Barclays Buy ING

Barclays Bank have agreed to buy ING Direct UK. This is a good result for Barclays but not a terribly good one for savers. ING often have very competitive savings rates and the acquisition by Barclays will increase market share but do little for a competitive market. You may have seen the ING adverts which are a little odd, but attempt to create the sense of a no nonsense bank.

A Great Deal for Barclays

ING UK was launched in 2003 and has over 1.5m customers. It is entirely owned by the ING Group who had over €1.279bn of assets at the end of 2011. The deal will see £10.9bn in customer deposits pass over to Barclays and around £5.6bn of mortgage borrowing. ING have a high quality mortgage book, with 50% loan-to-value, which is very strong for any Bank. It is estimated that the deal, assuming approved, will take place in Q2 of 2013. ING Direct expect that 750 of their staff will transfer to Barclays. Whilst a relative newcomer to the UK, the roots of ING can be traced back to 1845 with the merger of Levensverzekering Bank and De Nederlandenvan 1845. ING was formed in 1991.

Barclays Buy INGDominic2023-12-01T12:22:58+00:00

Banks Leaving Financial Advice to IFAs

1990: Tie Me Up, Tie Me Down

Banks to leave financial advice to IFAs

Banks have been declaring their hand for the new financial world from 1st January. Last week Santander announced that they would only be offering investment advice to those with £25,000 or more and only from the range of products that they produce. In short they sell what they make. I’m always amazed that anyone would actually go to a bank for financial advice, but hopefully from January at least it will be clear how little a part of a proper conversation they are even able to entertain.

Too expensive for Bank customers

This was on the back of Lloyds also announcing that they are scrapping their services to anyone with less than £100,000 – again, why would anyone with £100,000 go to Lloyds for investment advice is beyond me. Barclays had already announced that they will not offer financial advice, except via its wealth management team, who focus on ultra wealthy (and presumably fairly easily pleased). HSBC will scrap their tied advice and provide execution only services (meaning you order what you want and they sort it out), they intend to remain whole of market, though frankly I don’t see how this will work in practice. Royal Bank of Scotland has abolished its independent arm (if you could ever find it) and going for a restricted model (limited financial products). Nationwide, one of my favourite Building Societies, is going to give it a go at offering fee based advice. It will be interesting to see how they get on and I imagine that the other Banks will be watching carefully.

Limited options for most

So in summary, the new rules about providing advice mean that the vast majority of people living in Britain will not get any form of independent advice. They probably won’t get an awful lot of option for restricted advice either. That of course is one way to solve the problem of mis-selling and scandal (reduce the choice) but it doesn’t seem terribly well thought through to me. We need a society with better financial education and greater access, not less.

Banks Leaving Financial Advice to IFAsDominic2023-12-01T12:22:55+00:00

Cash ISA Rates

Time to update you on some of the top rates of interest for deposit accounts. Remember that the FSCS (compensation scheme) only covers up to £85,000. This is not advice, but a list of top rates.

2007: Economic Theory – Becker

Instant Access (taxable)

Online: National Counties 2.75%

Bank: Virgin Money 2.60%

Building Society: Newcastle 2.35%

Cash ISA Fixed Rate (not taxable)

Online: Virgin Money 3.30% 3 years

Bank: Halifax 4.00% 5 years

Building Society: Leek United 3.50% 3 years

Cash ISA Variable Rate (not taxable)

Online: Sainsbury’s 3.01%

Bank: Virgin Money 2.85%

Building Society: Newcastle 2.35%

UK National Economy

Inflation – RPI measure: 2.90%

Inflation – CPI measure: 2.50%

Bank of England Base Rate: 0.50%

In terms of shared banking licenses (and therefore limited FSCS protection), Virgin Money share a license with Northern Rock and Halifax is part of RBS. All of the Building Societies listed above currently have their own separate licenses. Sainsbury’s Bank also holds a separate license.

As the above figures are some of the “best rates” it is clear that cash is rarely keeping pace with inflation, making life harder for savers as the spending value of every pound reduces.

