Everyone Can Achieve Financial Independence

You can be financially independent

I can pretty much guarantee that I can ensure that anyone can achieve financial independence. This is what the financial services industry, the Government and media all suggest is the main objective of financial planning. What they don’t tell you is how easy it is obtain this. If you live in Britain, I can pretty much guarantee your financial “freedom”.

Achieving financial independence is easy

Here is how. Sell everything you have and move to a warmer climate, in a country with a similar population size to the UK – The Democratic Republic of the Congo, the poorest country in the world based on per capita GDP. There you can buy a house, (or probably an entire town). You will almost certainly have enough money to live there, not that life is easy for the majority of the people there, but coming from Britain, you will achieve financial security. I cannot guarantee your personal security or indeed an anxiety free life, but that merely underlines my point.

The financial services industry talking about the wrong stuff

Of course, I’m being somewhat silly, but you appreciate the idea that financial independence is not really what great financial planning is about. I would argue that great financial planning is all about your lifestyle. How you want to live your life and the choices that you make is really what financial planning is about. The only person to set the objective for your lifestyle is you. As a financial planner my job is to help you to verbalise and clarify what lifestyle you want. It is not to judge your choices, after all these will be born from your values. My job is to assess if can afford to maintain your lifestyle for as long as you want it or if you are going to be forced to alter your lifestyle. Most financial advisers act as though what you really need is the best pension or the most fantastic investment. Sorry, but this is completely missing the point, financial products and investment strategies are nothing more than instruments to get you where you need to go, but unless you have been properly asked “to where ?” how can you have confidence in YOUR financial PLAN? So isn’t it about time that you were asked the right questions? Great financial planning is about YOU.

Everyone Can Achieve Financial IndependenceDominic2023-12-01T12:22:59+00:00

George Osborne needs better advice

Even George Osborne has employment rights

If the Government are to make progress with the national finances, then George Osborne needs better advice or perhaps should recall the story of Enron. His speech at the Tory party conference this morning suggested that his memory of the Enron story was already consigned to history and suggests a lack of understanding about business or people. I’m not referring to his last budget, but the announcement that employees are likely to want to swap employment rights for shares in the company that employs them. The rights to be given up – unfair dismissal, redundancy and time off for training, which could be swapped for £2,000 – £50,000 worth of company shares, which would be exempt from capital gains tax when sold. The fact that most people do not pay capital gains tax is somewhat lost on him and anyway CGT has a lower rate of tax than income tax, thanks to another blunder by the previous Government.

Employment Law red tape

We are in recession. There are plenty of opportunities for those that wish to find or see them, but it is not always the case that these are within reach of “ordinary people”. Any business looking to use this new arrangement has surely found itself in the position of having too many staff to do the work at hand. The shares will invariably be fairly illiquid and who knows what they will be worth (if anything). Perhaps he should seek advice about amending existing employment law, but not abolishing it. Yes there are lots of examples of silly red tape and “bad” employees, but equally there are examples of very poor employers. His proposals seem to miss the point of share ownership and employee rights and sets a worrying suggestion that the two are opposing concepts and I think that Mr Osborne needs better advice on this.

The Mansion tax

What we do have from Mr Osborne is an announcement of a £10bn cut in the welfare budget and an end to debate about the mansion tax, which is simply a wealth tax. I reckon that Mr Osborne needs some better advice. Look, I’m not in favour of high taxes, I do believe that we need a welfare state that provides for those that are in genuine need, but otherwise people should be incentivized to create and build wealth. I know this is not easy. Of course the rich should pay a fair share, but we all should. Having different rates of tax for different forms of income is daft and results in people finding legitimate ways to minimise tax. Of course, your own opinion may differ radically from mine, but I prefer to believe that individuals should chose how to spend their money not the State (who seem to make a pigs ear of the task – whatever party run the show) and it is a given that we need a good basic welfare state safety net. I still maintain that a single rate of tax is fair to all, yet no politician has the gumption to approach this very simple concept.

George Osborne needs better adviceDominic2023-12-01T12:22:58+00:00

Barclays Buy ING

Barclays Bank have agreed to buy ING Direct UK. This is a good result for Barclays but not a terribly good one for savers. ING often have very competitive savings rates and the acquisition by Barclays will increase market share but do little for a competitive market. You may have seen the ING adverts which are a little odd, but attempt to create the sense of a no nonsense bank.

A Great Deal for Barclays

ING UK was launched in 2003 and has over 1.5m customers. It is entirely owned by the ING Group who had over €1.279bn of assets at the end of 2011. The deal will see £10.9bn in customer deposits pass over to Barclays and around £5.6bn of mortgage borrowing. ING have a high quality mortgage book, with 50% loan-to-value, which is very strong for any Bank. It is estimated that the deal, assuming approved, will take place in Q2 of 2013. ING Direct expect that 750 of their staff will transfer to Barclays. Whilst a relative newcomer to the UK, the roots of ING can be traced back to 1845 with the merger of Levensverzekering Bank and De Nederlandenvan 1845. ING was formed in 1991.

