The Value of Financial Advice

Solomons-financial-advisor-wimbledon-blogger

The Value of Financial Advice

There is a new report by the International Longevity Centre (yes another that nobody has heard of) about the value of financial advice. Long story short, the research asked a wide range of people, over 91,000 households were surveyed (for the record, according to ONS there are about 27.1m households in 2016 of which 7.7m are one-person households). So it’s a far better survey than any of the cosmetic adverts you might see on TV, where number is invariably in the low 3-digits if you can read their faint printed disclosure). So this is a survey that I have a little more confidence in.

The headline is that anyone that took financial advice from someone qualified to provide it, was about £40,000 better off than those that didn’t when they had comparable wealth and socio-economic backgrounds. This was over 2012-2014. In essence, the report concluded that those that were advised were better savers and invested in assets that would or did grow. However only 16% of the general population take advice.

Affluent or Justing Getting By?

There were two key groups – “affluent” and “just getting by”. The affluent group generally had 17% more wealth due to being advised and the “just getting by” advised group had 39% more in liquid wealth and 21% more in pensions.

Ker-ching…Cash Machine

In short, (too late) getting advice will improve your wealth, in the timeframe considered, this was by an average of around £40,000 improvement in the period concerned. Whilst this is obviously helpful news to anyone considering financial advice, frankly I would expect a financial planner to add significantly more value than this (a multiple of £40,000). Some of which is measurable (financially) some is not (peace of mind, freedom from debt, retiring early, knowing your number). In fact if done properly, then a financial planner would expect to improve the value of the estate and retained value (post inheritance taxes). They would ensure a sufficient lifetime income – so that the money does not run out and minimise taxes, maximise reliefs. At Solomons we would also expect to improve investment and protection costs as well.

The Report Concludes

Directly quoting the report:

“Advisers must sell their added value: This report demonstrates the real value add of financial
advice – in terms of greater asset accumulation during working life and increased income in
retirement. Since those who receive advice accumulate more assets and have more retirement
income than those who don’t, this shows that advisers are good value for money. Post RDR,
people now understand what taking advice will initially cost them, but many of those who fail to
take advice are unlikely to know what the potential long term financial rewards are. It is up to the
advice sector to convince them.”

The Value of financial advice, A Research Report from ILC-UK July 2017

Cesira Urzi Brancanti, Ben Franklin and Brian Beach

So… what are you waiting for?

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 [email protected]

Email me to get in touch

The Value of Financial AdviceDominic2025-02-03T10:37:23+00:00

Hard Truths

Hard truths

As Wimbledon begins, some hard truths will be faced. Some players will not be “on their game”; some will peak too early and some will enjoy good luck whilst others might curse technology, training, lack of sleep or why on earth they did or didn’t do something that may have made all the difference. We will all have our favourites, but in the end only one person can win the singles championship. In just a couple of weeks all the questions, hopes and dreams for Wimbledon 2017 will be consigned to history.

In a similar vein, June was interesting and is now over. An election, a minority Government, a deal with the DUP, various horrendous disasters and circling political vultures all attempting to appeal to the crowds, some more obviously than others. Much of this we cannot control, despite what some might suggest within social media.

A new savings low

The FT reported the rather grim news that Britons are saving less of their disposable incomes that at any time since 1963 when such records began. An alarming 1.7% of income was left unspent in the first quarter of 2017, significantly below the long-term average of 9.2%. Reports also continue to make the argument that around 1 in 6 people use a credit card to get through the month. In tennis terms – there’s not enough left in the locker.

Squeezed rises

Whatever your view of austerity, clearly if income falls behind the rate of inflation, you effectively have a pay cut. This is something that the State Pension triple lock is designed to prevent (after many years when the State Pension arguably fell in real terms). It is estimated that the triple lock costs around £6bn. It would certainly appear that the days of austerity are coming to an end and that there is growing support for the end to the cap on Public Sector salaries which have been held back since 2010 (when Rafael Nadal won the men’s singles and Serena Williams won the women’s singles at Wimbledon).

