Sentimental Fool?

To The Church

Last night I went to the church, to the Union Chapel in Highbury, according to one Time Out review I saw, one of the best gig venues in London. Having been to the chapel several times before, I can vouch for its internal acoustics and rather splendid stained glass window. Perhaps it’s just me, but the pews aren’t that bad either –more comfortable than in many theatres or cinemas. Anyway, last night was an opportunity to hear Lloyd Cole, who was playing a couple of tracks from his rather good new album “Standards” as well as diving into a nearly 30 year back catalogue that extends from 1984.

Perfect Blue

Many of you will know his classic hits, such as “Perfect Skin”; “Are You Ready to be Heartbroken?”; “Brand New Friend”; “From the Hip” and “Jennifer She Said” when he fronted Lloyd Cole and the Commotions. By 1989 he had begun a solo career releasing 9 albums over 16 years with “Antidepressant” in 2006. Two albums later he “returns” with “Standards”. Now at 52 his latest work seems less melancholic and a more upbeat outlook and sound, though certainly there is something very familiar about “Blue Like Mars”. I’m taken with “Period Piece”.

Photograph by Philip Seymour

These Days

The solo acoustic performance was a great experience. Lloyd (if I may presume) was very down-to-earth and humble. His own website reinforces a sense of “normality”. Reflecting at points on a long career that he joked was finding its way into obscurity. He also talked of the double edged sword of social media, where engagement with fans can be a mixed blessing. He’s generally not one to be definitive about the meaning of his lyrics, which I believe is appropriate for someone that I would really categorise (if I must) as a poet with a guitar and distinctive sound. He explained that one fan suggested a rather rude double-entendre in one of his songs, which he didn’t spot or mean and now struggles to find a way to sing. A lot has happened since 1984, for me LC and the Commotions was part of my adolescence and a suitable background track. Now we are all much older and not so fresh faced, with many shared life experiences that Lloyd expresses through his lyrics.

Mainstream Afterthought

So what has this got to do with financial planning? nothing. Other than perhaps a reminder that time travel is possible only in our memories and time is fleeting. Perhaps too, that our personal journey sometimes doesn’t work out as expected, for Lloyd the music industry has undergone a revolution due to new technology and record sales are not based on what you have to say or ask, but how much attention you get. So whilst he’s probably no longer “mainstream” there is something unmistakably truthful, genuine and grounding about a good man with a guitar, singing in church…. From one sentimental fool to another.

Be There

Lloyd is performing all of the new tracks from “Standards” on 31st January 2014 (his 53rd birthday and tax payment day) at the Shepherds Bush Empire. I’m hoping to book my tickets shortly, perhaps you will join me too. Oh and yes, the sub-headings are all song tracks.

Dominic Thomas: Solomons IFA

Sentimental Fool?Dominic2023-12-01T12:38:28+00:00

Nothing bad happens when its sunny, right?

Last night I was at the UK premier of Parkland as one of the films in competition at the BFI London Film Festival. It is the story of the JFK assassination, which happened nearly 50 years ago on 22^nd November 1953. Those over the age of 50 will almost certainly remember where they were when the heard the news of his death. This film is not about JFK himself, neither is it one for the conspiracy theorists. It is the story from the perspectives of locals who were there, in particular the medical staff at the Parkland hospital in Dallas, who attempted to save his life.

Is the conspiracy theory right in the new JFK film Parkland?

It’s an interesting film, and reveals some rather strange conversations between Lee Harvey Oswald, his mother and brother, however it does not really reveal anything new about a conspiracy theory. The director, Peter Landesman introduced the film. He made some interesting observations about “iconic moments in history” that get revisited, often in the hope that the ending will somehow alter. He also observed that many “bad things” happen out of the blue… indeed on a bright blue sky day, a day when surely nothing could go wrong. It was a reminder that of course, “bad” things happen all the time – the time, place and weather are largely an irrelevance. However looking to the sky for signs that things are going to be good (or bad) in life is little more than a rather primitive approach – unless of course you are simply attempting to predict the weather for the day.

