When will the penny drop?

I regularly meet people that have bought a variety of financial products from their Bank or Building Society. For some reason, some seem to think that a Bank is particularly trustworthy and I never really understand why this is the case. I wonder if it has something to do with the appearance that other types of savings account are just “better rates” than a current account and its all free of charge. Whether it is appreciated or not; an account with a Bank is a product, which generates revenue for the seller.

Santander fined £12.4m for bad investment advice

The news that Santander has been fined £12.4m by the regulator doesn’t surprise many financial advisers. I have had to explain what it is that people have, invariably not what they thought. What annoys me is that this continues to go on and however much training Banks supposedly do, the problems persist. It takes the regulator considerable time to build a body of evidence to have a clear case and the fines to Banks are inconsequential.

Would Jensen, Rory and Jessica approve?… I doubt it

The advantage that Banks have is their huge marketing and PR budgets, let alone high street presence. Paying very likeable celebrities or stars to appear in adverts tends to create a warm, trusting feeling towards the brand itself. The reality is that of course there is little or no real connection between the star and the business and any feelings are frankly misplaced based upon the overwhelming evidence.

Get commercially real, Banking 1-2-3

The biggest delusion is the notion of free banking. Nothing is free; it’s paid for by someone. If all Banks charged for providing proper administration of day to day cash management, and this more honest, transparent approach was continued into other elements of their business, I would be very happy. Banking is a business, an important one, as we all need it. I am not knocking the core business of banking, but why they are allowed to offer financial advice on anything other than lending and deposit taking is beyond me. This is its core business, not arranging investments that are dressed up to look like deposit accounts. If Government and Regulators are serious about addressing the savings gap, it should not use Banks and frankly should ban any advertising that contains anyone vaguely famous. The wrong financial products can do a lot of harm, we warn people about smoking or drinking, but the penny really hasn’t dropped about the risks of Bank products.

Dominic Thomas: Solomons IFA

When will the penny drop?Dominic2023-12-01T12:39:06+00:00

Co-Op has lost the plot and now follows Animal Farm

Co-Op has lost the plot and now follows the one for Animal Farm?

A considerable proportion of investors do not want returns at any cost. This has resulted in a considerable growth in the number and range of ethical investment funds since the first (Stewardship) was offered in 1984 by Friends Provident. The year has today provided an unhelpful Orwellian twist in the tale as I read with jaw-dropping bewilderment at the poor judgement that has been on public display in the once warm and cuddly “Co-Operative”. The news re-reported within my own trade press (FT Money Marketing) cites the story broken by the Observer which makes Animal Farm an even more vibrant metaphor for the suggestion that some are more equal than others.

The report that Euan Sutherland is set to pick up a financial package of £3.66m this year with a basic salary of £1.5m will surely make blood boil as savers and investors are left wondering how on earth a co-operative could possibly end up with such a disparate share of risk and reward. Nothing good can come from the report that suggests that more than £24million will be paid to 8 (eight) Co-Op executives over the next 2 years, despite the Bank almost collapsing in spectacular style (with a £1.5bn black hole) and making thousands of redundancies.

The Co-operative online bank customers at Smile will presumably provide a quick migration to any other bank that at least isn’t attempting to claim being anything other than a Bank. Any informed customer will be rather outraged by what has been going on at the helm of what used to be an “ethical Bank”. It has been saved by private equity and the cultural shift or rather “modus operandi” has surely begun to reveal itself. To even have the nerve to have something called the “Ethical Plan” with the strap line “good things happen when we work together” one can only assume that they mean colluding with each other in the Board room rather than being “the most socially responsible business in the UK” you must be joking right?..

I found reading the Observer’s report “hugely disappointing” that yet again managers, not the owners are taking the lion share of the rewards, and so far being rewarded for failure with severance packages that could have only been dreamed up in the disconnected clubroom of arrogance and remuneration packages drawn up by “you scratch mine & I’ll scratch yours Ltd”. Yes I’m angry. Angry because Banking in Britain could be a lot better than this. Business is tarnished with understandable claims of greed and corruption. It doesn’t have to be this way, business should be leading not scoffing at the trough of self-interest.