Self-defeating

However, unless people begin to save for their own futures, arguments about austerity are going to seem like the proverbial storm in a teacup. The undeniable truth is that we all need to budget and live within our means. Most don’t appear to do this. No Government in recent history has achieved it either. If you cannot control what you earn, you can only control what you spend, which means accounting for how your money is spent. The truth is that hardly anyone likes to budget and probably dislikes drawing one up a little more. Our clients are no exception – and most don’t really “need to budget” but of course it is a discipline that we advise and encourage to ensure that your hard-earned income sticks to you.

However, it is vital to understand where your money goes. The chequebook (remember those?) does not lie. It is very easy to spend and keep spending in a society that is expert in parting you from your hard-earned cash.

As with politics, in tennis with patience, generally your opponent will tend to beat themselves. Sure, you may need to play well, but invariably the loser is the one that makes the most and more significant mistakes or errors. The most basic of these to make in financial planning is failing to budget, ignore it at your peril. In tennis terms, its the equivalent of not being able to serve.

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 [email protected]

Email me to get in touch

Hard TruthsDominic2025-02-03T10:37:24+00:00

A Case of Cops and Robbers?

There is an undeniable strange fascination with a story about bank robbery. Butch Cassidy and the Sundance Kid, The Great Train Robbery, The Italian Job, Bank Job, The Lavender Hill Mob, to name just a few. Perhaps there is something played out in the story that we might wish we could do, yet clearly do not. Perhaps the daring, cunning or planned deception appeals. Perhaps we admire something about “sticking it to the man” which in this instance is the large, faceless, corporate Banks, who we might tend to believe are the real robbers (anyone think their bank charges are fair?). This is of course nothing but escapism, a reality that thankfully we do not have to live with personally.

The new movie Baby Driver is on many levels another heist movie, a car chase, a gang and the inevitable show-down. Throw in a small romance and the ingredients are set another summer blockbuster. However, with the British Director Edgar Wright at the helm, who made comedy such as “Hot Fuzz”, “Shaun of the Dead” and there is arguably a more subtle nuance to the plot.

A Virtual Reality

In the days of computer games like Grand Theft Auto where players can commit all manner of crimes in the “safety” of a game without consequence, there are many that might ask questions about the impact on the player. Baby Driver attempts to draw from this conversation and whilst the first heist is very much like a clean version of a game of no consequence, each subsequent event gathers the reality of pain, suffering and ultimately the reality of loss. That said, I’m not too convinced that guns and violence are still not stylized and glorified within the film, there is still not enough consequence, but perhaps I am a little numb to violence within films.

Are you Being Served?

Consequences are of course something of a hot topic. Whatever your political views, the devastating fire at Grenfell Tower has triggered some significant discussion about the consequences of a divided society, divided on the grounds of have and have not. We have heard allegations about money being the motivation for almost every shortcut. Indeed the £1bn deal that Mrs May has struck with the DUP to many is an act of bribery and of course many now make the case that austerity has not worked and must cease, a policy that was the consequence of the financial collapse and the subsequent propping up of the system, which largely went to the balance sheets of the very Banks that created and manipulated the chaos. So we are back to robbing banks because of the belief that the banks are the bigger villains.

Bank Robbers…

The UK regulator (the FCA) has today issued a paper on how they would like to reform the investment banking community (like those that you probably see on billboards or sponsored events). Many have very high charges, most of which appear to be somewhat difficult to justify based upon performance. Indeed advisers such as myself that use evidence based investing as the basis for wealth management, combined with low cost techniques, have been calling for reform for quite some time. However, there is also the issue of extra charges and the regulator would like to see one all-inclusive charge. I don’t have a problem with the sentiment, however invariably complex problems are rarely easily solved with a simple answer. There always needs to be a context. None of us would actually rob a bank, let alone approve of it, our motivations for watching and loving such stories are clearly more complex.

The Good, The Bad and The Ugly?

Life would be pretty easy if the lines of “good” and “bad” were so easy to define, arguably the biggest flaw of all religions. Most Politicians seem yet to learn that most ideology is bereft of complex thought for the reality of life. The polarization of opinion is decidedly unhelpful. There are no magic money trees, but there are obviously ways to create money and to grow it. Taxing the rich is all well and good if you don’t drive them away. Keeping the poor in miserable conditions, where they feel powerless, unrepresented and ignored will eventually lead to inevitable calls to take power. Squeezing the middle classes until they feel bled dry whilst we celebrate and reward psychopathic bullies, be they CEOs or Heads of State (or party) isn’t going to help to establish a sense of fairness either. We live in complex times (as we always have). There are very few easy solutions to our complex problems.

