Investment Background Noise Archives - Page 2 of 5 - Financial Planning in Wimbledon

Better Late Than Never

1949: Death of a Salesman – Miller

I have never liked commission. I don’t think its entirely bad, it does help people to pay for advice. However, I have always argued that if an adviser is paid to sell products, then it is hardly surprising that it is products that are advised. Hence when I set my own firm up in 1999, I did so without the normal problems inherent within financial advice. I charged fees for the work and a fixed implementation fee, which was the same irrespective of the type of product. This saved our clients thousands of pounds (and continues to do so).

Today the Managing Director Martin Wheatley of the FSA, soon to become the FCA, announced that he wants to see and end to mis-selling created by sales incentives. He is particularly concerned to tackle Bank staff who are incentivised to sell their products – everything from a bank account, credit card, cash ISA, loan all has a commission incentive to the Bank staff. He said:

“Why is it that every time I walk into the bank to do something simple, like pay my credit card bill, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates? When did this happen? Banks for me used to be a service – a place where you would go in, stand in a queue, have a pleasant chat with the clerk and go about your daily business. Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to.”

This does not apply solely to Banks, it applies to financial advisers, Fund Managers, Investment Companies and pretty much anyone within financial services. I’m with Mr Wheatley on this in principal, however we need to be careful not to throw the baby out with the bathwater. Motivations and incentives certainly need to be in place. People do not wake up and form a queue at my door for impartial fee based financial planning. I have to play my part to promote what I do and make people aware of why they should consider using my services. That’s even part of the motivation behind this blog post. So whilst I’m in full agreement, a note of caution as big budget Banks and Investment Companies may simply flood us all with information overload and of course if base salaries for these sorts of employees were to rise to offset the “lost” bonuses, it is likely to lead to either higher costs, passed on to us all or increased redundancies, which is passed on to us all in the form of additional State benefit burden. So yes Mr Wheatley I fully agree, but don’t let them get away with a smoke and mirrors dance on how this plays out.

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

Better Late Than NeverDominic2023-12-01T12:22:44+00:00

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

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

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

Responsible Consumer Education

1943: Stormy Weather – Stone

There is a little bit of a storm brewing over how RDR is being communicated. The regulator, the Financial Services Authority is being accused that to date, little has been done to inform the public about the sweeping changes that will be upon us all from January. In essence the FSA is calling time on the myth that most financial institutions, many advisers and a significant proportion of the UK population have believed – that financial advice is free. Now of course the truth is that nobody really believed this, but behaved as though they did. This is why and how commission became the way that advisers got paid (from the policy). However, forward thinking advisers, clients and financial institutions have been saying for years, that “the Emperor is not wearing any clothes” or to put it bluntly, there is no such thing as free financial advice.

Fay Goddard, head of the Personal Finance Society has a few choice words for the 2 page online leaflet that the FSA issued a few months ago, yet still appear to have communicated little else to the public. She is reported to have said, “It was an insult in the broadest sense in the way it was worded and didn’t recognise the journey many advisers have been on”.

I have to say that I’ve been talking about RDR (as much as I don’t wish to bother you with dull stuff) within this blog since September 2010 nearly 2 years ago. Clients had been advised before this and anyway, we have been effectively a commission free firm since we set up in 1999. I firmly believe that our clients “get it” and it is little more than a minor detail. However for many people, their advisers are struggling to figure out how or what to charge for their advice, which with a little over 5 months to go, does not bode well.

Indeed on the consumer information page of the FSA site, I cannot see anything about RDR today. It seems mainly to be about PPI and Banking. RDR is a massive change. It means that advisers will have to seek a fee from you. This is something that for many will be a sharp wake up call that they will simply not want, yet as far as I can tell, you would have to search for RDR on the site to even know it exists. To save you (the consumer) the bother here is the link that seems very badly promoted. Whilst it is true that there is “nothing” for consumers to do, it is not entirely accurate, as consumers will have to pay a fee. Colin Wilcox, from the regulator has responded to criticism saying that from August “we do have plans to ramp it up from next month and we’re hoping to get a bit more traction within the national media”. Another 2 page document would be a 100% increase.

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

Responsible Consumer EducationDominic2023-12-01T12:22:27+00:00

Banks Should Make Fewer Promises

2010: A Screaming Man – Haroun

Banks, anyone have anything good to say about them? Nationwide customers had problems with their accounts being double debited, which is not exactly a helpful experience when many people will be enjoying the summer holiday, possibly unaware of the glitch that is playing havoc with their balances. I’m afraid that I have to admit to losing my temper with my own Bank. Like many banks it has “special” accounts although I cannot see the point of most of the additional services except for those relating to identity theft and fraud, which frankly ought to be the responsibility of the Bank not me. Anyway I lost my patience with them having failed to get even the vaguest of useful website access which kept looping around back onto itself, offering the hope of delivering useful information but failing miserably. So I gave up in order to try the telephone service. Considering that this is meant to be “exclusive” (yes, I’m not that naïve) after 5 or 6 minutes of waiting to speak to a human I gave up. Banks cannot even get the very basics of what they do right. Sadly all this really does Is alienate customers, which is a salutary reminder that having an IT system does not replace personal service.