If you are fed up with the Co-Operative, have a look at Triodos Bank, based in Bristol. This isn’t advice, merely a suggestion to have look and make up your own mind. To my mind, the grass is certainly greener… (the glass is anyhow).

Dominic Thomas: Solomons IFA

Co-Op has lost the plot and now follows Animal FarmDominic2023-12-01T12:39:01+00:00

When is £50 worthless?

How closely do you observe the cash you hold in your wallet or purse? The Bank of England has announced that the £50 banknote carrying the portrait of Sir John Houblon, the first Governor of the Bank of England, will be withdrawn from circulation on 30th April. From that time, only the £50 note featuring Matthew Boulton and James Watt, which was introduced in November 2011, will hold legal tender status.

Don’t confuse your Boulton with your Houblon

If you have any Houblon £50 notes can continue to use them up to and including 30 April, but technically they will not be legal tender. After 30 April, general retailers are unlikely to accept the Houblon notes as payment. However, most banks and building societies will continue to accept them for deposit to customer accounts. Agreeing to exchange the notes after 30 April is at the discretion of individual institutions. Barclays, NatWest, RBS, Ulster Bank and the Post Office have all agreed to exchange Houblon £50 notes for members of the public – up to the value of £200 – until 30 October 2014.

The Bank of England will continue to exchange Houblon £50 notes after 30 April, as it would for any other Bank of England note which no longer has legal tender status.

Dominic Thomas: Solomons IFA

When is £50 worthless?Dominic2023-12-01T12:38:49+00:00

Financial Fraud in Britain

Solomons-financial-advisor-wimbledon-blogger

Financial Fraud in Britain

Financial fraud in Britain is a serious problem. The sort of frauds that I hear about are very depressing… in the sense that it’s really quite difficult to imagine someone who would do such a crime, at least based upon the people in my life, I find it hard to imagine anyone being so cold. Anyway, I was on the way home yesterday and listening to a radio show on BBC5Live…as if the cricket score was not bad enough… anyway It was the Adrian Goldberg show, which yesterday covered assaults on taxi drivers and subject of “Vishing”. Vishing is a telephone scam.

Hello… its (A big retailer) and we think you’ve been subject to fraud..

In a nutshell, the crook tricks people into giving over their bank card details. Now on the one hand you would think this is fairly obvious and easy to avoid, but the scam basically goes along the following course. You get a call from someone claiming to work for a major retailer – say Tesco, chances are you have been there. The criminal says that the company have identified a suspected fraud on your card. S/he then suggests that you get your card… which one is it? And you have a look at the number on the back to report the fraud… you politely say thank you and hang up…. but you haven’t hung up, you still have an open line (if it’s a land line), the fraudster might even play the sound of a dial tone to make you think you’ve hung up. So you pick up the phone and dial your bank, but actually you are still speaking to the original fraudster (or his/her accomplice)… and so the fraud really begins.

Distraction & Misdirection

The main way that fraudsters operate is to distract. In this instance, to distract you with help. You are thrown off guard by being told you may have had fraud on your account. Do not give your bank details over the phone (or internet) to anyone that YOU have not properly identified and be careful when you are being asked for details.

Open Lines

This fraud works due to an issue with open phone lines. At the moment 40% of the land line network closes lines within 2 seconds of you hanging up, but this scam relies on the line being kept open for longer. BT and Virgin currently keep a line open for 2 minutes (according the BBC radio show). The Police advise using a different phone or waiting at least 5 minutes before calling your Bank on their proper number.

Before you next go shopping…check out FFA UK

This sort of stuff is miserable, but it happens all the time. Anyone can fall for it. You are generally not protected against fraud if you give your details out. In Surrey 81 cases have been reported, worth £900,000 since July. The Met report over 2,200 cases in London worth over £3.5m. You have been warned. Please have a look at the Financial Fraud Action UK website for further tips and advice.

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 info@solomonsifa.co.uk

Financial Fraud in BritainDominic2023-12-01T12:38:44+00:00

What’s Happened to the Co-Operative Bank?

You may well ask what has happened to the Co-Operative Bank? which has really come under fire of late. There is a very sad tale of Paul Flowers, the Chairman of the Bank since 2010. Mr Flowers has displayed some poor judgement, which he has admitted, but perhaps what is far more serious and telling of the problems within Banking and in particular the Co-Operative, is that it very difficult to see how he had the necessary skills and experience to run a large commercial Bank.