Escape to the…

We in turn, escape to the sun, the country, the movies, our mobile devices and use stories to tell ourselves that good will triumph, that injustice will be exposed and punished. There is presumably a place between Utopia and Dystopia that most of us manage to call home, where we really live our lives that are full of complexity and a healthy degree of compromise.

A New Reality

As the Brexit negotiations are under way, we are certainly going to need to compromise. Posturing the EU as pure evil or pure heaven, will not help our understanding of the complex. I expect nothing other than unhelpful reporting from most of the media and social media, yet we must sift through it to garner the occasional nugget of wisdom. To pretend that feelings will not be hurt or damaged seems somewhat naïve, indeed even Bats, a character from Baby Driver says:

The moment you catch feelings is the moment you catch a bullet.

Anyway, here is the trailer.

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 [email protected]

Email me to get in touch

A Case of Cops and Robbers?Dominic2025-02-03T10:37:24+00:00

Be Careful What You Wish For..

Be Careful What You Wish For…

I wonder if you have ever thought about how you would live life if you won the lottery. Probably most of us have given this a moment’s thought at some point. Our society seems to hang on the belief that money makes everything better. The Financial services industry be unrecognisable if there wasn’t an underlying message that money is the answer to pretty much every question. Of course, money can make life better and we certainly need it. As you will often hear me say, money provides choices.

Trust No.1

Enter Dave Dawes who won £101 million with the Euro Millions draw in 2011. A truly life altering amount of money that most of us will never experience – thankfully. Anyone suddenly gaining “wealth” is always going to struggle with the consequences, the most fundamental being – a suspicion of pretty much everyone. So, it follows that the worst thing you can do is agree to a press conference about your newfound fortune, which is of course what the lottery organiser wants a winner to do.

Forget Fair

Most people have money struggles, not necessarily lacking money, but most have some “baggage” and everyone has an opinion. It is obvious that life is not fair and money is merely one example of it. Yet increasingly there is a belief of entitlement. Anyone with a modicum of common sense understand that wealth is invariably not earned and never earned single-handedly. The best entrepreneurs freely acknowledge the help of others. Inherited wealth is not earned by the recipient. The entrepreneur may well be some sort of genius, but it’s also partly luck – with their genes, health, education, family, connections, geography, ethnicity and so on – sure, probably worked hard… but acknowledge the good fortune as well. It ought to be plainly obvious that being rich has nothing to do with being a “nice” or “good” person and frankly it doesn’t have anything to do with how hard you “work”. It is virtually irrelevant.

Hero or Villain?

Clearly we have some cultural confusion about money as well. Robin Hood, Dick Turpin, The Great Bank Robbery…. all thieves, yet for many are held in high regard as bringing about some sort of fairness by taking from “the rich”. As we enter the general election wars of empy words, expect more of the same. A more interesting point of view about our love of pirates is shared by Kester Brewin in his book “Mutiny” which is worth a read.

When someone wins money, various “journalists” will do their very best to work a story one of two ways – either the person is really “nice” and “deserves” it, or isn’t and doesn’t. I get the sense that Mr Dawes has experienced life in the media as the latter – and of course we simply do not know the truth. The revelation that Mr Dawes’ adult son Michael felt that his father should give him rather more after he spent all of the £1.6m already given to him, resulted in a court becoming involved. Michael clearly had expectations about his inheritance or support due to his father’s wealth. He quit his job and (it is reported) enjoyed a lifestyle costing around £25,000 a month. Mr Dawes felt that his son had received quite enough. The judge in the case recently ruled against Michael who had been pressing for lifetime financial support. The relationships are evidently in tatters. It turns out that Dave Dawes actually gave away a lot of money to family and friends, but the amount was quickly overlooked by the proportion in the case of his son. I wonder how differently things may have been if he had “only” won a million?

Yet, whilst this is news (the court ruling was yesterday). It is about as old a tale as there is. The prodigal son springs to mind, at least with some similarities. Money, for all the good it can do, can also create tremendous damage. As the numbers get larger, the walls tend to get higher. Money is not evil, but its lack or abundance can certainly create the appearance of it.

