November 2011 - Page 2 of 4 - Financial Planning in Wimbledon

Lloyds Chased for Missed Payment

1962: Cash on Demand – Lawrence

The blood-letting has begun. We have reached “that point”. Today an investment company whose services were terminated by the Lloyds Group have begun to take legal action against Lloyds. This is all to do with getting their severance pay for early termination of services, as contractually agreed. Lloyds have missed part of the payment that was due in June and now the investment company has decided to take matters further and publicly.

Invista Real Estate Investment Management is taking Lloyds to court for a missed final payment of £545,600. Not small beer and the irony of this will not be lost on anyone that has run into difficulties with a Bank. It is reported that Lloyds did pay £2.6m to Invista in May, but this payment has simply not been met. I wonder if they apply bank charges and daily interest.

This is perhaps an indication of the juggling that many businesses are now doing (whatever their size) – in effect delaying payments for as long as possible. This can be fatal to small businesses. Cashflow is king in the world of finance and irrespective of profitability, without cashflow, there is no business. The Lloyds Group Q3 results show a decline in income and profit – reducing income by 15% and profit before tax down 30%.

DT

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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Lloyds Chased for Missed PaymentDominic2023-12-01T12:48:37+00:00

Funds: Henderson Ethical/SRI Funds

1955: Hold Back Tomorrow – Hugo Haas

Henderson are in a cost-cutting spree and according to industry press are making their entire SRI team redundant. Henderson announced that Tim Dieppe will remain running the Industries of The Future Fund until the end of the year (which really is not that far away).

As a consequence I am reviewing holdings with Henderson and shall write to clients in due course. Henderson have had considerable success with their SRI funds. I am sure that Henderson have very good reasons for their actions, but this does seem like a backward step.

DT

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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Funds: Henderson Ethical/SRI FundsDominic2023-12-01T12:48:38+00:00

House of Sand – waving Dubai to money

2005: House of Sand – Waddington

I’ve been a financial adviser for over 20 years, my industry is full of people constantly believing that they have the best idea for the next money making exercise. In reality the vast majority of so-called good ideas make money for those selling the product, not those investing into it. I often refer to the Californian gold rush, in which those that made money were the ones selling the shovels and picks, not the ones doing the digging.

Today I learned of yet another sorry tale, this time a local firm that were “experts” in property investment funds, that has a number of joint ventures firms (Bentley-Leek Properties Ltd) that have gone bust, losing clients over an estimated £22m and creating an awful headache. The firm was involved with multiple joint ventures, formed with separate firms of Solicitors and Accountants. Sadly, this will impact a number of people in the local area who have been advised to implement this type of investment in Surrey.

Look, I’m not going to throw mud, but joint ventures exist to make money and usually because the cost of going it alone is too great or too arduous. The legal structure of the companies can become incredibly complex. Stand back for a moment and reflect if this is really what investing is meant to be about. The detail is buried in a mountain of complexity and paperchasing.

The company concerned is also an IFA and appears to be involved with Lusso Homes, although this is not completely clear. Lusso provide “high quality” homes for property investment. The investment brochure online provided by Lusso, has a table on page 10 that frankly I don’t understand – and I do this for a living. The numbers, though are enticing and anyone from the area knows that property in these locations is not exactly cheap. This may not have been their undoing (I don’t know the detail) but the fund also had property investment in Dubai – which might be a wonderful place to shop for luxury items, have some amazing architecture, but has little to do with property expertise in Surrey. One of the reported failed projects which intended to provide an annual return of 10% by investing in Dubai, used properties in Esher as security. Some of this investment was established via pensions (a SIPP).

As a consequence of the collapse, the IFA firm has also had to close. BDO have been appointed for the property company as the administrators and have written to investors, who are reported to be livid with the news reported that Directors of Bentley-Leek Properties Ltd also borrowed £2m from the fund.

There are some key points to make, that many forget all too easily. Property will not always go up in value. It is not a safe form of investment. It is not very liquid. Sure it can be part of a portfolio, but it should not be the entire portfolio. Investment in property abroad is much more “risky” than property in the UK. In nations where regulation is lax or non-existent, I get particulalry concerned. Our own regulators failed to identify or highlight practices that led to the credit crunch, so what chance have smaller, less transparent nations got? I don’t wish to sound simple, but frankly – if you don’t understand how the investment works within 2 minutes walk away. If it sounds too good to be true… well it probably is.

We all make mistakes. It is very easy to get finance wrong. I am not immune from making mistakes, to my knowledge nobody is. However, I imagine, believe (and know) that clients expect an adviser to properly know the investment product that is being advised. The FSA certainly believe this and so do I. This is yet another example of why I believe that my role is to help clients reduce the number of mistakes that they may otherwise make.

DT

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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House of Sand – waving Dubai to moneyDominic2023-12-01T12:48:38+00:00

Coldplay – Just The Ticket or The Just Ticket?