Experience from Inexperience?

Mr Flowers is a Methodist minister and for all I know he may be a wonderfully gifted one, however a 4 year job at NatWest when aged 19 (according to the BBC report) appears to be the sum total of his Banking experience. Now before everyone blows hot and cold on this, a Prime Minister has no experience of being one until they are elected, the same is true of pretty much any political position. There is certainly a case to be made for “you don’t get experience without starting without any” however it is more than surprising that in the months following the Credit Crunch he was appointed to such a significant position. I am not blaming Mr Flowers, but one has to question the wisdom of the Co-Operative Board and of course the regulatory approving body.

Biting off rather more than can be chewed

We all have off days and I’m sure have on occasion performed below expectations when “examined under the spot-light” and I can only hope that this explains his when questioned by the Treasury Select Committee on 6^th November. This is shown on the BBC website and rather speaks for itself. Mr Flowers might be a thoroughly good man (my hope if he is a Methodist minister) however being a nice or decent bloke does not qualify you to run a multi-billion operation.

Blushes not Smiles

I am not suggesting that Mr Flowers is entirely responsible for the demise of the Co-op Bank, (which includes Smile and Britannia) but losses of £781m are hard to ignore. I wonder if you can read the figures held within the Group Interim Report 2013 any better. Turn to page 12 on see the Balance sheet. I can only assume that Mr Flowers was thinking of Consolidated Net Assets of £3.5bn rather than assets of the Bank.

Now, don’t get me wrong, I am a fan of co-operatives and any organisation that attempts to apply ethics to business practice as the Co-Operative have claimed over the years….Heaven knows we could all do with a competitive retail banking sector that has some decency! So the plight of Co-Op is all rather saddening. I hope that they can be “fixed” but now run by Hedge Fund Managers, not known for their ethics, but for their asset stripping results. To my mind this appears to be the point at which the Co-Op Bank’s core values will either shine or fizzle out, consigned to history.

Dominic Thomas: Solomons IFA

What’s Happened to the Co-Operative Bank?Dominic2023-12-01T12:38:37+00:00

Easter Bank Holiday – Banks to receive forgiveness?

As we approach Easter and a Bank Holiday Monday – you cannot have failed to notice that the Banks have been in the news again this week, notably the problems in Cyprus and the re-opening of their banking system today. There was also the news from the Bank of England, which essentially told Britain’s banks to hold larger sums on deposit to improve their capital adequacy by a few £billion. This is likely to delay the return of the largely nationalised banks into the private sector and the main players will all seek to raise funds – either from selling off bits of their businesses or raising money through share/bond issues. The concern is that this will also lead to further tightening of lending criteria.

Today’s news is that what was once Abbey National, Alliance & Leicester and a few others (now Santander) have closed their investment advice services, well to the majority of the public anyhow. Today they announced 724 jobs culled leaving a team of 150 to support Santander investment customers UK-wide. We knew this was coming as they had to suspend their advice services due to having identified that their staff and systems were not ready for RDR (see the previous post). In addition they have some ongoing problems about bad advice to resolve with the FSA.

Life for the Banks continues to be pretty difficult, but few have much sympathy for them given the years of overcharging and mis-selling (not that this was exclusively the domain of Banks). However, we need a good banking system to help the economics of our society to function. I would like to see retail banks help people manage their finances better, do the basic stuff well, not constantly attempt to sell anything they can from roadside recovery to VIP airport services. As for attracting new customers? well we know that the average person is more likely to get divorced than leave their bank, so why on earth are millions spent sponsoring sporting events… particularly when this is really the taxpayers money? So as it is Easter, I wonder if we are collectively ready to forgive the Banks and permit them to have a resurrection experience?

The office will be closed for Good Friday and reopening on Tuesday 2nd April. Have a happy Easter.

Dominic Thomas: Solomons IFA

Easter Bank Holiday – Banks to receive forgiveness?Dominic2023-12-01T12:23:31+00:00

Financial Advice from Banks

Few will get financial advice from Banks due to RDR

As I had posted earlier today that Nationwide, the largest Building Society in Britain (by miles) has suspended its pension advice (as the one pension that they sell, er I mean advise (Legal & General) is not compliant with the new adviser charging rules) it is only fair to outline what the other banks are planning. Very few people will be able to get financial advice from banks, if anything more people will find the restricted offering is likely to lead to increased focus on product pushing by Banks. We shall have to see.