A financial planning conversation is designed to reveal what you really want from life. Money is part of the conversation, but this is an opportunity for you to reflect on your values and what is genuinely important to you – whether you have a lot or a little. Importantly, we will help ensure that you do not live beyond your means, there is not a limitless supply. Only your imagination is limitless.

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 [email protected]

Email me to get in touch

Be Careful What You Wish For..Dominic2023-12-01T12:18:32+00:00

Guardians of the Galaxy Volume 2

The myth, fantasy or religion of the superhero or saviour is pretty much embedded in every culture in the world. For those of us that grew up watching Spock, Kirk and Bones boldly go where no man had gone before, the idea of a mixed crew facing new existential threats in new frontiers is nothing new. The global melting pot that is post-modern America, is represented in contemporary superhero saviours.

Guardians of the Galaxy is one of the many branches of Marvel comic superheroes. Unlike many of the more two-dimensional superheroes that are “good” and fight “bad”, the Guardians are a more eclectic mix of pirates with a conscience, out to save life-kind. Any reading of most myths would likely suggest that subtlety is an unlikely prerequisite for the role of hero, saviour or guardian and this motley crew are as subtle as the obligatory movie soundtrack sale (ker-ching!).

Sadly, Guardians of the Galaxy Volume 2 is a rather more obvious copy of previous attempts of the same story, almost a direct copy of “Return to the Forbidden Planet” which is derived from “The Tempest” by Shakespeare. The CGI is obviously better, but essentially, it’s the same.

Superhero your financial plan?

So what on earth can a financial planner gain from a Superhero film? Well, perhaps a reminder that relationship is at the heart of everything and those that are obsessed with their own ego, the narcissists, are just about the worst people to hang out with. However, perhaps allowing for the more nuanced subtlety that real people (and real clients) require, there is one particularly vital lesson for investors. It is this. The perfect world does not exist…. life is brief.

The real world is as complex and as messy as the people that inhabit it. Investors seeking illusory risk-free bumper returns, yet despite regulation, your inbox or “newspaper” is probably crammed with offers of them. Investing in property because you believe equities are “risky” is a misunderstanding of both. We might want jargon free, easy to understand financial products (most could be substantially improved) yet we live in an imperfect world where often all is not as it appears and our own desires may not necessarily be the best path for us to take. Simple is not always better.

The Perfect Life?… good luck with that

We live in a world of fairly immediate gratification, yet there are consequences to every decision. What we require, all of us, is wise and good counsel, that is designed for our best interest, not necessarily the convenience of “perfection”, which is invariably disguised as more earthy, pithy virtues such as redemption or restoration of broken relationships… or perhaps simply finally attaining the approval of a parental figure, through the acquisition of “stuff” that is the equivalent of those unnoticed (or noticed) gold stars.

Our revels now are ended. These our actors,
As I foretold you, were all spirits and
Are melted into air, into thin air;
And, like the baseless fabric of this vision,
The cloud-capp’d towers, the gorgeous palaces,
The solemn temples, the great globe itself,
Yea, all which it inherit, shall dissolve,
And, like this insubstantial pageant faded,
Leave not a rack behind. We are such stuff
As dreams are made on: and our little life
Is rounded with a sleep.

The Tempest, Prospero Act 4, Scene 1.

As for Guardians, well it’s a bit of fun and in a world where distraction from the trials of life is the invisible drug that keeps most of us going, it will doubtless make a fortune. I hear that the third film is already commissioned. Here is the trailer for the latest movie, Guardians of the Galaxy Volume 2… and no it isn’t everyone’s cup of tea, however Guardians is all about the ordinary doing the extraordinary when sharing a common cause together as a family, tribe or group of misfits.

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 [email protected]

Email me to get in touch

Guardians of the Galaxy Volume 2Dominic2023-12-01T12:18:34+00:00

Time for the Oscars

The Oscars take place on Sunday night. To my mind, this always signals the end of the awards season. It also acts as a reminder and marker about certain years. Its 20 years since The English Patient picked up a bunch of Oscars. Frances McDormand, Juliette Binoche, Geoffrey Rush and Cuba Gooding Junior. Twenty years since Jerry Maguire and “Show me the money”. How time flies.