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

Cash ISA RatesDominic2023-12-01T12:22:52+00:00

Dictum Meum Pactum

1953: Latin Lovers – LeRoy

I have to admit that I often feel “plebeian” in my dealings with my Bank. Whilst I know that Banks are massive impersonal organisations, the promise (and payment) for a personal service differs considerably in understanding between my Bank and I. I tend to expect personal to mean, handled by a person – with whom there is a relationship that is based upon understanding beyond box ticking, to my Bank it seems that whilst this is their claim, every phone number provided is an automated call centre with a rabbit warren of PIN, alphanumeric options and “let me put you through to a different department” responses. Despite the heavy rain and falling temperature, my office reached boiling point yet again following another lengthy blow by blow regurgitation of my problem and attempt to find solutions. It is with a degree of sadness that I find much fault in my Bank. As with many Banks they seem to display an attitude where customers serve them not the other way around.

It is amusing to note the folly of the Conservative Chief Whip over the weekend. The truth is plain for those that wish to see it, as sad as it is. The depressing state of those “in power” are giving “leadership” a very bad name and displaying none (or very few) of the necessary qualities, choosing instead to apologise for things they did not do and ignore the things they did. Many of our leaders should win gold medals for their gymnastic agility with meaning-less words. I was at Public School too, Prep School in particular was a place where the term “pleb” was used in a derogatory fashion (by certain staff and pupils) perhaps fed by a schoolboy’s poor grasp of very limited Latin, which otherwise was a struggle. Thankfully I know better, (and was reasonably ok with my Latin) because I grew up and don’t spend time (as far as I’m aware) with people that have such attitudes. Radio 4 had an interesting insight into the term “pleb”. However, perhaps I should be less quick to judge. I can be demanding and rather impatient when things don’t go my way, most obviously displayed by bad banking and bad driving. Holding my tongue is a life lesson that I know I need to work on too, particularly when it comes to reading some of the nonsense in the financial pages. So sincere apologies to anyone at my Bank that caught my ire and those drivers that I accuse of cutting their license off a packet of cereal. mea culpa. As my Latin Master once wrote “must try harder”.

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

Dictum Meum PactumDominic2023-12-01T12:22:51+00:00

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

The Truth About Mortgages

1997: The Borrowers – Hewitt

The FSA published its review of the mortgage market on Friday. This did not make happy reading. Since the credit crunch crisis began (and yes I do not believe it is over) the difference between the rate that people borrow at and the Bank of England base rate has widened. Prior to the crunch, the average difference or “spread” between 2005-2007 was only 0.50%, it is now above 3.0%. The difference might be described as profit to the lender.

I’m still amazed to see that as of Q1 2012, income is only verified for around 70% of “low risk” borrowers – meaning that they are remortgagers and movers. “Higher” risk borrowers such as first time buyers have their incomes verified in 87% of cases, which the FSA think is an improvement on the lower level of around 70% in 2008. I don’t see why income is not verified in every case, unless there are exceptional circumstances. Even assuming sensible lending based on verified income, this would suggest that there is a margin for error of around 30% which is hardly inspiring confidence in the market.

Financial Advisers (rather than Banks) used to arrange around 64% of mortgages, now this has reduced to around 46%-56% according to the FSA. This reveals a growing market share of mortgages sold directly to consumers by Banks and Building Societies.

In terms of what people can borrow, there seems to be a shift by lenders, some of whom are lending 4.5x to 5.5x income. However compared to pre-crunch, lenders are not offering as many high multiple lending. This is precisely why a specialist mortgage broker (not me) is required to source the best mortgage based upon your circumstances, particularly as the number of mortgage products is returning to pre-crunch levels, but still lower at 2,991 different mortgages available. This is despite the fact that there are still relatively few mortgages requiring a deposit of 5% or less, although more are becoming available. The bulk of borrowers now have 25%-50% deposits. The proposition of interest-only mortgages has also reduced considerably, though this was a general trend over the last 10 years. The balance of power has altered, in part due to the collapse in the number of financial advisers offering mortgages, (which would include ourselves) almost halving since 2005. The result has been that the top 20 mortgage lenders have gained an increased market share, now at 94% of the entire mortgage market, I suspect you could name them all. On the whole, though mortgage sales have remained fairly static since 2009 at less than half the amount it was in 2005.

