December 2011 - Page 2 of 3 - Financial Planning in Wimbledon

Mortgage Rules Changing to “Common Sense”

1954: Jubilee Trail – Joseph Kane

Over the last year or so most Governments, companies and individuals will have come to appreciate more of the corrosive aspects of debt. Debt has been one of the main tools used over the last 20 years or so to fuel our way of life, though few actually appreciated the degree to which indebtedness would become a problem. The notion of saving has been lost for the majority of a generation (on a generalised national basis) a culture of buy it now, pay for it later, following the widescale adoption of HP (Hire Purchase) in the US in the last century. However borrowing is nothing new, it is as old as human culture, one of the first recorded words of wisdom about debt can be found in Proverbs. Chapter 22 (verse 7) says “The rich rule over the poor, and the borrower is servant to the lender.” In 2011 we still find this verse to be a rather sad statement of fact. The concept of debt being wiped off after 25 years is known as “Jubilee” and might be regarded as a principle for life.

Today the FSA have announced some new rules in relation to mortgages, following its Mortgage Market Review (MMR). You may be surprised at the key principles, which any reasonable person would have probably assumed were already a part of the borrowing process. To paraphrase:

1. Mortgages and loans can only be advanced where there is a reasonable chance of them being repaid, without including the possibility that property prices will rise.

2. Lenders should assess the afforability of the loan, allowing for the possibility that interest rates might rise. Borrowers should not enter contracts on the assumption that interest rates will remain low forever.

3. Interest only mortgages should be assessed as though they are on a repayment mortgage basis. Assumptions about the ability to repay debt from rising property values are not to be permitted.

In short, plain English – don’t enter into a loan that you cannot genuinely afford and allow reasonable assumptions about changes in the future. I assume that this new approach (which seems like common sense to most of us) has clearly not been applied by most of the Governments in the West and in particular in Europe, with some obvious and notable exceptions.

The FSA also propose banning self-certification mortgages (where the borrower provides minimal information but confirms that the loan is affordable). In addition, the proposals include banning “non-advised” mortgages – in other words a proper dialogue and presumably therefore a proper assessment will need to take place by the lender of the borrower, with the exception of high net worth borrowers (who presumably the FSA believe never make such mistakes with finance). A statistic that I find somewhat staggering and highly alarming is that something like 50% of mortgages are currently “non advised” according to the FSA, which does rather pose a few questions doesn’t it and once again suggests further evidence of negligent lending and borrowing which one would like to have believed would have been spotted some time ago.

The FSA Consultation Paper (CP11/31) will be followed with consultation and it is expected that new rules will be brought into effect from the summer of 2013. The FSA are very keen to ensure that responsible lending is achieved (and by inference, responsible borrowing). The report is based upon reducing the number of people that experience problems with repaying debt. The majority of mortgage arrears are caused by unemployment/redundancy (32%), relationship breakdown/divorce (26%), serious illness/accident (15%), extended work break to care for young children (11%), partner serious illness/accident (7%), no self-employed income (6%), business failure (3%) and finally time caring for parents (2%). Those mathematicians amongst you will figure out that there must be an error in the data as this amounts to more than 100% (102%) which again is a little concerning that the regulator cannot check its own data.That said, clearly the relevant point is that life changes, stuff happens – be as prepared as you can be, reasonbly.

What this means for most of us is that lenders will now probably charge more for the extra work that they do, so expect loan and mortgage fees to rise. Borrowers will probably also find themselves wasting more time and by going direct to a lender, may be deterred by the lengthy experience from shopping around. Therefore having a top rate independent mortgage adviser with access to the entire market should be a significant advantage. We don’t arrange mortgages any more, but are ideally placed to put you in touch with one.

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

Mortgage Rules Changing to “Common Sense”Dominic2023-12-01T12:48:22+00:00

Peace on Earth, Goodwill to all men (mankind)

1967: The Thief of Paris – Louis Malle

Are you in the Christmas spirit yet? today is the day that many businesses have their office party, known by paramedics as “Black Friday” as it ends up being one of their busiest nights of the year – today probably not helped by the sleet across the country.