What signs should investors look for?

Investors would do well to take heed of the warning not to read too much into “the signs” about stockmarkets or indeed anything that impacts our economies. I reckon that I have now heard most theories in relation to investor euphoria or depression, ranging from the price of corn to the number of coffee shops, goals scored or skirt length as “indicating signs”. The reality, is that life is full of risk, full of the unknown, frankly that is what makes it life and “fun”. Knowing the future is really more of a curse if you stop to think about it. So please beware of those holding themselves out to be foreseers of economic doom/oblivion/meteoric rise, they are simply guessing. There are ways to have a successful investment experience that do not involve guessing or living in fear of what may (or may not) happen. Yes, unforeseen “major events” do occur, but in reality a long-term perspective encompasses these. The real conspiracy is that few understand that they don’t need to play the fear and greed game.

Parkland will soon be available at UK cinemas, with the expected release date to coincide with the 50th anniversary of the assassination on 22 November.

Dominic Thomas: Solomons IFA

Nothing bad happens when its sunny, right?Dominic2023-12-01T12:38:28+00:00

Why is it better to have a good deposit for a house when buying a home?

Why is it better to have a good deposit for a house when buying a home? The short answer is that having a large deposit is cheaper for two key reasons. Firstly you have a greater choice of lenders who are willing to offer a mortgage. Secondly, the rate of interest that you pay is much less (currently almost 2.5 times less). A third reason would be that it is a larger buffer against a sharp fall in property prices, reducing the possibility of negative equity, which in the US is no big deal, because they just hand the keys back, but here in the UK you have to pay your debts.

What is the Government Help to Buy Scheme?

If you believe the owning property is a particularly good thing, you may well support the Government help to buy scheme, enabling people to buy their first home. Since the credit crunch lenders have cut back the amount that they lend and the risk that they take. As a result it is difficult to find a competitive mortgage rate unless you have a large deposit of significant equity in your home. The new Government scheme basically underwrites the risk which is not passed on to the lenders (several of whom we all effectively now own). So to be blunt, the taxpayer is taking the risk… again.

Why have property prices risen so much?

I am not against property ownership at all. However current property prices are daft. They are fuelled by overzealous estate agents, surveyors and lenders who all essentially collude in the myth that property is fairly valued. Frankly they all have to, because to do otherwise would be so out of touch with the market that they would go out of business, so I’m not blaming anyone. However the main culprit is the lender, who essentially makes money out of nothing (they do not have the resources to back the loan; merely re-lend your deposit and all of our collective cash. This “easy money” has fuelled the myth that property values have soared legitimately. They haven’t. There is a massive disconnection between income and property prices. As salary inflation has remained relatively static of late and property prices have “risen” the gap is constantly widening. Sadly, there are no easy solutions – big salary rises or a reversal of property valuations.

How much more is a 90% LTV?

Britain is peculiar in its obsession with home ownership, most of Europe rent. That of course does not mean the we Brits are wrong – look at the state of European finances and we are apparently rather savvier. Today’s news that if you have a 60% mortgage (40% equity or deposit) your mortgage is likely to cost you almost 2.5 times less than someone with a 10% deposit. In short it pays to have cash and to have less debt. You know this of course, but that doesn’t help the next generation who are going to struggle to buy a home and due to inflated property prices the size of the deposit is becoming out of reach for many. So rather than address the root causes, the Government has merely said, borrow the money and they will cover the risk. Not what I would call wisdom in action, but by far the most palatable of alternatives of massive salary increases (which may not work) or a massive property devaluation.

Dominic Thomas: Solomons IFA

Please note that we do not arrange mortgages, if you want help with a mortgage, we can suggest a very good independent mortgage broker.

Why is it better to have a good deposit for a house when buying a home?Dominic2023-12-01T12:38:27+00:00

Neil Woodford to leave INVESCO Perpetual

It has been announced this lunchtime that one of the best known and most successful Fund Managers, Neil Woodford has announced his departure from INVESCO Perpetual by April next year. The media will almost certainly be awash with this over the next few days as Neil runs some of the largest and most successful funds in the UK. He has been an excellent servant of both INVESCO and investors, delivering some remarkable returns over a 25 year career.