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

The Truth About MortgagesDominic2023-12-01T12:22:44+00:00

FSA RDR Consumer Guidance

1968: The High Commissioner – Thomas

FSA RDR Consumer Guidance

Today has seen an update to FSA RDR consumer guidance, which is information to the general public about the Retail Distribution Review (RDR). This can be found within the FSA website. This is meant to explain the changes that will effect all UK investors from January 2013.

RDR – Keeping it too simple

The 6 page pdf booklet is the FSA RDR consumer guidance and is brief, frankly I’m left wondering how on earth something that appears to be so simple has cost the financial services industry millions to adapt and prepare for. In short, we have reverted back to a “not quite” polarised industry – with “restricted” advisers and “independent” advisers. The definitions of each are still far from clear. I would also argue that the issue of how advice is paid for has been really poorly handled, though this is in part due to the vast number of computer systems with different approaches to the same fundamental problems. My stance has always been to be clear about the charges that we apply and to have these on a fee basis, so that they can be agreed and are not open to manipulation by advisers or product providers. Sadly I do not believe that this document conveys the issues well enough, rather “downplaying” the significance. Most people will not be able to afford financial planning because this process was started too late and made the fundamental mistake of banning commission. This is not an issue for our clients, but it is for millions of people who have been under the impression that their adviser works for free and occassionally collects a bit of commission. The FSA are aware of this problem, hence the links to the Money Advice Service, which indicates the advent of the online DIY approach that most will believe to be the only option…after all we can’t trust the banks can we?

FSA RDR Consumer GuidanceDominic2023-12-01T12:22:42+00:00

Bank Holiday Cash ISA Rates

2007: Mr Bean’s Holiday – Bendelack

Banks continue to remain in the news. Santander are chancing their arm by increasing their standard variable rate by 0.50% for their mortgage customers. I can see no good reason for this with the base rate being so low – perhaps they had to pay out rather more than expected with their Rory McIlroy bonus as he won the US Open last week. There has been much press coverage about whether a free bank account is really free and indeed even one that is always in credit still isn’t really “free”. I’ve blogged about this before and so won’t cover the same ground here.

Since I last updated you with some of the top rates, there have been quite a few changes. So here is a more up to date list of some of the top rates available. Remember this is not advice, just a list. If you are a client and want advice about accounts please get in touch, if you aren’t then either get in touch to see if there is mileage in working together or otherwise please ensure that you do your own research and always remember that the FSCS only cover up to £85,000 per person per Bank – and that is really per Banking License (some banks share a license). In the event of collapse, you are only covered for £85,000.

Instant Access Accounts

Online: Saffron Building Society 2.76%

Bank: Virgin Money 2.60%

Building Society: Newcastle 2.60%

Cash ISA – Fixed Rate

Online: Bank of Cyprus UK 3.50% (3 year fixed)

Bank: Halifax 4.00% (5 year fixed)

Building Society: Kent Reliance 3.75% (5 year fixed)

Cash ISA – Variable Rate

Online: Aldermore 3.15% (60 day notice)

Bank: Virgin Money 2.85%

Building Society: Kent Reliance 3.51% (2 year tracker)

I would like to underline that this is not advice in any way. There are many aspects to selecting a deposit account besides the headline rate, the financial security of the institution, its ethos and general customer service to name just a few issues – also a local physical branch is important to some people. Anyway I hope that this helps. Enjoy your Bank Holiday weekend, after the banking scandals of money laundering, systems failures, LIBOR and charging for accounts, I imagine that many retail bankers will be looking forward to the day off.

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

Bank Holiday Cash ISA RatesDominic2023-12-01T12:22:39+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

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