Barclays Buy INGDominic2023-12-01T12:22:58+00:00

Small Business Marketing

Small Business Marketing – A New Look Website

Small business marketing simply doesn’t have the budget to compete with hours of focus group research, constant test-piloting of messages and so on. However, what we do possess is hundreds of hours each year meeting real people that actually use our services. Social media also provides a network of helpers that can provide helpful insight and ideas about what it is that we stand for. Marketing as far as I’m concerned is about attracting the right clients (not simply attracting everyone). It also acts as a way of reminding our existing clients about our main messages. So we now have a new website which is a based upon what we have done, where we are going and input from our existing clients and those with an interest in the firm.

Your Feedback

We will be updating the new site, but if you have any thoughts I would like to hear them. The blog will now be found properly within the website and should be easier to find. The original blog has reached nearly 38,000 views and I am keen to build upon this, but ensure that the content is relevant to our clients. From this point forward I intend to locate all my new blog posts here.

Independent In Name?

Those that are in the know, will recognise that I am a great advocate of independent financial advice and to my mind clients want impartial advice, which I would argue can only be provided if the adviser has access to all products without any bias between them and paid the same whatever product (if any) is arranged. This in mind, we have the task of selecting the best name to use for our website. The choice is between solomonsifa.co.uk or solomonsfinancialplanning.co.uk I wonder if you would care to comment.

Small Business MarketingDominic2023-12-01T12:22:57+00:00

Offshore Investing – The Weakest Link

1967: The Graduate – Nichols

Offshore Investing

Offshore investing can be a very wise strategy for investors, however much caution is needed. The over-arching principle should be simple – placing money offshore means it grows free of tax until it is brought back to the UK or anywhere else – at which point it will be taxed appropriately. In its proper place, offshore investment is little more than delaying tax. In an ideal world (for the investor) you bring funds back to the UK when your rate of tax is more favourable. To my mind there is nothing morally or ethically wrong with this. It is not tax evasion, it is tax delaying – and not in the sense of paying HMRC late, but as appropriate (when the money is in the UK).

Traps To Avoid

So it is disappointing to note that The Times has today reported that various well-known people have been named once again in an offshore scheme (Liberty Tax Strategy) that is so aggressive in its approach to create artificial losses that it potentially could be regarded as tax evasion. This is of course up to HMRC to decide, not The Times. However I do wonder what on earth some advisers tell their clients. I would like to think that everyone has been advised appropriate or suitable investments that they can understand. However it must be particularly important for those in the public eye to avoid any suggestion of improperness when it comes to tax. Certainly irrespective of fame, our clients are not put in a position where they may have to do some serious explaining to the HMRC and possibly the media. Yet this is precisely what journalist, BBC Watchdog and The Weakest Link host Anne Robinson has read today in The Times. She’s not alone either – several members of the “boy band” Take That are also caught in the crossfire. There is believed to be around £1.2bn invested in the scheme by around 2,000 investors.

Tax is not the focus of your Financial Plan

The heart of good investing is making sure that your investments are suitable to your financial plan. It is very hard to believe that the sort of “investing” that I’ve outlined above is in any way helpful to a good financial plan – and certainly not a great one. Your financial plan should reflect your values and be structured around your requirements. Tax is a part of the investment discussion, but it should never dictate the terms. It would appear that as in the film “The Graduate” a certain Mrs Robinson, journalist and Watchdog consumer champion, might have known better. Our clients won’t get exposed to this sort of thing.

Offshore Investing – The Weakest LinkDominic2023-12-01T12:22:56+00:00

Impartial Investment Advice

1939: You Can’t Cheat An Honest Man

Impartial Investment Advice

I spent the first half of this week at the annual IFP (Institute of Financial Planners) conference. The IFP are to my mind the leading professional body for proper financial planners. It is a fairly “top drawer” group who share ideas and work with a set of shared values and ethics. One of the most obvious identifiers about IFP members is that we all agree to provide impartial investment advice.

Discretionary Fund Managers

At one point, I was talking with fellow advisers about investments for clients. We are a pretty open and honest bunch, some do the investment themselves, whilst others outsource the service to a Discretionary Fund Manager or DFM. A DFM has the ability to trade and deal without asking permission from the client (other than at the very outset of the relationship). They are effectively a stockbroker. Some are pretty good, but many are pretty hopeless (and believe me, some are really very hopeless). Many advisers have been switching their clients across to DFM services, because they have been concerned that to invest money for clients carries compliance risk and many don’t possess the skills or time (or both) to look after portfolios. One of the most significant problems is evaluating performance and getting DFMs to properly outline their understanding of “risk”, “long term investing” and “volatility” and keep to the brief outlined for the client.

