Summer Holidays Come To An End

2010: Insane – Jacobsson

I doubt that I am the only one that wonders why politicians think that each failed bailout for a failing Euro zone member must be met with yet another pile of money. If the problems are bad now, then surely simply throwing more long-term debt for future generations to struggle with is folly. In fact, I read somewhere that the definition of insanity is continuing to repeat the same mistakes expecting different results. It seems to me as though this is the perfect description of those that are more bothered about their next election than about the legacy that they leave us all.

I am deeply concerned for the younger generation who will be working longer, earning less, buying a home later, having to look after elderly parents that have run out of money and have tax rates that make ours look playful. It is beyond the point of a discussion over a glass of Pimms, but a deeply distressing situation that needs resolving. Here and in Europe, we need to stop funding the ridiculous and start funding enterprise that employs people from within their own borders. We need to rediscover self sustainability and work collaboratively with our neighbours to ensure mutual prosperity.

Importantly, I also believe that we need to abolish financial instruments that enable some to bet against a nation and effectively magnify a crisis. This facility may be part of the “investment piece” but it is deeply flawed in its connection with people. Economics should serve society, not the other way around. Markets are meant to be a place to swap things at a negotiated fair price, not murder the seller.

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

Summer Holidays Come To An EndDominic2023-12-01T12:22:36+00:00

The Cable Guy challenges the City

Solomons-financial-advisor-wimbledon-blogger

Cable challenges City to think long term

It seems that the Government has produced some research that endorses what many advisers have known for some time. That investing needs to have a long-term horizon to work properly. Diversification is really important to successful investing and if you are determined to use an active Fund Manager, make sure that they have a process that enables them to deliver the outperformance (alpha) rather than simply hug a benchmark and watch rivals, so that they are not out of step with their peers which is short-termism at its worst or perhaps most timid.

Last year Vince Cable, the Business Secretary (at the time of writing this blog) commissioned a review – The Kay Review of UK Equity Markets and Long-Term Decision Making. The 133 page report has now been published and will doubtless add further fuel to fire surrounding the issue of what Fund Managers charge for and how do they get away with it.

I appreciate that it takes a Government report to generally weigh this information properly (and I’m guessing that this won’t be the last one). However anyone that visits the City of London, New York or any other major financial centre, will appreciate that despite the expensive land price, there is an awful lot of room given over to a marble-floored foyer. It should be no surprise that this has a price tag which needs paying for.

I’m all for a smart office, particularly when I have to work in it, but I do remember one very successful Fund Manager that used to run a “special situations” (i.e. undervalued) type of fund say to me that he would apply some very early filters to his process. On a visit to a company, if the car park was full or cars with personalised number plates he wouldn’t even enter the building. If he found a fountain in the foyer he would turn around and leave. It served him rather well, because he knew that sometimes the ego is simply too big to accept necessary change.

I shall be working my way through the report in the coming days. However the key themes from it have a resonance that I quite like. I quote.

Restore relationships of trust and confidence in the investment chain, underpinned by the application of fiduciary standards of care by all those who manage or advise on the investments of others.
Emphasise the central function of trust relationships in financial intermediation and diminish the current role of trading and transactional cultures
Establish high level statements of good practice
Improve the quality of engagement by investors with companies, emphasising and broadening the existing concept of stewardship.
Shift regulatory philosophy and practice towards support for market structures which create appropriate incentives, rather than seeking to counter inappropriate incentives through the elaboration of detailed rules of conduct.
Tackle misaligned incentives in the remuneration practices of company executives and asset managers, the disclosure of investment costs, and in stock lending practices.
Reduce the pressures for short-term decision making that arise from excessively frequent reporting of financial and investment performance (including quarterly reporting by companies), and from excessive reliance on particular metrics and models for measuring performance, assessing risk and valuing assets.

It’s as if he read my blog and website!