Mind you, I’m fairly sure that some people do get a great service from their Bank. Take Jerry de Missier, the former Chief Operating Officer at Barclays, who is reported to have been able to withdraw £8.75million in cash. He is accused of being one of those involved with the LIBOR rate rigging scandal that seems to engulf more Banks by the day. We all know that there is no such thing as “free banking” but it seems that Adair Turner the current Chairman of the FSA, thinks everyone should pay for current accounts. He is one of the people in the running to become the next Governor of the Bank of England. Meanwhile European shares are on the rise because the European Central Bank or rather Mario Draghi has promised “to do whatever it takes” to support the Euro. Whilst to some this provides much needed confidence, I remain very dubious about anyone that makes such a statement, which smacks of desperation and gives the appearance of having bottomless pockets, which is of course utter nonsense. I would prefer Europeans to restrict their flamboyance to their design and creation of wonderful cars, clothing, food and wine. Perhaps the sudden hot weather in London has gone to my head, but are Banks really this bad?

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

Banks Should Make Fewer PromisesDominic2023-12-01T12:22:25+00:00

Spinning The Records – The Truth About GDP

1939: Tail Spin – Roy Del Ruth

There is further bad news for the Government, which will note the growing criticism that current actions to stimulate the economy do not appear to be working. The ONS data reveals that the UK economy contracted by 0.7% in the second quarter of 2012. This is of course only an estimate, but means that the main way we measure the growth of the UK economy has shrunk for a third successive quarter. This is obviously unwelcome news. However, once again I would like to remind you of how politicians from all sides and our rather lazy media will report this.

Total seasonally adjusted GDP for the UK has data collected since 1948. Then it stood at £276,458m and last year reached £1,437,909m. A big number I’m sure you will agree. Remember that GDP naturally rises due to inflation (or should do). If I were to reveal that GDP reached its highest point in 2007 before the credit crunch, this may help provide a fuller picture.

We don’t know yet how 2012 will end, but if things remain as they I estimate a figure of £1,428,328, which would be better than 2010 and 2009 but not quite as good as last year £1,437,909. This would represent a decline in GDP by 0.66% against last year. I would remind you, not that you need it, that the crisis in Europe and world economies is probably the most serious in living memory. For the record, the top ten largest actual quarterly falls in GDP were as follows:

1958 Q2 -2.5%

1974 Q1 -2.4%

1979 Q3 -2.3%

2008 Q4 -2.1%

1980 Q2 -1.8%

2008 Q3 -1.8%

1975 Q2 -1.6%

2009 Q1 -1.5%

1975 Q4 -1.2%

The latest figures are the 22nd worst out of a possible 230 recorded. Negative or no growth is recorded in 51 of the 230 quarters. That’s about 22% of occasions. Growth under 1% is recorded in 101 quarters (44% of the time) and growth of 1% or more is recorded on 78 quarters 34% of the time. You may be interested to also know that there has been only one incident of quarterly growth of 2% or more in the last 33 years (since 1979), which was in Q3 of 1987 when 2.4% was recorded.

Whilst the media may talk of this as the worst economic data since the wheel, five successive negative quarterly periods were “achieved” from 1990 Q3- 1991 Q3 and again from 2008 Q2- 2009 Q2. The latest media feeding frenzy that this is news of a third consecutive negative quarter also occurred in 1973 Q3-1974 Q1 and 1980 Q1-Q3, and only just avoided 1974-1975. The uncomfortable truth is that we have not really recovered from the credit crunch, which anyone with a pulse knows. Certainly things are not good economically, but the way information is presented is not exactly helpful. Of course a reality check will not prevent the markets from behaving foolishly, but frankly in the short-term that is pretty much all we expect anyway. The wise proceed with caution.

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

Spinning The Records – The Truth About GDPDominic2023-12-01T12:22:23+00:00

How Deep Is The Rabbit Hole?

1999: The Insider – Mann

As with many things in life, sometimes you simply don’t know who or what to believe. It seems that the IMF are under the spotlight for some criticism (normally they dish it out). Peter Doyle who left the IMF sent them a fairly scathing letter about their leadership and oversight, suggesting that he was even ashamed to have worked for the organisation. It is not unusual for an economist to disagree or frankly be wrong far more often than they are right, but his criticism of the IMF is something of a revelation about the organisation. It was CNN that “broke” the story which the BBC picked up. Mr Doyle, is fairly forthright in his opinion about the lack of direction and implies a significant degree of blame at the door of the IMF for the deepening crisis in Europe. If this were not so deeply concerning and real, it would make a thrilling plot line for a film.

Whilst these are very unusual times, we still believe that diversified portfolios with a long-term outlook remain the best proven strategy for successful long-term investing.

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

How Deep Is The Rabbit Hole?Dominic2023-12-01T12:22:20+00:00