October 2013 - Page 3 of 3 - Financial Planning in Wimbledon

Living a full life?

Whilst we all want to get the most out of life that we can, there are moments when you realise that you are probably overdoing it. Sometimes, we are reminded of our inability to do it all by our bodies effectively screaming for us to “slow down”. Living a full life doesn’t necessarily mean, doing every thing. Most of us will have possibly uttered the words to at one point or another “its quicker for me to do it than to show you how to” or words to that effect. Whilst this may well be true in the moment, it is unlikely to remain true in the broader picture.

Work, rest and play..

Running my own business, I know that whilst I can do all of the tasks required, invariably it makes little sense to do so, hence the reason for employing others to fill particular roles. Anyway, just because I can do the task, doesn’t even mean that I am able to complete it the best. This enables me to focus on the things that “only I can do” so that my time is used more productively. However, even with this mindset, it is still often the case that most of us still find ourselves doing too much. It is important to know your limits without constantly having to find them. Unlike those that govern us and seek to maximise every working moment of our lives, I believe in the value of rest, play and reflection. I admit that perhaps this is something of a luxury, but to me its pretty vital. It is during these moments that I can gather myself for thought about how I might develop the business, how we can improve what we do and continue to think about clients so that they are at the centre of how the business is shaped.

Pie crust promises

Personally, I find my morning dog walk around Richmond Park a helpful way to clear my head and think about the day to come and the clients that I will be serving. Of course other intrusions and interruptions may take me a little off path in the course of the day, but in general, it is mapped out in my mind. I believe that keeping promises is important in life, so to make promises that I know I cannot keep runs contrary to my values. As a financial planner, the world of money is full of promises. The vast majority are little more than wishes. This is particularly so with financial companies promising a certain level of service, improvement or continuance but invariably is a “pie crust promise” – easily made and easily broken. It’s important to know your limits and whether your physical and mental infrastructure can take the strain. As the video of this unfortunate shelf-stacker discovers.

Dominic Thomas: Solomons IFA

Living a full life?Dominic2023-12-01T12:38:23+00:00

Taxing the Family – Child Benefit

If you are a high earner and have children you will be well aware of the changes to child benefit which came into effect on 7th January 2013. In this instance a “high earner” is someone with income of £50,000 or more, which is probably what most would not think of as a “high earner”. HMRC believe that a large number of families are affected by the rule changes and should now have registered for self-assessment as a result. Failure to do so may result in a penalty – given the hunger of HMRC to collect as much as possible, this is likely and will come as a further penalty to those that are already losing the child benefit.

Expect Little Sympathy with £422m at stake

It will be difficult to plead that you didn’t know when over 2million higher rate taxpayers were written to about this topic by HMRC. Pleading the case for children to authoritarians often doesn’t wash, as the wonderful Charlie Chaplin discovered in “The Kid”. The official figures suggest that around 400,000 people have ended up opting out of receiving child benefit, which is currently £20.30 per week for the eldest child and £13.40 for each subsequent child. So in theory those that opted out have saved the State a minimum of £1,055.60 a year each, which is £422m. The last HMRC estimate suggested that they believed 600,000 would be affected.

Dominic Thomas: Solomons IFA

Taxing the Family – Child BenefitDominic2023-12-01T12:23:58+00:00

Blue Jasmine lacks any self-reflection

Woody Allen is 77 and still doing what he loves – making movies and making music (he is a very accomplished Jazz musician). His latest film plots the downfall of a New York socialite (played by Cate Blanchett) who is married to a property developer. The story begins to unfold the chaos and denial in which Jasmine loses herself. This isn’t the classic American story, but the opposite of the traditional Cinderella tale. The film is very well acted, but I found myself having little or no real empathy with the main character, who was so self absorbed and lacking in any real self-reflection that having any empathy for her was difficult to say the least, despite the efforts of Cate Blanchett. This isn’t my usual reaction to a Woody Allen movie.

Financial Freedom Day

What has this got to do with financial planning? Well several things. Firstly Woody Allen is doing what he loves. He doesn’t live by other peoples expectations of “retirement”. I really like this about him (and many others). To me, retirement is not an event in the way that most mean it to be. I prefer to think of it as financial freedom day – the day when you don’t have to work to pay the bills to have the lifestyle, but you may choose to do so. However the film itself touches on ideas about trust, value, esteem and money. There are valuable reminders that “if it sounds too good to be true then it probably is”. The suggestion that turning a blind eye is no excuse when it comes to financial fraud and never (never) put all your wealth into a single investment.

Filter Out The Junk

Some might watch the film and think it wouldn’t happen to them, but the problem with investment scams is that they rarely sound “too good to be true” and often looking under the bonnet needs more than a cursory glance, a message repeated throughout the film when it comes to assessing suitors. A significant proportion of my time is spent preventing clients from making mistakes such as falling victim to yet another financial scam. On many occasions, it isn’t even a scam, its just a reaction to the constant media storm about the state of the world’s markets which is invariably counter-productive to their own well being. A good adviser helps filter out much of the junk and will not bombard you with investment information. Financial planning is not really about investing. Its about the lifestyle you want and how you should arrange your finances to get there and stay there or make you aware of the consequences of your own actions. Sometimes this is an uncomfortable truth, some prefer to ignore it and look the other way, rather like Jasmine.

Blue Jasmine is showing in nationwide at the moment, for more information check the IMDB page.