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

The Cable Guy challenges the CityDominic2023-12-01T12:22:35+00:00

The Offshore Treasure Island

1950: Treasure Island – Haskin

I have to admit to being a little amused by some of the comments in the media about offshore tax havens. Most amusing of all is the political nonsense that seems to gush from every quarter. Politicians have known that offshore investing and saving is available and has been for many years. HMRC has the role of collecting tax and interpreting the laws agreed and set by the Treasury. These need to be democratic, so that we don’t have a country that is effectively a tax dictator.

Government (and it really makes no difference who is in power) tweak and tinker at the edges, claiming that they are making adjustments for our general good. Governments attempt to encourage or discourage investment, to encourage or discourage enterprise. Now we may be entering the realm of political philosophy, but the purpose of this exercise is to find a balance for all citizens to live in a degree of harmony, rewarded for enterprise and not rewarded for laziness; providing good care, education etc for all of us and a welfare state for those that are truly unfortunate.

An element of financial advice will consider reducing or minimising someone’s tax. This can be done to varying degrees depending upon the complexity of the person’s affairs. So an ISA is a tax avoidance – of future capital gains and income tax. A pension is a tax avoidance, in that there is a tax reducing element (tax relief) to encourage saving and there is a tax free lump sum upon retirement. The scale of products or solutions grows. Placing money offshore can be perfectly legitimate as a place to hold funds, but once they are returned (repatriated) to the UK tax might be payable (depending one the personal allowance etc).

There are of course all sorts of offshore schemes that are deliberately set up to minimise tax. These invariably carry other problems (for example, not being tested in law – so the tax avoidance may prove pointless). You can also find that the investment is plainly “rubbish”.

If politicians were genuine about wanting to change the tax system they could do so easily. All that we need is a single rate of tax. At the moment there are volumes of tax rules. There are lots of tax rates. Taxing income, gains, profit, dividends, inheritance, and so on. It is a badly thought through system, providing motivation (legitimately) to find a way of reducing tax on “income” depending how the income is derived. This is not a difficult problem to resolve. All income earned in the UK should be subject to UK tax, all income and assets bought in the UK should be subject to UK tax. A single tax rate would work. It is fair, it is proportionate. So there’s my challenge to HMRC, Treasury and Parliament.

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 Offshore Treasure IslandDominic2023-12-01T12:22:35+00:00

Rising Interest In Equity Release

1952: High Noon – Zinnemann

It is amusing to read commentary from industry experts sometimes. The Equity Release Council have issued figures that show an increase in the number of equity release products sold. Whilst the numbers are relatively small at a little over 4300 in the first quarter of 2012 it represents cash advances of £224.8m advanced by equity release providers to homeowners.

The experts say that these numbers “signal a return to positive growth” and that 2012 should be a better year for equity release than 2011. It does rather depend on how you view the increase in debt and the sale of equity release products. They certainly have their place, but from my perspective, they are invariably the product of last resort, at which point they are of course invaluable. Essentially you would only use such a product when you have run out of other resources, which of course is symptomatic of other problems (lack of income, increased costs due to inflation and spending more generally). Therefore it is vital that to ensure that your financial plan reveals if you will run out of money. Equity release is not an area that we get involved in as we tend to have clients that have adequate resources. I’m not suggesting that these products are bad, merely that seeing increases as “growth” is an understandable, but odd way of looking at life. Rather like in a western movie, where the undertaker is measuring up the population and expecting a boom in business.

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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Rising Interest In Equity ReleaseDominic2023-12-01T12:22:34+00:00

Alarm Bells For Charity Accounts

1998: Lock, Stock – Ritchie

This is a very odd tale. It is reported that a Bristol Accountant was sacked for forging a charity’s fire alarm certificates. However after his departure it emerged that over a period of about 5 years he has misappropriated over £560,000 from the Charity “Above and Beyond”, a reasonably large sum of money. Mr Brendan Joyce from Bristol used the money to fund his lifestyle which surprised many. He was something of a car collector, but perhaps not the sort of cars you might expect, his choice was more run of the mill Vauxhall Carlton type. It is reported that he kept over 100 cars in lock-up garages across Bristol and had eventually found the monthly rental payments beyond his means. Mr Joyce has been sentenced to three years in prison.