As you will have gathered I use film to explore various financial planning issues. At times I admit the links are a little stretched, but in essence a client comes to me with a story in progress and seeking help with how it turns out. There is some required editing, script writing, direction and the key characters all need to play their part. Of course original and unique content is always preferred.

So here are my posts for some of those nominated for the 2017 Oscar ceremonies. If I were a betting man, I’d suggest that La La Land are likely to take a bunch of awards. I enjoyed it greatly, but for me Hidden Figures, Hacksaw Ridge and Elle all had more of a profound impact. It was a shame that “I, Daniel Blake” didn’t get picked up in the US but was recognised at the BAFTAs.

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 [email protected]

Time for the OscarsDominic2023-12-01T12:18:41+00:00

Dancing in the Moonlight

Moonlight

Imagine being unable to give voice to your dreams, let alone be permitted to live them. Doing so would result in physical violence, exclusion, prison and perhaps death. Moonlight. This is a sadly familiar story. Throughout history we have seen the cost of standing up for fairness, equality and dignity. Yet today, there are many countries where freedoms that most of us take for granted are prohibited.

However, even within more egalitarian countries, there are pockets of fear and suspicion, where freedoms are not as available as they might be. You know the freedoms I’m talking about, for gender, ethnicity and sexuality. The movie “Moonlight” explores the taboo of homosexuality within American black culture. It is a powerful and moving story of one man’s struggle with his identity and is effort to build himself and find somewhere where he fits.

Being true to yourself

There is very little in the film that I can possibly hook onto for a financial planning angle. The best I can do is remind you that whoever you are, you have a story and as a financial planner my role also involves helping you to write and live the story you wish to be told of your life. This means being true to yourself, not simply accepting the social norms of what the majority expect from working life and a lengthy retirement. What others think is not as important as your own integrity and an authentic walk, which I concede is pretty easy for a white, English speaking, able-bodied, heterosexual, married male to say.

Freedom is more than spending power

I am utterly fed up with hearing negative pointed comments about feminism or political correctness. As far as I can tell, both simply seek fairness, respect and civility and anyone that thinks those are not worthy aspirations really does need to rethink their values. OK, so Moonlight won’t be for everyone, but the non-acceptance of difference should be a cause for concern to us all. British, Sri-Lankan comedian Romesh Ranganathan challenged me (and the audience) about this last night at a small cabaret near Victoria. Much like the Lear’s Fool, he pulled no punches with some harsh truths about what we find offensive or normal, whilst wrapped in the the mirth of comedy. It seems that the world is currently attempting to turn back time on the progressive changes that have been hard-won. Why people cannot live in peace is a mystery that I will never fathom. If money is meant to bring freedom, then some of the richest still have much to learn.

Here is the trailer for Moonlight.

and here is a short video of Romesh Ranganatham at the Royal Variety Show.

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 [email protected]

Dancing in the MoonlightDominic2023-12-01T12:18:47+00:00

Awards Season

Award Season

It is the awards season, in many aspects of life there are now annual awards. I recognize that this isn’t everyone’s “cup of tea”, many are highly subjective and some…well frankly they are bought marketing manipulations. Some argue that successful people have already had their rewards by virtue of a swollen bank balance. I have some sympathy with those points of view.

There are of course good and “bad” awards, sometimes you may have a preference about who wins, sometimes… not so much. It wont surprise you that I enjoy awards for music, art, film and theatre which are arguably daft as they are completely subjective… so perhaps I’m a little daft too

Presidential Medal of Freedom

One award ceremony that I saw recently was the 2016 Presidential Medal of Freedom. Critics of awards tend to dismiss them as unnecessary fluff for people that are already thanked and seem to miss the point of the hard work, often selfless struggles that expose the true nature and values of the individual concerned and their impact on others.

Inspired to greatness

Watching reactions, hearing snippets of their stories is both moving and inspirational. They affirm what we hope to be and inspire us to greater things… (I can’t believe its just me that feels that way). To my mind one of the great attributes of President Obama was (is) his integrity and his ability to relate to ordinary people in a quite extraordinary manner. All of us probably want recognition for our efforts, few of us are likely to receive this in any form other than our wages, except perhaps from our small group of friends and family.