It would seem that the head of the Bank of France or Banque de France, Mr Noyer, is clearly not in a Christmas mood, calling for credit ratings agencies to downgrade the UK ahead of France. This follows an interview given to Le Telegramme. It seems that rather than taking responsibility it is far easier to carp about others. On Monday Moody’s published an Outlook report on the French Banking sector which was not as golden as the Banque had hoped. France had “erroneously” had its credit rating downgraded earlier ion the year, which was then corrected. This follows news from Paris that yesterday the court decided that Jacques Chirac was found guilty of embezzlement (specifically redirecting public funds) and whilst unable to remember anything (medics say his memory is poor – he is 79 years old) was given a suspended prison sentence.

One gets the sense that a number of European Governments will be looking to kick the proverbial cat and the UK seems a likely target due to Mr Cameron’s decision not to give control of Britain’s tax and financial system to the EU. One does wonder why the Europeans believe that they are so well qualified to act as guardians of the financial system when the Euro has clearly been a complete mess. Joyeux Noel!

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

Peace on Earth, Goodwill to all men (mankind)Dominic2023-12-01T12:48:22+00:00

Busy Little Bee

2009: Vanishing of the Bees – Langworthy

As the countdown to Christmas continues and the anxiety about whether parcels from online retailers will turn up in time, many of us will be finding the tempo significantly increases in preparation for the Christmas “break”. Like busy bees many of us will be going from one task to another in the merry-go-round of shopping, wrapping and cooking. Taking a moment is now the real luxury.

As I begin to count (not really) the emailed Christmas wishes, I’m reminded that we get what we measure. Sadly many people (and organisations) measure the wrong things. In the context of financial services, our industry is awash with outrage as yet more duff companies and products that very few financial advisers sold are expected to subsidise by way of compensation. Now there is even the suggestion that UK advisers will be asked to pay compensation to Americans that invested in MF Global (whose demise I blogged about a few weeks ago). The FSCS have issued a warning that IFAs may need to find a few million more – perhaps 40, perhaps 100..we will know in the new year.

As I regularly meet with other advisers at conferences etc increasingly I am left with the impression that there will be a significant culling over the next 12 months. Many are tired of an industry that seems to only ever be wise after the event, never learns and applies rules retrospectively. There is a very real sense that only a few of us will be left standing. I want to make it clear that I intend to continue to work for my clients for many years to come. The IFA may become an endangered species – rather like the humble bee.

Bees are under serious threat and it is not really clear why. Bees play a significant and vital part in pollination (you know that). We take them for granted and tend to underestimate their importance. IFAs are not bees. I would prefer to save bees than IFAs (no contest) most IFAs are creative enough to find alternative ways to earn a living – but without bees, one begins to wonder if life would be considerably “less” and not in the sense that less is more, but less is most definitely less. Anyway, I came across this website (vanishing bees) and a new film about the plight of bees, which may be worth a look. As for IFAs – well hopefully common sense within financial services will prevail one day – though that day may be well past my time, but I certainly hope that 2012 will be a better year for investors, IFAs and bees. I doubt anyone would adopt an IFA, but you can adopt a beehive from the British Beekeepers Association.

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

Busy Little BeeDominic2023-12-01T12:48:23+00:00

Homeless for Christmas? Past, Present and Future

1997: The Borrowers – Peter Hewitt

The FSA are reported to be claiming that repossession increased 5.88% from 9,134 to 9,670 between the third quarters of 2010 and 2011. However the Council of Mortgage Lenders state that the figure is 9,200 for the third quarter of 2011 compared to 8,900 for the same period in 2010. The CML figures would suggest a rise of 3.3% over the year. It is possible that the difference in figures is due to the fact that CML cover 94% of the residential lending market, not all of it. Back in 2010 there were 11.4million mortgages in the UK with loans amounting to £1.2trillion. In 2011 there are 11.2 million mortgages in the UK with loans amounting to £1.2trillion (no difference).

Perhaps in the big scheme of things, the difference in the numbers is fairly inconsequential – unless of course you are someone that has been repossessed. These figures are useful indicators about the health of the economy. We currently have the lowest interest rates for many years, yet clearly for some people mortgage payments are still too onerous. Indeed the CML would argue that their data for October 2011 shows that mortgages are the most affordable that they have been in 8 years. In October of the 28,000 mortgages taken up and £4,500m borrowed across the country the average mover took out a 69% mortgage equating to 2.89 times gross income with payments costing 9.2% of income. The typical first time buyer (all 16,400 of them) borrowed a total of £2,000m (average £121,950) with a 20% deposit (£30,500) and had an average income of £38,110 – which is above the national average wage. Lending levels fell by 10% against the September 2011 figures for first time buyers.