That awkward succession thing…

The funds that he runs from Henley will be carefully handed over to Mark Barnett and Neil will oversee the process. This is likely to cause an exodus from the funds, not due to anything that Mark Barnett has done, or even INVESCO Perpetual, but investors that like active fund management, tend to follow the successful managers and that includes following them out the door. It will be interesting to see what happens to four key funds in particular.

Invesco Perpetual Income Fund
Invesco Perpetual High Income Fund
Invesco Perpetual Distribution Fund
Invesco Perpetual Monthly Income Plus Fund

Take stock and review

Whatever happens, I wish Neil a very happy… retirement (I’m not certain that he is, rumour has it that he will be starting his own fund group, who knows!) but he has certainly done a good job over many years. Naturally, anyone with holdings in any of the funds run by him will wish to give thought to how this may impact future decisions to hold the funds.

Dominic Thomas: Solomons IFA

Neil Woodford to leave INVESCO PerpetualDominic2023-12-01T12:38:27+00:00

The Red Carpet Effect

Red Carpet Experience

The demands of a voracious media upon celebrities are significant. Attending the BFI London Film Festival is one of my now annual indulgences – being able to see some great new movies and enjoy the experience of the razzmatazz. It is interesting to observe the stars, the media and the public who all play their parts in the red carpet experience. The moment is fleeting and slightly surreal. I wonder how celebrities put up with the constant attention and deal with the inevitable experience at some point of not being the centre of attention. I have to say that all those that I bumped into (some literally) along the red carpet appeared to be comfortable with the attention and I was struck by how calm their demeanour – no small feat when hundreds of people are shouting and demanding your gaze.

Labor Day

Last night I saw yet another good Kate Winslet film. This time “Labor Day” (yes American). It is a moving story about a escaped convict that seeks shelter in the depressed home of divorcee Adele (Kate Winslet) who lives with her son Henry who does his best to help her struggle through the day. Both lack confidence and need a shot of inspiration which arrives in the unexpected form of Frank Chambers (Josh Brolin). I won’t divulge the story any further, but it is a reminder that in life there are often people that lift us and inspire us. I think that for me this is often the role that art, in its many forms often plays in my own life. That is not to say that inspiration always comes from a perfect or purist place, but rather, true inspiration is invariably grounded in the difficulty of real life.

A Passionate and Connected Life

For all the gloss of financial services, the reality is that great financial planning is grounded in real life, in your hopes and experiences. It is not a wish-making factory, though I can certainly see how this can appear to be the case. I work hard with clients to help them verbalise the life that they want. We might call this a lifestyle, which can sound like a glamorous term, in practice it invariably means a life where thought has been placed into how personal values are outworked. I cannot think of a single client for whom relationships, connection to others is not one of their driving motivations. It isn’t really about the toys, but a sense of being known. Money merely provides choices, it’s a resource, my clients reflect on how they wish to use it in order to reflect their own values. This is easier said than done in a world that honours and basks in the glitz, which can be a lot of fun, but can be a lonely place, where being oneself is increasingly difficult. What I find clients are really bothered by, is a very real, passionate and connected life, themes touched on in the film – hence the blog.

The BFI Film Festival continues until Sunday 20^th October.

Dominic Thomas: Solomons IFA

The Red Carpet EffectDominic2023-12-01T12:38:26+00:00

Treasury consider restrictions to ISA and Pension Tax Free Cash

Many Things Float To The Top, Not Just Cream

It has been reported this morning that The Treasury are considering or “floating ideas” that they may restrict the amount held in ISAs – with the lowest outlined restriction being £100,000 (according to various press sources). They also propose to reduce the amount of tax free cash available from pensions. These are just “floated ideas”. However, clearly provide unsettling “news” for investors.