1999: Just The Ticket – Wenk

For those that like attending gigs (I loathe that word for some reason).. anyway “music events”, you will appreciate the bizarre way that the ticket market operates. The ticket price may be £20-£150 but there is invariably a handling/postage fee which makes the ticket agency a fair profit I suspect. Anyway, apart from this gripe, I am also increasingly annoyed by the way that “events” are promoted. For example, Coldplay (Britain’s biggest band at the moment and one that I have liked for many years and seen them live on numerous occasions) have a new album “Mylo Xyloto” and are beginning a world tour. Tickets are sold out within minutes of being released online, jamming up various Internet servers. In theory you can only buy 4 tickets at a time for most bands. Yet no sooner is the panic over as you purchase the last remaining tickets, than a new date is announced – the following day.

Now I’m fairly sure that venues probably need a little more notice than what appears to be an impulsive reaction to the huge demand for tickets. It smacks of a con and must surely be market manipulation. I’m not citing Coldplay as unique in this, they all do it – and frankly it probably has almost nothing to do with the bands and everything to do with the promoters.

To make matters worse, ticket agencies seem to be allocated loads of tickets and then sell these on at a premium, even when an event is sold out, clearly it isn’t ever sold out. Turning up to the actual event also reveals a considerable number of “empty seats” – whoever the band is.

Within the financial services industry regulation makes market fixing illegal. Prices are meant to represent the real metrics of supply and demand.

Coldplay tickets can be found at their own site, but it will redirect you to Ticketmaster – so if you would like a little more choice, here are just a few of those of the first page of google.

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

Coldplay – Just The Ticket or The Just Ticket?Dominic2023-12-01T12:48:39+00:00

Dear George…

1939: In Name Only – John Cromwell

We are gradually counting down to 29th November, when George Osbourne presents his Autumn Statement. There has been much debate in the press about whether he will abolish or reduce the amount of tax free cash available from pensions – currently 25% of the fund. A cynic might say that the change in terminology brought in by the previous Government might aid this cause.

Pensions no longer have a retirement date. The current and previous Governments have made this possible through the abolition of the compulsion to buy an annuity – even though in practice, most will still do so. You no longer retire – you crystallise benefits. Yes you did read that correctly, at least they didn’t call it “fossilize”.

The new jargon for the tax free lump sum is “Pension Commencement Lump Sum” PCLS… which leaves open the door for having no reference to tax free.

In his bid to cut costs, Mr Osbourne and the Treasury are also rumoured to be considering reducing or scrapping higher rate tax relief on pensions. In theory this could be worth £10,000 a year to someone using the £50,000 annual allowance. This sort of rumour has been around for as long as I can remember and one has to be a little suspicious of the financial services industry, who invariably use rumour of change to encourage people to take pre-emptive action.

Pensions have already had far too much change. These sort of changes would be entirely counter productive to encouraging the population to save for retirement and independence of the State. So should anyone with any input into the Treasury be reading this. Please don’t mess things up further!

DT

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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Dear George…Dominic2023-12-01T12:48:39+00:00

The End of Sterling? sein größter bluff?

1954: The Million Pound Note – Neame

I’m at a loss for words (well nearly)… it is being reported (in Die Welt) that the German Finance Minister Wolfgang Schauble believes that Sterling will be dumped in favour of the Euro, much more quickly than we in Britain believe. I would have thought that the current fiasco in Europe is serving as a reminder that sharing a currency means sharing (for which read – have the same) economic and social policy, which does not work with different approaches to these rather important issues, many of which are culturally ingrained. Perhaps Mr Schauble is simply bluffing and hopeful that Germany will not be left alone in bailing out its Eurozone partners, but I cannot see many here agreeing that the Euro would make really good sense for Britain. I imagine that this may be something that David Cameron discusses with Angela Merkel today.

DT

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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The End of Sterling? sein größter bluff?Dominic2023-12-01T12:48:40+00:00

Gold: Fools Rush In?

1925: The Gold Rush – Charlie Chaplin

The World Gold Council has just published its third quarter data for 2011. I’m one of those people that find this sort of stuff interesting, which is presumably a good thing if you are a client. Anyway, demand for gold increased by 6% on a year-on-year basis. Investment demand for gold as a “safe haven” is driving demand and altering the shape of the gold market. Way back in 1970, when the world was clearly a different place, Jewellery accounted for about 70% of gold market with investment and technology roughly sharing the balance of the market equally. Scroll forward to 2010 and investment gold now makes up about 40% of the market, with jewellery squeezed to 50%.

What is also interesting in the report is that nearly 80% of gold production mines were in Africa in 1970 (the bulk being in South Africa) with 10% based in the US and the rest of the world accounting for only 10%. Today, or rather in 2010, there is a completely different picture, East Asia now has the biggest distribution of mines, but by an large there is an even spread across the US, Latin America, Middle East, Oceanic and Africa, Europe by comparison has virtually no significant input into the numbers. Of course since 1970, South Africa in particular has changed dramatically.