The Above and Beyond Charity does some really great work raising money for nine of Bristol’s hospitals to improve the hospital environment, fund research, support and train staff and provide equipment. The charity provides over £3m to hospitals in Bristol each year, with 11 employees and over 400 volunteers. It is perhaps due to the financial cunning of Mr Joyce that the theft was not discovered sooner. However, this should be another reminder to business owners and charities to ensure that the Accounts are understood and checked thoroughly, which is also the responsibility of the auditors for charities, which in this case was Grant Thornton. As someone that serves on a charity Risk and Audit committee, the importance of this no small undertaking.

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

Alarm Bells For Charity AccountsDominic2023-12-01T12:22:34+00:00

Banking On Full Information

1958: The Whole Truth – Guillermin

I put in what I believe to be sensible caveats about a list of top rates being paid by Banks and Building Societies. The regulator’s own website is fairly brief when it comes to checking the Banking licenses. They have several points at which you can access information, though it would be more helpful if they could simply provide pdf, word or excel document that lists all banks and their licenses. The website “UK Banking Brands and FSCS Cover” at the moment (in July 2012) simply shows the main banks in Britain. These are the Bank of Scotland, Barclays, The Co-Operative, Halifax, Lloyds, Nationwide, NatWest, RBS and Santander. These are some of the biggest names, but of course often not shown as those that pay the highest deposit rates. Not exactly “whole of market”.

The important thing to remember is that the FSCS cover is up to £85,000 per person, per banking license. So generally it is not advisable to hold more than this amount, in fact to be on the safe side £80,000 before any interest is paid.

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

Banking On Full InformationDominic2023-12-01T12:22:33+00:00

Another Good Win?

1959: No Name on the Bullet – Arnold

The FSA recently fined and banned a commercial insurance broker who used clients’ insurance premiums to fund his business. The Lancashire based adviser, Stephen Goodwin, was fined £168,000 and had to replace the funds that he has misappropriated. This is the largest ever individual fine that the FSA has handed out. The total fine amounting to £471,846. Between 2008 and 2012 the firm used over £300,000 of money that should have been paid to insurers for their own purposes. One client attempted to claim against the insurance that they believed was in place, only to discover that it was not. It appears that this was a clear case of fraud. To my mind the FSA were right to ban and fine him.

The name of the culprit did remind me of another Goodwin, Sir Fred. Who made a mockery of the UK banking system by buying ABN AMRO without proper due diligence (as far as can be gathered) at a point when the financial crisis made it apparent to almost anyone that such a purchase would be unwise. This cost shareholders and the British public billions, and of course the legacy still rumbles on. The regulator even admitted that they could have done better. The fine for this Mr Goodwin….. well a pay off that most people would class as a lottery win. Whilst Fred may not have misappropriated funds in the same way, frankly the issue is really one of corporate governance and response to financial pressures. I find it very hard to disagree with many of those within the financial adviser community that believe that they receive far harsher treatment than those that really create a very big mess.

The story about Stephen Goodwin is another opportunity for me to remind you that we do not handle client money. All payments to us are for our fees. If and when we advise investments of any description the payment is made to that organisation. This is something that I believe is very important for the security of both our clients and our business.

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

Another Good Win?Dominic2023-12-01T12:22:33+00:00

Permission To Carry On Doctor

1967: Carry On Doctor – Thomas

Doctors have to be revalidated. In other words, they have to regain GMC approval to practice. This is a result of the Government’s decision to have a revalidation process beginning from the end of this year. I understand that the revalidation will need to be reviewed every five years, which whilst being an irritation to many already over-worked doctors, will be a relief that at least it will not be an annual process. A part of the RDR (Retail Distribution Review) is that advisers must effectively attain an annual Statement of Professional Standing certificate, provided by one of a few organisations licensed as a provider.