More Tax Fudge And Added Sweeteners

I am struggling to restrain myself from making too many comments about those that govern the nation or determine economic and taxation policy. It seems that most policymakers are determined to use the politic of envy rather than common sense to determine the general direction of policymaking. Sadly this seems true at both ends of the spectrum – either suggesting that the “rich” aren’t paying enough tax or the poor are taking too much in benefits with the middle ground being the ones that actually receive the focus of political bribery – be it energy price freezes or a partial share of personal allowances for married couples. As you will have gathered I find it difficult to be anything other than cynical about politicians when it comes to tax.

An Overly Controlling Parent

If we wish to encourage financial independence from the State, we have to provide a mechanism to do so. We are now at the start of compulsory pension contributions (Auto Enrolment) whilst at the same time reducing the amount that can be held in or paid into a pension. Tax rates are incredibly complex and largely about giving the appearance of “fairness” rather than being “fair”. Rather than create an environment of encouraging people to hold assets in Britain, the tax regime is having the opposite effect. As a result potential tax revenues and “business” flow away from the UK to places like Monaco. It would appear that even Richard Branson has now given up and relocated permanently to his own island.

Tax Tail Is Wagging The Dog

The result of restricting what I might call “mainstream” investing is that more and more people get tempted into forms of investing that are largely about potential tax reduction than good investing. Despite all the problems of the Credit Crunch, the Government are still hell-bent on property ownership and increasing personal debt they have also proposed holding AIM listed shares in ISAs in order to possibly reduce IHT (inheritance tax). The restrictions on pension contributions and higher tax rates encourage use of tax shelters. As with most things, not all are “bad” but sadly many are pretty awful ways to invest (except for those running the schemes). The degree of investment risk is rising – dramatically. When it all goes wrong (due to poor research, naivety or folly) the adviser community will have to pick up the bill, which will reduce the number of advisers and thereby resulting in fewer people receiving decent advice.

Keep To The 7 Key Principles

I actually do not care that much about tax free cash on pensions or how much can be held in an ISA. What bothers me is the deliberate manipulation for political “advantage”. There is no genuine attempt to simplify tax or investing. If there was we would have one rate of tax. Financial planning is not about minimising tax or maximising returns. It is about planning your lifestyle and figuring out what you need and how to best achieve and maintain such a position. When terms are used like “we’re all in it together” this is blatantly only applicable to those than remain in the UK. The question is “in what?” Sadly successive Governments have failed to keep to a single of my 7 financial planning principles. 1. Spend less than your income (keep within budget). 2. Saving part of your Budget. 3 Have a sensible reserve and maintain liquidity. 4 Have a proper financial plan with a purpose. 5 Avoid the use of credit and focus on clearing debt. 6. Diversify risk appropriately. 7 review the plan regularly.

Dominic Thomas: Solomons IFA

Treasury consider restrictions to ISA and Pension Tax Free CashDominic2023-12-01T12:38:25+00:00

This is a man’s world right?… er no

We have heard it said that this is a man’s world. I have no doubt that there is a great deal of gender inequality and that women tend to be the target for any passing misogynistic cheap shot and despite all our laws to prevent it, such attitudes persist. In practice of course, it has little if anything to do with a woman’s ability and everything to do with a “mans” insecurity.

The Most Powerful Position on Earth

Take Janet Yellen, who at 67 looks set to become possibly the most powerful person on earth (don’t tell the President). She looks set to head up the Federal Reserve; it will be her leadership that sets the tone of US economics and monetary policy, which will impact us all (given the size of the US stockmarket). Her significant credentials are considerable; yet the mere fact that at 67 she is embarking on such a powerful position is itself impressive. The majority of the Western world looks to retire at such an age, yet she seems to shifting gears and ready for action.

Defying Gravity?