The Christmas nativity reminds us of a couple that ended up in a stable and whilst the forecasters appear to have over-estimated the figures for repossessions, they are still very high and over 102 a day. Making sure that your financial planning is properly budgeted is vital to avoid the sort of pressures that some fall victim to. That’s why each year we issue a Financial Statement, showing our clients precisely where there money has been spent – but this should be a tool for also looking forward and planning spending in 2012 which ought to take account of yesterdays announcement that CPI is 4.8% and RPI 5.2%. Preparation is everything.

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

Homeless for Christmas? Past, Present and FutureDominic2023-12-01T12:48:23+00:00

Cash ISA Top Rates – A Little Bit More?

2003: Something’s Gotta Give – Meyers

The usual warning to this information – this is merely a list of some of the top paying accounts at the moment. You should always check the details yourself as this is not advice. I would also warn you that just because something is paying a better rate of interest, does not necessarily make this a better option. Decent rates tend to suggest that a lender could do with your cash, so will offer a little bit more. Please be mindful of the protection limitations of the FSCS and the reality of many inter-connected banks making the limit considerably smaller than you may think.

One Year Deposit

Online: Yorkshire Bank 3.60%

Bank: Santander 4.20%

Building Society: Barnsley 5.00%

Two Year Deposit

Online: Yorkshire Bank 4.01%

Bank: Clydesdale 4.01%

Building Society National Counties 3.76%

Instant Access

Online: AA Savings 3.20%

Bank: Santander 2.50%

Building Society: Nottingham 3.25%

Cash ISA – Fixed Rate

Online: Governor Money 4.50%

Bank: Halifax 4.40%

Building Society: Barnsley 5.00%

Cash ISA – Variable Rate

Online: AA Savings 3.05%

Bank: Santander 4.00%

Building Society: Newcastle 3.05%

Check out some of the best rates using Moneyfacts.

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

Cash ISA Top Rates – A Little Bit More?Dominic2023-12-01T12:48:24+00:00

RBS, £45billion and Nobody to Blame?

2002: Catch Me If You Can – Spielberg

The depressing news today is that the £45.5bn or so that you and I (and the rest of the country) coughed up to pay for RBS cannot be blamed on anyone in particular. The regulator has admitted to a raft of mistakes regulating RBS, but seems to have slightly side-stepped taking responsibility suggesting that Mr Brown’s light touch approach, a general widespread belief about the stability of the financial system and having limited skills, experience and resources were all contributing factors. In addition, legal advice was presented that essentially says you cannot prosecute for a law that does not exist.

RBS seem guilty of being “somewhat foolish” (massive understatement) in their assessment of ABN AMRO who they took over without adequate due diligence (which comprised of two lever arch files and a CD) and was funded the purchase with debt. According to the Chairman of the FSA, this degree of due diligence is typical of contested takeovers (gulp, surely the big Accountancy firms would not be guilty of yet another Enron?). The 452 page report will probably leave most wondering how on earth many of the “glaring errors” were not picked up before. IFAs are pretty livid citing the fact that had an IFA been responsible for such systemic poor governance, they would be fined heavily and probably have their license revoked permanently. They have a point, but clearly have not even attempted to read the report but simply respond to industry media headlines, which sadly will simply provide further belief that few of them actually do any proper research before commenting.

The FSA Chairman’s forward to the report makes interesting reading and states that the “RBS executive and Board were ultimately responsible”. So there it is – the RBS Board are/were responsible for basically being pretty hopeless, these people are listed on page 342 of the report, Appendix 2H, however a word of caution, not all were in-situ during the two key “hostile” takeovers of NatWest and ABN Amro.

I believe that the FSA are to be congratulated on a thorough report, one that offers much very valuable information to any organisation – small or large. Whilst the world remains in difficult economic conditions, surely we should be learning from the recent mistakes and ensuring that they are not repeated.

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

RBS, £45billion and Nobody to Blame?Dominic2023-12-01T12:48:24+00:00

FTSE 100 – Top of the Pops

1965: Life at the Top – Kotcheff

The FTSE 100 index had its quarterly review on Wednesday and saw three companies dropped from the index (Investec, Lonmin and Inmarsat) replaced by CRH, Evraz and Polymetal International. The index is reviewed every quarter (every day would simply create an unnecessary administrative burden as companies towards the bottom of the top 100 list would alter far too often). The FTSE100 is based on the largest UK listed companies, by value. It includes well known names and companies that most people would not have heard of.