The contrast could not be greater

Watching the clip of the event I was encouraged and inspired, informed and moved. A humorous, personal speech from Obama along with a clear affection for those that were being recognized. This is the America that most of us wish to see, that is the world leader of inspiration and reflects the source of the special connection that in reality most nations probably feel to some extent. Whilst I recognize it is full of contradictions, (as am I) this is the version of America that today feels rather different and lost under the new President. In time we shall see what sort of President Mr Trump makes, but an inability to understand, empathize or appreciate the difference between facts and lies does not bode well.

I suspect that you don’t spend hours watching reality TV shows, but if you do have about an hour this video is worth seeing, even if you have it on in the background as you work. For more about the 2016 recipients click here.

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 [email protected]

Awards SeasonDominic2023-12-01T12:18:53+00:00

Money Box – Interest Only Mortgages

Money Box- Interest only mortgages

If you follow me on twitter you may be aware that I was raising some concerns about the reporting of an item on BBC Radio 4 Money Box and BBC1 Breakfast about interest-only mortgages. Let me be clear I do not provide mortgage advice – we refer this to someone that does – should anyone require it, we encourage clients to clear off debt and mortgages as quickly as possible.

Paul Lewis relates the story of Christine, a woman now 70 years old, bought her flat in Liverpool in August 2004 at the age (I assume) of 58 with a ten-year mortgage of £151,774. It was an interest only mortgage, meaning that she was only paying interest, not the loan which would need repaying at the end of 10 years. Having had 2 years extra time to repay the money, her lender (Santander) has now given her until 24th November 2016 to do so or face legal proceedings.

There is not enough information (as ever) in the story presented to be able to provide any solid advice. We are told that there is no equity in the property (the value of the flat less the mortgage). This could be because the flat has not increased in value at all since 2004 (which whilst possible seems a little unlikely) or it could be that she has amassed other debt which has wiped out any equity that built up over the last 12 years. The reality is we don’t know and in any event, this is the situation she is now in.

We are told that Christine now (in 2016) has an income from pensions of £1,100 a month and her mortgage costs her £600 a month. It is unclear if she has any other savings. The story is clearly upsetting to Christine, but I am suspicious of what is being reported.

What is missing?

If the angle for Money Box is the possible miss-selling of the mortgage then some better factual information is really required. As I have said I don’t arrange mortgages, but it would be unusual for someone to borrow £151,744 without an income to justify this (typically 3.25x income, which would mean requiring an income of about £46,700. Being 58 at the time she was only 2 years away from receiving her State pension. So what income did she declare? And was the lender really offering a 58-year old a 100% mortgage within 2 years of retirement? Now that would have some grounds for complaint about bad advice. She cannot “recall” being offered a repayment mortgage or anyone asking her how it would be repaid.

But there was a foreign property…

Christine is certainly very unclear about what an interest-only mortgage is, thinking (for a some reason that it would continue) when she knows it wouldn’t (not outstanding until she dies) and of course would be clearly stated on the annual statements and original mortgage offer. Christine provides what appears to be conflicting information, recalling when asked how she expected the mortgage to be repaid, she mentions an intention to sell a foreign property to help do so. Sadly this “crashed” but again merely demonstrates that rather more (and better) questions need to be asked. More information is needed, but is woefully lacking.

Clarity or Charity?

When Christine was asked a direct question “Did you not understand what interest only meant?” she replies “Yes, you were just paying off interest that they were charging on the house itself and not off the property. That is how it was sold to me”. The reporter does not challenge her statement which makes no sense at all unless by “house” and “property” she really means mortgage/loan or capital (read it back to yourself).

The Coming Mortgage Apocalypse….

The only clear thing is that she appears confused, not fully understanding how mortgages work and is certainly distressed. Money Box seem concerned that lots of people are in a similar position, reporting that over 160,000 interest-only mortgages are due for repayment within the next 2 years. Money Box report that about 2million people have interest-only mortgages and that 1 in 8 (12.5%) of them appear to be like Christine, not realising that the money needs to be repaid (though presumably having been asked the question they do now know). Importantly 40% claim that they will struggle to repay the mortgage in full.