Yesterday I was on a training course, led by a woman, the best and most thoughtful questions and responses came from the females in the audience. In the evening I was at the London premier of “Gravity” which is a fantastic, very tense new film (that you really must shell out to see in 3D), which whilst fiction, has a hugely impressive female lead character (played by Sandra Bullock) who overcomes enormous difficulties. This morning Radio 4 were featuring Carolyn McCall who is the CEO of Easyjet, who has managed to treble their share price (form £4 to £12) in a little over 3 years and has picked up accolades for services to women in business.

Changing Perspective

So we can probably agree that things are changing, not before time! Yet my industry is still dominated by a “male voice” and fails to engage with women generally. More than half of my clients are female and I insist on seeing couples together, yet I am certain that more could be done to make financial planning more engaging for women (and men). I suspect the language of much of financial services is tiresome to both sexes, it’s just that women are less willing to engage with the utter nonsense that is spewed into the arena. So, here’s where I need your help – what are your suggestions and thoughts? – how can I make the personal, bespoke financial planning that I provide even more accessible to women? (and men).

Dominic Thomas: Solomons IFA

This is a man’s world right?… er noDominic2023-12-01T12:38:25+00:00

The Vacationers’ Guide to Investing

Here is another good piece from Jim Parker over at Dimensional.

Two colleagues went on vacation separately. One had a great time. The other had a miserable experience. Their respective stories provide valuable lessons, not just about taking a holiday, but about investment.

Frances booked a beach house up the coast for a week. Brian opted for six nights of bush walking through the mountains. Frances returned to work, rested and recharged. Brian came back a jibbering wreck. What happened? Brian is a last-minute kind of guy. He’d heard about outdoor excursions from a stranger and decided on impulse to book a rugged ‘alpine adventure’. The problem was his urgency left him little room to negotiate over price or service. And the package he chose was not the one his acquaintance had recommended.

Brochures of Promise

The brochures promised sunlit vistas and invigorating nights in the open under canvas. But the weather wasn’t kind. It rained every day. Brian’s hired gear, which he’d organised at the last moment, was inadequate. His shoes fell apart, the tent leaked and he, quickly discovered, he hated bush walking.

It rained on Frances’ holiday, too. But she hadn’t invested all her expectations into lying on the beach. Anticipating all climates, she’d packed books to catch up on, along with a painting kit, crossword puzzles and a guide to local galleries and cafes. Having planned her vacation months in advance, Frances also had had a chance to think about her desired end experience. It wasn’t so much the beach she was looking forward to. It was the solitude, and quiet and chance to refocus. Frances had taken advice about the holiday from a friend who had known her for years, understood her tastes and values and knew her tolerances.

Brian, on the other hand, was so focused on someone else’s vision that he had no idea what he was trying to achieve. The advice he received was from a complete stranger and he had never really articulated to himself the goal of his trip. His impulse-buying meant he had spent too much on an experience that wasn’t right for him anyway and which left him no control or choice over his destiny.

Planning ahead

The point of this story is to show that investing is a little bit like planning a vacation. There are always going to be things outside your control, like the weather. But you can mitigate that by packing well and diversifying your activities. Not doing it all on impulse or at the last moment gives you more flexibility around cost and design. And thinking clearly about who you are and what you are trying to achieve lessens the chance of taking inappropriate risks.

Seeking counsel beforehand is best done through someone who knows you, understands what you value and appreciates what you are prepared to risk. Most of all, like most things in life, the journey and the destination shouldn’t really be separated. Where we are trying to go through investment and how we are trying to get there are often one and the same. Once we understand all that, holidays (and investment) can be much more successful and much less stressful.

Jim Parker: Vice President Dimensional

The Vacationers’ Guide to InvestingDominic2023-12-01T12:38:24+00:00

The US Government Shut Down

You will not have been able to avoid the news about the US Government being paralysed by the bureaucracy of democracy and resulting in the US Government shut down. The rights and wrongs of this are not for me to debate, essentially the matter boils down to ideology and whether you believe that Government is a good thing or not. We all know that Governments can be tiresome with their constant squabbling and policy changes, however, I would rather have one that at least attempts to manage our national common interests, than leave things to resolve themselves. This is of course a hugely hot political topic and not my arena of expertise.