Impartial Investment Advice

Several of us agreed that one of the problems with DFMs is that despite the fact that advisers don’t manage the portfolio, they still get paid by the the DFM for effectively adding little of value to the client (it is clearly valuable for an adviser to review the performance of the DFM – and ideally establish the parameters). Another problem is that as DFM’s focus purely on investing, they tend to trade a lot, creating liability for capital gains and income tax, perhaps without regard for the full picture which is a significant advantage that advisers should have. Indeed due to VAT rules, this sort of service can be even more expensive to the client. Those that I spoke to admitted that they struggle with the ethics of advisers being paid the same amount if they hand off the work to a DFM rather than doing it properly themselves. This is one of those topics that simply doesn’t get talked about in clear terms, but it is refreshing to find advisers at the IFP that have high standards.

Impartial Also Means Being Open Minded

It would seem that the regulator tends to agree, having announced today that advisers cannot be paid by DFMs (but they can be paid by the client). I can see the logic and wisdom of this, but I’m now also concerned that as a result of this formal decision a couple of things may happen. If advisers don’t get paid by a DFM, I imagine that those that have told clients to use a DFM may find excuses to bring the money back under their management and would probably discourage their clients from using a DFM. I have already acknowledged that a DFM may be suitable for some clients, so a carte blanche “I never use DFMs” would seem to my mind to be very unwise and contrary to being impartial. This dilemma could all be avoided with properly agreed fees – something that we have always done with our clients.

Impartial Investment AdviceDominic2023-12-01T12:22:56+00:00

Business Owners or Executives – Car Benefit Scheme Warning

1977: The Car – Silverstein

Car Benefit Scheme Warning

If you are a business owner or executive with a company car and a salary sacrifice scheme, it seems that life may get a little more complicated and probably more expensive. The online accountancy media are suggesting that those with salary sacrifice and company car schemes are going to get more expensive due to a European Court of Justice ruling. This is due to VAT which employees have had to pay on non-cash goods provided by employers in exchange for income, a service, which is VAT liable. This has been the case since January 2012.

The ECJ basically ruled in agreement with HMRC that the salary sacrificed is a supply of services in return for payment and therefore subject to VAT. This careful fine twist in the rules has wider implications for any salary sacrifice scheme. You should certainly take this matter up with your Accountant and I would urge you to read the HMRC guidance which you can find here.

Nobody should be under any illusion that HMRC is a soft touch, the Coalition Government are very clear that all tax must be properly collected and HMRC must deliver results and effective measures to ensure that this happens. Whilst there are advisers and accountants that will always push at the edges of tax avoidance into evasion, you need to be clear that tax evasion can carry serious penalties, including a custodial sentence. Whilst we assist clients reduce tax and plan appropriately to do so, it is important that such actions do not contravene the law or the direction of the law.

Business Owners or Executives – Car Benefit Scheme WarningDominic2023-12-01T12:22:55+00:00

Banks Leaving Financial Advice to IFAs

1990: Tie Me Up, Tie Me Down

Banks to leave financial advice to IFAs

Banks have been declaring their hand for the new financial world from 1st January. Last week Santander announced that they would only be offering investment advice to those with £25,000 or more and only from the range of products that they produce. In short they sell what they make. I’m always amazed that anyone would actually go to a bank for financial advice, but hopefully from January at least it will be clear how little a part of a proper conversation they are even able to entertain.

Too expensive for Bank customers

This was on the back of Lloyds also announcing that they are scrapping their services to anyone with less than £100,000 – again, why would anyone with £100,000 go to Lloyds for investment advice is beyond me. Barclays had already announced that they will not offer financial advice, except via its wealth management team, who focus on ultra wealthy (and presumably fairly easily pleased). HSBC will scrap their tied advice and provide execution only services (meaning you order what you want and they sort it out), they intend to remain whole of market, though frankly I don’t see how this will work in practice. Royal Bank of Scotland has abolished its independent arm (if you could ever find it) and going for a restricted model (limited financial products). Nationwide, one of my favourite Building Societies, is going to give it a go at offering fee based advice. It will be interesting to see how they get on and I imagine that the other Banks will be watching carefully.

Limited options for most

So in summary, the new rules about providing advice mean that the vast majority of people living in Britain will not get any form of independent advice. They probably won’t get an awful lot of option for restricted advice either. That of course is one way to solve the problem of mis-selling and scandal (reduce the choice) but it doesn’t seem terribly well thought through to me. We need a society with better financial education and greater access, not less.

Banks Leaving Financial Advice to IFAsDominic2023-12-01T12:22:55+00:00

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