click Financial Ltd, though accounting details would presumably be lodged at Companies House). I admit commenting with such little information is dangerous and I have no intention to harm Click. What occurs to me is that the business was presumably not valued properly – whilst commission may appear to offer significant rewards for sales, the business model and assumptions would seem to have been wrong. A free lunch does cost someone. Utlimately people do not wake up and decide to buy life assurance, its one of those things that needs to be highlighted and explained.

Why am I bothering with this? well in short, with the FSA pressing ahead with RDR, the main thrust of which is to provide fee-based advice which means that the “best advisers” (remaining) will be charging fees, the rest will either have to leave the industry of offer a service similar to that of Click. The main reason that most advisers are struggling to adapt to RDR requirements is failing to know how and what to charge. If you have been telling people that your service is free it is pretty difficult to place a price of free other than £0.

Advisers need to quickly get a good understanding of how much the work that they do is worth. (as do their clients). This will presumably have some relation to complexity, time, experience and the amounts involved. This is not normal territory for many of them, for a significant number (I hope not most) their business is response driven – something arrives by post or email and the adviser responds. The classic squeeky wheel gets the oil. This has nothing to do with service.

The closure of Click ought to be a warning to the FSA that the most obvious unintended consequence of RDR is that most people will be left to get advice from a Bank where there seems little real service proposition, more of a “buy as I think of it” approach. Banks provide statements and marketing leaftlets and little else (yes even the Gold card “services” are plainly hapless). The one advantage is that Banks are easier to regulate and fine (assuming that they don’t become insolvent) which would make life easier for the FSA – who have an unenviable job policing the system.

As someone that has operated on a proper fee system since forming my company in 1999 you would be forgiven for thinking that I believe that fees is the only way. I don’t and it isn’t. The issue is that people get good advice and that this is not swayed by a system that creates bias in the advice (different commission for different products from different companies). Many people cannot afford fees for even a basic level of service, yet invariably these are the people that most need good financial counsel – to help them become financially independent of the State.

RDR must be re-thought otherwise we are creating a rod for our own back where those without get even less and rely on the State even more and it would appear that these sums are not sustainable. Much like a business model that doesn’t work because the number are wrong.

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

Click shows flaws in RDRDominic2023-12-01T12:52:21+00:00

Britain on track…for going bust

According to research conducted by Dr Eamonn Butler of the Adam Smith Institute, Britain is headed for doom at some point between 2019 and 2032 by his best estimate. Citing that our Government is actually doing relatively little to remedy this and still writing cheques on the backs of a workforce that may well have entirely lost its faith in politicians, our welfare system and public services all cost far too much and need a serious overhaul.

One has to take the Adam Smith Institute pretty seriously these days and the article doesn’t make good reading. Mind you the problem would be solved with some “once a generation” nasty events – such as plague and war to reduce the number of pensioners and curtail life expectancy rates significantly. I do hope that my cynicism is very misplaced!

Cynicism aside, this would lead to a downgrade of UK Gilts in general which has historially been a safehaven for investors. This is the time of year that many people attempt predictions about the future – frankly this is at best educated guessing, at worst fortune telling. Neither really have a place in the armoury of a good financial planner. But if pressed, I’m expecting house prices to continue to fall – in my view they have a long way to drop yet. Most people simply are not moving rather than realising the losses. I would also expect interest rates to rise perhaps by 1.5% over the next 12 months. Inflationary pressures would seem to be driving this – not helped by increased indirect taxes (VAT). Inflation tends to help equity markets – perhaps creating a false sense of “good feeling”.

If Butler is right, one might expect many Europeans (and others) that have come to Britain as economic migrants, to seek an alternative home – but for our comparatively generous welfare system – which we know will be altered. So if I was to play along with Butler, one might expect an exodus from UK which would both help the UK (reduced costs) and hinder it (reduced cheap labour and perhaps further property price reductions).

The truth is that NOBODY knows what the future holds. It is very easy to forget this when reading predictions about the future that are doomsday like. We are able to address these issues in the UK and we are all fortunate enough to live in a country that offers the opportunity for most of us to create our own future, admittedly some have a better start than others on this. As you may have observed I am somewhat sceptical about predictions, much can change in life. I have not yet come across any econmoist that consistently gets any “predictions” right. We would do well to observe the rather hapless success enjoyed by the weather predictions.

The short facts are obvious – don’t rely on the State, sort your own finances out and get your own “house in order”, have a plan, review it and make adjustments. Don’t spend more than you earn and build liquidity.

Any questions?

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

Britain on track…for going bustDominic2023-12-01T12:52:22+00:00

Tax Overhauls

The Government continue to press ahead with a review of taxes, which are certainly in need of simplification. One of our least favoured taxes is inheritance tax – which has been reduced for many in recent years with the introduction of a double nil-rate band for couples and a reasonable increase in the nil rate band itself (currently £325,000). However, combined with clever tax planning and falling property prices IHT does not raise a huge amount of tax and the current climate may well lead to changes. Personally I suspect that this is likely to be a case of smoke and mirrors – why get rid of a tax that does at least raise money? in practice it will probably appear to reduce by alterations to the nil rate band or rules themselves – but I wouldn’t bet your house on a change that means you end up inheriting more!

There are various tools available to reduce the impact of IHT, but please watch out for schemes that seem to do it all. The reality is often very different – most people need to retain control of their capital, which would contravene most IHT “plans” and HMRC guidance. Gifting the money or spending it are the two most basic and straight-forward ways to reduce your IHT. Not always possible, but many schemes that promise much tend to deliver little and are regularly reviewed by HMRC. This is not the time to hope that HMRC will adopt a “light touch”.

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

Tax OverhaulsDominic2023-12-01T12:52:23+00:00