This of course is probably the real scare story or anxiety that Money Box wishes to convey and the implication being that this is the fault of unsafe products and a bad industry of bad lenders and bad mortgage advisers…. which will lead to are creating more homelessness. Well as with all things, there are likely to be some, (bad ones) but such generalisations and calling for yet more regulation is a far stretch, when in practice this has more to do with some people not understanding the commitment that they are making or claiming not to understand.

There are more options than you think

Christine is very worried, understandably, she has my sympathy, yet it seems that the only options she has discussed (remember there is a financial adviser “on hand”) is going into an old peoples home or a hostel. It sounds to me as though her adviser is pretty useless if this is the case. A quick search of properties to rent in Liverpool for £600 or less reveals over 2,000 listed as available.

The Power of Denial

“It’s a terrible thing that’s happened, that I never thought it would come to this”. Well it is certainly hard, but Christine has £1100 a month of income and can chose how to use it. Renting is a viable option. So I am left feeling that this is more a report on the power of denial – denial of reality. Something has clearly gone very wrong, with poor budgeting and planning. This does not make Christine innumerate, frankly successive Governments fail far more spectacularly and one wouldn’t really accuse them of innumeracy or financial illiteracy, as tempting as it may be.

I’m left with the impression that this is a story of not wanting to understand, rather than not being able to understand, which is perhaps true of Money Box as well. Accusing lenders or advisers of mis-selling is a very lazy approach, when actually Santander has been providing information and already extended the deadline by 2 years.

Paul Lewis ends the piece with a nod to the debt-counselling charity Step Change, which implies an awareness that there is rather more here than simply clearing the mortgage by selling the flat and what is actually missing is a fundamental grasp of a budget and the reality of consequences. Getting out of depth financially is not a sin, it can easily happen to anyone, (and I do mean anyone… even billionaires!) the key is facing the truth and exploring options carefully.

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 [email protected]

Money Box – Interest Only MortgagesDominic2023-12-01T12:19:03+00:00

Captain Fantastic

The new movie Captain Fantastic won’t be everyone’s proverbial “cup of tea” but it is perhaps one of the better movies that I have seen over the last few months. In essence it is the challenge that we all face, (not merely parents) about how to carve out a life worth living from the plethora of choices that exist.

In the film, a couple (Ben and Trin) decide to go “off grid” to educate their children in the things that they believe to be truly important. There is much to their credit, not least of which is the relationships that they build between each other. Of course not all the decisions are wise, sometimes getting lucky, narrowly avoiding disaster. Their choices are grounded in beliefs, naturally rather leftist and alternative to the mainstream, but are a welcome and timely reminder that the status quo or indeed the general culture of the day, clearly hasn’t really achieved its promises, which often seem as empty as the off casts and refuse that at best, are redirected to landfill. This is a vivid reflection of the tension within the American dream, though of course, could equally be a British one.

Values, norms and challenges

This is not a comfortable watch, there are a plethora of challenges, notably the physical endurance challenges that the children face, but also our own cultural comforts and inability to face some of the glaring facts of modern, or post-modern life. One cannot help but admire the comprehension, creativity and engaged accomplishment achieved by all the children, albeit without the context of wider “socialisation”.

I’m not giving anything away by outlining a plot which centres around Ben, (Captain Fantastic) trying to look after his children following the death of their mother. Cultural values collide within the wider family leading to the inevitable flashpoint. Whatever you think of Ben’s methods or values (played by Viggo Mortensen – you may know from Lord of the Rings) there is a very moving penultimate scene in which he provides some parting words as he “blesses” his son Bo (George MacKay). Words that perhaps we all long to hear.

So, as ever, this prompted me to consider the choices we (ok…. I) make all the time. Invariably clients want to protect the lifestyle that they have, but perhaps it is worth pausing to reflect if this is really what you want. We all tend to live within what is familiar and shy away from giving ourselves too much creative leeway to construct a life that may look and feel considerably different from the one we currently live. I’m not passing any value judgement, merely reminding you (and myself) to pause to consider if we are conforming to expectations rather than forming them.

Here’s the trailer, the film is officially released on Friday 9th September. The American “child actors” are typically brilliant, but 24 year-old London born George MacKay is exceptional and certainly has a very bright future as an actor and continues to make some very sensible role choices.

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 [email protected]

Captain FantasticDominic2025-01-28T10:00:31+00:00