Barclays withdrew their “financial planning” services in January last year. They do offer advice to their more wealthy customers under the Barclays Wealth label.

Lloyds has ceased providing advice to anyone with less than £100,000.

RBS will be offering restricted advice, having cut its number of advisers in half.

Santander has had to suspend its 800 or so advisers from further investment advice as they are concerned that their advisers are not adequately trained. Santander have previously stated that they will offer restricted advice (their own products) to anyone with £25,000 or more.

Why? because compliantly providing financial advice is very expensive. Providing proper financial planning advice is even more expensive as it involves two limited resources – time and expertise. This was outlined several years ago (and repeatedly ever since) by Ernst & Young who warned Banks to change their business model and that the hourly rate would need to be at least £200, which clearly for a standard bank customer is unlikely to be workable.

Financial Advice from BanksDominic2023-12-01T12:23:17+00:00

Retail Distribution Review (RDR) Chaos before Christmas

Just A Few Days Left… until Retail Distribution Review

Most of us now buy a large proportion of our Christmas gifts on-line. Those that have not planned ahead, may have an anxious wait for the parcels arriving during the busiest period of the year with only a couple of weeks left. In a similar way, advisers have been awaiting RDR, the Retail Distribution Review which is also only a few working days away now. It officially starts on Monday 31st December 2012 (that’s in 24 days time). Sadly, whilst full of noble intentions (clearly priced advice, better quality advisers, clearly defined types of adviser) I regret to say that its a complete shambles across the majority of the financial services industry.

What The Dickens?

You need proof of course, but take Nationwide. One of the few mass-market banks/building societies that has intentions to provide advice going forward. Most Banks elected not to do so as they priced their hourly costs at over £250 an hour, which of course is not likely to be afforded by most of their customers, who are likely to scream “more? you want some more?” in that Oliver Twist way as yet another way of extracting cash from unsuspecting customers is served up like a warm bowl of gruel. So in practice most people will no longer be able to go to their bank for advice; (I want to say that this is probably a good thing as bank advice generates the most complaints and most advisers would probably say isn’t as good). That’s a half-truth though, they have more complaints because they have a lot of customers, as for being as good – well some are, some aren’t as with all other advisers. The reality is that it should be the case that getting advice is better than not getting any, so even the Banks have a role to play.

Get Your Goose? Walks, Talks, Sounds, Smells and looks like…

Sadly, due to the way that the FSA have approached “adviser charging” this has created a raft of problem with pretty much all financial products requiring an upgrade and re-think. It is concerning that Nationwide have today announced that they are suspending their pension advice because even at this stage they don’t have the ability to offer an RDR compliant pension. They know that they want to get 3% for the “advice” and 0.5% for ongoing “advice” but bluntly to anyone in my industry this looks very much like a product selling approach. To those in the know, this is akin to “if it walks like a duck, speaks like a duck, looks like a duck… it is a duck”. To enlightened advisers, this would raise the question of Nationwide’s leadership, culture and governance to have allowed matters to get to this point with this “approach” and that is putting it very politely. Natiowide are reported to have about 460 “advisers” and are looking to get the number over 500. in the meantime Nationwide have said that customers wanting a pension should go to speak to an independent financial adviser… which of course Nationwide is not and from the end of the month, will be offering “restricted” adviser solution. As of this moment, their website has not been amended to reflect this fact.

Who hasn’t delivered… Santa or Sants?

Santa will not be bringing you a pension from Nationwide this Christmas, largely thanks to the way Mr Sants (who is seeking new employment) has decided to interpret and apply RDR. Mind you, its not as though there’s a queue of people asking if they can have one. Pensions aren’t really in that naughty or nice discussion are they? So credit to Nationwide for being nice by suspending pension advice, although of course if they hadn’t they would have probably been found out as rather naughty and on an entirely different list. Mind you, Nationwide are “on your side” this Christmas.

