ANOTHER DECADE OF CHANGE

TODAY’S BLOG

ANOTHER DECADE OF CHANGE

A new year, a new decade. There have been huge global changes over the last decade. Cast your mind back to 2010. Gordon Brown was PM. The FTSE100 closed 2009 at 5412. The starting rate of income tax was 10%, the personal allowance was £6,475 unless you were over 65. The annual allowance for your pension contribution was £245,000 with a lifetime allowance of £1,750,000. ISAs were limited to £10,200. Corporation tax was 28% or 21% for small companies. The Credit Crunch had happened, unemployment in the UK had soared to 7.8%.

On a lighter note, Chelsea were top of the Premier League, Jenson Button had been F1 World Champion for 2 months. The year ended and 2010 began with the worst snowfall since 1982. The iphone 3GS was 6 months old, the ipad hadn’t even been launched.

Looking back, 2010 started nursing the pains of the credit crunch

Most (almost all) financial advisers all worked on a commission, the regulator (FSA) and its Chief Executive were still fending off criticism about mishandling the credit crunch, whilst working to implement new standards for advisers, which wouldn’t be implemented for another 3 years. Solomons had been removing commission since formation in 1999. A decade of commission removed already!

Evolution

Technology has evolved. Advisers have evolved (as has the regulation). Tax rates and allowances have changed, pensions have been mauled. We have lived with base rates of less than 1% for a decade (all that wasted money in Cash ISAs!).

“Lessons will be learned” (more likely: mistakes will be repeated)

The top Unit Trust returned 684% over the decade (ending 2009) it happened to be a fund investing in gold. At the start of the relevant time period, the then UK Chancellor was at the beginning of Government policy (1999-2002) to sell off UK Gold reserves like they were a bad disease, the price of gold was rock bottom at the time. However, the worst fund returned (lost) -72%! That’s a huge difference, and of course only something most didn’t achieve, for few investors had the stomach for gold when tech was the best game in town. In fact, it was the Framlington NetNet fund that was launched in 1999, a fund that was marketed to capture the returns of the internet. Within a few weeks of the start of 2000, the dotcom bubble burst. The fund was renamed and rejuvenated which ended the decade at a loss of -72%. Most investors (and Governments) did the exact opposite of what they should have done. Lesson learned? Of course not.

Planning is Art and Science

Technology is often fantastic; I use tools that I wish I had in the early days. The 2020s will only see more become available and hopefully more efficient ways to do things. Technology is simply a tool, not a replacement. It doesn’t cope well with real life and the changes that can be very sudden. So, advice should always be grounded in the real world, but more importantly with your real goals and real values. That’s where the art comes in and here is some from Carl Richards of the Behavior Gap (American!)

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

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

Financial Advisers – on best behaviour?

Have financial advisers changed their behaviour?

There are days when I breathe a sigh of relief. Days when I find reasons to take heart in the financial services industry. Today was one of those days. I spent the morning with a small group of some really good financial planners. They talk sense and certainly convey the impression that they do what they say. I know that my industry is full of some very good salespeople, so sometimes deciphering the fact from fiction is not easy and I’m not going to pretend that I have mastered the art of doing so, but some days, I get a sense that if all advisers were like this, there would be little need for a regulator or compensation system. Sadly, history gives the regulator good reason to be concerned. So I admit, it isn’t always easy to tell if financial advisers aren’t simply on their best behaviour, but some days – well, you just know it isn’t faked.

Small fish in a small pond?

Now its true that I attend events that probably only the better financial planners go to, so I do tend to meet some very good people within the “industry”. I haven’t met everyone and I haven’t met some of the most well-known, but I can say that the days of being embarrassed by my peers are largely long gone. Indeed many are inspirational, encouraging and willing to help me to build a better business and serve my clients even better.

Isn’t it terrible….

This flies directly in the face of stories I read in my trade press “pinks” that highlight FSA fines, advisers being imprisoned and generally outlining the “dark side” of financial services. Trust is a big deal and something that has to be earned and is very difficult to measure. So I was heartened to read in “The Behavior Gap” (American) by Carl Richards a delightfully honest take on conflicts of interest. Something that I have blogged about before, but not sure that I have conveyed terribly well. Here’s what Carl says:

“Here’s my take: conflicts of interest are inherent in almost any situation when you’re paying for advice. Lawyers, accountants, financial advisors, auto-mechanics…we all have to cope with situations when our interests may not fully align with the interests of our clients, at least in the short run“.

Chapter 8: You’re Responsible For Your Own Behavior, The Behavior Gap, Carl Richards Published by the Penguin Group 2012.

Something about reaping and sowing…

Carl goes on to make some great points, but he doesn’t fudge the issue. In a world where advisers are generally paid to invest money, it is no surprise that they attempt to control it and perhaps attempt to grow it in a way that doesn’t suit the client, or could be used more thoughtfully (such as clearing debt or giving it away). You only find out what your adviser will do when you get to such a point. My approach is to clear debt first as I hope is obvious from the website. This is because of my beliefs about good financial planning, which means that many people are not able to invest with me until this has been done. This is very much to my short-term detriment, but I believe that it is absolutely in the best interests of my clients – and those that are not able to be clients.

Holding onto principles

This cropped up again this week. An email from a prospective client asking for help which essentially wanted to know how to make a little bit of money into a lot more money over 3 years. This is not what I do. It is also not what I believe to be good for anyone except those that really are able to gamble without damaging their own security. The email wasn’t from a place of greed, but a place of speed and sadly some things simply take time, which is true of good financial planning as well, it takes time – and time as we all know, costs money.