My concern is primarily that gold has become such a significant holding within portfolios that the price is perhaps unnaturally high due to the demand. It is clear that gold is a traditional “safe” asset, but the volatility in the price of gold would suggest that as with other asset classes, timing is everything and is of course very difficult to get right consistently. The economic environment leads investors to seek safety, but I am beginning to wonder whether we are gradually getting to the bottom of the mine that we have dug for ourselves. By the time characters like “the little tramp” (nothing to lose) are gold speculators, it is time to get out.

DT

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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Gold: Fools Rush In?Dominic2023-12-01T12:48:40+00:00

Avoiding The Pitfalls

1966: This Property is Condemned

What makes a good financial adviser? Given the way that most investors behave, I would assume that most must believe that a good adviser is one that makes them a fortune without any risk. If only this were possible. The truth is rather more uncomfortable. In my opinion, a good financial adviser is one that helps investors make fewer mistakes. I have spoken and written about this regularly.

Yesterday, an offshore British Real Estate Fund (BREF) run by Tilney Asset Management (owned by Deutsche Bank) went into administration. Accountancy firm PriceWaterhouseCoopers (PWC) are fairly grim about the chances of investors getting back any of their money. This is a fund with spectacular under performance in recent years. The fund, which invests in commercial property resides in Guernsey (a tax haven) and was able to use borrowing to ideally improve returns, but as we all know, debt can be a millstone and can lead to ruin, which is precisely what happened here when combined with sharp declines in commercial property valuations. Many businesses rely on finance (borrowing) to be renewed or renegotiated. This is not the world that the Banks now live in. In the summer, the fund had 24 properties worth £58.65m and debt of £77.61m a loan-to-value of over 130%. The BREF could not agree a way forward with its existing lenders (Santander and Aareal Bank) and so called in PWC.

Most Fund Managers and advisers will have an element of property within their portfolios. I am reluctant to say “never” but in general I don’t like assets that are not very liquid. Selling a property fund is sometimes very difficult – you might recall AVIVA suspended their European property fund in November 2008 for 13 several months. The point being that it is not easy to sell all or part of a retail/business park. The BRE Fund has only 24 properties (see page 10 for a list). Property can have a place in a portfolio, but it is not as safe as some would wish to believe. Indeed it can be a very high risk form of investment when debt is also involved. This is one mistake that our clients have not made of late, but one that many big-name firms have.

DT

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

Avoiding The PitfallsDominic2023-12-01T12:48:41+00:00

The Confidence Index

1946: Great Expectations – David Lean

Nationwide, the UK’s largest Building Society provides a range of data. One is the Consumer Confidence Index which they report has fallen yet again, this time to a score of 36. This is a complex index and deals with perception. Nationwide drearily announce that the Expectations Index fell by 14 points, taking it to its lowest ever reading of 48. May I remind you of my post on November 4th about investors becoming curvaceous. As an investor, one might see “rock bottom, depressing news” as an investing opportunity… waiting for consumer confidence to return is invariably after the event.

DT

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

The Confidence IndexDominic2023-12-01T12:48:41+00:00

Virgin Banks on Tyneside

2007: Virgin Territory – David Leland

Virgin Money have agreed a price for Northern Rock. I’m not sure if Mr Branson is having a slight joke as the jumbo sized £747million is the pricetag agreed with the Government, who are intent on selling the nationalised banks back to the private sector as quickly as possible. There will be other funds that will need to be paid, £330m of them in total if the deal works out for Virgin.

Virgin Money have made no secret of their desire and attempt to revolutionise the world of high street banking. In theory this builds nicely upon their existing financial services range, however it remains to be seen whether the typical Virgin customer has sufficient funds to make Banking profitable in these more challenging economic times.

Virgin are purchasing the “good bank” part of Northern Rock, as with most things that Virgin do, very little are actually “virgin” in the sense that a business is invariably bought and rebranded as Virgin. The toxic element of Northern Rock will be left with the British taxpayer (naturally!).

The first half results for Northern Rock reveal continued losses, Executive Chairman Ron Sandler “Northern Rock has made good progress in the first half of 2011. The company continued to be loss-making,

[£78.8m] as expected, but losses are significantly reduced [£140m in first half 2010] and we are generating momentum. The company expects to begin trading profitably during the second half of 2012″. If to be believed, Mr Branson won’t have to wait too long to begin to see a profit on his investment.

I fear though that despite the regulators efforts to ensure that financial products are properly marketed and sold from 2012 that this may simply be another Bank that struggles to know what free really means. Currently employers can set up staff pensions “for free” using Virgin, which is of course a nonsense that they acknowledge that they will charge the employees via their pension. Admittedly the financial services industry needs knocking into shape, but many of the issues are rather more complex than simply a new coat of paint. Whatever your view about Virgin, it is undoubtedly a successful sales outlet, not simply selling products and services, but invariably the businesses themselves. The only reason not to sell is when the profits show little sign of diminishing, which then perhaps tells us rather more about what is really being offered. As the regulator seems in the mood for fines, I do hope that Mr Branson got his caveat emptor.

DT

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

Virgin Banks on TynesideDominic2023-12-01T12:48:42+00:00