Retail Distribution Review (RDR) Chaos before ChristmasDominic2023-12-01T12:23:16+00:00

Assumptions and Black Swans

Assumption is the mother of chaos

I was reminded last night that sometimes what you get depends entirely upon your perspective. I was at a “gig” (I loathe the word) for one of my favoured bands – Athlete. A nice bunch of guys from London who had a few big hits and keep at their music. I was treated to tickets to hear them in Wimbledon, which was a bit confusing because Wimbledon is not known for its music venues in London, so assumptions were made, that suggested a small intimate event.. perhaps for up to 100 people. Not beyond the realm of reason as this happens quite regularly. However this assumption was somewhat off the mark. One presumably made by the venue manger and tour manager as well.

Wrong time and place

Sadly expectations were not met, though I dare say that the first 50 people to arrive had a great time. Unfortunately, as nice as the venue was, it was not suitable for the event and the 500+ people that showed up. It would have been pretty good for 50. This wasn’t Athlete’s fault and I have to admit that I felt rather sorry for them as many people got fed up and left or expressed their frustration at them rather than the venue. The venue was/is tiny, there wasn’t enough room for everyone. The shape of the venue made it impossible even for someone of my height (6’2″) to see them or hear anything other than the bass – no I couldn’t even hear the apologies for the recognised mis-selected venue. Disappointment all round, hopefully something good may still come from this.

We all make mistakes, but do we learn from them?

I’m reminded though that there is a time and place for everything. How many people in a venue, how many clients can be served, cared for and looked after. Sometimes we bite off more than we can chew and sometimes the environment means we should pack up and reschedule. Knowing when to quit is as important as knowing when you aren’t up to the task. This is an experience that the BBC are facing today as well. Enormous organisations are hard to manage, but then – so are smaller ones. Similarly with our own money, we make choices, people tend to spend what they have rather than managing it properly or planning spending. We are all faced with management tasks, some we get right, others we get wrong. Sometimes we need to take note and change behaviours. This means learning from mistakes and forming new (better) habits. This is not a luxury, we all make mistakes and all need to be afforded the opportunity to learn from them and correct them where we can. Someone that is a fan – or on your side, will give you a second chance, perhaps a third and fourth (maybe more) but barring all but the most patient of people there is a limit to our “forgiveness” if actions to remedy and resolution are not taken. The Banks still seem unable to learn this basic lesson. It seems certain politicians have the same problem. As for small firms like mine or a great band like Athlete, well we simply have to learn, try harder and make sure that we don’t over promise and under-deliver… much like my new i-phone that is still unusable. The question is, is the mistake an out of character rare event (a black swan) or it is merely representative of a wider problem?

Assumptions and Black SwansDominic2023-12-01T12:23:07+00:00

Cash ISA latest rates

Latest Cash ISA Rates

There continues to be the expected speculation about inflation and interest rates – how on earth would the media use their time if they didn’t spend so much of it guessing the future? As we know, official inflation rates are falling, yet you and I probably pay more for the things we actually consume, strange but true. Anyway, here are some of the top rates currently available. Please note that this is simply a list, it is not advice. It is important to ensure that your funds are ideally within FSCS compensation limits and not restricted due to shared banking licenses.

Instant Access Accounts

On-line: Melton Mowbray 2.50%
Bank: Virgin Money 2.20%
Building Society: 2.35%

Cash ISA – Variable Rates

On-line: Sainsbury’s Bank 2.80%
Bank: Virgin Money 2.40%
Building Society: Earl Shilton 2.70% (90 day notice)

Cash ISA – Fixed Rates

On-line: Bank of Cyprus UK 3.20% (3 years)
Bank: Halifax 3.60% (5 years)
Building Society: Yorkshire 3.20% (fixed until 31 May 2014)

I have to admit that I’m not overly comfortable with a society that has supermarkets offering banking services, which probably says more about Banks than it does about supermarkets. However many people visit their supermarket more than they visit their bank. I have to admit that I prefer to visit neither and am rather an advocate of on-line service.

New ISA Allowance for 2013/14

You may wish to know that the ISA allowance is now linked to inflation and the September figure for inflation (2.20%) is used for the following tax year. So the 2013/14 ISA allowance will be £240 more. As a result the full 2013/14 allowance will be £11,520 with up to half this into a Cash ISA (£5,760).

Cash ISA latest ratesDominic2023-12-01T12:23:04+00:00

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