$16 trillion and rising

In essence the US Government cannot pay its way. As with the majority of Governments around the world it has only two main options to finance its plans – to tax and to borrow. A third approach is to sell (privatization). The problem being that the level of borrowing has soared over the decades and taxes have remained relatively low. The total Federal debt is now roughly $16,738,158,460,000 and rising. Unlike an individual, the Government inherits the collective debt and is therefore fairly constrained in what it can do. Of course, it isn’t only debt that is inherited, but the infrastructure, policies, economic and political scenario at the time. To say that each Government is not left with much “wriggle room” is an understatement and probably reveals why there is relatively little practical difference between mainstream political parties.

Care required…interpreting the data

So in this context, when the Tea Party who in general oppose Government and taxes attempt to seize the opportunity to reverse major spending plans; in this instance, spending on healthcare or “Obamacare”. Unlike here in the UK, you cannot pitch up at hospital and expect or rather demand medical treatment; you can only do so in the US if you have insurance, which as you may gather is pretty expensive. I know where I would rather live. However, in reality this is one issue – the US debt has risen for many reasons, the bank bailouts, wars and a population of over 300m. Any blame or interpretation of a “chart” needs to be considered carefully.

Fifty Shades? the real bondage is debt

Anyway, long story short. The US is at a stalemate. It might default on its debt payments, which would mean that its own borrowing costs would rise (just like you and I would experience). This wouldn’t be the end of the world, but it is not healthy. Indeed it rather proves the proverb that a borrower is the slave to the lender. The more debt you have the less wriggle room you have and therefore the more compromise you are likely to have to make, which invariably makes for considerable discomfort. This is why I focus on clearing debt first. Stockmarkets rise and fall, but debt left to market conditions, tends to become out of control.

Dominic Thomas: Solomons IFA

The US Government Shut DownDominic2023-12-01T12:38:24+00:00

The Lifetime Allowance Cut

The Lifetime Allowance (LTA… nothing to do with tennis here in Wimbledon) is the amount that you are permitted to hold in all of your various pension pots unless you have Enhanced, Primary or Fixed Protection. The limit is currently £1.5m which sounds like quite a lot, but with annuities at rock bottom rates, a 4% annuity would generate a taxable income of £60,000 a year, if you take the tax free cash, then it would be £45,000 a year. Before you challenge my figures, yes this is a guide, I could almost certainly find you a better rate than 4% but just play along..

Standard Life, the rather large Scottish pension company, have suggested that the reduction in the LTA to £1.25m at the start of the next tax year (6 months time) would mean that something like 300,000 people are likely to be punished with a penalty. The penalty for exceeding the LTA is currently a 55% tax charge. Yikes! Now you can protect your existing £1.5m allowance, but with strings attached and you need to begin this process soon.

Final Salary – Final Farce

If you think that you are one of the lucky ones in a final salary pension scheme (or Defined Benefit scheme) and avoid this problem think again. Your pension is given a cash value, based upon the income and lump sum that you will get. There is a magic formula to work this out, which I shall not bother you with here, but suffice to say those with long-term service in a final salary pension scheme… say NHS, Teacher, Civil Service, BBC and who have a high final salary or expect to have promotions that trigger increased pension rights, then you are likely to be caught by this.

The Real Impact of Taxes

This was one of the previous Government’s knee-jerk reactions to the credit crunch and has made simplified pension planning about as much a reality as Utopia. However, we live with the reality of many poor political decisions and the current administration seem equally as unprepared to alter things. To do a quick bit of maths for you 55% of £250,000 is an extra tax charge of £137,500 on money that you have saved or a reduction on your pension pot of 9.1%…. yet politicians seem to fuss over 1% pension charges. Standard Life suggest that this will impact rather more people over the longer term – perhaps 10 times as many unless the rules are altered or abolished entirely. This is not a good way to encourage people to save for their retirement.

Dominic Thomas: Solomons IFA

The Lifetime Allowance CutDominic2023-12-01T12:38:23+00:00

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