Doctors will get six months notice of their revalidation dates. The GMC have advised that revalidation dates for currently licensed doctors would likely be within the next three years to March 2016, with this possibly stretched over a five-year period for trainees.

Whilst there is clearly merit in ensuring that skills and competence is maintained and kept up to date, one does begin to wonder if we have simply created more form-filling and form vetting jobs without actually ensuring any significant improvements. This isn’t just an issue for doctors or financial advisers, similar principles are being adopted in many fields. I suspect that the cost of all this validation is fairly significant. I have tremendous respect for doctors, but I really don’t believe that revalidation will make any difference to the confidence I have in them and I imagine that my SPS will not provide greater confidence in me.

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

Permission To Carry On DoctorDominic2023-12-01T12:22:32+00:00

Beware of Average

1969: Beta Mathematics – Goddard

The average London house price is on a slow rise according to the research and data from the BBA (British Banking Association). The average London property is now worth £409,447 (May 2012) which is the highest average figure that has been achieved on record. This is helping equity levels within property, but of course is only a part of the picture. The reality is that inflation has accounted for a significant part of the improving property prices which slumped or devalued, whichever your preference, from around 2007. However since then, prices have recovered in most London Boroughs to levels above the 2007 peak. Indeed the average property price in Hammersmith and Fulham (4th) is now £649,114, Richmond is now 5th at £599,311, Wandsworth is 7th at £499,492, Merton is 11th at £423,689, Kingston 17th at £361,362,. The highest average property price being found in the Borough of Kensington and Chelsea at £1,439,897. The lowest average price of all London Boroughs (33rd) was in Barking and Dagenham at an average price of £175,235.

This is where statistics can often be used to suit your argument and much caution is required. Whilst it may be true that the average price of property in London is rising this and is now £409,447 the mid-point average property is actually £364,411. This is because those Borough’s at the top end distort the average number significantly by 11%. Indeed the majority (60%) of Borough’s have an average price below £400,000. All I’m really saying is that the adage location, location, location very much holds true when buying property. Of course, your residence is your home and not an investment.

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

Beware of AverageDominic2023-12-01T12:22:31+00:00

Blurring The Ethical Code?

2000: Code Unknown – Haneke

A private hospital which accepts NHS work seems to be in the firing line. It is reported that the hospital in question instructed doctors to artificially delay operations on non-paying patients. The hope was that this would encourage them to pay fees for private treatment. It seems that this has now set the cat amongst the pigeons. It would appear that some are willing to massage their figures to boost their numbers.

This leads nicely into all that is the Retail Distribution Review. You will recall from 2013 advisers will be either independent or restricted. At the moment, other professionals are meant to refer their clients only to independent financial advisers. Here we see another set of massaged numbers as a leading Accountancy trade body has decided to redraft its code of ethics, to potentially allow Accountants to refer their clients to restricted advisers. The ICAEW seem to now be reviewing their general principle. I have some sympathy, the FSA have made a pigs breakfast of the terminology and definition of independent and restricted, but never-the-less I am wary of changes to codes of ethics, where these have no real basis of necessity. The head of the ICAEW’s financial services faculty is suggesting that Accountants must assess whether a restricted adviser can cover enough of the market that is relevant to the clients needs. The code will remain fundamentally unchanged; we are simply altering the terminology.” I guess he has a point, if the Accountant is simply looking to get a pension set up, but missing the holistic element of financial planning is often an extremely costly mistake. Solicitors are similarly softening their stance as well (Solicitors Regulation Authority). I’m sure that this has nothing at all to do with representations from firms with links to advisers that won’t be independent, that provide some rather generous payments for introductions.

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

Blurring The Ethical Code?Dominic2023-12-01T12:22:31+00:00