Lonmin, is the worlds third largest platinum mining company, based in South Africa. The latest results for the company revealed improvements in profit and debt reduction against 2010 figures. However its share price has gradually collapsed to about half value over the last 12 months.

Inmarsat are a satellite company – the space technology type. The company was promoted to the FTSE100 in September 2008 but has now been “relegated” though this information does not appear on their website. The third quarter 2011 figures show improving revenue, up nearly 18% to $364m, however the share price has fallen around 40% over the year.

Investec are an investment company originally from South Africa. They provide financial products here in the UK and of course globally. You might have seen their adverts which tend to include a zebra. They would describe themselves as a specialist bank and asset manager. In the UK and Europe they manage around £45bn where operating profits increased by 8% in their last financial year. However their share price has also fallen significantly this year – by around 30%.

As a result, these three companies have dropped out of the FTSE100, which means that anyone with a UK FTSE100 tracker fund will have minor adjustments being made. The replacements are Evraz, a steel company with significant production in Russia. A theme continued with the inclusion of Polymetal International, a precious metals mining company with significant production in Russia and Kazakhstan. CRH are a building materials company with its HQ in Ireland. It was originally formed as a merger between Cement Ltd and Roadstone Ltd in 1970.

Never forget the adage – where there’s muck there’s brass.

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

FTSE 100 – Top of the PopsDominic2023-12-01T12:48:25+00:00

Funds: Blackrock Cash

1955: Bad Day at Black Rock – Sturges

Blackrock are amending the investment objective of their Cash Fund. This is a fund that investors tend to use for short-term holdings or something akin to a deposit fund. The changes come into effect on 30th December 2011. I am not unduly concerned by this change, but will be keeping an open mind, there are numerous alternatives for a similar fund, but this is one of the better ones generally. If you have holdings in this fund and want to discuss the changes with me please get in touch – though I suspect it will not be high on the Christmas “to do” list. If I believe that a change should be made I will write to you about this. I do not believe that there is anything to be particularly concerned about, however the timing of the announcement could have been rather better than during the run up to Christmas.

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

Funds: Blackrock CashDominic2023-12-01T12:48:26+00:00

Why All The Movies?

1985: Back to the Future – Zemeckis

You will probably have gathered that I’m something of a film fan. Well in truth, I enjoy pretty much all of the arts and like a good story. Hearing the stories of my clients also gives me a buzz, I really enjoy learning about people – where they’ve been and where they hope to go. Film also provides another opportunity to work or an alternative form of investment and this is something that is also relevant to some clients.

Film is a culturally relevant medium for today and has been so for most of our lives. The way films are made and promoted has certainly changed (which is interesting anyway) but invariably we find many stories being repeated. One reason for citing the year the film was released is to remind myself and any other reader, that of course, many of our struggles have been faced before, at different times, in different contexts.

One of the great problems with much current media is the fixation with the present and a fear induced approach to the future. I also love history and whilst not an expert beyond A’level and general interest, am struck by how little we draw on the wealth of experience of others throughout history. Its not that I think that the past was better, just that it can teach us or remind us of many timeless principles. Given the long-term nature of investing, I believe it is just as important to look back as it is to look ahead, but of course live in the present. The financial planning process can seem a little like time-travel, but not in the sense of science fiction, more like – learning from what went before and taking stock of where it is we want to go.

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

Why All The Movies?Dominic2023-12-01T12:48:26+00:00

ISA Rule Change – Never say Never Again

1983: Never Say Never Again – Kershner

The Treasury has announced a change in the ISA rules. It is my sincere hope that these are not rules that any of our clients will benefit by – as they are only enacted once an existing ISA provider company has gone bust. The change will enable investors that see an ISA provider go bust, maintain their previous ISA allowances rather than having to start again. Of course, one would hope and expect that should an ISA provider go bust then there is protection or at least compensation – but in some recent cases (Keydata) the value of the investment collapsed along with the product provider. This new change to the rules means that once the dust has settled, ISA allowances and previous contributions will be effectively protected.

Mark Hoban is reported to have said that this “will enable investors whose ISAs are affected by the failure or default of a financial firm to continue to benefit from tax-advantaged savings.”

Frankly, I hope that none of our clients ever see a day where their ISA product provider goes bust, but should that day ever arrive, this is at least good news.

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

ISA Rule Change – Never say Never AgainDominic2023-12-01T12:48:27+00:00