Dominic Thomas: Solomons IFA

Blue Jasmine lacks any self-reflectionDominic2023-12-01T12:23:58+00:00

Blog Makeover

You may have noticed that the blog has had a small makeover to celebrate its first birthday (we had a serious makeover of our website in October 2012). This was due to some issues that prevented me from making it look a bit better with images. Previously in this blog (which is my second) I was struggling to successfully add pictures, they would end up too large or in the wrong place. This was partly out of my control due to the techy stuff that I don’t understand that well, but was to do with the site theme and structure. So hopefully from this point forwards images can be inserted to make it look rather better. The old blog is still running, and as of now has had over 50,000 views, but I don’t update it at all and the original content has been moved to this one.

Social Media

We have also added my twitter feed and expect to add Linkedin, Facebook and various other social media formats for you to hook up to, should you choose to do so. Social media seems to be rather addictive and it is a good way to share useful information, the trick is separating the wheat from the chaff.

A good user experience

Finally, whilst my marketing team work hard to ensure a good user experience, it would be helpful to have any feedback about pages that don’t load up properly or you cannot view etc. Of course you may not know what it is meant to look like, but if it looks odd let me know. We have made considerable efforts to enable you to view our site and all of its content on your desktop, laptop, tablet or mobile smart phone. There are as you may know, hundreds of different formats and it is wise to keep yours up to date.

Dominic Thomas: Solomons IFA

Blog MakeoverDominic2023-12-01T12:23:57+00:00

LibDems mull over possible capital gains tax increase

This is not a political blog, but it is important that I highlight some of the discussions about potential tax changes amongst the politicians. We all know that politicians can talk a lot of hot air, but on occasion the odd policy gets made that can have significant impact on clients. The recent round of political conferences saw the LibDems mull over tax hikes and in particular proposed increases in capital gains tax (CGT).

CGT problem for landlords

They have given thought to a top rate of capital gains tax of 45% – which would depend on your other income. This would restore capital gains tax rates to previous approaches, which linked the rate payable to your other income. This could have a significant impact on landlords and investors nursing significant CGT gains. They also mooted a reduction in the CGT allowance from £10,900 to £2,000. This is possibly because so few people actually pay CGT.

General Anti Abuse Rules

The least contentious tax plan (by any party at present) is the strengthening of the General Anti Abuse Rules (GAAR) which aims to ensure that loopholes are not exploited for tax reductions that go against allowances and the spirit of the rules. This does not mean an end to pension tax relief or ISAs – these are carefully manipulated (sorry, crafted) allowances used to incentivise saving.

Dominic Thomas: Solomons IFA

LibDems mull over possible capital gains tax increaseDominic2023-12-01T12:23:57+00:00

Why social impact investing and regulation are good for each other…and you.

Here is a piece by Mitchell Kutney in the US. I’m reproducing it here with his permission. He has a thoughtful perspective on finance and philanthropy and an active interest in social impact investing. Here he argues why social impact investing needs good regulation so that it doesn’t get abused in the way that some micro finance initiatives have.

We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks… Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people. — Muhammad Yunus, founder of Microfinance.

In the 1990s, people assumed that the altruistic intentions inherent in microfinancing would be enough to prevent exploitation once introduced into mainstream markets. Perhaps impact investing is a similar enough financial innovation that we can learn from some of the growing pains of microfinancing to help prevent history from repeating itself.

Microfinance is a form of financial service for individuals and businesses lacking access to traditional banking and institutional credit. It differs from impact investing in that it focuses on opening capital to typically disadvantaged populations, whereas impact investing is more concerned with results-based outcomes that either improve society or the environment while still garnering economic returns. Also, occasionally impact investing is connected with donations and public dollars to account for various financial risks, or if there is government involvement (e.g., social impact bonds).

Regardless, both impact investing and microfinance are market-based solutions designed to address economic gaps within society. However, the notion of profiting from the poor is still a contentious debate at the cornerstone of these modern financial innovations, and impact investing is no exception with its primary target being emerging markets.

Accountability Structures

One way of possibly addressing this issue would be to embed third-party oversight into the very infrastructure of governance, such as regulation and accountability structures. This way, if any donations or public dollars are topping off an impact investment, we can be sure those dollars are being used appropriately, or if a company is leveraging an impact investment as a part of their social responsibility envelope, the public will be informed whether the investment is actually making a positive difference in the community.

If proponents for impact investing are serious about the introduction of new social and environmental markets, they need to equip these markets with the necessary tools to stand a fighting chance. Otherwise, once impact investing becomes commonplace, and more and more players enter the market, financial outcomes will again dominate, as witnessed in some cases of microfinancing, only with impact investing, it will be at the expense of social and environmental gains.

Avoiding Exploitation

The lack of regulation in microfinancing opened the door to exploitation and led to a number of negative consequences with the most egregious being a series of suicides that happened after a number of reckless microloans were made to local farmers in India. According to MFTransparency, the annual percentage rates of some microloans have been over 300 percent in countries like Zambia or Ghana. These high interest rates alone are not necessarily indicative of exploitation (since the smaller the loan, the higher the distribution cost), but they serve as sobering reminders of how market forces dictate costs despite any altruistic intentions. Clearly, the only way to ensure values are being upheld is by providing some type of oversight or monitoring.

Organizations like the IIPCollaborative have been making some notable efforts in this domain, such as their London Principles guidelines, but these recommendations represent drops of water in the ocean; more global institutional support is needed to help establish oversight, financial transparency, credibility and appropriate standardizations (especially for environmental and social metrics).

Swimming with Sharks

Since impact investing is searching for the sweet spot between high-net-worth individuals’ expectations for responsible investing and effective channels for catalyzing social change, we need to ensure that this financial instrument is not abused. Or else, just as microfinance was defenseless against the sharks, impact investing may find itself in deep waters.

Mitchell Kutney

Follow him on twitter: @MKutney

Why social impact investing and regulation are good for each other…and you.Dominic2023-12-01T12:23:56+00:00